HomeMy WebLinkAboutResolution No. 86-13 s
� R 86-13
p, Resolution by the City Council o� the City ot
Friendswood
(the "City" ) authorizing the execution and deiivery of
a Lease Purchase Agreement ; levying a continuing
direct annual ad valorem tax, within the limitations
prescribed by law, for the payment o� lease payments
thereunder ; pledging certain funds , revenues and taxes
to the payment of the lease obligations ; approving the
assignment of such Lease Purchase Agreement and the
issuance of Certificates of Participation or other
evidence of ownership therein through a trust
established by the lessor or otherwise; and resolving
other matters incident and related thereto .
WHEREAS, the City Council of the City (the "City
Council" ) has determined that it is necessary to provide for
the use, acquisition and purchase of c�rtain personal proper�y
on behalf of the City; and
WHEREAS, in order to facilitate the acquis�tion of
such property by a corporation, as lessor (the "Lessor" ) and to
lease such property, with an option tc purchase such property
during and at the end of the lease term for each item or
property, at a cost that is advantageous to the City, the City
Council has determined that it is desirabie to enter into a
Lease Purc:�ase Agreement to provide for the financing and
retinancing ot such property and approve the assignment oL suc:�
Lease Purchase Agreement and the issu3nce of Cer�if�cates ot
Participation or other evidenc� of ownership therein (the
"Certificates" ) through a trust established by the lessor or
otherwise as further described below; now, there�ore , �
BE IT ORDAINED BY THE CIT'� COUNCIL OF T:�E CI'�`T:
SECTION 1 : FindinQS : It is hereby f�unc ana
determined that :
(a) all of the property to be acquired under the
Lease is personal property, and during t�e ter� o= the Laase is
to remain personal property;
{b) the Lease, including its for:n as a lease purchase
obligation, and the terms and conditions the��or are deemed to
be appropriate by this City Council ;
} �(c) the contractual obligation of the Lease and the
Certificates should be made payable . £ram revenues , funds , and
taxes available to the City for its public purposes , as
permitted by Section 4 ( a) of the Public Property Finance Act ,
Articie 2368a . 2 , V.A.T.C. S . (the "Act" } ,
SECTION Z : Execution and Delivery of Lease .
(a) The duly authorized officers of the City listed
in paragraph (b) hereof are hereby authorized to eYecute and -
deliver the Lease Purchase Agreement substantial'ly in the form
attached hereto as Exhibit "A" , to be dated as of August 1,
1986 , in order to facilitate the use, acquisition, and purchase
of the equipment described in Exhibit "B" hereto , and certain
other property to be specified during the term ot the Lease,
all as authorized pursuant to the Act .
(b) The officers authorized to perform the duties
described in paragraph (a) hereof are:
� Name Tit1e
( 1) City Manager/Agent
( ii)
SECTION 3 : Consent to AssiQnment ; Creation ot Trust ;
Issuance of Certificates . The City Council hereby consents to
the assignment by the Lessor of its rights under the Lease to a
trustee (the "Trustee" } under terms of a trust aSre�ment ( the
"Trust Agre�ment" ) and the c�eation or a trust and the issuance
of the Certificates in the aggregate princ�pal amount necsssary
to provide for the purc�ase the equipmenc desc��bed in
E:ihibit "B" hereto and to provide for a reasona�le reserve �und
and costs of issuance . P�oc�eds of the Certif�cates shall be
deposited in the acquisition fund ( the "Ac�uisition Fund" )
created pursuant to such Trust Agre�ment and invested for and
on . behalf of the City by the Trustee until applied to ourchase
Equipment pursuant to the Lease. �
SECTION 4 : Limited Obli�ations . Not�rithstanding any
other provision or this Resolution Lease Payrnents under t'.:e
Lease and payments on the Certificates sha?1 be special ,
limited obligations of the Cit��, payable solely from ( i) moneys
deposited �rom proceeds of the Certificates in the Ac�uisition
Fund established and maintained by the Truste�, and earnings
thereon, if any, and ( ii) the obligation of the Ci 't�� to make
other Lease Payments under the Lease, which obligat�ons shall
be incurred only after and to the e�ten� that moneys have been
disbursed from the Acquisition Fund to purchase Equipme.^.t , as
defined in the Lease .
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SECTION 5 : Lew of Taxes . To provide for the payment
of the Lease Payments under and as defined in the Lease, there
is hereby levied, out of the tax legally available for the
lease/purchase, and there shall be annually assessed and
collected in due time, form, and manner, a tax on all taxable
property within the boundaries of the City, within the
limitations prescribed by Iaw, and such tax shall be and is
hereby Ievied on each one hundred dollars ' valuation oi taxable
property within the boundaries of the City at a rate from year
to year as wi1l be ample and sufficient to provide funds each
year to pay the Lease Payments as the same become due during
the term of the Lease, fuli allowance being made for
delinquencies and costs of collection.
Separate accounts and tax records relating to the
receipt and disbursement of taxes levied, assessed and
collected £or and on account of the Lease shall be kept and
maintained by the City at all times during the term or the
Lease, � and the tazes collected for the payment of the Lease
Payments shall be deposited to the credit of a "Spec:ai 1986
�Lease Account" maintained on the records of the City, and ,
deposited in a special fund maintained at an official
depository of the City' s funds ; and such tax hereby levied, and
to be assessed and collected annually, is hereby pledge� to the
payment of the Lease Payments .
Proper officers of the City are hereby authorized and
directed to cause to be transferred to the Trustee or paying
agent for the Certificates appointed by the Lessor , f�om funds
on deposit in the Special 1986 Lease Account , amounts
sufficient to fully pay and discharge promptly the Lease
Payments as the same become due and payable; such transfers ot
Lunds to be made in such manner as will cause collec�eci funds
to be deposited with the Trustee on or berore eac'� Lease
Payment Date for the Certificates , as provided in the Laase .
The amount of taxes to be .p.rovided annually for the
payment of the Lease Payments with respect to the Base Rent ( as
defined in the Lease) including the principai comnonen� and
interest component thereof ( "Debt Service Requirements" ) shall
be determined and accomplished in the following manner :
( a) Prior to the date this City Council es�abiishes
the annual tax rate and passes an ordinance levying ad valorem
taxes eac?� year, the City Council shall determine:
( 1) The amount on deposit under the Trust
Agreement to pay principal and interest components ot "
the Certificates atter ( a) deducting there*_=rom the
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r � total amount of Debt Service Requirements to become
due as Base Rent prior to the date annual ad valorem
tazes levied by the City become delinquent (the
- "Collection Date" ) and (b) adding thereto the amount
of the other revenue and funds - appropriated and
allocated to pay such Debt Serviee Requirements prior
to the Coilection Date for the ad valorem ta$es to be
levied.
(2) The amount of other revenue and funds
appropriated and to be set aside for the payment of
the Debt Service Requirements between the Collection
Date for the taxes then to be levied and the
Collection Date for the tages to be levied during the
ne$t succeeding calendar year .
(3) The amount of Debt Service Requirements to
become due and payable between the Collection Date for
the taxes then to be levied and the Collection Date
. for the taxes to be levied during the next succeeding .
calendar year. �
(b) The amount of taxes to be levied annually each
year to pay the Debt Service Requirements sha11 be the amount
established in paragraph (3 ) above less the sum total of the
amounts established in paragraphs ( 1) and ( 2 ) , after taking
into consideration delinquencies and costs o� collec��ng suc�
annual taxes . With respect to the amount due as Additional Rent
( as defined in the Lease) , the amount budqeted for such
purposes shall be the amount anticipated to become due during
the Fiscal Year following , plus any amount of Lease Payments
remaining unpaid from the previous year .
The City covenants that , in accordance r�ith the
provisions of the Property Tax Code, Section 26 . 04(g) , any
amounts budgeted to pay the Lease Payments whic� are due more
than one year E�om the date of the Lease will be set aside in
the tax levy for the payment of such Lease Payments . .
SECTION 6 : PledQe . The City hereby covenants ana
agrees that all the �unds and re��enues wnic� are legaliy
available for the purpose, with the esc�ption of those in
e�cess of the amounts required to be deposited to the Special
1986 Lease Account , are hereby irrevocably pledged to the
payment of the Lease Payn:ents , and the pledge of suc:� �unds and
revenues herein made for the payment of the Lease Payments
shall constitute a lien on such funds and revenues in
accordance with the terms ana provisions hereof and be valid
and binding without any physical delivery thereof or £urther
act by the City.
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SECTION ?: Lease and Purchase o� Equipment . On the
date hereof , the City reasonably egpects to proceed with due
diligence to lease/purchase the Equipment described on exhibit
"B" hereto within three years of the date hereof and to
Iease/purchase other equipment to be identified during the term
of the Lease. However, it is expressly understood that the
City shall not be required to apply for the disbursement of
moneys from the Acquisition Fund for the lease and purchase of
Equipment unless and until :
( i) the interest rate component of the Base Rent
shall have been deterrnined and shall be acceptable to the City;
( ii) the City shall have received approval of the
Credit Provider, as defined in the Lease;
( iii) the amount of Costs of Issuance to be included
in the Equipment Costs (as defined in the Lease) shall be
acceptable to the City;
( iv) the need for the Equipment by the Cit� e�ists
at the time of such disbursement;
(v) the Equipment is available at a reasonable cost
and, if applicable, acceptable bids for the sale and purchase
of the Equipment are received; and �
(vi) the City Council approves the purchase of the
Equipment and the execution and delivery of documents required
in connection with the lease and purchase thereof .
SECTION 8 : Deliverv of Certificates . The duly
authorized officers of the City are hereby authorized to
esecute and deliver the Lease and other instruments and
certificates as may be reason�bly required in connec��on with
the sale and purchase of the Certificates and to ccnsent to
suc� changes in the terms of the Lease as may. be reasonably
necessary in connection with such delivery; eYecution and
delivery of the Lease with any such changes by officers oi the
City shall constitute evidence of the approval by the City
Council thereof .
SECTION 9 : Open Meetina . It is hereby found and
determined that advance notice or the time, place anc purpose
of the meAting was given to each member of the City Council;
and that said meeting, and deliberation of the aforesaid public
business , was open to the public, and written rotice of said
me��ing, including the subjec� of the entitled Resolution was
posted and given in advence thereof in compliance with the
provisions of Article 6252-17, Section 3A, V.A.T.C. S .
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� SECTION 10 : Effective Date . This Resolutionshall be
in force and effect from and after its passage on the date
shown below.
PASSED AND ADOPTED, this August 11 , 1986 .
CITY OF : Friendswood
By
Mayor
A E �
.
Cit � Secretary
(Seal)
To Be Attached: Exhibit "A" - Lease Purc:�ase Agreement
Exhibit "B" - Description of Equipment to be
financed ( from Demand Survey)
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LEASE PURCHASE AGREEMENT
This Lease Purchase Agreement , dated as of the first
day of August , 1986 but effective on the Closinq Date
hereinafter defined, by and between Houston-Galveston Equipment
Finance Corp. , a corporation organized and existing under the
laws of the State of Texas, as Lessor (the "Lessor" ) , and the
party identified as lessee on the signature page of this Lease
Purchase Agreement , as Lessee (the "Lessee" ) .
WITNESSETH:
WHEREAS, Lessor wishes to lease to Lessee, and Lessee
wishes to lease from Lessor , certain personal property as
further provided herein; and
WHEREAS, in order to finance the acquisition of such
personal property, Lessor has assigned the Lease Purchase
Agreement to the Trustee hereinafter defined for the owners of
certificates of participation in such Lease and for the Bank
hereinafter defined, on a subordinate basis ; and
WHEREAS, the proceeds from the sale of such
certificates of participation have been deposited with the
Trustee for purchase of Equipment, at the direction o� the
Lessee, to be leased to Lessee under the terms hereof ;
NOW, THEREFORE, in consideration of the rent to be
paid and other payments due or to become due hereunder and the
covenants and agreements contained herein, it is agreed by and
between the parties as follows :
Section l . Certain Defined Terms . In addition to the
terms defined elsewhere in this Lease, the followinq terms have
the meanings given below unless the context clearly requires
otherwise:
"Acquisition Fund" means the Fund by that name
established pursuant to the terms of the Trust Indenture and
held by the Trustee .
