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HomeMy WebLinkAboutORD 86-107 ORDINANCE NO. I ENTITLED AN ORDINANCE BY THE GOVERNING BODY OF THE CITY OF BEAUMONT (THE "PARTICIPANT" ) RELATING TO THE LEASE PURCHASE AGREEMENT BY AND .BETWEEN THE PARTICIPANT AND HOUSTON- GALVESTON EQUIPMENT FINANCE CORPORATION, AS LESSOR, HERETOFORE EXECUTED AND DELIVERED PURSUANT TO AN ORDINANCE OF THIS GOVERNING BODY ADOPTED ON THE 1ST DAY OF AUGUST, 1986 ; APPROVING CERTAIN AMENDMENTS TO SUCH LEASE PURCHASE AGREEMENT AND PROVIDING FOR SUCH AGREEMENT, AS SO AMENDED, TO BE RESTATED AS A MATTER OF CONVENIENT REFERENCE TO THE PARTIES; RATIFYING, CONFIRMING AND APPROVING CERTAIN ACTIONS HERETOFORE TAKEN IN CONNECTION THEREWITH; APPROVING THE ASSIGNMENT OF THE RESTATED AND AMENDED LEASE PURCHASE AGREEMENT AND THE PRIOR ISSUANCE OF THE CERTIFICATES OF PARTICIPATION OR OTHER EVIDENCE OF OWNERSHIP THEREIN; AND RESOLVING OTHER MATTERS INCIDENT AND RELATED THERETO. WHEREAS, on the lst day of .August, 1986, this governing body authorized the execution and delivery of a Lease Purchase Agreement by and between this City ( a "Participant" ) and Houston-Galveston Equipment Finance Corporation, as the Lessor, and such document provided for the levy of a continuing and direct ad valorem tax, and approved the assignment of such lease and the issuance of certificates of participation or other evidence of ownership in such lease; WHEREAS, Lessor and the Participant wish to make certain amendments to the lease (which are evidenced by the blacklined Restated and Amended Lease, attached hereto) , and such amendments have been consented to by the Trustee and are permitted under the Trust Agreement, both as hereinafter defined; and WHEREAS, it is now proper to ratify and confirm the action heretofore taken pursuant to such Lease Purchase Agreement NOW, THEREFORE, BE IT ORDAINED BY THE CITY OF BEAUMONT: Section 1 . That all of the recitals contained in the preamble hereof are found to be true and are adopted as the finding and judgment of this Council. Section 2 . That the prior approval of the Lease Purchase Agreement (the "Lease" ) by this Council and all actions heretofore taken in the execution and delivery of the Lease on behalf of the City and all actions taken by others in reliance upon the provision of said Lease are hereby ratified and confirmed. Section 3 . (a) That the "Restated and Amended Lease Purchase Agreement, " attached hereto as Exhibit A, is hereby approved as to form and substance and one of the authorized officers named in paragraph (b) of this Section is hereby authorized to execute such agreement for and on behalf of this Council and as its act and deed. Such authorized officer shall cause such agreement, when executed on behalf of this City, to be executed on behalf of the Lessor and then cause the Trustee under the First Restated and Amended Indenture of Trust ( to which the City is not a party) to hold such instrument in trust and for delivery upon the effective date of the Restated and Amended Lease Purchase Agreement. 2 - �-zf��U7 The Lease as approved by the ordinance mentioned in the preamble thereof and attached as Exhibit A to that resolution is approved, ratified and confirmed and shall continue to be effective until the effective date of the Restated and Amended Lease Purchase Agreement. The effective date of the Restated and Amended Lease Purchase Agreement shall be October 21, 1986. (b) Either of the officers named in this paragraph are authorized to perform the duties described in paragraph (a) : Name Title (i) Albert Haines City Manager (ii) Betty Dunkerley Finance Officer Section 4. The Governing Body hereby consents to the assignment by the Lessor of its rights under the Restated and Amended Lease Purchase Agreement to Texas Commerce Bank National Association, as Trustee (the "Trustee" ) and to the terms of a First Restated and Amended Indenture of Trust ( the "Trust Agreement" ) and the creation of a trust and the issuance of the Certificates of Participation (the "Certificates") in the aggregate principal amount necessary to provide for the purchase of equipment described in Exhibit .B hereto and to provide for a reasonable reserve fund and costs of issuance. The deposit of the proceeds of the Certificates as provided in the original Trust Agreement pending their application to the purchase of equipment pursuant to the Restated and Amended Lease Purchase Agreement is hereby ratified, confirmed and approved. 3 - Section 5 . Notwithstanding any other provision of this Ordinance, Lease Payments under the Lease or the Restated and Amended Lease Purchase Agreement and payments on the Certificates shall be special, limited obligations of the Participant, payable solely (i) from moneys deposited to the funds established and maintained by the Trustee under the Trust Agreement, and earnings thereon, if any, and (ii) pursuant to the obligation of the Participant to make other Lease Payments under the Lease or the Restated and Amended Lease Purchase Agreement, 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 or Restated and Amended Lease Purchase Agreement. Section 6 . To provide for the payment of the Lease Payments under and as defined in the Lease or the Restated and Amended Lease Purchase Agreement, there is hereby levied, 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 Participant, 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 Participant at a rate form year to year as will be ample and sufficient to provide funds each year to pay such Lease Payments as the same become due during the term of the Lease or the Restated and Amended Lease Purchase Agreement, full allowance being made for 4 - Dr'O/��` , F 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 or the Restated and Amended Lease Purchase Agreement shall be kept and maintained by the Participant at all times during the term of the Lease or the Restated and Amended Lease Purchase Agreement, 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 