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HomeMy WebLinkAboutOrdinance 4478 ORDINANCE NO. 4478 AN ORDINANCE AUTHORIZING THE EXECUTION AND-DELIVERY Ur A MASTER EQUIPMENT LEASE/PURCHASE AGREEMENT HAVING A NOMINAL PRINCIPAL AMOUNT NOT TO EXCEED $5,000,000.00 FOR THE PURPOSE OF FINANCING THE COST OF ACQUIRING CERTAIN FIRE FIGHTING APPARATUS; AND PRESCRIBING OTHER MATTERS RELATING THERETO WHEREAS, the City Council of the City of Fayetteville, Arkansas has determined that there is a great need for a mechanism to finance the costs of acquisition of certain fire fighting apparatus to benefit the residents of the City; and WHEREAS, the City is authorized and empowered under the provisions of the Constitution and laws of the State of Arkansas, including particularly Amendment 78 to the Constitution of the State of Arkansas and the Local Government Short-Term Financing Obligations Act of 2001 , codified as Arkansas Code Annotated (2001 Supp.) Sections 14-78- 101 et seq. as from time to time amended, to enter into certain short-term lease/purchase arrangements to finance the costs of various capital improvements, which lease obligations shall constitute general obligations of the City under Amendment 78 and the Act; and WHEREAS, the City has made arrangements for the entry into a Master Equipment Lease/Purchase Agreement with Banc of America Leasing & Capital, LLC, a Delaware limited liability, in substantially the form presented to and before this meeting; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS THAT: Section 1 . Under the authority of the Constitution and laws of the State of Arkansas, the Mayor is hereby authorized and directed to execute the Lease/Purchase Agreement, and the City Clerk is hereby authorized and directed to execute the Lcase/Purchase Agreement and to affix the seal of the City thereto, and the Mayor and the City Clerk are hereby authorized and directed to cause the Lease/Purchase Agreement to be executed by Banc of America Leasing & Capital, LLC. The Lease/Purchase Agreement is hereby approved in substantially the form submitted to this meeting. The Mayor is hereby authorized to confer with with Banc of America Leasing & Capital, LLC and Kutak Rock LLP, Bond Counsel, in order to complete the Lease/Purchase Agreement in substantially the form submitted to this meeting, with such changes as shall be approved by such persons executing the Lease/Purchase Agreement, their execution to constitute conclusive evidence of such approval. Section 2. The nominal principal amount of the Lease/Purchase Agreement may not exceed $5,000,000.00 in the aggregate, the term of the Lease/Purchase Agreement shall expire no later than five years from the date of adoption of this ordinance, and the effective interest rate relating to the City's obligations under the Lease/Purchase Agreement shall not exceed the maximum rate prescribed by Arkansas law, including Amendment 78 and the Act. Section 3. It is affirmed that, pursuant to Amendment 78 and the Act, the payment obligations of the City under the Lease/Purchase Agreement shall constitute general obligations of the City, and the total annual payments owed by the City under the Lease/Purchase Agreement in each of the City's fiscal years shall be charged against and paid from the general revenues of the City for such fiscal years. Section 4. As required by Amendment 78 and the Act, the City hereby finds and determines that: (a) Each of the components to be financed under the Lease/Purchase Agreement has an average useful life in excess of one year; and (b) The aggregate nominal principal amount of all obligations of the City under Amendment 78 and the Act, including the Lease/Purchase Agreement, will at no time exceed five percent (5%) of the assessed value of the taxable real and personal property located within the City, as determined by the last tax assessment completed prior to the date hereof. Section 5. The Mayor and City Clerk, for and on behalf of the City, are hereby authorized and directed to do any and all things necessary to effect the execution and delivery of the Lease/Purchase Agreement, and to perform all of the obligations of the City under and pursuant thereto. The Mayor and the City Clerk are further authorized and directed, for and on behalf of the City, to execute all papers, documents, certificates and other instruments that may be required for the carrying out of such authority or to evidence the exercise thereof. Section 6. The provisions of this Ordinance are hereby declared to be severable, and if any section, phrase or provision shall for any reason be declared to be illegal or invalid, such declaration shall not affect the validity of the remainder of the sections, phrases or provisions of this Ordinance. Section 7. All ordinances, resolutions and parts thereof in conflict herewith are hereby repealed to the extent of such conflict. PASSED and APPROVED this the 15`h day of April, 2003 . t ;, rEIJt !, APPROVED: By: �, ., r •} DA COODY, ayor By: Son ra Smith, City Clerk 2 � A/ MASTER EQUIPMENT LEASE/PURCHASE AGREEMENT (AMENDMENT 78 LEASE) This