"Acquisition Fund Draw" or "Draw" means a
withdrawal of money from the Acquisition Fund to be used to
acquire Equipment for leasing to Lessee and to pay Conversion
Costs .
"Acquisition Fund Draw Date" means the first
Business Day of November, February, May and Rugust during the
term hereof .
"Act" means the "Public Property Finance Act , "
Article 2368a . 2 , Revised Civil Statutes of Texas , as amended.
"Additional Rent" means the Program Costs payable by
the Lessee hereunder .
"Aliocable Share of Costs of Issuance" means , with
respect to an Acquisition Fund Draw, at any time of calculation
thereof , the product of the (A) difference between ( i) the
aggregate principal amount of all Outstandinq Certificates and
( ii) the sum of (a) the unpaid principal balance of all
Acquisition Fund Draws previously made plus (b) the balance on
deposit in the Acquisition Fund and the Debt Service Reserve
Fund, and (B) a fraction the numerator of which is such
Acquisition Fund Draw and the denominator of which is the
amount deposited in the Acquisition Fund at Closinq;
provided, that such amount shall not be less than zero .
"Annuai Budget" means the budget of the Lessee for a
forthcoming Fiscal Year .
"Annual Demand Survey" means the document required
pursuant to Section 3 hereof .
"Authorized Officer, " when used with respect to
Lessee, means the chief administrative officer or persons
designated by the governing body of the Lessee as an Authorized
Officer for the purposes of this Lease. The term "Authorized
Officer , " when used with respect to the Lessor , means the
president or other person designated by the governing body of
the Lessor as an Authorized Officer for purposes of this Lease .
"Bank" shall mean The Sumitomo Trust & Banking Co . ,
Ltd. , New York Branch, New York, New York, or any successor
bank which becomes a party to the Standby Bond Certificate
Agreement .
"Bank Certificates" means any certificates pledged
to the Bank pursuant to the Standby Certificate Purchase
Agreement .
"Bank Rate" means with respect to a Certificate
which would otherwise bear interest at the Annual Rate if it
were not a Bank Certificate and had been successfully
remarketed on the day on which it became a Bank Certificate, a
rate equal to (x) the Prime Rate with respect to the first
through the thirtieth day, inclusive, following the date on
which such Certificate becomes a Bank Certificate, (y) the
Prime Rate plus one percent ( 1°�) per annum with respect to the
thirty-first through one hundred and eightieth day, inclusive,
following the date on which such Certificate becomes a Bank
,
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Certificate, and (z) the Prime Rate plus two percent (2%) with
respect to any day thereafter that such Certificate remains a
Bank Certificate; provided, however, that , notwithstanding the
foregoing, Certificates in a principal amount equal to any
portion of the Principal Component past due and owing under
this Lease shall at all times bear interest at a rate equal to
the maximum rate then permitted by applicable law. Provided,
further, the "Bank Rate" may change at any time The Sumitomo
Trust & Banking Co . , Ltd. is no longer the issuer of a Standby
Purchase Commitment with respect to the Certificate.
"Base Rent" means the total of Principal Payments
and the Interest Component thereon paid by the Lessee to the
Trustee, as set out on a Payment Schedule, with respect to each
Acquisition Fund Draw. "Base Rent" also includes Prepayment
Option Amounts other than Additional Rents .
"Business Day" means any day other than a Saturday,
Sunday, a legal holiday on which banking institutions generally
in the place of payment or in a city where the principal
corporate trust office of the Trustee or the principal office
of the Bank is located are authorized or required by law to
close, or a day on which the New York Stock Exchange is closed.
"Certificates" means the certificates of
participation delivered pursuant to the Trust Indenture.
"Certificaie of Acceptance" means a certificate of
an Authorized Officer of the Lessee stating that the Equipment
described therein has been acquired, delivered and installed
( if required) in conformity with the requirements of the
Lessee, substantially in the form of Exhibit F to this Lease.
"Closing Daie" means the date of initial
authentication and delivery of the Certificates .
"Costs of Issuance" means all items of expense
directly or indirectly payable by or reimbursable to the Lessee
or the Lessor relating to the financing of the Equipment from
the proceeds of the Certificates , including but not limited to
costs of underwriting the Certificates, filing and recording
costs , fees of special legal counsel with respect to the
Certificates , the initial fee and charges , including legal
fees , of the Trustee, the initial fee and charges, including
legal fees , of the Bank, initial fees of the Servicer, initial
fees of the Texas Association of School Administrators ,
printing costs , legal fees and charges, financial and other
professional consultant fees , costs of rating agencies or
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credit ratings , fees for execution, transportation and
safekeeping of the Certificates and charges and fees in
connection with the foregoing .
„Conversion Costs" means all items of expense
relating to the conversion of the interest rate on Certificates
to Fixed Rates or an Annual Rate, due to an Acquisition Fund
Draw, including but not limited to remarketinq, legal , and
servicing fees .
"Eligible Acquisition Period" means the maximum time
period that moneys in the Acquisition Fund can be used by
Lessee for the lease and purchase of Equipment pursuant to this
Lease. With respect to proceeds from the initial delivery of
the Certificates and investment earnings thereon, the Eligible
Acquisition Period means either, a period ending 3 years from
the Closing Date or the Principal Payment Date following a
determination that, and to the extent that, Lessee does not
have a continuing demand for moneys in the Acquisition Fund,
whichever date comes first . With respect to proceeds to be
deposited to the Acquisition Fund from Lease Principal
Payments , the Eligible Acquisition Period means either , a
period endinq 3 years from the date such Lease Principal
Payment is deposited to the Principal Fund or the Principal
Payment Date of the Lease followinq a determination that , and
to the extent that, Lessee does not have a continuing demand
for moneys in the Acquisition Fund within such period,
whichever date comes first . Continuing demand for moneys to
lease and purchase Equipment will be determined in accordance
with Section 3 of the Lease.
"Equipment" means the personal property more
particularly described on Exhibit A hereto and any additional
personal property financed pursuant to Section 33 hereof .
"Equipment Costs" means all costs of payment of
acquisition, installation and financing of the Equipment,
including architectural , engineering and installation costs ,
management and administrative costs and capital expenditures
relating to installation and financing payments , leasehold and
leasehold improvement acquisition costs , sales tax on the
Equipment , closing costs , and including costs of feasibility,
environmental and other reports , inspection costs , permit fees,
and filinq and recording costs .
"Equipment Purchase Amount" means the portion of an
Acquisition Fund Draw used to pay Equipment Costs .
"Event of Default" means the occurrence of any of
the events of default set forth in Section 22 of this Lease.
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"Fiscal Year" means the fiscal year of Lessee
currently commencing September 1 or such other period of time
hereinafter adopted by Lessee as its fiscal year for which
funds are appropriated.
"Indenture" or "Trust Indenture" means an
Indenture of Trust dated as of August l, 1986 between Lessor
and the Trustee named therein, under which certificates of
participation in the Lease have been issued.
" Independent Counsel " means an attorney duly
admitted to practice law before the highest court of any state
who is not a full-time employee, director or officer of the
Trustee, Lessor or Lessee.
"Interest Component" means that portion of Base Rent
with respect to an Acquisition Fund Draw which equals interest
on the Principal Component of Base Rent at an interest rate
equal to that borne by the Certificates evidencing the
financinq of such Acquisition Fund Draw.
"Lease" or "Lease Purchase Agreement" means that
certain Lease Purchase Agreement, dated as of August l, 1986 ,
between the Lessor and the Lessee, as originally executed or as
it may from time to time be supplemented, modified, or amended
by one or more instruments supplemental thereto entered into in
accordance with the applicable provisions thereof .
"Lease Payments" means the Base Rent and the
Additional Rent for which provision is made in the Lease.
"Lease Payment Date" means each date a Lease Payment
is due on the Lease, as set out in the Payment Schedule.
"Lease Payment Term" means , with respect to an item
of Equipment being financed, a term of three, five or seven
years, which most closely approximates, but in any event is not
greater than, the useful life of the Equipment established in a
schedule prepared from time to time by the Bank.
"Lease Supplement" means each Supplement to the
Lease, substantially in the form of Exhibit C hereto, executed
by Lessee and Lessor , which will describe the Equipment to be
financed on an Acquisition Fund Draw Date and which will
contain a Payment Schedule describing the Lease Payments
arising from such Draw.
"Lease Term" means the period commencing on the
Closing Date and terminating on the earlier of the final Lease
Payment Date or August 1, 2011 .
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"Lessee" means the political subdivision of the
State of Texas identified as such on the signature page of this
Lease.
"Lessor" means Houston-Galveston Equipment Finance
Corp. and its successors and assiqns as lessor under the Lease .
"Net Proceeds" means any insurance proceeds or
condemnation award paid with respect to the Equipment remaining
after payment therefrom of all expenses incurred in the
collection thereof .
"Outstanding" when used with respect to Certificates
means , as of the date of determination, all Certificates
theretofore authenticated and delivered under the Indenture,
except , without duplication:
( 1) Certificates theretofore cancelled by the Trustee
or delivered to the Trustee for cancellation;
(2) Certificates for the payment or redemption of
which (and for all interest accrued and to accrue thereon)
money in the necessary amount has been theretofore
deposited with the Trustee or any paying agent in trust for
the Holders of such Certificates , provided that, if such
Certificates are to be redeemed, notice of such redemption
has been duly given pursuant to the Indenture, or waived,
or provision therefor satisfactory to the Trustee has been
made;
(3) Certificates in exchange for or in lieu of which
other Certificates have been authenticated and delivered
under the Indenture;
(4) Certificates alleged to have been destroyed,
lost, or stolen which have been paid as provided in the
Indenture;
(5) Certificates for the payment of the principal of
(and premium, if any) and interest on which money or
Governmental Obligations or both are held by the Trustee or
an escrow agent with the effect specified in the Indenture;
"Owner" or "Certificate Owner" or "Owner of a
Certificate" , or any similar term, means the person in whose
name such Certificate is registered.
"Parity" occurs when the Allocable Share of Costs of
Issuance is equal to zero .
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"Payment Schedute" means that certain schedule
attached to each Lease Supplement, substantially in the form
attached to Exhibit C, which describes all the Lease Payments
due and payable from the financing of Equipment on an
Acquisition Fund Draw Date.
"Permitted Encumbrances" means as of any particular
time (i) liens for taxes and assessments not then delinquent ,
(ii) the Lease and the Trust Indenture, and ( iii) any lien
which the Trustee may, pursuant to the Trust Indenture, permit
to remain unpaid.
"Prepayment Option Amount" means the amount required
to prepay Lease Payments with respect to a specific piece of
Equipment or all the Equipment, as described in Section 21 of
this Lease .
"Prepayment Option Date" means any date on which a
Lessee is deemed to have prepaid any of its Lease Payments by
payment 125 days earlier of the applicable Prepayment Option
Amount to the Lessor . In the case of an Annual Lease, a
Prepayment Option Date may occur on any June 15 , and in the
case of a Fixed Rate Lease, a Prepayment Option Date may occur
on any August 1 or February 1 .
"Prime Rate" shall mean, for any day, the annual
rate of interest publicly announced by the Bank as its prime or
base lending rate as in effect for that day, each change in the
prime or base lending rate of the Bank so announced by the Bank
to be effective as of the effective date of the announcement
or, if no effective date is specified, as of the date of the
announcement . Any chanqe in the Prime Rate is to be reflected
by simultaneous adjustment to any rate of interest calculated
by reference thereto .
"Principal Component" or "Principai Payments"
means that portion of Base Rent with respect to an Acquisition
Fund Draw which repays part or all of the Total Lease Principal
without taking into account any payment for the time use of
money.
"Principal Paymenr Date" means any date on which a
Principal Component of Base Rents is due and payable .
