CC 2017-08-22_09f Lease Agreement PW Vehicles
MEMORANDUM
TO: CITY COUNCIL
FROM: DEBBIE MALICOAT, DIRECTOR OF ADMINISTRATIVE SEVICES
SUBJECT: CONSIDERATION OF LEASE PURCHASE FINANCING FOR PUBLIC
WORKS DEPARTMENT VEHICLES AND EQUIPMENT
DATE: AUGUST 22, 2017
RECOMMENDATION:
It is recommended the City Council:
1. Adopt a Resolution authorizing lease purchase financing with Holman Capital for
Public Works vehicles and equipment; and
2. Delegate authority to the City Manager to execute all necessary documents to
facilitate the financing.
SUMMARY OF ACTION:
Take action to approve borrowing money for the purchase of vehicles, equipment and
aftermarket products for the City’s fleet.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
The replacement of Public Works vehicles and equipment is proposed through a
lease/purchase arrangement utilizing the services of a municipal financing firm.
Payments for a four (4) year lease/purchase arrangement were allocated in various
Public Works Divisions for the FY 2017-18 budgets. Approval of the purchases is
recommended under a separate agenda item.
BACKGROUND:
The FY 2017-18 adopted budget includes funds for replacing aging vehicles and
equipment in the Public Works Department fleet. The annual allocation of replacement
funds is intended to cover a four (4) year lease payment arrangement with a municipal
financing company.
After assessing the condition of the fleet, a plan for replacements was developed, as
described in more detail in a separate agenda item. The total cost of vehicles,
equipment and aftermarket products is approximately $478,300.
Item 9.f. - Page 1
CITY COUNCIL
CONSIDERATION OF LEASE PURCHASE FINANCING FOR PUBLIC WORKS
DEPARTMENT VEHICLES AND EQUIPMENT
AUGUST 22, 2017
PAGE 2
ANALYSIS OF ISSUES:
Given the life cycle of large equipment and previous direction from the City Council, the
use of lease purchase financing enables the City to spread the cost of vehicles and
equipment over several years, thus establishing consistent annual replacement
budgets. The use of lease purchase agreements has been very successful in managing
the cost of the City’s fleet for more than a decade.
Staff solicited financing terms for a four year lease purchase agreement and
recommends utilizing Holman Capital. Final “lock in” of interest rates will occur just
before funding of the loan, therefore financing costs are still estimates at this time. The
essential terms of the financing are:
Term: 4 years
Interest rate: 2.60%
Semi-Annual payments
Semi-Annual payment amount: $63,338
Total Payments: $513,702 (includes documentation fee of $7,000)
It is recommended that the City Council delegate authority to finalize the necessary
financing documents to the City Manager provided they do not substantively change the
terms of the lease and are generally in conformance with the attached draft documents.
This will facilitate ease of closing the transaction without the necessity of returning to the
City Council for final document approval. Preliminary draft documents are provided as
Attachment 1.
Rather than entering into a lease purchase arrangement, the City could pay for the
purchase of the vehicles and equipment through the use of fund balance. Paying cash
for the vehicles and equipment would save the City $35,400 in financing costs. This was
not contemplated in the preparation of the FY 2017-18 budget; rather spreading the cost
over several years to more closely match the useful life and replacement cycles of
equipment was proposed. Given the future fiscal uncertainty of retirement costs and the
historically low interest rates, it seems most prudent to finance these purchases and
retain fund balances at their current levels.
ALTERNATIVES:
The following alternatives are provided for the Council’s consideration:
1. Adopt the Resolution authorizing the lease purchase financing and delegate
authority to the City Manager to execute all necessary documents;
2. Do not adopt the Resolution and provide direction to staff to use fund balances to
facilitate the purchases;or
3. Provide other direction to staff.
Item 9.f. - Page 2
CITY COUNCIL
CONSIDERATION OF LEASE PURCHASE FINANCING FOR PUBLIC WORKS
DEPARTMENT VEHICLES AND EQUIPMENT
AUGUST 22, 2017
PAGE 3
ADVANTAGES:
The Public Works fleet will be updated and reduce upfront costs by allowing payments
to be made over four years.
DISADVANTAGES:
The recommended action will commit the City to a four year lease purchase program.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City’s website in accordance with
Government Code Section 54954.2.
Attachment:
1. Draft legal documents
Item 9.f. - Page 3
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO
GRANDE AUTHORIZING THE EXECUTION AND DELIVERY OF AN
EQUIPMENT LEASE-PURCHASE AGREEMENT, AN ESCROW
AGREEMENT AND EQUIPMENT SCHEDULE WITH RESPECT TO THE
ACQUISITION, PURCHASE, FINANCING, AND LEASING OF CERTAIN
EQUIPMENT FOR THE PUBLIC BENEFIT; AUTHORIZING THE
EXECUTION AND DELIVERY OF DOCUMENTS REQUIRED IN
CONNECTION THEREWITH; AND AUTHORIZING THE TAKING OF
ALL OTHER ACTIONS NECESSARY TO THE CONSUMMATION OF
THE TRANSACTIONS CONTEMPLATED BY THIS RESOLUTION
WHEREAS, the City of Arroyo Grande (the “Lessee”), a body politic and corporate duly
organized and existing as a city and political subdivision of the State of California, is
authorized by the laws of the State of California to purchase, acquire, and lease
personal property for the benefit of the Lessee and those it provides services to and to
enter into contracts with respect thereto; and
WHEREAS, the Lessee desires to purchase, acquire and lease certain equipment
constituting personal property necessary for the Lessee to perform essential
governmental functions; including without limitation various vehicles and all other
equipment Lessee or its Designated Officers may deem necessary and/or desirable in
an amount not more than $500,000.00 (the “Equipment”); and
WHEREAS, in order to acquire such Equipment, the Lessee proposes to enter into one
or more Equipment Lease-Purchase Agreements (together with the Equipment
Schedules and all related exhibits, schedules, and certificates attached thereto, the
“Lease Agreements”) with Holman Capital Corporation (the “Lessor”) and one Escrow
Agreement (together with the Disbursement/Payment Request Form and Acceptance
Certificate, the “Escrow Agreement”, and together with the Lease Agreements, the
“Transaction Documents”) with the Lessor, the forms of which have been presented to
the governing body of the Lessee at this meeting; and
WHEREAS, the governing body of the Lessee deems it for the benefit of the Lessee
and for the efficient and effective administration thereof to enter into the Transaction
Documents for the purchase, acquisition, and leasing of the Equipment to be therein
described on the terms and conditions therein provided.
NOW, THEREFORE BE IT RESOLVED by the City Council of the City of Arroyo
Grande as follows:
SECTION 1. Approval of Documents. The governing body of the Lessee hereby
approves the form, terms and provisions of the Transaction Documents in substantially
the forms presented to this meeting and authorizes and directs James A. Bergman, the
City Manager of the City of Arroyo Grande, and such other persons as he may delegate
Item 9.f. - Page 4
RESOLUTION NO.
PAGE 2
(the “Designated Officers”), and each of them individually, for and in the name of and on
behalf of the Lessee, to execute and deliver the Transaction Documents, and any
related Certificate, Exhibits, or other documents attached thereto in such forms with
such changes, insertions, revisions, corrections, or amendments as shall be approved
by the officer executing them. The execution of the foregoing by a Designated Officer
shall constitute conclusive evidence of such officer’s and the governing body’s approval
of any such changes, insertions, revisions, corrections, or amendments to the
respective forms of agreements presented to this meeting.