Participant, and deposited in a special fund maintained at an official depository of the Participant' 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 Participant 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 said 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 or the Restated and Amended Lease Purchase Agreement. The amount of taxes to be provided annually for the payment of the Lease Payments with respect to the Base Rent ( as 5 - f r defined in the Lease or the Restated and Amended Lease Purchase Agreement) including the principal component and interest component thereof shall be not less than (i) the interest component and (ii) a sinking fund for redemption at maturity or a sinking fund of 2% , whichever amount shall be the greater, ( "Debt Service Requirements") determined and accomplished in the following manner: (a) Prior to the date this Governing Body establishes the annual tax rate and passes an ordinance levying ad valorem taxes each year, the Governing Body shall determine: (1) The amount on deposit under the Trust Agreement and available in accordance with its terms to pay principal and interest components of the Certificates after (a) deducting therefrom the total amount of Debt Service Requirements as Base Rent prior to the date annual ad valorem taxes levied by the Participant 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 during the next succeeding calendar year. Q—fob"—/07 — 6 — (3 ) The amount of Debt Service Requirements to become due and payable or required to be levied 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 for 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 Participant convenants that, in accordance with the provisions of the Property Tax Code, Section 26.04(g) , any amounts budgeted out of taxes 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 7 . The Participant hereby covenants and agrees that all the funds and revenues which are legally available for the purpose, with the exception of those in excess 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 7 - �d-/�7 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 Participant. Section 8 . 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 Governing Body; 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 . Section 9 . This Ordinance shall be in force and effect from and after its passage on the date shown below. PASSED BY THE CITY COUNCIL of the City of Beaumont this the day of &2- A4-tl , 1986. PARTICIPANT: CITY OF BEAUMONT ATTEST: - Mayor - - City Clerk - 8 - OCT 14 1986 RESTAT Axm %KENDEn LEASE PURCHASE AGREEMENT This Re5tatP� -�nd� A- nH-1 Lease Purchase Agreement, dated as of the first day of August, 1986 but effective on the Closing Date hereinafter defined, by and between Houston-Galveston EQUibmPnfi Finance Corporation, 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 of 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 1 . Certain Defined Terms . In addition to the terms defined elsewhere in this Lease, the following 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 . 4635R Exhibit "A" �d -sG7 _ r r "Acquisition Fund Draw Date" means the first Business Day of November, February, May and August 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 . "Allocable 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 Outstanding 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 Closing; provided, that such amount shall not be less than zero. "Annual 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 A Certificate e Agreement . "Bank Certificates" means any certificates pledged to the Bank pursuant to the/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 �/D 7 -2- 4635R r r 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 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 which hall be the "Bank Rate" for such ur ose. Provided, further , the "Bank Rate" may change at any time The Sumitomo Trust & Banking Co . , Ltd. is no longer the issuer of an Irrevocable C rtifica� to , 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 . "Certificate 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. "Certificate Purchase Agreement" means that certain Certificate Purchase Agreement, dated as of October 1, 1986, among the Bank, the Lessor, and the Remarketing Agent . "Closing Date" means the date of initial authentication and delivery of the Certificates . /U7 -3- 4635R "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, the legal fees of The Sumitomo Trust & Banking Co. Ltd. in connect with the investment o r t described in the Indenture, initial fees of the Servicer, initial fees of the Houston-Galveston Area Council , printing costs, legal fees and charges, financial and other professional consultant fees, costs of rating agencies or 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 remarketing, legal , and servicing fees . "Debt Service Reserve Fund" means the Fund by that name established pursuant to the terms of the Trust Indenture and held by the Trustee. "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 August 1 , U8_9 , with res ect a Fixed Rate Lease and June 15, 1989 , e e a u e Lea e or the 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 ending on the fir t Business Da of Ma in the third ear after such Lease Principal Payment is deposited to the Acou� sition Fund or the ate following a determination that , and to the extent that, Lessee does not have a continuing demand for moneys in the Acquisition Fund within such period, -4- 4635R 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 filing 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. "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 1 , 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/ reasonably ac���t ��� t a k "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 financing of such Acquisition Fund Draw. "Irrevocable Certificate Purchase Commitment" means that certain Irrevocable Certificate Purchase Commitment dated