"Program Costs" means the amount payable five days
before each Auqust 1 and February 1 in the case of a Fixed Rate
Lease, five days before each June 15 and December 15 in the
case of an Annual Rate Lease, and as incurred and invoiced,
with respect to any unscheduled amounts payable as Additional
Rents and consists of the fees, expenses , and all charges of
the Trustee, the Bank, the Remarketing Agent and the Servicing
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Agent, any other costs associated with the ongoing
administration of the Lease and the Certificates associated
therewith, and any other payments required to be made by the
Lessee under Sections 14 , 17 , 19 and 20 of the Lease .
"Requisition" means a Requisition Requesting
Disbursement from the Acquisition Fund in the form of Exhibit E
attached hereto .
"Resolution" means the resolution adopted by Lessee,
authorizing a draw on an Acquisition Fund Draw Date, in the
form attached hereto as Exhibit D.
"Service Agent" or "Servicing Agent" means the
service agent appointed pursuant to this Lease or any successor
as service agent appointed thereunder .
"Service Agreement" means the agreement dated as of
the date hereof among the Lessor, the Service Agent and the
Trustee, as the same may be amended and supplemented.
"Standby Certificate Purchase Agreement" means that
certain Standby Certificate Purchase Agreement, dated as of
August 1, 1986 , among the Bank, the Lessor, and the Remarketing
Agent .
"Standby Purchase Corronitment" means that certain
Standby Purchase Commitment dated as of August 1, 1986 issued
by the Bank to the Trustee. ,
"State" means the State of Texas .
"Totai Lease Principal " or "Toral Principal "
means , with respect to an Acquisition Fund Draw, the sum of the
Principal Components of Base Rent , including any portion of a
Prepayment Option Price attributable to principal , and is the
sum of ( 1) the Equipment Purchase Amount, (2) Conversion Costs ,
and (3) the Allocable Share of Costs of Issuance.
"Trustee" means the Trustee initially named in the
Trust Indenture and any successors under the Trust Indenture.
Section 2 . Acquisition of Equipment . The Lessee
represents and covenants :
(a) that the selection, size, design and
specifications of the Equipment listed in Exhibit A were, and
the selection, size, design and specifications of any
additional equipment leased pursuant to Section 34 will be,
determined by and acceptable to Lessee, and that neither Lessor
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nor its assiqnee has responsibility for the selection, size,
design and specifications of such Equipment ;
(b) that it shall furnish the Requisitions , toqether
with all instruments referred to therein, for payment of
Equipment Costs to the Trustee (with a copy to the Lessor and
Servicing Agent) . Upon the delivery to the Service Agent of
each such instrument , Lessee shall be conclusively presumed to
have accepted the portion of the Equipment to which such
Requisition relates ;
(c) that the total Equipment Costs for such Equipment
shall not exceed the Equipment Cost as defined herein;
(d) that it has an immediate need and future need
(within 3 years from the date of the delivery of this Lease)
for the Equipment listed on Exhibit A hereof and that the use
of the Equipment is essential to the conduct of its business ;
and
(e) that it reasonably expects to proceed with due
diligence to lease the Equipment described on Exhibit A hereto
within three years of the Closing Date and to lease other
equipment to be identified during the term of the Lease;
however, it is expressly understood that the Lessee shall not
be required to apply for the disbursement of moneys from the
Acquisition Fund for the lease and purchase of Equipment unless
and until :
( i) the Interest Component of the Base Rent shall
have been determined and shall be acceptable to the Lessee;
(ii) the Lessee shall have received approval of the
Bank;
( iii) the amount of Costs of Issuance to be included in
the Total Lease Principal shall be acceptable to the Lessee;
( iv) the need for the Equipment by the Lessee exists
at the time of such disbursement;
(v) the Equipment is available at a reasonable cost
and, if applicable, acceptable bids for the sale and
purchase of the Equipment are received; and
(vi) the governing body of the Lessee approves the
purchase of the Equipment and the execution and delivery of
the Resolution and Lease Supplement and other documents
required in connection with the lease and purchase thereof .
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Section 3 . Demand Study. The Lessee shall complete
an Annual Demand Survey to establish the continuing need by
Lessee to utilize moneys held in or to be deposited to the
Acquisition Fund for the lease and purchase of Equipment .
Annual Demand Surveys are to be delivered to the Servicing
Agent (with copies to the Trustee and Lessor) on or before the
30th day prior to the scheduled Principal Payment Date under
the Lease, commencing 30 days prior to August 1, 1987 for Fixed
Rate Leases and 30 days prior to June 15 , 1987 for Annual
Leases . For purposes of the requirement to complete Annual
Demand Surveys , the Lessee is assumed to have made an
Acquisition Fund Draw on the first Acquisition Fund Draw Date
applicable under this Lease.
Lessee aqrees and acknowledges if, in the event that
Lessee ' s demand for proceeds for the lease and purchase of
Equipment within the applicable Eliqible Acquisition Period
does not equal or exceed the amount of proceeds on hand in the
Acquisition Fund and the amount to be deposited in the
Acquisition Fund from the next ensuing Principal Payment, then
such unneeded proceeds will be deposited to the Redemption
Account by the Trustee to redeem and cancel a like amount of
Certificates ( rounded down to the nearest $5, 000) on the next
ensuing Lease Principal Payment Date. If Lessee does not
complete any such Annual Demand Survey it acknowledges and
agrees that the Trustee will, absent its receipt of such
applicable Annual Demand Survey, on the 30th day prior to such
Lease Principal Payment Date make a conclusive and irrevocable
determination that Lessee has no continuing demand for proceeds
for the lease and purchase of Equipment . The Trustee will
deposit such unneeded proceeds determined pursuant to this
Section to the Redemption Account to redeem and cancel
Certificates using the following order of priority:
(a) first from such amount of Lease Principal
Payments due on the next ensuing Lease Principal Payment
Date and
(b) subsequently, from unneeded amounts on hand in
the Acquisition Fund.
Failure to provide an Annual Demand Survey shall not be an
Event of Default hereunder . Provided, however, that
notwithstandinq anything else in this Section, the Trustee will
not redeem any Certificates pursuant to this Section until the
earliest possible redemption date following the occurrence of
Parity.
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Section 4 . Riqhts and Obligations under the Lease .
In consideration of Lessee ' s promise to make the payments
required under the Lease, Lessor hereby agrees to ( 1) acquire
the property described herein and to lease such property to
Lessee on the terms of the Lease, and (2) to provide funds to
Lessee to pay all amounts necessary to pay principal and
interest due on the Certificates other than Lease Payments ;
provided, however, Lessor ' s obliqation to provide funds to
Lessee for such payments is a special , limited obligation of
Lessor, payable solely out of the moneys deposited from
proceeds of the Certificates in the Funds established and
maintained by the Trustee under the Indenture, and earnings
thereon, if any. Lessee hereby directs the Lessor to fulfill
its obligation to Lessee to make the payments described above
by causing the Trustee to make such payments , all for the
account of and on behalf of the Lessee.
This contract is an agreement for the use,
acquisition, and purchase of personal property by the Lessee
from the Lessor . Lessor hereby demises , leases and lets to
Lessee, and Lessee rents , leases and hires from Lessor, the
Equipment in accordance with the provisions of this Lease, to
have and to hold for the Lease Term. Upon and during
installation of the Equipment, all leasehold riqhts granted to
Lessee by Lessor under this Lease shall vest in Lessee, without
any further action on the part of Lessor .
Section 5 . Term.
(a) The term of this Lease will commence on the
Closing Date and will end on the date specified in Section 1,
provided however, the term hereof shall terminate prior to such
expiration date upon the occurrence of the first of the
following events :
(i) the exercise by Lessee during any Fiscal Year of
its option to purchase all of Lessor ' s interest in the
Equipment pursuant to Section 21; or
( ii) a default by Lessee and Lessor ' s election to
terminate this Lease pursuant to Section 24 .
(b) Upon termination of this Lease under
clause (a) (i) of this section, Lessee shall not be responsible
for the payment of any additional Lease Payments accruing after
the date of termination, except the Trustee ' s termination fee.
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In the event this Lease is terminated by reason of
clause (a) (ii) of this Section, if Lessee has not delivered
possession of the Equipment to Lessor in accordance with
Section 24 within ten ( 10) days after the termination of the
Lease, the termination shall nevertheless be effective, but
Lessee shall be responsible without limitation of any rights of
Lessor hereunder for the payment of damages in an amount equal
to the amount of the Lease Payments thereafter coming due which
are attributable to the number of days after such ten ( 10) day
period during which Lessee fails to deliver possession of the
Equipment and for any other loss suffered by Lessor as a result
of Lessee' s failure to deliver possession of the Equipment as
required.
Section 6 . Limited Obligation. Notwithstandinq any
other provision of this Lease, Lease Payments under the Lease
and all amounts necessary to pay principal and interest on the
Certificates shall be special , limited obligations of the
Lessee, payable solely (i) from moneys deposited from proceeds
of the Certificates in the Acquisition Fund established and
maintained by the Trustee, and earnings thereon, if any, and
(ii) pursuant to the obligation of the Lessee to make Lease
Payments under the Lease, which obligations shall be incurred
only after and to the extent that moneys have been disbursed
from the Acquisition Fund to purchase Equipment, as defined in
the Lease.
The Lessee' s obligation to make Lease Payments under
the Lease with respect to and to the extent of moneys disbursed
from the Acquisition Fund pursuant to specific Requisitions for
the lease and purchase of Equipment are stated in Section 7 .
Section 7A. Lease Payments - ANNUAL RATE LEASE .
(a) Lessee agrees to pay or cause to be paid to the
Trustee, as assignee of the Lessor, the Lease Payments arising
from each Acquisition Fund Draw and all other amounts necessary
to pay principal and interest due on the Certificates (subject
to the limitations stated in Section 6) . The Lease Payments
arising from an Acquisition Fund Draw are equal to the sum of
(i) the Base Rent , and ( ii) Additional Rent .
(i) The Base Rent consists of an Interest Component
and a Principal Component .
( ii) The Total Lease Principal is a number to be
derived for each Acquisition Fund Draw and approved by the
Lessee pursuant to a Lease Supplement . It consists of ( 1)
the amount withdrawn from the Acquisition Fund to pay
Equipment Costs , (2) the amount withdrawn from the
Acquisition Fund to pay Conversion Costs , and (3) the
Allocable Share of Costs of Issuance.
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(iii) Total Lease Principal is to be paid in annual
installments over a three, five, or seven year term,
depending upon the Lease Payment Term with respect to the
Equipment financed. The Principal Payment due each year is
the principal component of a level debt service schedule
(or as nearly level as possible in $5 , 000 increments) ,
computed using a term equal to the Lease Payment Term and
the initial interest rate used to determine the Interest
Component of such Base Rent . It is payable 5 days prior to
each June 15 , except June 15 , 2011 when it is payable 125
days in advance .
( iv) The Interest Component of Base Rent will be set
out on the Payment Schedule attached to each Lease
Supplement . The annual Interest Component is calculated by
multiplying Principal Component not yet paid by the Annual
Rate on the Certificates which convert to an Annual Rate on
the Acquisition Fund Draw Date, and each June 15 thereafter .
(v) Notwithstanding ( iv) above, in the event
Certificates bearing an Annual Rate must be purchased under
the Standby Purchase Commitment on any June 15 , the
Interest Component of Base Rent will be calculated at the
Bank Rate (on an amount of the Principal Component equal to
the principal on the Certificates pledge under the Standby
Certificate Purchase Agreement) until such Certificates are
remarketed or retired.
(vi) The Interest Component of Base Rents is payable
semi-annually five days before each June 15 and December 15 .
(vii) Commencing on the third anniversary of the
Closing Date, available money in the Revenue Fund
established under the Indenture will be credited to payment
of interest on the Lease. The Trustee will notify the
Lessee of the amount of such credit, if any, and Lessee is
entitled to reduce the interest payable on the next
Interest Payment Date by the same amount .