SECTION 2. Other Actions Authorized. The officers and employees of the Lessee
shall take all action necessary or reasonably required by the parties to the Transaction
Documents to carry out, give effect to, and consummate the transactions contemplated
thereby (including, but not limited to, the execution and delivery of Certificates of
Acceptance and Disbursement/Payment Requests, Notice and Acknowledgements of
Assignments, and any tax certificate and agreement, each with respect to and as
contemplated in the Agreement and/or Escrow Agreement) and to take all action
necessary in conformity therewith, including, without limitation, the execution and
delivery of any closing and other documents required to be delivered in connection with
the Transaction Documents. The Designated Officers and all other officers and
employees of the Lessee are hereby directed and authorized to take and shall take all
action necessary or reasonably required in order to select, purchase, and take delivery
of the Equipment. All actions heretofore taken by officers, employees, and agents of the
Lessee that are in conformity with the purposes and intent of this resolution are hereby
approved, confirmed, and ratified.
SECTION 3. No General Liability. Nothing contained in this Resolution, the
Transaction Documents, nor any other instrument shall be construed with respect to the
Lessee as incurring a pecuniary liability or charge upon the general credit of the Lessee
or against its taxing power, nor shall the breach of any agreement contained in this
Resolution, the Transaction Documents, or any other instrument or document executed
in connection therewith impose any pecuniary liability upon the Lessee or any charge
upon its general credit or against its taxing power, except to the extent that the rental
payments payable under the Transaction Documents are special limited obligations of
the Lessee as provided therein.
SECTION 4. Appointment of Authorized Lessee Representatives. The Designated
Officers are each hereby designated to act as authorized representatives of the Lessee
for purposes of the Transaction Documents until such time as the governing body of the
Lessee shall designate any other or different authorized representative for purposes of
the Transaction Documents.
SECTION 5. Severability. If any section, paragraph, clause, or provision of this
Resolution shall for any reason be held to be invalid or unenforceable, the invalidity or
unenforceability of such section, paragraph, clause, or provision shall not affect any of
the remaining provisions of this Resolution.
Item 9.f. - Page 5
RESOLUTION NO.
PAGE 3
SECTION 6. Repealer. All bylaws, orders, and resolutions or parts thereof, inconsistent
herewith, are hereby repealed to the extent only of such inconsistency. This repealer
shall not be construed as reviving any bylaw, order, resolution, or ordinance or part
thereof.
SECTION 7. Effective Date. This Resolution shall be effective immediately upon its
approval and adoption.
On motion of Council Member , seconded by Council Member ,
and on the following roll call vote, to wit:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this day of , 2017.
Item 9.f. - Page 6
RESOLUTION NO.
PAGE 4
JIM HILL, MAYOR
ATTEST:
KELLY WETMORE, CITY CLERK
APPROVED AS TO CONTENT:
JAMES A. BERGMAN, CITY MANAGER
APPROVED AS TO FORM:
HEATHER WHITHAM, CITY ATTORNEY
Item 9.f. - Page 7
INDEX TO LEGAL DOCUMENTS
BANK-QUALIFIED, APPROPRIATION-BASED, ESCROW FUNDED
TAX-EXEMPT EQUIPMENT LEASE-PURCHASE AGREEMENT
DATED <___________________> BY AND BETWEEN
HOLMAN CAPITAL CORPORATION
And
<LESSEE NAME>
Lease Documents:
Tab 1: Equipment Lease-Purchase Agreement;
Tab 2: Exhibit A – Equipment Schedule;
Tab 3: Exhibit B – Notice and Acknowledgment of Assignment;
Tab 4: Exhibit C-1 – Insurance Coverage Request;
Tab 5: Exhibit C-2 – Self-Insurance Rider (if applicable);
Tab 6: Exhibit D – Essential Use Certificate;
Tab 7: Exhibit E – Incumbency Certificate;
Tab 8: Exhibit F – Opinion of Lessee’s Counsel;
Tab 9: Exhibit G – Bank Qualified Designation;
Tab 10: Exhibit H – Post Issuance Tax Compliance Procedures;
Tab 11: Exhibit I – Escrow Agreement;
Tab 12: Resolution of Lessee;
Tab 13: UCC-1 Financing Statement with attached Schedule A (to be filed by the Investor);
Tab 14: Form 8038-G;
Tab 15: Closing Memorandum/Payment Proceeds Direction; and
Assignment Documents (Lessor and Investor Only):
Tab 16: Assignment Agreement with Schedule A thereto.
HOLMAN CAPITAL CORPORATION
ATTACHMENT 1
Item 9.f. - Page 8
ENERGY CONSERVATION EQUIPMENT LEASE-PURCHASE AGREEMENT
1. Agreement. Subject to the terms and conditions contained in this Energy Conservation Equipment
Lease-Purchase Agreement dated <___________________> (this “Lease Agreement”), HOLMAN CAPITAL
CORPORATION, as lessor (“Lessor”), whose mailing address is 25201 Paseo de Alicia, Suite 290, Laguna Hills, CA
92653, hereby purchases from and agrees to sell, transfer and lease back to the <LESSEE>, as lessee (“Lessee”), whose
mailing address is <Lessee Address, City, State, Zip>, and Lessee hereby sells to and agrees to acquire, purchase and
lease back from Lessor, the items of personal property (together with any replacement parts, additions, substitutions,
repairs or accessories now or hereafter incorporated in or affixed to it, hereinafter referred to collectively as the
“Equipment”) described in Exhibits A-1 and A-2 attached hereto. The Lease Agreement and Equipment Schedule
shall constitute the “Lease.”
2. Term. The term of this Lease (the “Lease Term”) begins as of the Commencement Date stated in
Exhibit A and shall continue so long as any amounts remain unpaid hereunder. The Lease Term will terminate upon
the first to occur of: (a) the exercise by Lessee of the option to purchase the Equipment pursuant to Paragraph 10,
(b) Lessor’s election to terminate this Lease Agreement pursuant to Paragraph 16, (c) Lessee’s option to terminate this
Lease Agreement pursuant to Section 3, and (d) the payment by Lessee of all sums required to be paid by Lessee
hereunder.
2.5. Escrow Agreement. On the Commencement Date, Lessor and Lessee shall enter into an escrow
agreement (an “Escrow Agreement”) dated the Commencement Date, between Lessor, Lessee, and <Bank Name>, as
escrow agent, relating to the escrow fund (an “Escrow Fund”) created thereunder. On the Commencement Date,
Lessor shall deposit: <Deposit Amount> into the Escrow Fund to be held in escrow and applied upon the express
terms and conditions of the Escrow Agreement; for the acquisition of the equipment which shall be disbursed as
provided for in the Closing Memorandum and/or Escrow Agreement, each of even date herewith.
3. Rental Payments. Lessee agrees to pay the rental payments hereunder for the Lease Term in the
amounts and on the dates identified in Exhibit A. Payment of all rental payments and other amounts payable
hereunder shall be made to Lessor at its above-stated address or as it shall otherwise designate in writing. As set forth
in Exhibit A, 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.
Notwithstanding any provision to the contrary in this Lease Agreement, Lessee may terminate this Lease at
the end of any fiscal year of Lessee as identified in Exhibit A (a “Fiscal Year”) if sufficient funds are not appropriated
by Lessee’s governing body to pay rental payments and other amounts due hereunder during the next succeeding
Fiscal Year (an “Event of Nonappropriation”). Lessee hereby agrees to notify Lessor at least 30 days prior to the last
day of its then current Fiscal Year of the occurrence of an Event of Nonappropriation or, if nonappropriation has not
occurred by that date, promptly upon the occurrence of an Event of Nonappropriation.