Master Equipment Lease/Purchase Agreement (the "Agreement ") dated as of / 5tA CI , 2003, and entered into between Banc of America Leasing & Capital, LLC, a Delaware limited liability company ( "Lessor '), and City of Fayetteville, Arkansas, a body corporate and politic existing under the laws of the State of Arkansas ( "Lessee WITNESSETH: WHEREAS, Lessee desires to lease and acquire from Lessor certain Equipment described in each Schedule (as each such term is defined herein), subject to the terms and conditions of and for the purposes set forth in each Lease; and in the event of a conflict the terms of a Schedule prevail; and WHEREAS, the relationship between the parties shall be a continuing one and items of equipment may be added to the Equipment from time to time by execution of additional Schedules by the parties hereto and as otherwise provided herein; and WHEREAS, Lessee is authorized under the Constitution and laws of the State, including, particularly, Amendment 78 to the State Constitution and the Local Government Short-Term Financing Obligations Act of 2001 , as amended, codified as Arkansas Code Annotated Sections 14-78- 101 et seq. (2001 Supp.) (the "Act'), to enter into certain short-term general obligations, such as this Agreement and the Schedules hereto, for the purposes set forth herein; and WHEREAS, the City Council of the Lessor has authorized the execution and delivery of this Agreement and the Schedules hereto pursuant to Ordinance No. adopted and approved on * r,�, 2003 ; Now, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, and in consideration of the premises hereinafter contained, the parties hereby agree as follows: ARTICLE I Section 1. 01. Definitions. The following terms will have the meanings indicated below unless the context clearly requires otherwise: "Acquisition Amount " means the amount specified in each Lease and represented by Lessee to be sufficient to acquire the Equipment listed in such Lease, which amount shall be not less than $ 100,000 for each Lease. "Acquisition Period " means, with respect to each Lease, that period stated in the Schedule to such Lease during which the Acquisition Amount attributable to such Lease may be expended on Equipment Costs. (Amendment 78 Lease) t "Act" means the Local Government Short-Term Financing Obligations Act of 2001 , as amended, codified as Arkansas Code Annotated Sections 14-78- 101 et seq. (2001 Supp). "Agreement " means this Master Equipment Lease/Purchase Agreement, including the exhibits hereto, together with any amendments and modifications to the Agreement pursuant to Section 13 .05 . "Code " means the Internal Revenue Code of 1986, as amended. Each reference to a Section of the Code herein shall be deemed to include the United States Treasury Regulations proposed or in effect thereunder. "Commencement Date " means, for each Lease, the date when Lessee's obligation to pay rent commences under such Lease, which date shall be the date on which the Equipment listed in such Lease is accepted by Lessee in the manner described in Section 5 .01 . "Equipment " means the property listed in each of the Leases and all replacements, repairs, restorations, modifications and improvements thereof or thereto made pursuant to Section 8.01 or Article V. Whenever reference is made in this Agreement to Equipment listed in a Lease, such reference shall be deemed to include all such replacements, repairs, restorations, modifications and improvements of or to such Equipment. "Equipment Costs " means the total cost of the Equipment listed in each Lease, including all delivery charges, installation charges, capitalizable consulting and training fees approved by Lessor, legal fees, financing costs, and other costs necessary to vest full, clear legal title to the Equipment in Lessee, subject to the security interest granted to and retained by Lessor as set forth in each Lease, and otherwise incurred in connection with the financing provided by the lease- purchase of the Equipment as provided in each Lease; provided that in no event shall approved consulting and training fees or other non-capitalizable "soft" costs relating to the Equipment listed in any Lease which are to be financed by Lessor hereunder exceed 2% of the total cost of such Equipment as determined by Lessor; and provided further, that in no event shall capitalizable delivery charges, installation charges, taxes and similar capitalizable "soft costs" relating to such Equipment be included without Lessor's prior consent. "Event of Default " means an Event of Default described in Section 12.01 . "Lease " means a Schedule and the terms of this Agreement which are incorporated by reference into such Schedule. Each Schedule shall constitute a separate and independent Lease. "Lease Term " for each Lease means the Original Term and all Renewal Terms therein provided and for this Agreement means the period from the date hereof until this Agreement is terminated. "Lessee " means the entity referred to as Lessee in the first paragraph of this Agreement. "Lessor " means (a) the entity referred to as Lessor