(viii) Additional Rents consists of a share of Program
Costs equal to a fraction the numerator of which is the
Acquisition Fund Draw and the denominator of which is the
amount in the Acquisition Fund on the Closing Date.
(ix) Additional Rents which pay Program Costs incurred
on a regular basis are payable in semi-annual installments
at the same time as the Interest Component of Base Rents .
Additional Rents which pay Program Costs incurred on an
irregular basis will be invoiced and payable 30 days
thereafter .
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(x) Late payments from the due date thereof will bear
interest at the highest rate allowed by law.
Lease Payments with respect to each Acquisition Fund Draw will
be set out on a Payment Schedule attached to a Lease
Supplement . In the event of a conflict between the Payment
Schedule and this Section, the former will control absent
mathematical error .
(b) The liability of the Lessee for Lease Payments
shall be limited to, and shall be payable solely from, the
limited tax revenues pledged to the payment thereof as
described in Section 9 hereof , as reduced in accordance with
the Indenture, from investment earnings on all trust-held funds
and accounts after application of such investment earnings to
all other prior purposes as described in the Trust Indenture.
(c) Except as hereinafter provided and as provided in
the Trust Indenture, payments of the Principal Component of
Base Rents received by the Trustee on each Principal Payment
Date shall be deposited into the Acquisition Fund and, if so
deposited, shall not reduce the unpaid balance of the Principal
Component of Base Rents ; provided, that in order to be
eligible for deposit into the Acquisition Fund, a request for
funds in an amount equal to such Principal Payment in the three
year period following the Principal Payment Date with respect
thereto must be demonstrated by the Annual Demand Survey
submitted by the Lessee to the Trustee, as provided in
Section 3 .
(d) Lessee understands that all proceeds from the
sale of Certificates , including the Acquisition Fund and the
Debt Service Reserve Fund, shall be applied and invested, as
provided in the Trust Indenture and shall become part of the
Trust Estate created thereby, and shall be subject to the
pledge and lien of the Trust Indenture as provided therein.
Section 7B . Lease Payments - FIXED RATE LEASE.
(a) Lessee agrees to pay or cause to be paid to the
Trustee, as assignee of the Lessor, the Lease Payments arising
from each Acquisition Fund Draw and all other amounts necessary
to pay principal and interest due on the Certificates (subject
to the limitations stated in Section 6) . The Lease Payments
arising from an Acquisition Fund Draw are equal to the sum of
( i) the Base Rent , and ( ii) Additional Rent .
( i) The Base Rent consists of an Interest Component
and a Principal Component .
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( ii) The Total Lease Principal is a number to be
derived for each Acquisition Fund Draw and approved by the
Lessee pursuant to a Lease Supplement . It consists of ( 1)
the amount withdrawn from the Acquisition Fund to pay
Equipment Costs , (2) the amount withdrawn from the
Acquisition Fund to pay Conversion Costs , and (3) the
Allocable Share of Costs of Issuance .
(iii) Total Lease Principal is to be paid in annual
installments over a three, five, or seven year term,
depending upon the Lease Payment Term with respect to the
Equipment financed. The Principal Payment due each year is
the principal component of a level debt service schedule
(or as nearly level as possible in $5 , 000 increments) ,
computed usinq a term equal to the Lease Payment Term and
the interest rates used to determine the Interest Component
of such Base Rent . It is payable 5 days prior to each
August 1, except August 1, 2011 when it is payable 125 days
in advance.
( iv) The Interest Component of Base Rent will be set
out on the Payment Schedule attached to each Lease
Supplement . The annual Interest Component is calculated by
multiplying Principal Component not yet paid by the Fixed
Rates on the Certificates which convert to Fixed Rates on
the Acquisition Fund Draw Date and which have the same
Lease Payment Term as the longest term Equipment financed
by the Acquisition Fund Draw and which have mandatory
tender dates conforming to the Principal Payment Dates for
the Principal Component .
(v) The Interest Component of Base Rents is payable
semi-annually five days before each August 1 and December l .
(vi) Commencing on the third anniversary of the
Closing Date, available money in the Revenue Fund
established under the Indenture will be credited to
payments of interest on the Lease. The Trustee will notify
the Lessee of the amount of such credit , if any, and Lessee
is entitled to reduce the interest payable on the next
Interest Payment Date by the same amount .
(vii) Additional Rents consist of a share of Program
Costs equal to a fraction the numerator of which is the
Acquisition Fund Draw and the denominator of which is the
amount in the Acguisition Fund on the Closinq Date.
(viii) Additional Rents which pay Program Costs incurred
on a regular basis are payable in semi-annual installments
at the same time as the Interest Component of Base Rents .
Additional Rents which pay Program Costs incurred on an
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irreqular basis will be invoiced and payable 30 days
thereafter .
(ix) Late payments from the due date thereof will bear
interest at the highest rate allowed by law.
Lease Payments with respect to each Acquisition Fund Draw will
be set out on a Payment Schedule attached to a Lease
Supplement . In the event of a conflict between the Payment
Schedule and this Section, the former will control absent
mathematical error .
(b) The liability of the Lessee for Lease Payments
shall be limited to, and shall be payable solely from, the
limited tax revenues pledged to the payment thereof as
described in Section 9 hereof , as reduced in accordance with
the Indenture, from investment earnings on all trust-held funds
and accounts after application of such investment earnings to
all other prior purposes as described in the Trust Indenture.
(c) Except as hereinafter provided and as provided in
the Trust Indenture, payments of the Principal Component of
Base Rents received by the Trustee on each Principal Payment
Date shall be deposited into the Acquisition Fund and, if so
deposited, shall not reduce the unpaid balance of the Principal
Component of Base Rents ; provided, that in order to be
eligible for deposit into the Acquisition Fund, a request for
funds in an amount equal to such Principal Payment in the three
year period following the Principal Payment Date with respect
thereto must be demonstrated by the Annual Demand Survey
submitted by the Lessee to the Trustee, as provided in Section
3 .
(d) Lessee understands that all proceeds from the
sale of Certificates, including the Acquisition Fund and the
Lease Payment Reserve Fund, shall be applied and invested, as
provided in the Trust Indenture and shall become part of the
Trust Estate created thereby, and shall be subject to the
pledge and lien of the Trust Indenture as provided therein.
Section 8 . Conditions Precedent To Each AcQuisition
Fund Draw.
(a) No less than 45 days prior to each Acquisition
Fund Draw Date on which the Lessee wishes to draw moneys from
the Acquisition Fund, the Lessee shall notify the Service Agent
of the Equipment to be purchased, its purchase price, and the
Lease Payment Term or Terms .
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(b) No less than 35 days prior to each Acquisition
Fund Draw Date on which the Lessee wishes to draw moneys from
the Acquisition Fund, the Service Agent shall notify the
Trustee, the Tender Aqent , and the Remarketing Agent of the
Total Lease Principal , which shall equal the sum of ( 1) the
Equipment Purchase Amount, (2) Conversion Costs , and (3 ) the
Allocable Share of Costs of Issuance attributable to ( 1) and
(2) . The sum of ( 1) , (2) , and (3) must be an integral multiple
of $5 , 000 which is at least $100 , 000 . The Service Agent shall
also notify the Trustee, the Tender Agent, and the Remarketing
Agent of the Lease Payment Term or Terms for the Equipment .
(c) After giving the notice provided in (b) , the
Service Agent shall complete a Payment Schedule in the form
attached to the Lease Supplement , estimating the expected
interest rates , for review by the Lessee.
(d) After receipt of the notice provided in (b) , the
Remarketing Agent will offer for sale and use its best efforts
to find purchasers for such Certificates to convert to an
Annual Rate or Fixed Rates on the Acquisition Fund Draw Date
and shall have remarketed such Certificates on or prior to the
Acquisition Fund Draw Date.
(e) No less than seven Business Days prior to each
Acquisition Fund Draw Date on which the Lessee wishes to draw
moneys from the Acquisition Fund, the Lessee shall provide the
Trustee with the following :
( i) A fully completed and executed Lease Supplement
in the form of Exhibit C, attached hereto and by this
reference made a part hereof ,
( ii) A fully completed Payment Schedule, in the form of
the Schedule to the Lease Supplement for an Annual Lease,
if this is an Annual Lease, or for a Fixed Rate Lease, if
this is a Fixed Rate Lease,
( iii) A list of Equipment to be leased under the Lease
Supplement, the cost and the useful life thereof , in the
form of Exhibit A to the Lease Supplement ,
(iv) A resolution authorizing execution of a Lease
Supplement, in the form of Exhibit D, attached hereto and
by this reference made a part hereof,
(v) A Requisition in the form of Exhibit E, attached
hereto and by this reference made a part hereof ,
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(vi) Invoices or other supporting documentation to
show purchase of Equipment ,
(vii) A Certificate of Acceptance, in the form of
Exhibit F, attached hereto and by this reference made a
part hereof ,
(viii) An opinion of Independent Counsel that ( 1) the
Trustee has a security interest in the Equipment for which
payment is being requested, (2) a search of all Uniform
Commercial Code records disclosed that there were no
previous filings with respect to the Equipment , and (3)
coverinq such other matters relating to the Lease and
Equipment as the Bank shall reasonably request,
(ix) Copies of executed and filed UCC-1 forms or other
appropriate financing statements evidencing the Trustee ' s
security interest in the Equipment and the Lease,
(x) A notification regardinq the location of the
Equipment , in the form of Exhibit G, attached hereto and by
this reference made a part hereof; and
(xi) A certificate executed by an Authorized Officer
of the Lessee, certifyinq ( 1) to the incumbency of those
officers of Lessee executing the Lease Supplement, (2) that
the Lease Supplement has been authorized by all necessary
action on the part of the Lessee, (3) that the Lease
Supplement is a valid and enforceable obligation of the
Lessee, (4) that there is no litiqation which, if adversely
determined, would put into question the ability of the
Lessee to deliver the Lease Supplement or to perform its
obligations thereunder or which would materially adversely
affect the financial condition of the Lessee, (5) that the
Trustee has a perfected security interest in the Equipment,
and Lessee has not granted an interest in the Equipment to
any other person, and (6) no Event of Default under the
Lease shall have occurred and been continuing .
(f) The Lessee shall not be entitled to make any
Acquisition Fund Draw until receipt by the Trustee of the
Standby Purchase Commitment and in full force and effect and a
direction from the Bank that the amount of Lessee ' s Draw has
been approved by the Bank.
(g) The Lessee will not be entitled to make any draws
from the Acquisition Fund after August 1, 2004 to acquire
Property with a seven-year Lease Payment Term, after August 1 ,
2006 to acquire Property with a five-year Lease Payment Term,
and after August 1, 2008 to acquire Property with a three-year
Lease Payment Term.
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(h) The Lessee will only be entitled to make draws
from the Acquisition Fund to provide for payment of an invoice
or bill for payment received from the vendor of the Equipment
no earlier than 45 days prior to the most recent Acquisition
Fund Draw Date, unless an opinion of Independent Counsel shall
be delivered to the Trustee to the effect that a draw made at a
different time is authorized by the law of the State and will
not adversely affect the exemption from federal income taxation
of interest paid by the Lessee under the Lease.
Section 8A. Purchases Pursuant to the Lease Between
Quarters . In the event Lessee wishes to acquire on behalf of
and lease from the Lessor Equipment, but such Equipment must be
available for use by the Lessee on a schedule so that the
purchase price therefor, or a portion thereof , will be due on a
day which is not an Acquisition Fund Draw Date, the Lessee may
irrevocably elect to lease the Equipment under the Lease by
delivering to the Trustee a notice in the form of Exhibit H,
attached hereto and by this reference made a part hereof , prior
to paying the purchase price or a portion of the purchase price
for the Equipment . Upon receipt of such notice, the Trustee
will set aside an amount in the Acquisition Fund for such
Equipment and provided the conditions of Section 8 are met ,
such amount will be disbursed to the Lessee on the next
Acquisition Fund Draw Date to pay Lessee for obtaining such
Equipment , in contemplation of being able to lease the
Equipment under the Lease. On the Acquisition Fund Draw Date,
title to the Equipment will pass to Lessor, who will then
convey title to the Equipment to the Lessee, who will lease the
Equipment pursuant to the terms of the Lease.