Lessee represents and warrants that: (a) it has made sufficient appropriations or has other legally available
funds to pay all rental payments hereunder due during the first Fiscal Year hereunder; (b) the officer of Lessee
responsible for budget preparation will do all things lawfully within his/her power to obtain appropriated funds for the
payment of rental payments and other amounts required to be paid hereunder in each next succeeding Fiscal Year for
the Lease Term; and (c) Lessee acknowledges that Lessor has relied upon these representations as an inducement to
enter into this Lease. If an Event of Nonappropriation hereunder shall occur, Lessee agrees, at Lessee’s sole cost and
expense, peaceably to deliver the corresponding Equipment to Lessor at such location in the continental United States
as is specified by Lessor, in the condition required by Paragraph 7 of this Lease Agreement, on or before the effective
date of termination.
Lessee’s obligation to pay rental payments and any additional amounts payable hereunder constitutes a
current obligation payable exclusively from legally available funds and shall not be construed to be an indebtedness
within the meaning of any applicable constitutional or statutory limitation or requirement.
4. Essentiality. Subject to Paragraph 3 of this Lease Agreement, Lessee’s present intention is to make
rental payments for the Lease Term as long as it has sufficient appropriations or other legally available funds. Lessee
represents that, with respect hereto, (a) the use and operation of the Equipment is essential to its proper, efficient, and
economic governmental operation and (b) the functions performed by the Equipment could not be transferred to other
equipment available for its use. Lessee does not intend to sell or otherwise dispose of the Equipment or any interest
Item 9.f. - Page 9
therein prior to the last rental payment scheduled to be paid hereunder. On the Commencement Date, Lessee shall
complete and provide Lessor a certificate in the form of Exhibit D.
5. Disclaimer of Warranties. LESSEE REPRESENTS THAT IT HAS SELECTED THE
EQUIPMENT PRIOR TO HAVING REQUESTED LESSOR TO FINANCE THE SAME. LESSEE AGREES
THAT LESSOR HAS NOT MADE ANY, AND MAKES NO, REPRESENTATIONS OR WARRANTIES OF
ANY KIND OR NATURE, DIRECTLY OR INDIRECTLY, EXPRESS OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING (WITHOUT LIMITATION) THE SUITABILITY OF THE EQUIPMENT,
ITS DURABILITY, ITS FITNESS FOR ANY PARTICULAR PURPOSE, ITS MERCHANTABILITY, ITS
CONDITION, ITS CAPACITY, ITS OPERATION, ITS PERFORMANCE, ITS DESIGN, ITS MATERIALS,
ITS WORKMANSHIP AND/OR ITS QUALITY. AS BETWEEN LESSEE AND LESSOR, LESSEE LEASES,
PURCHASES AND ACQUIRES THE EQUIPMENT “AS IS” “WHERE IS” AND “WITH ALL FAULTS.”
Lessor hereby assigns to Lessee, to the extent that it may lawfully do so, so long as no Event of Default and no Event
of Nonappropriation shall have occurred and be continuing hereunder, all rights and benefits that Lessor may have
under any warranty, guaranty or the like that may be made with respect to the Equipment by the manufacturer, seller
and/or supplier (collectively, the “Vendor”) thereof. Lessor shall not be liable to Lessee or any third party for any
loss, damage, injury or expense of any kind or nature caused directly or indirectly by any of the Equipment or the use
or maintenance thereof or any defect therein, the failure of operation thereof or by any interruption of service or loss
of use thereof or for any loss of business or damage whatsoever and howsoever caused. Lessor makes no warranty as
to the treatment of this Lease for tax or accounting purposes or as to the compliance of the Equipment with applicable
government regulations or requirements. Lessee agrees to look solely to the Vendor for any claim arising from any
defect, breach of warranty, failure or delay in delivery, mis-delivery or inability to use the Equipment for any reason
whatsoever and Lessee’s obligations to Lessor hereunder shall not in any manner be affected thereby, including
(without limitation) Lessee’s obligations to pay Lessor all rental payments and other amounts payable hereunder.
Lessee has selected both the Equipment and the Vendor and acknowledges that Lessor has not participated in any way
in Lessee’s selection of the Equipment or the Vendor. Lessor has no obligation to install, erect, test, adjust, service or
maintain the Equipment.
6. Delivery and Acceptance; Quiet Enjoyment. Lessee shall accept the Equipment for which
disbursement is requested from the Escrow Fund upon its delivery and authorizes Lessor to insert on Exhibit A the
serial numbers and any additional description of the items of Equipment so delivered. As evidence of that acceptance,
Lessee shall execute and deliver to Lessor a Certificate of Acceptance in the form attached as Exhibit A to the Escrow
Agreement. Regardless of whether Lessee has furnished a Certificate of Acceptance pursuant to this Paragraph 6, by
making a rental payment after its receipt of the Equipment, Lessee shall be deemed to have accepted the Equipment
on the date of such rental payment for purposes hereof. During the Lease Term, Lessee shall be entitled to quiet
enjoyment of the Equipment, subject to the terms of this Lease Agreement.
7. Use of Equipment; Maintenance and Repairs. Lessee shall keep the Equipment within the State
at the “Equipment Location” stated in Exhibit A and Lessee shall not remove any of the Equipment therefrom without
Lessor’s prior written consent. Lessee shall use the Equipment in a careful manner and shall at all times, at its sole
expense, keep the Equipment in good operating condition, repair and appearance and comply with all laws,
ordinances, regulations or requirements of any governmental authority, official, board or department relating to its
installation, possession, use or maintenance. Lessee shall not make any alterations, additions, or improvements to the
Equipment that are not readily removable without causing damage to or reducing the value of the Equipment. All
alterations, additions, or improvements not readily removable shall become property of Lessor.
8. Security Interest; Title to Equipment. (a) The provisions of this Section 8(a) apply generally to all
Equipment, regardless of the type, and the Escrow Fund (if any/applicable): To secure the performance of all of
Lessee’s obligations hereunder, Lessee hereby grants to Lessor, and Lessor shall have and retain, a security interest
constituting a first priority and perfected lien and security interest on the Equipment delivered hereunder and on any
attachments, proceeds therefrom. Lessee agrees to execute and deliver such additional documents, including, without
limitation, opinions of counsel, financing statements, landlord-tenant or mortgagee waivers, notices and similar
instruments, in form satisfactory to Lessor, that Lessor deems necessary or appropriate to establish and maintain its
security interest in the Equipment or for the confirmation or perfection of Lessor’s rights hereunder. As further
security therefor, Lessee hereby grants to Lessor a first priority security interest in the cash and negotiable instruments
from time to time in the Escrow Fund and all proceeds (cash and non-cash) thereof, and agrees with respect thereto
that Lessor shall have all the rights and remedies of a secured party under the applicable Uniform Commercial Code.
Lessee, at its expense, will protect and defend Lessee’s rights in the Equipment and Lessor’s rights and interests
Item 9.f. - Page 10
therein and will keep the Equipment free and clear from any and all claims, liens, encumbrances and legal processes
of Lessee’s creditors and other persons. Lessor shall have the right during normal hours, upon reasonable prior notice
to Lessee, to enter upon the premises where the Equipment is located in order to inspect the Equipment.
(b) Solely with respect to Equipment that is not comprised of vehicles and during the Lease Term,
ownership and legal title of all of the Equipment and all substitutions, repairs, modifications, and replacements shall
be in Lessee, and Lessee shall take all necessary action to vest such ownership and title in Lessee. Lessor does not
own the Equipment, and, by this Lease Agreement, Lessor is merely financing the acquisition of the Equipment for
the Lessee. Lessor has not been in the chain of title, does not operate, control or have possession or control over the
Equipment, or Lessee’s use, maintenance, operation, storage, or maintenance of the Equipment. Lessee is entitled to
use and possession of the Equipment, subject to the rights of Lessor hereunder (including its interest in the Equipment
as the lessor hereunder). If Lessor terminates this Lease Agreement pursuant to Paragraph 16 hereof or an Event of
Nonappropriation occurs hereunder, all rights, title, and interests in the Equipment shall immediately vest in Lessor
free and clear of any right, title or interest of Lessee. Lessee, at its expense, will protect and defend Lessee’s rights in
the Equipment and Lessor’s rights and interests therein and will keep the Equipment free and clear from any and all
claims, liens, encumbrances and legal processes of Lessee’s creditors and other persons. Lessor shall have the right
during normal hours, upon reasonable prior notice to Lessee, to enter upon the premises where the Equipment is
located in order to inspect the Equipment.