in the first paragraph of this Agree- ment or (b) any assignee or transferee of any right, title or interest of Lessor in and to the Equipment under a Lease or any Lease (including Rental Payments thereunder) pursuant to (Amendment 78 Lease) 2 Section 11 .01 , but does not include any entity solely by reason of that entity retaining or assuming any obligation of Lessor to perform under a Lease. "Maximum Equipment Cost " means, when aggregated with the Maximum Equipment Cost under a Master Equipment Lease/Purchase Agreement (Amendment 65 Lease) of even date herewith between Lessor and Lessee, an amount not to exceed $5,000,000. "Original Term " means the period from the Commencement Date for each Lease until the end of the fiscal year of Lessee in effect at such Commencement Date. "Purchase Price " means, with respect to the Equipment listed on a Lease, the amount that Lessee may pay to Lessor to purchase such Equipment as provided in such Lease. "Renewal Terms " means the renewal terms of each Lease, each having a duration of one year and a term coextensive with Lessee's fiscal year, as specified in the Schedule applicable thereto. "Rental Payments " means the basic rental payments payable by Lessee under each Lease pursuant to Section 4.01 , in each case consisting of a principal component and an interest component. "Schedule " means each separately numbered Schedule of Property substantially in the form of Exhibit A hereto together with a Rental Payment Schedule attached thereto substantially in the form of Exhibit A- 1 hereto. "State " means the State of Arkansas. "Utilization Period " means the date, by which Lessee must deliver an Acceptance Certificate for the Equipment under such Lease as indicated in Section 3 .05(b). " Vendor " means the manufacturer or supplier of the Equipment or any other person as well as the agents or dealers of the manufacturer or supplier from whom Lessor arranged Lessee's acquisition and financing of the Equipment pursuant to the applicable Lease. ARTICLE II Section 2. 01. Representations and Covenants of Lessee. Lessee represents, covenants and warrants for the benefit of Lessor on the date hereof and as of the Commencement Date of each Lease as follows: (a) Lessee is a political subdivision of the State within the meaning of Section 103(c) of the Code, duly organized and existing under the Constitution and laws of the State, including Amendment 78 to the State Constitution and the Act, with full power and authority to enter into this Agreement and each Lease and the transactions contemplated hereby and to perform all of its obligations hereunder and under each Lease. (b) Lessee has duly authorized the execution and delivery of this Agreement and each Lease by proper action of its governing body at a meeting duly called, regularly convened and (Amendment 78 Lease) 3 attended throughout by the requisite quorum of the members thereof, or by other appropriate official approval, and all requirements have been met and procedures have occurred in order to ensure the validity and enforceability of this Agreement and each Lease. (c) No event or condition that constitutes, or with the giving of notice or the lapse of time or both would constitute, an Event of Default exists at the date hereof. (d) Lessee will do or cause to be done all things necessary to preserve and keep in full force and effect its existence as a body corporate and politic. (e) Lessee has complied with such public bidding requirements as may be applicable to this Agreement and each Lease and the acquisition by Lessee of the Equipment as provided in each Lease. (f) During the Lease Term, the Equipment will be used by Lessee only for the purpose of performing essential governmental or proprietary functions of Lessee consistent with the permissible scope of Lessee's authority. Lessee does not intend to sell or otherwise dispose of the Equipment or any interest therein prior to the last Rental Payment (including all Renewal Terms) scheduled to be paid under each Lease. (g) Lessee shall keep its books and records in accordance with generally accepted accounting principles and practices consistently applied and shall deliver to Lessor (i) annual audited financial statements (including (1 ) a balance sheet, (2) statement of revenues, expenses and changes in fund balances for budget and actual, (3) statement of cash flows and notes, and (4) schedules and attachments to the financial statements), on August 1 of each year during the Lease Term, (ii) such other financial statements and information as Lessor may reasonably request, and (iii) its annual budget for the following fiscal year on or before February 1 of each year during the Lease Term. The financial statements described in subsection (i) shall be accompanied by an unqualified opinion of Lessee's auditor. Credit information relating to Lessee may be disseminated among Lessor and any of its affiliates and any of their respective successors and assigns. (h) Lessee has an immediate need for the Equipment listed on each Schedule and expects to make immediate use of the Equipment listed