Section 9 . Covenant to Levy Taxes ; Limited Tax.
(a) Lessee covenants that during each Fiscal Year the
budget officer of Lessee shall place in its proposed budget of
maintenance and operating expenses for each ensuing Fiscal
Year, durinq the Lease Term, an amount necessary to pay any
past due Lease Payments and the anticipated Lease Payments for
any such successive Fiscal Year; Lessee further covenants that
the final budget for each Fiscal Year during the Lease Term
shall set aside and appropriate (out of revenues , funds , and
taxes available to Lessee during such budget year) an amount
sufficient to pay the obligations of Lessee hereunder, and such
revenues , funds and taxes , in an amount sufficient to make such
payments , is hereby pledged to the Trustee for such purpose.
(b) To provide for payment of the Lease Payments ,
Lessee has levied a tax on all taxable property within the
boundaries of Lessee, within the limitations prescribed by law,
at a rate from year to year as will be ample and sufficient
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together with other funds and revenues available for the
purpose to provide funds each year to pay the Lease Payments ,
full allowance being made for delinquencies and costs of
collection, and such tax together with other funds and revenues
available for the purpose have been pledged to the payment of
the Lease Payments as the same shall become due and payable
under this Lease, all as provided in the ordinance authorizing
the execution of this Lease.
(c) Lessee represents that the duties of the
officials of the Lessee to do and perform the actions mentioned
in paragraphs (a) and (b) of this section are ministerial
duties , and that the tax levied and to be annually assessed and
collected may not exceed the amount of tax permitted by
applicable law.
(d) Notwithstanding any other provision of this
Lease, the parties hereto recognize that this Section prevails
over any other provision of this document .
Section 10 . Limitation on Warranties .
(a) The Equipment has been selected by Lessee, and
neither Lessor nor any assignee thereof shall have any
responsibility in connection with the selection of the
Equipment , its suitability for the use intended by Lessee, or
the acceptance by Lessee of the order submitted. Lessee
authorizes Trustee to add the serial number , if any, of the
Equipment to Exhibit A of the Lease when available.
(b) Lessor shall have no obligation to install,
erect , test, inspect , service or maintain the Equipment under
any circumstances, and any such obligation or obligations
provided under the terms of the purchase and sale thereof ,
shall be assigned to, and assumed by Lessee.
(c) Lessor hereby assigns to Lessee for and durinq
the Lease Term, all of its interest in all warranties and
guarantees , express or implied, if any, from, or made by, the
manufacturer, wholesale distributor, or other party issued on
or applicable to the Equipment , and Lessor hereby authorizes
Lessee to obtain the customary services furnished in connection
with such warranties and guarantees at Lessee ' s expense.
(d) Lessor hereby assigns to Lessee for and during
the Lease Term all of its interest in patent indemnity
protection with respect to the Equipment . Such assignment of
patent indemnity protection by Lessor to Lessee shall
constitute the entire liability of Lessor for any patent
infrinqement by Equipment furnished pursuant to this Lease .
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(e) THE EQUIPMENT IS DELIVERED AS IS, AND NEITHER
LESSOR, THE SERVICING AGENT NOR THE TRUSTEE MAKE ANY WARRANTY
OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE,
DESIGN, CONDITION, MERCHANTABILITY, FITNESS OR USEFULNESS FOR
ANY PARTICULAR PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY
LESSEE OF THE EQUIPMENT, OR ANY OTHER REPRESENTATION OR
WARRANTY WITH RESPECT TO THE EQUIPMENT. NO BREACH OF WARRANTY
SHALL AFFECT THE OBLIGATION OF LESSEE TO REMIT THE LEASE
PAYMENTS PRESCRIBED HEREUNDER. THIS DISCLAIMER IS GIVEN BY
LESSOR, THE SERVICING AGENT AND THE TRUSTEE ONLY AND IS NOT
INTENDED, NOR SHALL IT BE CONSTRUED, TO AMEND, MODIFY OR
OTHERWISE AFFECT THE GUARANTEES AND WARRANTIES, IF ANY,
PROVIDED BY THE MANUFACTURER, WHOLESALE DISTRIBUTOR, OR ANY
OTHER PARTY WITH RESPECT TO THE EQUIPMENT.
Section 11 . Authority; Authorization; Additional
Representations .
(a) Lessee represents , covenants and warrants as
follows :
(i) Lessee is a political subdivision of the State
authorized under the Constitution and laws of the State to
enter into this Lease and the transactions contemplated
hereby, and to perform all of its obligations hereunder .
( ii) The officer of Lessee executing this Lease has
been duly authorized to execute and deliver this Lease, by
appropriate action of the governing body of Lessee,
evidence of such action is attached hereto as Exhibit B,
and Lessee has taken all action and complied with all
applicable procedures necessary to insure enforceability of
this Lease.
(iii) Lessee will not pledge, mortgage or assign this
Lease, or its duties and obligations hereunder, to any
other person, firm or corporation except as provided under
the terms of this Lease.
( iv) The Lease Payment Terms set out on each Payment
Schedule will be calculated in the manner required by this
Lease.
(v) The Equipment will be used during the Lease Term
only to carry out the lawful purposes of Lessee and that
the location, condition, and use of the Equipment will
comply with all state and federal laws so that no cause of
action will arise which would cause the Lessor, Trustee,
Servicinq Agent or Bank to be responsible for any
liability, claim or demand while the Equipment is in the
possession of the Lessee.
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(vi) Upon delivery and installation of the Equipment ,
Lessee will provide to the Trustee a completed and executed
copy of the Certificate of Acceptance attached hereto as
Exhibit F.
(vii) Lessee will process the acquisition of the
Equipment through competitive biddinq pursuant to
applicable law or has determined the same to be exempt from
such competitive bidding .
(viii) The Equipment will be installed on land located
in the county set forth in Exhibit G, which land is owned
in fee by Lessee, is described on Exhibit G attached hereto
and is free from all liens and encumbrances for borrowed
money except as set forth on Exhibit G.
(ix) In the event any liens are identified on
Exhibit G, Lessee prior to the delivery and installation of
the Equipment shall deliver to Lessor written waivers from
the holders of any such liens expressly waiving and
disclaiming any interest, as security or otherwise, in the
Equipment .
(x) The Equipment is and shall at all times be and
remain personal property. The Equipment or any part
thereof may not be or hereafter become in any manner
affixed or attached to or embedded in or permanently rested
upon real property or any building thereon or attached in
any manner that will cause the same to be considered a part
of the realty under State law.
(b) Lessor represents , covenants and warrants as
follows :
(i) Lessor is a corporation authorized under the
Constitution and laws of the State to enter into this Lease
and the transactions contemplated hereby, and to perform
all of its obligations hereunder.
( ii) Lessor has not and will not pledqe, mortgage or
assign this Lease, or its duties and obligations hereunder,
to any other person, firm or corporation except as provided
under the terms of this Lease and the Indenture.
Section 12 . Title. Lessee agrees that it will
purchase Equipment on behalf of Lessor, who will then convey
title to the Lessee. Lessee shall have title to the Equipment
during the Lease Term, subject and subordinate to the security
interest granted under the Lease to the Lessor .
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Section 13 . Security Interest ; Liens . (a) In order
to secure all of its obligations hereunder, Lessee hereby: ( 1)
grants to Lessor a first and prior security interest in any and
all rights and interest of Lessee in the Equipment and in all
attachments , accessions , and substitutions thereto, and on any
proceeds therefrom; ( ii) agrees to execute and deliver all
financing statements , certificates of title and other
instruments necessary or appropriate to evidence such security
interest .
Lessee may replace all or a portion of such Equipment
and Lessor hereby agrees to release its security interest in
such portion of the Equipment; provided, that at or before the
time it releases its security interest, Lessee: (a) grants to
Lessor a first and prior security interest in any and all
Lessee ' s right, title and interest in the replacement equipment
and in all attachments , accessions and substitutions thereto
and on any proceeds therefrom which security interest is
limited to the value of the portion of the Equipment being
replaced; (b) delivers to Lessor an opinion of Independent
Counsel that Lessor has a first priority perfected security
interest in the replacement equipment to the extent of the
security interest described in the preceding clause (a) ; and,
(c) delivers to Lessor a certification by the vendor thereof
that the replacement equipment is compatible with the
Equipment, does not adversely affect the operation capabilities
of the Equipment and does not reduce or adversely affect the
fair market value of the Equipment .
(b) During the Lease Term, Lessee shall not, directly
or indirectly, create, incur , assume or suffer to exist any
mortgage, pledge, lien, charge, encumbrance or claim on or with
respect to the Equipment, other than the respective rights of
the Trustee, Lessor and Lessee as herein provided as Permitted
Encumbrances . Lessor shall promptly, at its own expense, or
cause the Lessee to take such action as may be necessary to
discharge or remove any such mortgage, pledge, �ien, charge,
encumbrance or claim if the same shall arise at any time.
Section 14 . Use; Repairs . Lessee will use the
Equipment in a careful manner for the use contemplated by the
manufacturer for the Equipment, shall take all reasonable steps
to assure that the Equipment is used solely by persons
qualified and trained to do so and shall comply with all laws ,
ordinances, insurance policies and regulations relating to, and
will pay all costs , claims , damages, fees and charges arising
out of its possession, use or maintenance of the Equipment .
Lessee, at its expense, will keep the Equipment in good repair ,
and furnish all parts mechanisms and devices required
therefor . If Lessee fails to maintain the Equipment in
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accordance with this Section 14 , the assignee of the Lessor
shall have the riqht, but not the obligation, to maintain the
Equipment . If the assignee of the Lessor incurs any expense in
maintaining the Equipment for which Lessee is responsible or
liable under this Section 14 , Lessee shall reimburse such
assignee therefor .
Section 15 . Alterations . Lessee will not make any
alterations , additions or improvements to the Equipment if the
value of the Equipment affected thereby exceeds $50 , 000 without
prior written notice to Lessor unless such alterations ,
additions or improvements may be readily removed without damage
to the Equipment or such alterations , additions or improvement
become subject to Lessor ' s security interest in the Equipment
in accordance with the terms and conditions set forth in
Section 13 hereof .
Section 16 . Inspection. Lessor will be entitled to
inspect the Equipment at the location designated by Exhibit G
during reasonable business hours . Such right of inspection
shall be subject to reasonable security arrangements .
Section 17 . Liens and Taxes . Lessee shall keep the
Equipment free and clear of all liens, and encumbrances except
those created under the Lease .
Lessee agrees to pay any charges or taxes ( local ,
state and federal) presently or hereafter imposed on the
ownership, leasing, rental, sale, purchase, possession or use
of the Equipment . Lessee at its own expense may contest the
assessment of such charges and taxes until it obtains a final
administrative or judicial determination of its liability for
such charges or taxes unless the Equipment is encumbered by any
levy, lien or other type of encumbrance because of Lessee ' s
failure to pay such charges and taxes . If Lessee fails to pay
said charges and taxes when due, the assignee of the Lessor
after consultation with Lessee shall have the right , but shall
not be obligated, to pay said charges and taxes . If such
assignee of the Lessor pays any charges or taxes for which
Lessee is responsible or liable under this Lease, Lessee shall
reimburse such assignee therefor .
Section 18 . Risk of Loss; Damaqe; Destruction;
Condemnation. Lessee assumes all risk of loss of or damage to
the Equipment from any cause whatsoever, and no such loss of or
damage to the Equipment nor defect therein nor unfitness or
obsolescence thereof shall relieve the Lessee of the obligation
to make Lease Payments or to perform any other obliqation under
this Lease. In the event of damage to any item of Equipment ,
Lessee will immediately place the same in good repair, and,
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when received, shall apply the Net Proceeds of any insurance
recovery to the costs incurred in making such repairs . If
Lessor determines that any item of Equipment is lost, stolen,
destroyed or damaged beyond repair or if any of the Equipment
is taken by condemnation, Lessee will either (a) replace the
same with equipment of equivalent value and usefulness in good
repair, or (b) on the next Principal Payment Date, pay Lessor
the Prepayment Option Amount with respect to such Equipment .