(c) Solely with respect to Equipment consisting of vehicles, the provisions of this Section 8(c) shall
apply: Lessee agrees to either cause the original registration of Lessor or its assignee as legal owner of the Equipment
or endorse the certificate of ownership showing Lessor or its assignee as legal owner (as required by Section 6301 of
the California Vehicle Code). Lessee agrees to execute and deliver such additional documents, including, without
limitation, opinions of counsel, MSOs/Certificates of Origin, Title Applications, notices and similar instruments, in
form satisfactory to Lessor, that Lessor deems necessary or appropriate to establish and maintain its security interest
in the Equipment or for the confirmation or perfection of Lessor’s rights hereunder. During the Lease Term, Lessee
shall be the owner (as defined in Section 460 of the California Vehicle Code) of the Equipment entitled to use and
possession of the Equipment, subject to the rights of Lessor hereunder, which is the legal owner (as defined in Section
370 of the California Vehicle Code) of the Equipment. If Lessor terminates this Lease Agreement pursuant to
Paragraph 16 hereof or an Event of Nonappropriation occurs hereunder, all rights, title, and interests in the Equipment
shall immediately vest in Lessor free and clear of any right, title or interest of Lessee.
9. Personal Property. The Equipment shall be and remain personal property notwithstanding the
manner in which it may be attached or affixed to realty. Lessee covenants that, unless Lessee owns the premises in
which the Equipment is to be located and such premises are not subject to any mortgage or lease, at Lessor’s request,
Lessee shall provide Lessor with a waiver from each landlord and/or mortgagee of the premises in which the
Equipment is to be located of any rights that such landlord and/or mortgagee may have in respect of any of the
Equipment.
10. Purchase of Equipment by Lessee; Prepayment. At the option of Lessee, and provided that no
Event of Default has occurred and is continuing hereunder, Lessor’s interest in all, but not less than all, of the
Equipment will be transferred, conveyed and assigned to Lessee, and this Lease shall terminate: (a) upon payment in
full of the rental payments and all other payments then due hereunder or (b) on any rental payment date hereunder,
provided Lessee shall have delivered written notice at least 30 days prior to such date of Lessee’s intention to
purchase the Equipment pursuant to this provision, by paying to Lessor, in addition to the rental payment due on such
date, an amount equal to the concluding payment (the “Concluding Payment”) shown for such rental payment date in
the rental payment schedule in Exhibit A. Lessee shall not have the option to purchase the Equipment hereunder as
provided in the foregoing clause (b) on any rental payment date hereunder for which a Concluding Payment is not
stated in the rental payment schedule.
11. Risk of Loss. Lessee shall bear the entire risk of loss, theft, destruction of or damage to the
Equipment or any part thereof from any cause whatsoever during the Lease Term and thereafter until redelivery to a
location designated by Lessor, and shall not be relieved of the obligation to pay rental payments or any other
obligation hereunder because of any such occurrence. If (a) the Equipment or any portion thereof hereunder is
destroyed (in whole or in part) or is damaged by fire or other casualty or (b) title to, or the temporary use of, the
Equipment or any part thereof hereunder is taken under the exercise of the power of eminent domain, Lessee shall
immediately notify Lessor. Lessee and Lessor shall cause the net proceeds of any insurance claim (including self-
insurance) or condemnation award to be applied, at Lessor’s option, to (i) the prompt repair, restoration, modification
Item 9.f. - Page 11
or replacement of the Equipment so affected or (ii) the payment in full of the then applicable Concluding Payment.
Any balance of net proceeds remaining after completion of such work or payment of such Concluding Payment shall
be paid promptly to Lessee. If the net proceeds are insufficient to pay the costs of such repair, restoration,
modification or replacement or to pay such Concluding Payment in full, Lessee shall, at Lessor’s direction, either
complete the work or pay the then applicable Concluding Payment in full and in either case pay any cost in excess of
the amount of net proceeds, but only from legally available funds.
12. Insurance. (a) Insurance Policies. If Lessee is not self-insured (as hereafter provided), Lessee
shall, at its expense, keep the Equipment fully insured against loss, fire, theft, damage or destruction from any cause
whatsoever in an amount not less than the greater of (a) the total rental payments for the Lease Term, and (b) the full
replacement cost of the Equipment without consideration for depreciation. Lessee shall also provide such additional
insurance against injury, loss or damage to persons or property arising out of the use or operation of the Equipment as
is customarily maintained by the owners of like property, with companies satisfactory to Lessor. Each policy shall
provide that, as to the interest or coverage of Lessor or Lessor’s assignee, the insurance afforded thereby shall not be
suspended, forfeited or in any manner prejudiced by any default or by any breach of warranty, condition or covenant
on the part of Lessee. If Lessee shall fail to provide any such insurance required hereunder or, within ten (10) days
after Lessor’s request therefor, shall fail to deliver the policies or certificates thereof to Lessor, then Lessor, at its
option, shall have the right to procure such insurance and to add the full cost thereof to the rental payment next
becoming due, which Lessee agrees to pay as additional rent. All such insurance shall be in form, issued by such
insurance companies and be in such amounts as shall be satisfactory to Lessor, and shall provide that losses, if any,
shall be payable to Lessor and its successors and/or assigns as “loss payee,” and all such liability insurance shall name
Lessor and its successors and/or assigns as an “additional insured.” Lessee shall pay the premiums for such insurance
and deliver to Lessor a certification in the form of Exhibit C-1 and satisfactory evidence of the insurance coverage
required hereunder on or before the Commencement Date of the Lease, but in no event not later than the date on
which an Acceptance Certificate is executed with respect to any Equipment hereunder. Lessee hereby irrevocably
appoints Lessor as Lessee’s attorney-in-fact to make claim for, receive payments of and execute and endorse all
documents, checks or drafts received in payment for loss or damage under any such insurance policy.
(b) Self-Insurance. If Lessee is self-insured (including any self-insured retentions and deductibles) with
respect to equipment such as the Equipment, the Equipment will be self-insured under an actuarially sound self-
insurance program that is subject to Lessor’s prior written consent and approval. If the Lessee shall maintains during
the Lease Term such actuarially sound self-insurance program and in lieu of the coverage required under Section 16(a)
hereunder, Lessee will, at all times, provide Lessor a certification in the form of Exhibit C-2 together with evidence of
the self-insurance program in form and substance satisfactory to Lessor. The approval of self-insurance, self-insured
retentions, and deductibles are all subject to Lessor’s approval and prior written consent, which shall be based on the
Lessor’s then current credit underwriting practices.
13. Fees; Taxes and Other Governmental Charges; Liens. Lessee covenants and agrees at all times
to keep the Equipment free and clear of all levies, liens (other than those created hereunder) and encumbrances, and to
pay all charges, taxes and fees (including any recording or stamp fees or taxes) that may now or hereafter be imposed
upon the ownership, leasing, rental, sale, purchase, possession or use of the Equipment and shall give Lessor
immediate written notice of any of the foregoing. If any of same shall remain unpaid when due, Lessor may pay same
and add such payment to the rental payment next becoming due, as additional rent. Lessee shall execute and deliver
to Lessor upon Lessor’s request such further instruments and documents containing such other assurances as Lessor
deems necessary or advisable for the confirmation or perfection of Lessor’s rights hereunder or to otherwise effectuate
the intent of this Lease Agreement and the Lease.