on each Schedule. Lessee's need for the Equipment is not temporary and Lessee does not expect the need for any item of the Equipment to diminish during the Lease Term to such item. (i) The payment of the Rental Payments or any portion thereof is not (under the terms of any Lease or any underlying arrangement) directly or indirectly (x) secured by any interest in property used or to be used in any activity carried on by any person other than a state or local governmental unit or payments in respect of such property; or (y) on a present value basis, derived from payments (whether or not to Lessee) in respect of property, or borrowed money, used or to be used in any activity carried on by any person other than a state or local governmental unit. The Equipment will not be used; directly or indirectly, in any activity carried on by any person other than a state or local governmental unit. No portion of the Equipment Costs for the Equipment will be used, directly or indirectly, to make or finance loans to any person other than Lessee. Lessee has not entered into any management or other service contract with respect to the use and operation of the Equipment. (Amendment 78 Lease) 4 (j) There is no pending litigation, tax claim, proceeding or dispute that may adversely affect Lessee's financial condition or impair its ability to perform its obligations hereunder. Lessee will, at its expense, maintain its legal existence in good standing and do any further act and execute, acknowledge, deliver, file, register and record any further documents Lessor may reasonably request in order to protect Lessor's security interest in the Equipment and Lessor's rights and benefits under this Lease. ARTICLE III Section 3. 01. Lease of Equipment. Subject to the terms of this Master Lease, Lessor agrees to provide the funds specified in each Lease to be provided by it to acquire the Equipment, up to an amount equal to the Maximum Equipment Cost. Upon the execution of each Lease, Lessor demises, leases, transfers and lets to Lessee, and Lessee acquires, rents and leases from Lessor, the Equipment as set forth in such Lease and in accordance with the terms thereof. The Lease Term for each Lease may be continued, solely at the option of Lessee, at the end of the Original Term or any Renewal Tenn for the next succeeding Renewal Term up to the maximum Lease Term set forth in such Lease (which total Lease Term may not exceed five years from the date of the ordinance authorizing each such Lease). At the end of the Original Term and at the end of each Renewal Term until the maximum Lease Term has been completed, Lessee shall be deemed to have exercised its option to continue each Lease for the next Renewal Term unless Lessee shall have terminated such Lease pursuant to Section 10.01 . The terms and conditions during any Renewal Term shall be the same as the terms and conditions during the Original Term, except that the Rental Payments shall be as provided in the applicable Lease. Section 3. 02. Continuation of Lease Term. Lessee intends, subject to Section 10.01 , to continue the Lease Term of each Lease through the Original Term and all Renewal Terms and to pay the Rental Payments thereunder. Lessee affirms that sufficient general revenues are available for the current fiscal year, and Lessee reasonably believes that an amount sufficient to make all Rental Payments during the entire Lease Term of each Lease can be obtained from legally available general revenues of Lessee. Lessee further intends to do all things lawfully within its power to obtain and .maintain general revenues sufficient and available to discharge its obligation to make Rental Payments due hereunder, including making provision for such payments to the extent necessary in each budget adopted in accordance with applicable provisions of law. Section 3. 03 [Intentionally omitted] . Section 3. 04. [Intentionally omitted] Section 3. 05. Conditions to Lessor 's Performance. (a) As a prerequisite to the performance by Lessor of any of its obligations pursuant to any Lease, Lessee shall deliver to Lessor the following: (i) A fully completed Schedule, executed by Lessee; (Amendment 78 Lease) 5 (ii) A Certificate executed by the Clerk or Secretary or other comparable officer of Lessee, in substantially the form attached hereto as Exhibit C, completed to the satisfaction of Lessor; (iii) A certified copy of an ordinance or other official action of Lessee's governing body authorizing the execution and delivery of this Lease and performance by Lessee of its obligations hereunder; (iv) An opinion of counsel to Lessee in substantially the form attached hereto as Exhibit D respecting such Lease and otherwise satisfactory to Lessor; (v) Evidence of insurance as required by Section 7.02 hereof, (vi) All documents, including financing statements, affidavits, notices and similar instruments, in form satisfactory to Lessor, which Lessor deems necessary or appropriate at that time pursuant to Section 6.02; (vii) Assignment of each performance bond, if any, as collateral security to Lessor pursuant to Section 7.02A