Notwithstanding any other provision of this Lease to
the contrary, in the event the Lessee elects to make the
payment referred to in the preceding paragraph, the Lease
Payments to be made by the Lessee shall be reduced to reflect
such payment . Rny Net Proceeds paid to Lessee as a result of
condemnation of all or any part of the Equipment shall be
applied by it as set forth in (a) or (b) of the preceding
paragraph. Any Net Proceeds of insurance, or compensation paid
to Lessor as a result of the loss of , theft of , destruction of ,
damaqe beyond repair to or condemnation of all or any part of
the Equipment shall be applied as set forth in (a) or (b) of
the preceding paragraph.
Section 19 . Insurance.
(a) Liability Insurance. Upon receipt of possession
of the Equipment , (to the extent that such risk is not barred
by the Texas Tort Claim Act) , Lessee shall take such measures
as may be necessary to assure that any liability for injuries
to or death of any person or damage to or loss of property
arising out of or in any way relating to the condition or the
operation of the Equipment or any part thereof is covered by a
blanket or other general liability insurance policy maintained
by Lessee.
(b) Property Insurance. In a manner consistent with
State law, upon receipt of possession of the Equipment or
earlier, if required by the terms of the sale with a vendor,
Lessee shall have and assume the risk of loss with respect
thereto . Lessee shall obtain and maintain continuously in
effect during the Term of this Lease, including any extensions ,
from whatever source legally available, all-risk insurance
(including flood and earthquake coverage, if applicable) . If
any such policy is obtained or caused to be obtained from a
private insurer, then such coverage is subject only to the
standard exclusions contained in the policy, in such amount as
will be at least sufficient so that a claim may be made for the
full replacement cost or any part thereof damaged or destroyed
or to pay the applicable Prepayment Option Amount of the
Equipment, whichever sum is higher . Such insurance may be
provided by a rider to an existing policy or under a separate
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policy. Such insurance may be written with customary
deductible amounts . The Net Proceeds of insurance required by
this Section shall be applied to the prompt repair , restoration
or replacement of the Equipment, unless the Lessee elects not
to repair, restore or replace the Equipment in which case the
Net Proceeds will be applied to the Lease Payments due
hereunder in inverse order of due date. If the Lessee elects
to have the proceeds applied to the repair, restoration and
replacement of Equipment, then any Net Proceeds in excess of
the costs of the repair, restoration or replacement shall be
applied as a credit to the Lease Payments due hereunder in
inverse order of due date. Any remaining Net Proceeds shall be
applied to amounts due Lessor, thereafter to Lessee.
All Net Proceeds of insurance with respect to the
Equipment shall be deposited in an Insurance Fund to be
established by the Trustee under the Indenture, if necessary.
(c) Worker ' s Compensation Insurance. If required by
State law, Lessee shall carry Worker ' s Compensation Insurance
covering all employees on, in, near or about the Equipment, and
upon request, shall furnish to Lessor certificates evidencing
such coverage throughout the Term of this Lease.
(d) Requirements For All Insurance. All insurance
policies including all applicable riders , addenda, clauses or
otherwise, required by this Article shall be obtained from and
maintained with responsible insurance companies organized under
the laws of one of the states of the United States and
qualified to do business in the State; and shall contain a
provision that the insurer shall not cancel or materially
revise coverage thereunder without giving written notice to the
insured parties at least thirty (30) days before the
cancellation or revision becomes effective. Al1 insurance
policies, riders , addenda, clauses or letters of coverage
required by Section 18(a) and (b) shall name Lessee, Lessor,
and the Trustee as insured party for the benefit of the owners
of the Certificates .
�e) Indemnification of Lessor . Lessee shall and does
hereby agree to protect and save Lessor and its assignee
harmless against any and all losses or damage to the Equipment
by fire, flood, explosion, tornado, or theft and Lessee shall
and does hereby assume all liability to any person whomsoever
arising from the location, condition or use of the Equipment ,
and shall indemnify and does indemnify Lessor and its assignee
of and from all liability, claim and demand whatsoever arising
from the location, condition, or use of the Equipment , and
qrowinq out of any cause, including alleged imperfections or
defects in Equipment, and from every other liability, claim and
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demand whatsoever during the term of this Lease or arisinq
while the Equipment is in possession of Lessee. Lessee also
agrees to promptly pay or, reimburse the Trustee, in cash, for
any taxes paid by Trustee in connection with, or arising out
of , this Lease including without limitation any and all ad
valorem property taxes levied against the Equipment, and sales
taxes or use taxes imposed on Lessee, Lessor, or the Trustee.
Section 20 . Indemnification. The Lessee agrees to
comply with the terms of this Lease, including the payment of
the Lease Payments and assures the Lessor that in the event
there is a default on its part hereunder it will pay to the
Lessor, the Bank, the Tender Agent , the Trustee or the
Remarketing Agent any monetary losses ( including court costs
and attorney' s fees) such party may suffer thereby.
Section 21 . Prepayment Option. Provided that there
is not then existing an Event of Default, or an event which
with notice or lapse of time, or both, could become an Event of
Default , Lessee will have the right to prepay all or part of
its obligations hereunder . The Lessee shall identify the
Principal Payments due on the Equipment it wishes to prepay,
which must be in integral multiples of $5 , 000, and the interest
required to be paid thereon through the Prepayment Option Date
and shall notify the Servicer, the Trustee, and the Tender
Agent .
For an Annual Lease, such prepayment must occur 125
days prior to any June 15 , on which date the prepayment
purchase option shall be deemed to have been exercised. The
Prepayment Option Amount is the sum of Principal Payments
remaining unpaid on the Equipment, interest on all such
Principal Payments to the June 15 Prepayment Purchase Option
Date, and Additional Rents which have been incurred and are
unpaid. The Lessee shall direct the Trustee to deposit the
Prepayment Purchase Option in the Redemption Account and to use
such funds to redeem Certificates on the succeeding June 15 .
For a Fixed Rate Lease, prepayment must occur 125 days
prior to any August 1 or February 1 Interest Payment Date, on
which date the prepayment purchase option shall be deemed to
have been exercised. The Prepayment Option Amount is the sum
of ( 1) Principal Payments on the Equipment remaining unpaid,
(2) interest on all Principal Payments remaining unpaid through
the succeeding Interest Payment Date, (3) Additional Rents
which have been incurred and are unpaid, and (4) a premium
computed as a percentage of the Principal Payments remaining
unpaid as stated in the following table if the Prepayment
Option Date will occur on a date that is equal to or less than
the number of years stated in the following table after the
Acquisition Fund Draw for such Equipment :
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Premium Percentage
Number of Years 3-Year Lease 5-Year Lease 7-Year Lease
1 3% 6% 8%
2 3% 6%
3 4%
4 2%
The Lessee shall direct the Trustee to deposit the Prepayment
Option Amount in the Redemption Account and to use such funds
to redeem Certificates on the succeeding Interest Payment Date .
Upon satisfaction by Lessee of such prepayment
conditions , Lessor will release any and all of its rights and
interests in the Equipment to Lessee as is , without warranty
express or implied, except that Lessor will warrant to Lessee
that the Equipment is free and clear of any liens or other
encumbrances created by Lessor .
If , on the final Lease Payment Date, provided that
there is not then existing an Event of Default, or an event
which with notice or lapse of time, or both, could become an
Event of Default, Lessee tenders the final Lease Payment ,
Lessor will release any and all of its rights and interest in
the Equipment to Lessee as is, without warranty express or
implied except that Lessor will warrant to Lessee that the
Equipment is free and clear of any liens or other encumbrances
created by Lessor .
Section 22 . Assignment . Lessee may not assign,
transfer, pledge, hypothecate or grant any security interest
in, or sublet or otherwise dispose of , or lend this Lease or
the Equipment or any interest in this Lease or the Equipment
(except to the Lessor) , or permit the Equipment to be operated
by anyone other than Lessee, Lessee' s employees or persons
authorized by Lessee in connection with Lessee ' s operation of
the Equipment .
Lessee hereby consents to Lessor ' s assignment of its
rights and interest in and to this Lease, the Equipment, and
any other documents executed with respect to this Lease to the
Trustee. Upon such assignment, the Trustee shall have no
liability with respect to any covenants, representations or
warranties made by Lessee or any covenants and representations
of the Lessor .
Section 23 . Events of Default . An Event of Default
means the occurrence of any one of the following events :
(a) Lessee fails to make any Lease Payment (or any
other payment) , as it becomes due in accordance with the terms
of this Lease and any such failure continues for five ( 5) days
after the due date thereof ;
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(b) Lessee fails to perform or observe any other
covenant, condition, or agreement to be performed or observed
by it hereunder, provided that for any such covenant ,
condition, or agreement other than as set forth in Sections 11 ,
13 , 16 and 20 hereof , Lessee shall not be in default hereunder
unless such failure is not cured within twenty (20) days after
written notice thereof by Lessor, the Service Agent or the
Trustee;
(c) The discovery by Lessor , the Service Agent or the
Trustee that any material statement, representation, or
warranty made by Lessee in this Lease or in any writing ever
delivered by Lessee pursuant hereto or in connection herewith
is false, misleading, or erroneous in any material respect as
of the date when made;
(d) Any material provision of this Lease or the
Certificates shall cease to be valid and binding, or the Lessee
shall contest any such provision, or the Lessee or any aqent or
trustee on behalf of the Lessee shall deny that it has any
further liability under this Lease or the Certificates; or
(e) Lessee becomes insolvent or admits in writing its
inability to pay its debts as they mature or applies for,
consents to, or acquiesces in the appointment of a trustee,
receiver or custodian for the Lessee or a substantial part of
its property; or in the absence of such application, consent or
acquiescence, a trustee, zeceiver or custodian is appointed for
Lessee or a substantial part of its property and is not
discharged within sixty (60) days ; or any bankruptcy,
reorganization, debt arrangement , moratorium, or any proceeding
under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is instituted by or against Lessee and,
if instituted against Lessee, is consented to or acquiesced in
by Lessee or is not dismissed within sixty (60) days .
Section 24 . Remedies . Upon the occurrence of an
Event of Default, and as long as such Event of Default is
continuing, Trustee (as assignee of the Lessor) may, at its
option, exercise any one or more of the following remedies :
(a) By written notice to Lessee with a copy to the
Lessor, declare an amount equal to the Prepayment Option Amount
on the third business day after the taxes levied by the next
annual tax levy of the Lessee become delinquent to be due and
payable on such date, whereupon the same shall become due and
payable on such date;
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(b) By written notice to Lessee with a copy to the
Lessor, request Lessee to promptly surrender possession of the
Equipment to Lessor and permit Lessor or any party designated
by Lessor quiet enjoyment and use of the Equipment;
(c) By written notice to Lessee, with a copy to the
Lessor, request the Equipment be transported, insured and
freight prepaid in an amount equal to the freight charqe to any
destination as designated by the Trustee;
(d) Take immediate possession of and remove the
Equipment;
(e) Sell or lease the Equipment for the account of
Lessee or lease the Equipment for the account of Lessee,
holding Lessee liable for all Lease Payments and other payments
due to the effective date of such selling, leasing or
subleasing and for difference between the purchase price,
rental and other amounts paid by the purchaser, lessee or
sublessee pursuant to such sale, sublease or lease and the
amounts payable by Lessee hereunder; and
(f) Exercise any other right, remedy or privilege
which may be available to it under applicable laws of the State
of Texas , or any other applicable law, or proceed by
appropriate court action to enforce the terms of this Lease or
to recover damages for the breach of this Lease or to rescind
this Lease as to any or all of the Equipment .