14. Indemnification. (a) To the extent authorized by law, Lessee shall indemnify and save Lessor, its
officers, employees, agents, servants, successors and assigns, harmless from any and all liabilities (including, without
limitation, negligence, tort and strict liability), damages, expenses, claims, actions, proceedings, judgments,
settlements, losses, liens and obligations, including (without limitation) attorneys’ fees and costs (“Claims”), arising
out of the ordering, purchase, delivery, rejection, non-delivery, ownership, selection, possession, operation, control,
use, condition, maintenance, transportation, storage, repair, return or other disposition of the Equipment, any claims
arising under federal, state or local environmental protection and hazardous substance clean up laws and regulations
and any claims of patent, trademark or copyright infringement or, if Lessee shall be in default hereunder, arising out
of the condition of any item of Equipment sold or disposed of after use by Lessee, including (without limitation)
claims for injury to or death of persons and for damage to property. The indemnities, assumption of liabilities and
obligations herein provided shall be payable solely from funds legally available for such purpose and shall continue in
Item 9.f. - Page 12
full force and effect notwithstanding the expiration, termination or cancellation of this Lease Agreement for any
reason whatsoever. However, Lessee shall not be obligated to indemnify Lessor from Claims arising from the actual,
proven and proximate gross negligence, bad faith, fraud or willful misconduct of Lessor.
(b) Lessor’s Indemnification of Lessee. Lessor shall indemnify, defend, and hold harmless Lessee, its
Governing Board, boards, commissions, officials, employees, and volunteers (“Indemnitees”) from and against any
and all Claims arising from or in any manner connected to Lessor's willful misconduct or any negligent act or
omission, whether alleged or actual, regarding performance of services or work conducted or performed pursuant to
this Lease Agreement. If Claims are filed against Indemnitees that allege negligence on behalf of Lessor, Lessor shall
have no right of reimbursement against Indemnitees for the costs of defense even if negligence is not found on the part
of Lessor. However, Lessor shall not be obligated to indemnify Indemnitees from Claims arising from the sole or
active negligence or willful misconduct of Indemnitees.
15. Assignment; Subleasing. LESSEE SHALL NOT ASSIGN, PLEDGE, MORTGAGE, SUBLET
OR OTHERWISE TRANSFER OR ENCUMBER ANY OF ITS RIGHTS UNDER THIS LEASE, THE ESCROW
AGREEMENT (INCLUDING THE ESCROW FUND CREATED THEREUNDER) OR IN THE EQUIPMENT OR
ANY PART THEREOF, NOR PERMIT ITS USE BY ANYONE OTHER THAN LESSEE AND ITS REGULAR
EMPLOYEES, WITHOUT LESSOR’S PRIOR WRITTEN CONSENT. ANY SUCH PURPORTED TRANSFER,
ASSIGNMENT OR OTHER ACTION WITHOUT LESSOR’S PRIOR WRITTEN CONSENT SHALL BE VOID.
Lessor may, at any time and from time to time, assign, transfer or otherwise convey all or any part of its
interest in the Equipment, this Lease, and the Escrow Agreement (including the Escrow Fund created thereunder),
including, but not limited to, Lessor’s rights to receive the rental payments hereunder or any part thereof (in which
event Lessee agrees to make all rental payments thereafter to the assignee designated by Lessor) without the necessity
of obtaining Lessee’s consent, provided, however, Lessor will deliver to Lessee prior written notice of an assignment.
No such assignment, transfer or conveyance shall be effective until Lessee shall have received a written notice of
assignment that discloses the name and address of each such assignee. During the term of this Lease, Lessee shall
keep, or cause to be kept, a complete and accurate record of all such assignments with respect hereto in form
necessary to comply with Section 149 of the Internal Revenue Code of 1986, as amended (the “Code”). Lessee agrees
(unless otherwise stated), if so requested, to acknowledge any such assignment in writing within 15 days after request
therefor in the form attached as Exhibit B hereto. Lessee further agrees that any moneys or other property received by
Lessor as a result of any such assignment, transfer or conveyance shall not inure to Lessee’s benefit.
16. Events of Default; Remedies. Each of the following events constitutes an “Event of Default”
hereunder: (a) Lessee fails to pay in full the rental payment due hereunder on any date upon which such rental
payment is due; (b) Lessee fails to comply with any other agreement or covenant of Lessee hereunder for a period of
30 days following receipt of written notice of violation of such agreement or covenant and demand that such violation
be remedied; (c) Lessee institutes any proceedings under any bankruptcy, insolvency, reorganization or similar law or
a receiver or similar officer is appointed for Lessee or any of its property; (d) any warranty, representation or
statement made in writing by or on behalf of Lessee in connection herewith is found to be incorrect or misleading in
any material respect on the date made; (e) actual or attempted sale, lease or encumbrance of any of the Equipment or
the making of any levy, seizure or attachment thereof or thereon; or (f) Lessee defaults in its obligations under any
other agreement for borrowing money, lease financing of property, or otherwise receiving credit and the obligee
thereunder (or trustee on its behalf) is permitted to exercise any remedies under the agreement.
Immediately upon the occurrence of an Event of Default hereunder, Lessor may terminate this Lease
Agreement, the Lease, or Lessee’s rights hereunder and in any such event repossess the Equipment, which Lessee
hereby agrees, at its expense, to surrender promptly to Lessor at such location in the continental United States as
Lessor shall direct. Such right of repossession and other rights as specifically provided in this Paragraph 16 shall
constitute the sole remedies for Lessee’s failure to make payments or otherwise perform its obligations when required
hereunder. If Lessor is entitled to repossess the Equipment under any provision of this Lease Agreement, Lessee shall
permit Lessor or its agents to enter the premises where the Equipment is then located. In the event of any such
repossession, Lessee shall execute and deliver such documents as may reasonably be required to restore title to and
possession of the Equipment to Lessor, free and clear of all liens and security interests to which the Equipment may
have become subject. Upon repossession, if the Equipment is damaged or otherwise made less suitable for the
purposes for which it was manufactured than when delivered to Lessee, Lessee agrees, at its option, to (a) repair and
restore the Equipment to the same condition in which it was received by Lessee (reasonable wear and tear excepted)
or (b) pay to Lessor the reasonable costs of such repair and restoration. If Lessor sells or otherwise liquidates the
Item 9.f. - Page 13
Equipment following an Event of Default or an Event of Nonappropriation as herein provided and realizes net
proceeds (after payment of costs) in excess of total rental payments that would have been paid during the Lease Term
plus any other amounts then due hereunder, Lessor shall immediately pay the amount of any such excess to Lessee.
If Lessor terminates this Lease Agreement and/or the Lease under this Paragraph 16 or an Event of
Nonappropriation occurs hereunder and in either case Lessee continues to use the Equipment or if Lessee otherwise
refuses to pay rental payments hereunder due during a Fiscal Year for which Lessee’s governing body has
appropriated sufficient legally available funds to pay such rental payments due hereunder, Lessor (i) may declare the
rental payments due and owing for the Fiscal Year for which such appropriations have been made to be immediately
due and payable and (ii) shall be entitled to bring such action at law or in equity to recover money and other damages
attributable to such holdover period for the Equipment.