as of October 24 , 1986 issued by the Bank to the Trustee. -5- 4635R "Lease" or "Lease Purchase Agreement" means that certain Restated and Amended Lease Purchase Agreement, dated as of August 1 , 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 . "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 Corporation and its successors and assigns 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: -6- 4635R ( 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. "Payment Schedule" ms substantially t certain he Pole attached o each Lease Supplement, 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. -7- 4635R "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 change in the Prime Rate is to be reflected by simultaneous adjustment to any rate of interest calculated by reference thereto . "Principal Component" or "Principal 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 Payment 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 August 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 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 . -la,7 -8- 4635R "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. "State" means the State of Texas . "Total Lease Principal " or "Total 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 nor its assignee has responsibility for the selection, size, design and specifications of such Equipment; (b') that it shall furnish the Requisitions, together 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; 4635R _g (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 . 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) n the first Business Dav of May of each year Lessee agrees and acknowledges if, in the event that Lessee ' s demand for proceeds for the lease and purchase of Equipment within the applicable Eligible Acquisition Period �A=/U7 4635R does not equal or exceed the amount of proceeds on hand in the Acquisition Fund,A 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) within thirty days 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,A 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 Certificate . failure to provide an Annual Demand Survey shall not be an Event of Default hereunder . Provided, however, that notwithstanding 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. Section 4 . Rights 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, J2 rovide the money in the A isition Piingt he Lessee for acquisiti on of additional ro ert for lease to the Less e under the ter of Le s i h c e be s 1 t 0 1 ' ations of the Lessor under 3 below or under the Certificate Purchase A reement if necessar and 3) 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 obligation to provide funds to Lessee for such payments is a special , limited obligation of Lessor , payable solely out of the moneys deposited 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 -11- 4635R have and to hold for the Lease Term. Upon and during installation of the Equipment, all leasehold rights granted to Lessee by Lessor under this Lease shall vest in Lessee, without any further action on the part of Lessor . Lessee acknowledges that all the payment terms of the Certificates and the amount deposited to the Acquisition Fund from proceeds of the Certificates is set out in the Indenture and is acceptable to the Lessee. 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 . A (b) 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 Notwithstanding 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 to the Funds established and maintained by the Trustee under- and earnings thereon, if any, and ( ii) pursuant to the obligation of the Lessee to make Lease Payments under the -12- 4635R 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. ( iii) Total Lease Principal is to be paid it 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 commencing at least one year after the Draw, except June 15, 2011 when it is payable 90 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 . -13- 4635R .,, r (v) Notwithstanding ( iv) above, in the event Certificates bearing an Annual Rate must be purchased under the Irrevocable Certificate 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 pledged under the/ 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 and provided Parity, as defined in the n enture, has been achieved) , available money in t e Revenue Fund estab is ed un er 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 . (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 -14- 4635R 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 will be made available b the Lessor to the Lessee for the lease of 11 additional E i ment and to a Conversion Costs , on the terms rovided in this Lease (subject to use, as necessary, to a rinci al and interest due on t e Certi icates or amounts due under the Certificate Purchase Agreement) ; 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 . ( 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. -15- 46353. 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 interest rates used to determine the Interest Component of such Base Rent . It is payable 5 days prior to each August 1 commencing at least one year after t e Draw, 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 February 1. (vi) Commencing on the third anniversary of the Closing Date and rovided Parity, as defined in the Indenture has been achieved) , 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 Acquisition Fund on the Closing 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 irregular basis will be invoiced and payable 30 days thereafter . -16- 4635R Ox) 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 will be made available b the Lessor to the Lessee for the lease of additional E i ment and to Day Conversion Costs, on the terms royided in this Lease (subject to use, as necessary, to lo a _Sr."ind a an interest due on the Certificates or amounts due d r the Certificate Purchase A reement provi ed, t at 