In addition, Lessee will remain liable to the extent
permitted by law for all covenants and indemnities under this
Lease and for expenses , including court costs when and if
deemed appropriate and awarded by a court of competent
jurisdiction, incurred by Lessor or its assignee with respect
to the enforcement of any of the remedies listed above or any
other remedy available to Lessor, when it is finally
adjudicated by a court of competent jurisdiction that Lessee is
in default of this Lease.
(g) As a supplement to or as an alternative to any
one or more of the foregoing remedies , the Trustee, the Bank,
or Lessor may institute a mandamus action to require Lessee to
comply with the covenants made by Lessee herein and the
resolution which is attached as Exhibit B.
Section 25 . Appointment of Service Aqent . The Lessor
hereto hereby appoints the Servicing Agent, as an independent
contractor , to perform the duties ascribed to such person by
the provisions hereof , but may select a different Service Agent
at any time.
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� i
Section 26 . Notices . All notices to be given under
this Lease shall be made in writing and personally delivered or
mailed by certified mail , postage prepaid, return receipt
requested, to the other party at its address set forth at the
conclusion of this Lease Purchase Agreement or at such address
as the party may provide in writing from time to time.
Section 27 , Section Headings . All section headings
contained herein are for the convenience of reference only and
are not intended to define or limit the scope of any provision
of this Lease .
Section 28 . Governing Law. This Lease shall be
construed in accordance with, and governed by, the law of the
State of Texas .
Section 29 . Delivery of Related Documents . Lessee
will execute or provide, as requested by the Service Agent, the
Lessor or the Trustee, such other documents and information as
are reasonably necessary with respect to the transactions
contemplated by this Lease.
Section 30 . Entire Aqreement ; Waiver . This Lease,
together with the Certificate of Acceptance and other
attachments hereto, and other documents or instruments executed
by Lessee and Lessor in connection herewith, constitute the
entire agreement between the parties with respect to the lease
of the Equipment, and this Lease shall not be modified,
amended, altered, or changed except with the written consent of
the Lessee and Lessor . Any provision of this Lease found to be
prohibited by law shall be ineffective to the extent of such
prohibition without invalidating the remainder of this Lease.
The waiver by Lessor of any breach by Lessee of any term,
covenant or condition hereof shall not operate as a waiver of
any subsequent breach thereof .
Section 31 . Failure of Vendor to Perform. Lessor
shall have no liability or obligation to Lessee for failure of
any vendor to perform in accordance with the provisions of any
contract or agreement to acquire the Equipment ; and no
obligation of Lessee hereunder shall be terminated, reduced or
otherwise affected by any such failure.
Section 32 . Execution in Counterparts . This Lease
may be executed in several counterparts , each of which shall be
deemed an original , and all of which shall constitute but one
and the same instrument .
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Section 33 . Trust Indenture . Lessee hereby
acknowledges that, pursuant to the Indenture and in
consideration of the receipt of the proceeds from the sale of
Certificates of Participation in the Lease, Lessor has assigned
the Lease to the Trustee for the holders of the Certificates ,
first, and for the Bank, second. However, Lessee has retained
its obligation to provide funds to Lessee for a certain portion
of payments to be made under the Lease. Simultaneous with such
assignment , in further consideration of receipt of the sales
proceeds, Lessor has granted to the Trustee a security interest
in such sales proceeds to secure the performance of the
obligations of the Lessee under the Lease. Lessee hereby
acknowledges and consents to such security interest .
Section 34 . Additional Equipment . If Lessee elects
to acquire Equipment in addition to the Equipment listed on
Exhibit A hereto, Lessee may add such Equipment to Exhibit A
and obtain an Acquisition Fund Draw to purchase and lease the
Equipment, in the same manner as Equipment listed on Exhibit A
on the Closing Date, subject to the terms of the Lease . Any
Equipment financed and leased pursuant to this Lease, and all
Equipment listed in Lessee ' s annual Demand Survey, will be
added to Exhibit A, so that at all times it reflects Equipment
leased and to be leased hereunder . The acquisition of any such
additional equipment shall not affect the Lessor ' s security
interest in the Equipment or any other terms or conditions of
this Lease applicable to the Equipment .
Section 35 . Pay�ent on Non-Business Day. If pursuant
to the terms of this Lease any payment is due or obligation is
to be discharged on a day other than a Business Day, such
payment shall become due or obligation shall be discharged on
the next succeeding Business Day.
Section 36 . Financial Information. During the Lease
Term, Lessee annually will provide the Service Agent and the
Bank with current financial statements , budgets , proof of
compliance with the covenant with respect to the appropriation
and budqeting for the ensuing Fiscal Year and such other
financial information relating to the ability of Lessee to
continue this Lease as may reasonably be requested by Lessor or
its assignee.
Section 37 . Binding Effect . This Lease shall inure
to the benefit of and shall be binding upon Lessor and Lessee
and their respective successors and assigns . Lessee hereby
acknowledges and consents to the assignment of this Lease by
the Lessor to the Trustee under and pursuant to the Trust
Indenture and agrees as follows :
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(a) to make each Lease Payment provided for herein
directly to the Trustee so long as any Certificates shall be
Outstanding and unpaid, free and clear of any set-offs or
counterclaims whatsoever ;
(b) not to seek to recover any payment made to the
Trustee pursuant to the Indenture once such payment is made; and
(c) that , so long as any Certificates shall be
Outstanding and unpaid, all rights of the Lessor as lessor,
with respect to this Lease, the Equipment or any part thereof ,
shall be exercisable by the Trustee .
Section 38 . Limitation of Liability. Execution and
delivery of this Lease is authorized by the governing body of
Lessee, and after completion and delivery of the Exhibits
hereto attached in a form and substance satisfactory to the
Trustee, the Trustee is authorized to deliver the same on
behalf of the Lessor . By the acceptance of this Lease, any
holder or assignee hereof understands and accepts that the
members of the governing body and Authorized Officers of Lessee
are not personally liable for the payment of any claim or the
performance of any obliqation hereunder; that this Lease is
executed and made part of the trust estate (as that term is
defined by the Trust Indenture) and that any recourse hereunder
or upon the Certificates is limited to revenues, funds and
taxes which secure the indebtedness evidenced by the
Certificates .
Section 39 . Severability. In the event any provision
of this Lease shall be held invalid or unenforceable by any
court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision hereof .
Section 40 . Amendments, Changes and Modifications .
This Lease may be amended by agreement among Lessor , the
Trustee and Lessee, provided any such amendment shall be
subject to the provisions of the Indenture. Subject to the
approval of the Trustee, Lessor and Lessee may consent to
amendment of this Lease to the extent permitted by law for the
purpose of curing any ambiguity, formal defect or omission or
providing additional security or to meet any requirements
imposed by any law or laws of the State or any order,
regulation or ruling . The Lessee and the Lessor may execute a
Lease Supplement, substantially in the form of Exhibit C
hereto, in order to fulfill the conditions of Section 8 of this
Lease, and the Trustee ' s disbursement of an Acquisition Fund
Draw will be deemed to be consent thereto .
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Section 41 . Further Assurances and Corrective
Instruments . Lessor and Lessee agree that they will , from time
to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such supplements hereto
and such further instruments as may reasonably be required for
conferring or affirming Lessor ' s ownership interest in and to
the Equipment (subject to this Lease) , for correcting any
inadequate or incorrect description of the Equipment hereby
leased or intended so to be, for indicating the closing date
and for carrying out the expressed intention of this Lease.
Section 42 . Tax Covenant . The Lessee recoqnizes that
the Holders of the Certificates from time to time will have
accepted them on, and paid therefor a price which reflects , the
understanding that interest on the Certificates is exempt from
federal income taxation under laws in force at the time the
Certificates shall have been delivered. In this connection the
Lessee covenants that it will not take or omit to take any
action which may render the interest on any of the Certificates
subject to federal income taxation, that it will use the
proceeds of the Certificates and any other funds of the Lessee
in such a manner that the use thereof , as reasonably expected
by the Lessee at the time of issuance of the Certificates ,
would not cause the Certificates to be "arbitrage bonds" under
Section 103(c) of the Internal Revenue Code of 1954 , as
amended, and the regulations thereunder and that it will not
permit at any time any proceeds of the Certificates or any
other funds of the Lessee to be used, directly or indirectly,
in a manner which would result in the exclusion of the interest
on any Certificate from the exemption from federal income tax
otherwise afforded by Section 103 (a) of the Code. The officers
and employees of the Lessee shall execute and deliver from time
to time, on behalf of the Lessee, such certificates ,
instruments and documents as shall be deemed necessary or
advisable to evidence compliance by the Lessee with said
Section 103 (c) and the regulations thereunder with respect to
the use of the proceeds of the Certificates . Such
certificates, instruments and documents may contain such
stipulations as shall be necessary or advisable in connection
with the stated purpose of this Section and the foregoing
provisions hereof, and the Lessee and Trustee hereby covenant
and agree to comply with the provisions of any such stipulation
throughout the term of the Certificate.
Section 43 . Time of Essence. Time is of the essence
in this Lease.
Section 44 . No Usury. Any provisions contained
herein to the contrary notwithstanding, neither Lessor nor the
Trustee shall be entitled to receive or collect , nor shall
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Lessee be obliqated to pay, interest on any amounts owing to
Lessor or the Trustee pursuant to this Lease in excess of the
maximum rate of interest permitted by applicable law, including
Section 717k-2 , Vernon' s Annotated Taxes Civil Statutes , and if
any provision herein shall ever be construed or held to permit
the collection or to require the payment of any amount of
interest in excess of that permitted by applicable law, the
provisions of this section shall control and shall override any
contrary or inconsistent provision herein. The intention of
the parties being to conform strictly to the usury limitations
under applicable law, this Lease shall be held subject to
reduction to the amount allowed under said applicable law as
now or hereafter construed by the courts havinq jurisdiction.
The term "applicable law" as used in this section shall mean
the law of the State of Texas or the law of the United States ,
whichever law allows the greater rate of interest , as such laws
now exist or may be changed or amended or come into effect in
the future.
Section 45 . Consent to Jurisdiction; Waiver of Immunities .
(a) In any action or proceeding arising out of or
relatinq to this Lease, Lessee hereby irrevocably submits to
the jurisdiction of any state or federal court sitting in the
county in which the Trustee is located, provided such location
is in the State, and Lessee hereby irrevocably agrees that all
claims in respect of such action or proceeding may be heard and
determined in such Texas State or Federal court . Lessee hereby
irrevocably waives, to the fullest extent it may effectively do
so, the defense of an inconvenient forum to the maintenance of
such action or proceeding . Lessee agrees that a final judgment
in any such action or proceeding shall be conclusive and may be
enforced in any other jurisdictions by suit on the judgment or
in any other manner provided by law.
(b) Nothing contained in subsection 45(a) above shall
affect the right of Lessor or the Trustee to bring any action
or proceeding against Lessee in the courts of any other
jurisdictions .
(c) To the extent that Lessee has or hereafter may
acquire any immunity from jurisdiction of any court or from any
legal process (whether through service of notice, attachment
prior to judgment, attachment in aid of execution, execution or
otherwise) with respect to itself or its property, Lessee
hereby irrevocably waives such immunity in respect of its
obligation under this Lease.
Section 46 . Execution. The duly authorized officers
of the Lessee have been authorized to execute and deliver the
Lease and other instruments and certificates as may be
< < y � ��
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reasonably required in connection with the sale and purchase of
the Certificates and to consent to such changes in the terms of
the Lease as may be reasonably necessary in connection with
such delivery. By their execution and delivery of the Lease,
such officers of the Lessee have consented to all changes in
the terms of the Lease and have found them to be reasonably
necessary in connection with the sale and purchase of the
Certificates and delivery of the Lease.
Section 47 . Election of Lease Interest Rate Mode.
Lessee hereby elects the following interest rate mode with
respect to all Acquisition Fund Draws . The lease interest rate
mode elected is (insert either Fixed Rate or Annual Rate)
fixed Such election may not be changed
without prior receipt of an opinion of nationally recognized
tax counsel that such change will not affect the exemption from
federal income taxation of the Interest Component on the
Certificates and without the prior written consent of the Bank
and the Lessor .