Lessor shall also be entitled to exercise any or all remedies available to a secured party under the applicable
Uniform Commercial Code and all other rights and remedies that Lessor may have at law or in equity. All rights and
remedies of Lessor shall be cumulative and not alternative. Lessor’s failure to exercise or delay in exercising any
right or remedy shall not be construed as a waiver thereof, nor shall a waiver on one occasion be construed to bar the
exercise of any right or remedy on a future occasion. Lessee agrees to reimburse Lessor for any expenses reasonably
incurred by Lessor with respect to the enforcement of any of the remedies listed above or any other remedy available
to Lessor, but only from legally available funds.
17. Late Payments. Whenever any rental payment or other amount payable to Lessor by Lessee
hereunder is not paid within thirty (30) days of the regularly scheduled due date (or if not a regularly scheduled due
date, then the due date specified in an undisputed invoice), Lessee agrees to pay Lessor a late charge on the delinquent
amount at the rate of one percent (1%) per month, or the maximum amount permitted under applicable law, whichever
is less. Such amount(s) shall be payable solely from legally available funds in addition to all amounts payable by
Lessee as a result of the exercise of any of the remedies herein provided.
18. Rental Payments to Be Unconditional. Except as expressly set forth in this Lease Agreement
(including Paragraph 3), Lessee agrees that as of the Commencement Date, Lessee’s obligations under the Lease are
absolute and unconditional and shall continue without set-off, deduction, counterclaim, abatement, recoupment, or
reduction and regardless of any disability of Lessee to use the Equipment or any part thereof because of any reason
including, but not limited to, war, act of God, governmental regulations, strike, loss, damage, destruction,
obsolescence, failure of or delay in delivery or failure of the Equipment to operate properly.
19. Tax Covenants. Lessee agrees that it will not take any action that would cause the interest
component of rental payments hereunder 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 a timely
manner, any action which omission would cause the interest component of rental payments hereunder to be or to
become ineligible for the exclusion from gross income of the owner or owners thereof for federal income tax
purposes. Lessee agrees to (a) execute and deliver to Lessor, upon Lessor’s request, a tax certificate and agreement in
form and content acceptable to Lessor and Lessee, relating to the establishment and maintenance of the excludability
from gross income of the interest component of rental payments hereunder for federal income tax purposes;
(b) complete and file in a timely manner an information reporting return as required by the Code; and (c) rebate an
amount equal to excess earnings on the Escrow Fund to the federal government if required by, and in accordance with,
Section 148(f) of the Code, and make the determinations and maintain the records required by the Code. Any tax
certificate or agreement executed pursuant hereto shall be fully incorporated by reference herein.
Lessee represents that neither Lessee nor any agency or unit of Lessee has on hand any property, including
cash and securities, that is legally required or otherwise restricted (no matter where held or the source thereof) to be
used directly or indirectly to purchase the Equipment. Lessee has not and will not establish any funds or accounts (no
matter where held or the source thereof) the use of which is legally required or otherwise restricted to pay directly or
indirectly rental payments hereunder. Lessor and Lessee certify that, so long as any rental payments hereunder remain
unpaid, moneys on deposit in the Escrow Fund will not be used in a manner that will cause this Lease to be classified
as an “arbitrage bond” within the meaning of Section 148(a) of the Code.
If Lessor either (i) receives notice, in any form, from the Internal Revenue Service or (ii) reasonably
determines, based on an opinion of nationally recognized independent tax counsel selected by Lessor, that Lessor may
not exclude any Interest paid under any Lease from its Federal gross income (each an "Event of Taxability"), the
Item 9.f. - Page 14
Lessee shall pay to Lessor upon demand (x) an amount which, with respect to Rental Payments previously paid and
taking into account all penalties, fines, interest and additions to tax (including all federal, state and local taxes imposed
on the Interest due through the date of such event), will restore to Lessor its after-tax yield (assuming tax at the
highest marginal tax rate and taking into account the time of receipt of Rental Payments and reinvestment at the after-
tax yield rate) on the transaction evidenced by such Lease through the date of such event and (y) as additional Rental
Payments to Lessor on each succeeding Payment Date such amount as will maintain such after-tax yield to Lessor.
It is Lessor’s and Lessee’s intention that this Lease not constitute a “true” lease for federal income tax
purposes and, therefore, it is Lessor’s and Lessee’s intention that Lessee be considered the owner of the Equipment
hereunder for federal income tax purposes.
20. Lessee Representations and Warranties. Lessee hereby represents and warrants to and agrees
with Lessor that:
(a) Lessee is a political subdivision of the State of California, within the meaning of Section 103(c) of
the Code, and will do or cause to be done all things necessary to preserve and keep in full force and effect its existence
as such.
(b) Lessee has the power and authority under applicable law to enter into the transactions contemplated
by this Lease and the Escrow Agreement and has been duly authorized to execute and deliver this Lease and the
Escrow Agreement and to carry out its obligations hereunder and thereunder. Lessee has provided to Lessor a full,
true and correct copy of a resolution or other appropriate official action of Lessee’s governing body specifically
authorizing Lessee to execute and deliver this Lease and the Escrow Agreement and all documents contemplated
hereby and thereby. Lessee has provided to Lessor a full, true, and correct copy of an Incumbency Certificate in
substantially the form attached as Exhibit F hereto relating to the authority of the officers who have executed and
delivered this Lease and who will execute and deliver this Lease and the Escrow Agreement and all documents in
connection herewith and therewith on behalf of Lessee.
(c) All requirements have been met and procedures have occurred in order to ensure the enforceability
of this Lease and the Escrow Agreement, and Lessee has complied with such public bidding requirements, if any, as
may be applicable to the transactions contemplated by this Lease and the Escrow Agreement.
(d) Lessee is not subject to any legal or contractual limitation or provision of any nature whatsoever that
in any way limits, restricts or prevents Lessee from entering into this Lease and the Escrow Agreement, or performing
any of its obligations hereunder or thereunder, except to the extent that such performance may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights generally.
(e) There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, known to be pending or threatened against or affecting Lessee, nor to the best knowledge
of Lessee is there any basis therefor, wherein an unfavorable decision, ruling or finding would materially adversely
affect the transactions contemplated by this Lease or the Escrow Agreement, or any other agreement or instrument to
which Lessee is a party and that is used or contemplated for use in the consummation of the transactions contemplated
by this Lease or the Escrow Agreement. All authorizations, consents, and approvals of governmental bodies or
agencies required in connection with the execution and delivery by Lessee of this Lease and the Escrow Agreement or
in connection with the carrying out by Lessee of its obligations hereunder and thereunder have been obtained.
(f) The payment of the rental payments or any portion thereof hereunder is not (under the terms of this
Lease) directly or indirectly (i) 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 (ii) 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 government unit. No
portion of the purchase price 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.
(g) The entering into and performance of this Lease Agreement, the Lease, and the Escrow Agreement
will not violate any judgment, order, law or regulation applicable to Lessee or result in any breach of, or constitute a
default under, or result in the creation of any lien, charge, security interest, or other encumbrance upon any assets of
Lessee or on the Equipment pursuant to an indenture, mortgage, deed of trust, bank loan or credit agreement, or other
instrument to which Lessee is a party or by which it or its assets may be bound, except as herein provided.
Item 9.f. - Page 15
(h) Lessee’s name as indicated on the first page of this Lease Agreement is its true, correct, and
complete legal name.
(i) The useful life of the Equipment will not be less than the Lease Term hereof.
(j) Lessee has entered into this Lease for the purpose of purchasing, acquiring, and leasing the
Equipment and not for the purpose of refinancing any outstanding obligation of Lessee more than 90 days in advance
of its payment or prepayment date. The purchase price for the Equipment has been or will be paid directly by Lessor
from the Escrow Fund to the Vendor, and no portion of the purchase price for the Equipment has been or will be paid
to Lessee as reimbursement for any expenditure paid by Lessee more than 60 days prior to the execution and delivery
hereof.