hereof, (viii) A copy of a fully completed and executed Form 8038-G; and (ix) Such other items, if any, as are set forth in such Lease or are reasonably required by Lessor. (b) In addition, the performance by Lessor of any of its obligations pursuant to any Lease shall be subject to: (i) no material adverse change in the financial condition of Lessee since the date of this Lease, (ii) no Event of Default having occurred, and (iii) the Equipment must be accepted by Lessee no later than the date specified in the relevant Schedule (the "Utilization Period "). (c) Subject to satisfaction of the foregoing, Lessor will pay the Acquisition Amount for Equipment described in a Schedule to the Vendor (or will reimburse Lessee for the prior payment of any such Acquisition Amounts by Lessee to the Vendor) upon receipt of the documents described in Sections 5.01 (a) and (b). (d) This Agreement is not a commitment by Lessor to enter into any Lease not currently in existence, and nothing in this Agreement shall be construed to impose any obligation upon Lessor to enter into any proposed Lease, it being understood that whether Lessor enters into any proposed Lease shall be a decision solely within Lessor's discretion. (e) Lessee will cooperate with Lessor in Lessor's review of any proposed Lease. Without limiting . the foregoing, Lessee will provide Lessor with any documentation or information Lessor may reasonably request in connection with Lessor's review of any proposed Lease. Such documentation may include, without limitation, documentation concerning the Equipment and its contemplated use and location and documentation or information concerning the financial status of Lessee and other matters related to Lessee. (Amendment 78 Lease) 6 ARTICLE IV Section 4. 01. Rental Payments. Subject to Section 10.01 , Lessee shall promptly pay Rental Payments, in lawful money of the United States of America, to Lessor on the dates and in such amounts as provided in each Lease. LESSEE SHALL PAY LESSOR A CHARGE ON ANY RENTAL PAYMENT NOT PAID WITHIN 10 DAYS ON THE DATE SUCH PAYMENT IS DUE AT THE MAXIMUM RATE PERMITTED BY ARKANSAS LAW, FROM SUCH DATE. Lessee shall not permit the federal government to guarantee any Rental Payments under any Lease. Rental Payments consist of principal and interest payments as more fully detailed on each Schedule, the interest on which begins to accrue as of the Commencement Date for each such Schedule. Section 4. 02. Interest and Principal Components. A portion of each Rental Payment is paid as, and represents payment of, interest, and the balance of each Rental Payment is paid as, and represents payment of, principal. Each Lease shall set forth the principal and interest components of each Rental Payment payable thereunder during the Lease Term. Section 4. 03. Rental Payments to Constitute a General Obligation of Lessee. Lessor and Lessee understand and intend that the obligation of Lessee to pay Rental Payments under each Lease shall constitute a general obligation of Lessee under the provisions of Amendment 78 and the Act. Section 4. 04. Rental Payments to be Unconditional. Except as provided in Section 10.01 , the obligations of Lessee to make Rental Payments and to perform and observe the other covenants and agreements contained in each Lease shall be absolute and unconditional in all events without abatement, diminution, deduction, set-off or defense, for any reason, including without limitation any failure of the Equipment, after it has been accepted by Lessee, any defects, malfunctions, breakdowns or infirmities in the Equipment or any accident, condemnation or unforeseen circumstances. Section 4. 05. Tax Covenant. Lessee agrees that it will not take any action that would cause the interest component of Rental Payments to be or to become ineligible for the exclusion from gross income of the owner or owners thereof for federal income tax purposes, nor will it omit to take or cause to be taken, in timely manner, any action, which omission would cause the interest component of Rental Payments to be or to become ineligible for the exclusion from gross income of the owner or owners thereof for federal income tax purposes. Section 4. 06. Event of Taxability. Upon the occurrence of an Event of Taxability, the interest component shall be at a Taxable Rate retroactive to the date as of which the interest component is determined by the Internal Revenue Service to be includible in the gross income of the owner or owners thereof for federal income tax purposes, and Lessee will pay such additional amount as will result in the owner receiving the interest component at the Taxable Rate identified in the related Lease. For purposes of this Section, "Event of Taxability " means a determination that the interest component is includible for federal income tax purposes in the gross income of the owner thereof due to Lessee's action or failure to take any action. (Amendment 78 Lease) 7 M Section 4. 07. [Intentionally omitted] ARTICLE V Section 5. 