IN WITNESS WHEREOF, Lessor has caused this Lease to be
executed in its name by its duly authorized officer ; and Lessee
has caused this Lease to be executed in its name by its duly
authorized officer .
LESSOR: Houston-Galveston
Equipment Finance Corp.
Address of Lessor : By:
Name:
Title:
LESSEE:
Address of Lessee: /� By:
O �L L�c<JiG� Name: 1..P �. r,,� �
Title: ��}-yp/l,
�"',�?X Fy S `7 7.5 l/ ,(z_
ATTEST (LESSEE) :
By:
Name:
The address of the Trustee is : Title:
(District Seal)
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� zo6n
The Servicing Agent accepts the appointment made by Section 25
hereof and agrees to perform the duties hereunder .
Servicing Agent :
Address of
Servicing Agent : By:
Name:
Title:
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EXHIBIT A
Demand Survey Supplement
As of the date of this Lease, the Lessee reasonably
expects to lease pursuant to this lease the Equipment listed
below. This list may be amended to delete Equipment or
substitute or add other items of Equipment .
Expected
Anticipated Purchase Date
Category of Equipment Cost (mo/yr)
1 . Demountable Buildings
(describe; location; if
known)
2 . Automobiles
3 . Trucks
4 . Furniture (specify
major purchases)
5 . Cafeteria Equipment
(specify major purchases)
6 . Demountable Fixtures
(described; location,
if known)
� t � 5h
Expected
Anticipated Purchase Date
Cateqory of Equipment Cost (mo/yr)
7 . Heating and Cooling
Systems that can be
moved ( location, if
known)
8 . Buses
9 . Copy Machines
10 . Telephone
11 . Portable Structures
(described; location, if
known)
12 . Computers (departments
or use, if known)
13 . Street Lighting
( location, if known)
14 . Other (specify)
ttvsn
Exhibit B
Resolution Authorizing Execution of Lease
� t �3 � �
AN ORDINANCE by the City Council of the City of
(the "City" ) authorizing the execution and delivery of
a Lease Purchase Agreement ; levying a continuing
direct annual ad valorem tax, within the limitations
prescribed by law, for the payment of lease payments
thereunder; pledging certain funds , revenues and taxes
to the payment of the lease obligations ; approving the
assignment of such Lease Purchase Agreement and the
issuance of Certificates of Participation or other
evidence of ownership therein through a trust
established by the lessor or otherwise; and resolving
other matters incident and related thereto .
WHEREAS, the City Council of the City (the "City
Council" ) has determined that it is necessary to provide for
the use, acquisition and purchase of c�rtain personal property
on behalf of the City; and
WHEREAS, in order to facilitate the acquisition of
such property by a corporation, as lessor (the "Lessor"-) and to
lease such property, with an option tc purchase such property
during and at the end of the lease term for each item of
property, at a cost that is advantageous to the City, the City
Council has determined that it is desirable to enter into a
Lease Purchase Agreement to provide for the financing and
refinancing of such property and approve the assignment of such
Lease Purchase Agreement and the issu3nce of Certificates of
Participation or other evidence of ownership therein (the
"Certificates") through a trust established by the lessor or
otherwise as further described below; now, therefore,
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY:
SECTION 1 : Findings : It is hereby found and
determined that :
(a) all of the property to be acquired under the
Lease is personal property, and during the term of the Lease is
to remain personal property;
(b) the Lease, including its form as a lease purchase
obligation, and the terms and conditions thereof are deemed to
be appropriate by this City Council;
(c) the contractual obligation of the Lease and the
Certificates should be made payable from revenues , funds , and
taxes available to the City for its public purposes , as
permitted by Section 4(a) of the Public Property Finance Act ,
Article 2368a . 2 , V.A.T.C.S. (the "Act" ) .
SECTION 2 : Execution and Delivery of Lease.
(a) The duly authorized officers of the City listed
in paragraph (b) hereof are hereby authorized to execute and
deliver the Lease Purchase Agreement substantially in the form
attached hereto as Exhibit "A" , to be dated as of August 1 ,
1986, in order to facilitate the use, acquisition, and purchase
of the equipment described in Exhibit "B" hereto, and certain
other property to be specified during the term of the Lease,
all as authorized pursuant to the Act .
(b) The officers authorized to perform the duties
described in paragraph (a) hereof are:
Name Title
(i)
(ii)
SECTION 3 : Consent to Assiqnment; Creation of Trust ;
Issuance of Certificates . The City Council hereby consents to
the assignment by the Lessor of its rights under the Lease to a
trustee (the "Trustee" ) under terms of a trust agreement (the
"Trust Agreement" ) and the creation of a trust and the issuance
of the Certificates in the aggregate principal amount necessary
to provide for the purchase the equipment described in
Exhibit "B" hereto and to provide for a reasonable reserve fund
and costs of issuance. Proceeds of the Certificates shall be
deposited in the acquisition fund (the "Acquisition Fund" )
created pursuant to such Trust Agreement and invested for and
on behalf of the City by the Trustee until applied to purchase
Equipment pursuant to the Lease.
SECTION 4 : Limited Obliqations . Notwithstanding any
other provision of this Ordinance, Lease Payments under the
Lease and payments on the Certificates shall be special ,
limited obligations of the City, payable solely from (i) moneys
deposited from proceeds of the Certificates in the Acquisition
Fund established and maintained by the Trustee, and earnings
thereon, if any, and ( ii) the obligation of the City to make
other Lease Payments under the Lease, which obligations shall
be incurred only after and to the extent that moneys have been
disbursed from the Acquisition Fund to purchase Equipment, as
defined in the Lease.
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. ,
� SECTION 5 : Levy of Taxes . To provide for the payment
of the Lease Payments under and as def ined in the Lease, there
is hereby levied, out of the tax legally available for the
lease/purchase, and there shall be annually assessed and
collected in due time, form, and manner , a tax on all taxable
property within the boundaries of the City, within the
limitations prescribed by law, and such tax shall be and is
hereby levied on each one hundred dollars ' valuation of taxable
property within the boundaries of the City at a rate from year
to year as will be ample and sufficient to provide funds each
year to pay the Lease Payments as the same become due during
the term of the Lease, full allowance being made for
delinquencies and costs of collection.
Separate accounts and tax records relating to the
receipt and disbursement of taxes levied, assessed and
collected for and on account of the Lease shall be kept and
maintained by the City at all times during the term of the
Lease, and the taxes collected for the payment of the Lease
Payments shall be deposited to the credit of a "Special 1986
Lease Account" maintained on the records of the City, and
deposited in a special fund maintained at an official
depository of the City' s funds; and such tax hereby levied, and
to be assessed and collected annually, is hereby pledged to the
payment of the Lease Payments .
Proper officers of the City are hereby authorized and
directed to cause to be transferred to the Trustee or paying
agent for the Certificates appointed by the Lessor, from funds
on deposit in the Special 1986 Lease Account , amounts
sufficient to fully pay and discharge promptly the Lease
Payments as the same become due and payable; such transfers of
funds to be made in such manner as will cause collected funds
to be deposited with the Trustee on or before each Lease
Payment Date for the Certificates, as provided in the Lease.
The amount of taxes to be provided annually for the
payment of the Lease Payments with respect to the Base Rent (as
defined in the Lease) including the principal component and
interest component thereof ("Debt Service Requirements" ) shall
be determined and accomplished in the following manner:
(a) Prior to the date this City Council establishes
the annual tax rate and passes an ordinance levying ad valorem
taxes each year , the City Council shall determine:
( 1) The amount on deposit under the Trust
Agreement to pay principal and interest components of
the Certificates after (a) deducting therefrom the
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� ,
� total amount of Debt Service Requirements to become
due as Base Rent prior to the date annual ad valorem
taxes levied by the City become delinquent (the
"Collection Date" ) and (b) adding thereto the amount
of the other revenue and funds appropriated and
allocated to pay such Debt Service Requirements prior
to the Collection Date for the ad valorem taxes to be
levied.
(2) The amount of other revenue and funds
appropriated and to be set aside for the payment of
the Debt Service Requirements between the Collection
Date for the taxes then to be levied and the
Collection Date for the taxes to be levied during the
next succeeding calendar year.
(3) The amount of Debt Service Requirements to
become due and payable between the Collection Date for
the taxes then to be levied and the Collection Date
for the taxes to be levied during the next succeeding
calendar year .
(b) The amount of taxes to be levied annually each
year to pay the Debt Service Requirements shall be the amount
established in paragraph (3) above less the sum total of the
amounts established in paragraphs ( 1) and (2) , after taking
into consideration delinquencies and costs of collecting such
annual taxes . With respect to the amount due as Additional Rent
(as defined in the Lease) , the amount budgeted for such
purposes shall be the amount anticipated to become due during
the Fiscal Year following , plus any amount of Lease Payments
remaining unpaid from the previous year .
The City covenants that, in accordance with the
provisions of the Property Tax Code, Section 26 . 04 (g) , any
amounts budgeted to pay the Lease Payments which are due more
than one year from the date of the Lease will be set aside in
the tax levy for the payment of such Lease Payments .
SECTION 6 : Pledqe. The City hereby covenants and
agrees that all the funds and revenues which are legally
available for the purpose, with the exception of those in
egcess of the amounts required to be deposited to the Special
1986 Lease Account, are hereby irrevocably pledged to the
payment of the Lease Payments, and the pledge of such funds and
revenues herein made for the payment of the Lease Payments
shall constitute a lien on such funds and revenues in
accordance with the terms and provisions hereof and be valid
and binding without any physical delivery thereof or further
act by the City.
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i
• SECTION 7 : Lease and Purchase of Equipment . On the
date hereof , the City reasonably expects to proceed with due
diligence to lease/purchase the Equipment described on exhibit
"B" hereto within three years of the date hereof and to
lease/purchase other equipment to be identified during the term
of the Lease. However, it is expressly understood that the
City shall not be required to apply for the disbursement of
moneys from the Acquisition Fund for the lease and purchase of
Equipment unless and until :
�i) the interest rate component of the Base Rent
shall have been determined and shall be acceptable to the City;
(ii) the City shall have received approval of the
Credit Provider, as defined in the Lease;
(iii) the amount of Costs of Issuance to be included
in the Equipment Costs (as defined in the Lease) shall be
acceptable to the City;
(iv) the need for the Equipment by the City exists
at the time of such disbursement;
(v) the Equipment is available at a reasonable cost
and, if applicable, acceptable bids for the sale and purchase
of the Equipment are received; and
(vi) the City Council approves the purchase of the
Equipment and the execution and delivery of documents required
in connection with the lease and purchase thereof .
SECTION 8 : Delivery of Certificates . The duly
authorized officers of the City are hereby authorized to
egecute and deliver the Lease and other instruments and
certificates as may be reason�bly required in connection with
the sale and purchase of the Certificates and to consent to
such changes in the terms of the Lease as may be reasonably
necessary in connection with such delivery; execution and
delivery of the Lease with any such changes by officers of the
City shall constitute evidence of the approval by the City
Council thereof .
SECTION 9 : Open Meeting . It is hereby found and
determined that advance notice of the time, place and purpose
of the meeting was given to each member of the City Council ;
and that said meeting, and deliberation of the aforesaid public
business, was open to the public, and written notice of said
meeting, including the subject of the entitled ordinance, was
posted and given in advance thereof in compliance with the
provisions of Article 6252-17, Section 3A, V.A.T.C.S.
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' SECTION 10 : Effective Date. This Ordinance shall be
in force and effect from and after its passage on the date
shown below.
PASSED AND ADOPTED, this �i� U S�, 1986 .
CITY OF: �/I.f i°A1/.t21'L�JO��D
By:
yor
ATT S :
. .
City Secretary
(Seal)
To Be Attached: Exhibit "A" - Lease Purchase Agreement
Exhibit "B" - Description of Equipment to be
financed (from Demand Surve�)
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