(k) The application, statements, and credit or financial information submitted by it to Lessor are true
and correct and made to induce Lessor to enter into this Lease and the Escrow Agreement.
(l) During the term of this Lease, Lessee shall (i) provide Lessor, no later than ten days prior to the end
of each Fiscal Year (commencing with the current Fiscal Year), with current budgets or other proof of appropriation
for the ensuing Fiscal Year and such other information relating to Lessee’s ability to continue the Lease Term for the
next succeeding Fiscal Year as may be reasonably requested by Lessor and (ii) furnish or cause to be furnished to
Lessor, at Lessee’s expense, as soon as available and in any event not later than 180 days after the close of each Fiscal
Year, the audited financial statements of Lessee at the close of and for such Fiscal Year, all in reasonable detail,
audited by and with the report of Lessee’s auditor.
(m) On the Commencement Date, Lessee shall cause to be executed and delivered to Lessor an Opinion
of Lessee’s Counsel in substantially the form attached as Exhibit G hereto.
(n) Lessee shall pay the excess (if any) of the actual costs of acquiring the Equipment hereunder over
the amount deposited by Lessor in the Escrow Fund and interest earnings thereon.
(o) Lessee has experienced no material change in its financial condition since the date of its last
prepared financial statements, which was <LAST AUDIT DATE – MM-DD-YY>.
(p) Lessee acknowledges that: (a) Lessor is acting solely for its own account and not as a fiduciary for
Lessee or in the capacity of broker, dealer, municipal securities underwriter or municipal advisor; (b) Lessor has not
provided, and will not provide, financial, legal, tax, accounting or other advice to or on behalf of Lessee with respect
to its acquisition of the Equipment; and (c) Lessee has sought and obtained financial, legal, tax, accounting and other
advice (including as it relates to structure, timing, terms and similar matters) with respect to this Lease from its
financial, legal and other advisors (and not Lessor) to the extent that Lessee desired to obtain such advice.
21. Execution in Counterparts; Chattel Paper. This Lease Agreement and the Equipment Schedule
may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one
and the same instrument; provided, however, that only Counterpart No. 1 of this Lease Agreement and Equipment
Schedule hereof shall constitute chattel paper for purposes of the applicable Uniform Commercial Code.
22. Applicable Law. This Lease Agreement shall be construed under the laws of the State of
California.
23. Binding Effect; Severability; Survival. This Lease shall not become effective until accepted by
Lessor at its herein-described office, and upon such acceptance shall inure to and bind the parties, their successors,
legal representatives, and assigns. No provision of this Lease that may be construed as unenforceable shall in any way
invalidate any other provision hereof, all of which shall remain in full force and effect.
24. Miscellaneous Provisions. Any notice to a party hereunder shall be deemed given when mailed to
that party by certified mail, return receipt requested, at its address set forth herein or such other address as either may
designate for itself in such notice to the other. This Lease and the Escrow Agreement constitute the entire mutual
understanding of the parties regarding the subject matter hereof and thereof and may not be modified except in
writing, signed by the party against whom such modification is asserted. Upon the request of Lessor, Lessee shall at
any time and from time to time execute and deliver such further documents and do such further acts as Lessor may
reasonably request in order fully to effect the purposes hereof and any assignment hereof. If a court with competent
jurisdiction rules that the interest rate charged hereunder exceeds the maximum rate of interest allowed by applicable
law, then the effective rate of interest hereunder shall be automatically reduced to the maximum lawful rate allowable
under the applicable laws.
Item 9.f. - Page 16
[Remainder of page intentionally left blank]
Item 9.f. - Page 17
THE UNDERSIGNED HEREBY AGREE TO ALL OF THE TERMS AND CONDITIONS AS SET FORTH IN
THIS ENERGY CONSERVATION EQUIPMENT LEASE-PURCHASE AGREEMENT.
HOLMAN CAPITAL CORPORATION, Lessor
By: x
Lance S. Holman
President & CEO
<LESSEE NAME>, Lessee
By: x
Name: <Name>
Title: <Title>
Counterpart No. _____ of two manually executed and serially numbered counterparts. To the extent that this Lease
Agreement constitutes chattel paper (as defined in the applicable Uniform Commercial Code), no security or
ownership interest herein may be created through the transfer or possession of any Counterpart other than Counterpart
No. 1.
Item 9.f. - Page 18
EXHIBIT A
EQUIPMENT SCHEDULE TO ENERGY CONSERVATION EQUIPMENT LEASE-PURCHASE
AGREEMENT DATED <DATE>
1. DESCRIPTION OF THE EQUIPMENT:
Energy conservation measures purchased/installed pursuant to that certain Installment Agreement with <Vendor
Name> (the “Vendor”) to reduce Lessee’s <Brief Description> and financed by this Equipment Schedule dated
<Date> to that certain Equipment Lease-Purchase Agreement dated <Date>by and between Holman Capital
Corporation and <Lessee Name>, including, without limitation, the following:
together with all accessories, attachments, substitutions and accessions.
2. EQUIPMENT LOCATION: <Address, City, State, Zip>.
3. RENTAL PAYMENT SCHEDULE: The rental payments shall be made for the Equipment as follows: The
following schedule is subject to change upon a change in the Maximum Federal Corporate Tax Rate (as hereinafter
defined).
* Assumes that all rental payments and additional rentals due on and prior to that date have been paid.
4. INTEREST RATE: 0.000% multiplied by the Margin Rate Factor.
“Margin Rate Factor” means the greater of (i) 1.0 and (ii) product of (a) one minus the Maximum Federal
Corporate Tax Rate newly in effect multiplied by (b) one divided by the sum of one minus the Maximum Federal
Corporate Tax Rate as of the Commencement Date (which for the avoidance of doubt equals 1.53846). The
effective date of any change in the Margin Rate Factor shall be the effective date of the decrease or increase (as
applicable) in the Maximum Federal Corporate Tax Rate resulting in such change.
“Maximum Federal Corporate Tax Rate” means the maximum rate of income taxation imposed on
corporations pursuant to Section 11(b) of the Code, as in effect from time to time (or, if as a result of a change in the
Code, the rate of income taxation imposed on corporations generally shall not be applicable to the Bank, the
maximum statutory rate of federal income taxation which could apply to the Bank).
5. COMMENCEMENT DATE: <Date>
6. SCHEDULED LEASE TERM: 15 years
7. Lessee’s current Fiscal Year extends from July 1, 2016.
8. The terms and provisions of the Energy Conservation Equipment Lease-Purchase Agreement described
above (other than to the extent that they relate solely to other Schedules or Equipment listed on other Schedules) are
hereby incorporated into this Schedule by reference and made a part hereof.
9. Lessee hereby represents, warrants, and covenants that (i) its representations, warranties, and covenants set
forth in the Energy Conservation Equipment Lease-Purchase Agreement (particularly Paragraph 20 thereof) are true
and correct as though made on the date of execution of this Schedule, and (ii) sufficient funds have been
appropriated by Lessee for the payment of all rental payments due under this Schedule during Lessee’s current
Fiscal Year.
10. Interest, if any, accruing from the Commencement Date to the actual date of funding shall be retained by
Lessor as additional consideration for entering into this Schedule No. 01.
<LESSEE NAME>, HOLMAN CAPITAL CORPORATION,
as Lessee as Lessor
By: _________________________________ By: ______________________________________
Name: <Name> Name: Lance S. Holman
Title: <Title> Title: President & CEO
Item 9.f. - Page 19
Counterpart No. _____ of two manually executed and serially numbered counterparts. To the extent that this
Schedule constitutes chattel paper (as defined in the applicable Uniform Commercial Code), no security or
ownership interest herein may be created through the transfer or possession of any Counterpart other than
Counterpart No. 1.