01. Delivery, Installation and Acceptance of Equipment. (a) Lessee shall order the Equipment, cause the Equipment to be delivered and installed at the location specified in the Leases and pay any and all delivery and installation costs and other Equipment Costs in connection therewith. When the Equipment listed in any Lease has been delivered and installed, Lessee shall promptly accept such Equipment and evidence said acceptance by executing and delivering to Lessor an acceptance certificate in the form attached hereto as Exhibit B. (b) Lessee shall deliver to Lessor original invoices and bills of sale (if title to such Equipment has passed to Lessee) relating to each item of Equipment accepted by Lessee. Lessor shall, upon receipt of an Acceptance Certificate from Lessee, prepare a Schedule of Property and Rental Payment Schedule in the forms attached hereto as Schedule A and A-1 . Lessee shall execute and deliver such Schedules to Lessor within 5 business days of receipt. Section 5. 02. Enjoyment of Equipment. Lessor shall provide Lessee with quiet use and enjoyment of the Equipment during the Lease Term, and Lessee shall peaceably and quietly have, hold and enjoy the Equipment during the Lease Term, without suit, trouble or hindrance from Lessor, except as otherwise expressly set forth in the related Lease. Lessor shall not interfere with such quiet use and enjoyment during the Lease Term so long as Lessee is not in default under the related Lease. Section 5. 03. Location; Inspection. Except in connection with normal operation and maintenance and repair, once installed, no item of the Equipment will be moved from the location specified for it in the Lease on which such item is listed without Lessor's consent, which consent shall not be unreasonably withheld. Lessor shall have the right at all reasonable times during regular business hours to enter into and upon the property of Lessee for the purpose of inspecting the Equipment. Section 5. 04. Use and Maintenance of the Equipment. Lessee will not install, use, operate, or maintain the Equipment improperly, carelessly, in violation of any applicable law or in a manner contrary to that contemplated by the related Lease. Lessee shall provide all permits and licenses, if any, necessary for the installation and operation of the Equipment. In addition, Lessee agrees to comply in all respects with all applicable laws, regulations and rulings of any legislative, executive, administrative, or judicial body relating to the installation, use, operation and maintenance of the Equipment; provided that Lessee may contest in good faith the validity or application of any such law, regulation or ruling in any reasonable manner that does not, in the opinion of Lessor, adversely affect the interest (including the reversionary interest) of Lessor in and to the Equipment or its interest or rights under the Lease. (Amendment 78 Lease) 8 Lessee agrees that it will maintain, preserve, and keep the Equipment in good repair and working order, in accordance with manufacturer's recommendations. Lessor shall have no responsibility to maintain, repair or make improvements or additions to the Equipment. In all cases, Lessee agrees to pay any costs necessary for the manufacturer to re-certify the Equipment as eligible for manufacturer's maintenance upon the return of the Equipment to Lessor as provided for herein. Lessee shall not alter any item of Equipment or install any accessory, equipment or device on an item of Equipment if that would impair any applicable warranty, the originally intended function or the value of that Equipment. All repairs, parts, accessories, equipment and devices furnished, affixed to or installed on any Equipment, excluding temporary replacements, shall thereupon become subject to the security interest of Lessor. ARTICLE VI Section 6. 01. Title to the Equipment. During each Lease Term, and so long as no Event of Default has occurred and is continuing under Article XII hereof, all right, title and interest in and to each item of the Equipment shall be vested in Lessee immediately upon its acceptance of each item of Equipment, subject to the terms and conditions of the applicable Lease. Lessee shall at all times protect and defend, at its own cost and expense, its title in and to the Equipment from and against all claims, liens and legal processes of its creditors, and keep all Equipment free and clear of all such claims, liens and processes. Upon the occurrence of an Event of Default, full and unencumbered legal title to the Equipment shall pass to Lessor, and Lessee shall have no further interest therein. In addition, upon the occurrence of such an Event of Default or such termination, Lessee shall execute and deliver to Lessor such documents as Lessor may request to evidence the passage of such legal title to Lessor and the termination of Lessee's interest therein, and upon request by Lessor shall deliver possession of the Equipment to Lessor in accordance with Section 12.02. Upon purchase of the Equipment under a Lease by Lessee pursuant to Section 10.01 , Lessor's security interest or other interest in the Equipment shall terminate, and Lessor shall execute and deliver to Lessee such documents as Lessee may request to evidence the termination of Lessor's security interest in the Equipment subject to the related Lease. Section 6. 