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 . -17- 4635R a (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 Agent, 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 $100 ,000 . The Service Agent shall also notify the Trustee, the Tender Agent, and the Remarketing Agent of the Lease Payment Term or Terms for the Equipment . (c) After giving the notice provided in (b) , the Service Agent shall complete a Payment Schedule in the form attached to the Lease Supplement, estimating the expected interest rates, for review by the Lessee. (d) After receipt of the notice provided in (b) , the Remarketing Agent will offer for sale and use its best efforts to find purchasers for such Certificates to convert to an Annual Rate or Fixed Rates on the Acquisition Fund Draw Date and shall have remarketed such Certificates on or prior to the Acquisition Fund Draw Date. (e) No less than seven Business Days prior to each Acquisition Fund Draw Date on which the Lessee wishes to draw moneys from the Acquisition Fund, the Lessee shall provide the Trustee with the following: ( i) with respect to the first draw only, a fully completed and executed Lease Purchase Agreement and a resolution authorizing its execution as restated and amended, in the form of Exhibit B, attached hereto and by this reference made a part hereof; _LjiQ A fully completed and executed Lease Supplement in the form of Exhibit C, attached hereto and by this reference made a part hereof; ( iii ) A fully completed Payment Schedule, in the form of the Schedule to the Lease Supplement for an Annual Lease, if this is an Annual Lease, or for a Fixed Rate Lease, if this is a Fixed Rate Lease; iv A list of Equipment to be leased under the Lease Supplement, the cost and the useful life thereof, in the form of Exhibit A to the Lease Supplement; -1$- 4635R (v) A resolution authorizing execution of a Lease Supplement, in the form of Exhibit D, attached hereto and by this reference made a part hereof; (vi) A Requisition in the form of Exhibit E, attached hereto and by this reference made a part hereof; vii) Invoices or other supporting documentation to show purchase of Equipment; viii) A Certificate of Acceptance, in the form of Exhibit F, attached hereto and by this reference made a part hereof; .-C3_XL 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) covering such other matters relating to the Lease and Equipment as the Bank shall reasonably request; (x) 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; oS ,al A notification regarding the location of the Equipment, in the form of Exhibit G, attached hereto and by this reference made a part hereof; and ii A certificate executed by an Authorized Officer of the Lessee, certifying ( 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 litigation 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, ^ (6) that no Event of Default under the Lease shall have ccurred and been continuing, and ( 7) that e ti on, deliver and performance of the Lease as supplemented by the Lease Supplement , o no an wi no d (n 1a17 -19- 4635R conf 1 ict with e o t ' t a a t under an or ni t' creation or existence or any court or administrative order , decree or ruling applicable to the Lessee or anv law, statute, or finance or regulation a li able o the Le se . (f) The Lessee shall not be entitled to make any Acquisition Fund Draw until receipt by the Trustee of the ev 1 C rtifi ate Purchase Commitment evidence satisfactory to the Trustee that the Irrevocable Certificate r ha e ommitment will be i f r -ft u ' n he s a ent Term, and a direction from the Bank that the 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. (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. ( i) The Lessee will not be entitled to make any Acquisition Fund Draw if an Event of Default, as defined in the Lease, the Indenture, or the Certificate Purchase Agreement, has occurred and is continuing. 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 -20- 4635R 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, during 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 Paymentsa -d nl Interest Com onent of Lease Payments is due in any t e ear, Lessee has levied a tax on all taxable property wit in oundaries of Lessee, within the limitations prescribed by law, at a rate from year to year as will be ample and sufficient 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 resolution 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. -21- 4635R (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 during 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 infringement by Equipment furnished pursuant to this Lease. (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, r -22- 4635R Section 11 . Authority; Authorization; Additional Representations . follows : (a) Lessee represents, covenants and warrants as (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, Servicing Agent or Bank to be responsible for any liability, claim or demand while the Equipment is in the possession of the Lessee. (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 bidding pursuant to applicable law or has determined the same to be exempt from such competitive bidding. -23- 4635R (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 jqqz. ents from the holders of any such liens expressly^ consenting to the, securit interest of the essor i h E i en . (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 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 and the Indenture. Section 12 . Title. Lessee agrees that it will a E i e o 1 f Lessor who will then conve t' t-� t th 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 . 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 . -24- 46354 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 Lessee ' s expense, or cause the Lessee to take such - action as may be necessary to discharge or remove any such mortgage, pledge, lien, 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 accordance with this Section 14 , the assignee of the Lessor shall have the right, 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 . -a5- 4635R 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; Damage; 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 obligation under this Lease. In the event of damage to any item of Equipment, Lessee will immediately place the same in good repair, and, 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 -26- 4635R 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 . Any 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, damage 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 policy. Such insurance may be written with customary -27- 4635R 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. All 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 6F -28- 4635R growing out of any cause, including alleged imperfections or defects in Equipment, and from every other liability, claim and demand whatsoever during the term of this Lease or arising 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 to be incurred through the Prepayment Option Date which 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 �l/a 7 -29- 4635R b v < F succeeding Interest Payment Date, (3) Additional Rents to be incurred throu h the Prepayment Option Date which are unpaid, and (4) a premium computed as a percen age of he 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 : 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 . -30- 4635R 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; (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 agent 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, receiver 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 -31- 4635R 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 the following amounts to be due on the third Business Day after the taxes levied by the Lessee at its next annual tax levy become delinquent : (i) with respect to an Annual Rate Lease, the sum of Principal Payments remaining unpaid on the Equipment, interest on all such Principal Payments to the due date declared herein, and Additional Rents incurred and unpaid on the due date declared herein. ( ii) with respect to a Fixed Rate Lease, the sum of Principal Payments remaining unpaid on the Equipment, interest on all such Principal Payments to the due date declared herein, Additional Rents incurred and unpaid on the due date declared herein, and a premium computed as a percentage of the Principal Payments remaining unpaid as stated in the following table if the due date declared herein 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 : Number of Years 3-Year Lease 5-Year Lease 7-Year Lease 1 3% 6% 8% 2 3% 6% 3 4% 4 2% (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 charge to any destination- as designated by the Trustee; -32- 4635R (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 Agent . 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. 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. -33- 4635R e } a V y U t 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 Agreement; 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 . 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, Lessor has retained 57—r-Z-1611-7 -34- 4635R 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 and availabilit of sufficient mone in the Ac isition Fund. 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 s hall 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 . Payment 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 budgeting 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 : 4635R -35- (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 obligation 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 . -36- 4635R 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 recognizes 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 president, the secretary and other 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. -37- 4635R 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 Lessee be obligated 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 having 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 relating 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 -38- 4635R 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 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. ByA execution and delivery of the Lease, such officers of the Lessee or either of them 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) 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 . Section 48 . Effect of Restated and Amended Lease Purchase Agreement . Upon its execution, this Restated and Amended Lease Purchase Agreement will supersede the Lease Purchase Agreement executed by the parties dated as of August 1 , 1986, which will be of no further force and effect . -39- 4635R 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-Equip- -ment Finance Corporation Address of Lessor : By: Name: Title: LESSEE: Address of Lessee: By: Name: Title: ATTEST (LESSEE) : By: Approved: Name : Title: Texas Commerce Bank National Association, as Trustee (District Seal) By: -40- 4635R The Servicing Agent accepts the appointment made by Section 25 hereof and agrees to perform the duties hereunder . Address of Servicing Servicing Agent : Agent : By: Name: Title: -41- 4635R 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 / Equipment $500,000 5/87 $500,000 10/88 4 . Furniture (specify major purchases) 5 . Cafeteria Equipment (specify major purchases) 6 . Demountable Fixtures (described; location, if known) &P� 7 1 1 9 5 b Exhibit "B" d Expected Anticipated Purchase Date Category of Equipment Cost (mo/yr) 7 . Heating and Cooling Systems that can be moved ( location, if known) 8 . Buses 9 . Copy Machines 10 . Telephone $100,000 12/86 11 . Portable Structures (described; location, if known) 12 . Computers (departments $400,000 9/86 or use, if known) $500,000 10/87 13 . Street Lighting ( location, if known) 14 . Other (specify) L 1 9 b