01. Security Interest. To secure the payment of all of Lessee's obligations under each Lease, upon the execution of such Lease, Lessee grants to Lessor a security interest constituting a first lien on (a) the Equipment applicable to such Lease, and (b) any and all proceeds of any of the foregoing. Lessee agrees to execute and authorizes Lessor to file such notices of assignment, chattel mortgages, financing statements and other documents, in form satisfactory to Lessor, which Lessor deems necessary or appropriate to establish and maintain Lessor's security interest in the Equipment and the proceeds thereof. Section 6. 03. Personal Property. The Equipment is and will remain personal property and will not be deemed to be affixed to or a part of the real estate on which it may be situated, notwithstanding that the Equipment or any part thereof may be or hereafter become in any manner physically affixed or attached to real estate or any building thereon. Upon the request of Lessor, Lessee will, at Lessee's expense, furnish a waiver of any interest in the Equipment from any party having an interest in any such real estate or building. (Amendment 78 Lease) 9 ARTICLE VII Section 7. 01. Liens, Taxes, Other Governmental Charges and Utility Charges. Lessee shall keep the Equipment free of all levies, liens, and encumbrances except those created by each Lease. The parties to this Agreement contemplate that the Equipment will be used for a govern- mental or proprietary purpose of Lessee and that the Equipment will therefore be exempt from all property taxes. If the use, possession or acquisition of any Equipment is nevertheless determined to be subject to taxation, Lessee shall pay when due all taxes and governmental charges lawfully assessed or levied against or with respect to such Equipment. Lessee shall pay all utility and other charges incurred in the use and maintenance of the Equipment. Lessee shall pay such taxes or charges as the same may become due; provided that, with respect to any such taxes or charges that may lawfully be paid in installments over a period of years, Lessee shall be obligated to pay only such installments as accrue during each Lease Term. Section 7. 02. Insurance. Lessee shall during each Lease Term maintain or cause to be maintained (a) casualty insurance naming Lessor and its assigns as additional insured and loss payee and insuring the Equipment against loss or damage by fire and all other risks covered by the standard extended coverage endorsement then in use in the State, and any other risks reasonably required by Lessor, in an amount at least equal to the then applicable Purchase Price of the Equipment; (b) liability insurance that protects Lessor from liability in all events in form and amount satisfactory to Lessor; and (c) worker's compensation coverage as required by the laws of the State; provided that, with Lessor's prior written consent, Lessee may self-insure against the risks described in clause (a). Lessee shall furnish to Lessor evidence of such insurance or self-insurance coverage throughout each Lease Term. Lessee shall not cancel or modify such insurance or self-insurance coverage in any way that would affect the interests of Lessor without first giving written notice thereof to Lessor at least 30 days in advance of such cancellation or modification. Section 7. 02A. Surety Bonds; Lessee to Pursue Remedies Against Contractors and Subcontractors and Their Sureties. Lessee has secured from each contactor directly employed by Lessee, in connection with the acquisition, construction, installation, improvement or equipping of the Equipment, payment and performance bonds executed by a surety company reasonably acceptable to Lessor and authorized to do business in the State in a sum equal to the entire amount to become payable under the contract with such contractor. Each bond was conditioned on the completion of the work in accordance with the plans and specifications for the Equipment and upon payment of all claims of subcontractors and suppliers. Lessee shall upon receipt of each bond from each contractor assign such bond as collateral security to Lessor. In the event of a material default of any contractor under any contract in connection with the acquisition, construction, improvement or equipping of the Equipment or in the event of a material breach of warranty with respect to any material, workmanship or performance guaranty, Lessee will promptly proceed to exhaust its remedies against the contractor, or supplier in default and against any surety for the performance of such contract with respect to the contractor. Lessee shall advise Lessor of the steps it intends to take in connection with any such default. Any amounts received by way of damages, refunds, adjustments or otherwise in connection with the foregoing shall be paid to Lessor and applied against Lessee's obligations hereunder, net of legal fees. (Amendment 78 Lease) 10