Item 9.f. - Page 20
EXHIBIT B
NOTICE AND ACKNOWLEDGEMENT OF SALE OF RENTAL PAYMENTS AND
ASSIGNMENT OF LEASE AGREEMENT AND ESCROW AGREEMENT
Holman Capital Corporation (“Lessor”) and the <Lessee Name> (“Lessee”) have entered into an Energy
Conservation Equipment Lease-Purchase Agreement and Equipment Schedule thereto both dated <Date> (the
“Lease Agreement”), under which Lessee has, or will have prior to its execution hereof, leased equipment (the
“Equipment”) described therein.
Lessee is hereby notified that Lessor has assigned its right, title, and interest in and to the Lease Agreement,
the leased Equipment, and the rental payments as permitted by the Lease Agreement.
Lessee is hereby directed to pay any and all rental payments and other amounts due under the Lease
Agreement to <Bank Name> and/or its affiliates, as Lessor’s assignee (the “Assignee”), as directed by the Assignee
or a paying agent acting on behalf of Assignee, pursuant to the instructions contained in any invoice or notice.
By signing this Notice and Acknowledgment, Lessee agrees that it will pay all amounts due under the
Lease Agreement as directed in the invoice without any set-off or deduction whatsoever notwithstanding any defect
in, damage to or requisition of any of the Equipment leased under the Lease Agreement, any other similar or
dissimilar event, any defense, set-off, counterclaim or recoupment arising out of any claim against Lessor or
Assignee.
Lessee further acknowledges and agrees that Assignee has not assumed any of Lessor’s obligations or
duties under the Lease Agreement or made any warranties whatsoever as to the Lease Agreement or the Equipment.
Lessee agrees that no change may be made to the Lease Agreement without the prior written consent of Assignee.
By signing this Notice and Acknowledgment, Lessee warrants that its representations and warranties under
the Lease Agreement are true and correct on the date hereof.
Date: <Date> <LESSEE NAME>, as Lessee
By: ____________________________________________
Name: <Name>
Title: <Title>
Item 9.f. - Page 21
EXHIBIT C-1
INSURANCE CERTIFICATION
[complete only if Lessee is not self-insured]
Holman Capital Corporation
25201 Paseo de Alicia, Suite 290
Laguna Hills, CA 92653
<Date>
Re: Energy Conservation Equipment Lease-Purchase Agreement dated
<Date>
In connection with the above-referenced Lease Agreement, <Lessee Name>, as lessee (the “Lessee”)
certifies that it has instructed the insurance agent named below (please fill in name, address, and telephone number):
Name of Agent: [Exclusive Risk Management Authority of California]
Address: [Need additional information from Lessee]
Phone:
to issue:
X
Liability Insurance. Lessee is required to maintain public liability insurance, personal injury
and property damage with policy limits of $3,000,000. The policy should be endorsed to
name <Bank Name> (the assignee of Holman Capital Corporation) as an additional insured.
X
Casualty Insurance. Lessee is required to maintain all risk extended coverage, malicious
mischief and vandalism insurance for the Equipment described in the above-referenced
Equipment Schedule in an amount not less than the greater of <$0.00> or the full
replacement cost of the Equipment. Such insurance shall be endorsed to name <Bank
Name> as a co-loss payee with respect to such Equipment.
The required insurance should also be endorsed to give <Bank Name> at least 30 days prior written notice
of the effective date of any material alteration or cancellation of coverage, and an endorsement confirming that the
interest of <Bank Name> shall not be invalidated by any actions, inactions, breach of warranty or conditions or
negligence of Lessee.
Proof of insurance coverage will be provided to <Bank Name> prior to and/or commensurate with the later
of the Commencement Date of the Lease or the delivery and acceptance of the Equipment.
Very truly yours,
<LESSEE NAME> , as Lessee
By: ____________________________________________
Name: <Name>
Title: <Title>
Item 9.f. - Page 22
EXHIBIT C-2
[complete only if Lessee is self-insured]
Holman Capital Corporation
25201 Paseo de Alicia, Suite 290
Laguna Hills, CA 92653
<DATE>
Re: Energy Conservation Equipment Lease-Purchase Agreement dated <Date>
In connection with the above-referenced Lease Agreement, <Lessee Name>, as lessee (the “Lessee”)
certifies that it participates in an actuarially sound self-insurance program for property damage and public liability
risks.
The following is attached (check all that apply):
Letter from risk manager describing self-insurance program
Other evidence of Lessee’s participation in self-insurance program
Very truly yours,
<LESSEE NAME>, as Lessee
By: ____________________________________________
Name: <Name>
Title: <Title>
Item 9.f. - Page 23
EXHIBIT D
ESSENTIAL USE CERTIFICATE
Holman Capital Corporation
25201 Paseo de Alicia, Suite 290
Laguna Hills, CA 92653
<Date>
Re: Energy Conservation Equipment Lease-Purchase Agreement dated <Date>
I, <Name>, appointed, or designated representative and <Title> of the <Lessee Name>, as lessee (the “Lessee”), am
qualified to answer the questions set forth below regarding the Equipment to be acquired by Lessee in connection
with the above-referenced Lease Agreement:
1. What is the specific use of the Equipment?
2. What increased capabilities will the Equipment provide?
3. Why is the Equipment essential to your ability to deliver governmental services?
4. Does the Equipment replace existing equipment?
(If so, please explain why you are replacing the existing equipment)
5. Why did you choose this specific Equipment?
6. For how many years do you expect to utilize the Equipment?
Very truly yours,
<LESSEE NAME>, as Lessee
By: _______________________________________________
Name: <Name>
Title: <Title>
Item 9.f. - Page 24
EXHIBIT E
INCUMBENCY CERTIFICATE
I, <Lessee Name>, do hereby certify that I am the <Title> of the <Lessee Name>, which is a body
corporate and politic duly established and validly existing as a political subdivision of the State of California and
operates under a Governing Board, and that I have custody of the records of such entity.
I hereby certify that, as of the date hereof, the individuals named below are the duly elected or appointed
officers of the District holding the offices set forth opposite their respective names. I further certify that:
(i) The signatures set opposite their respective names and titles are their true and authentic signatures,
and
(ii) Such officers have the authority on behalf of such entity to:
a. Enter into that certain Energy Conservation Equipment Lease-Purchase Agreement and
Equipment Schedule both dated <Date>(the “Lease Agreement”), between the <Lessee
Name> and Holman Capital Corporation, as lessor, and that certain Escrow Agreement dated
as of <Date>(the “Escrow Agreement”) between the <Lessee Name>, Holman Capital
Corporation, and <Bank Name>, as escrow agent; and
b. Execute Certificates of Acceptance, Payment Request/Disbursement Request Forms, and any
and all other certificate, documents, and agreements relating to the Lease Agreement and
Escrow Agreement.
NAME TITLE SIGNATURE
<Name> <Title>
IN WITNESS WHEREOF, I have duly executed this Certificate on behalf of the <Lessee Name>.
<Date>
___________________________________________
Name: <Name>
Title: <Title>
Item 9.f. - Page 25
EXHIBIT F
[Print on Counsel Letterhead]
OPINION OF LESSEE’S COUNSEL
<Date>
Holman Capital Corporation
25201 Paseo de Alicia, Suite 290
Laguna Hills, CA 92653
Re: Energy Conservation Equipment Lease-Purchase Agreement and Equipment Schedule
both dated <Date>
Ladies and Gentlemen:
As counsel to the <Lessee Name> (the “Lessee”), I have examined the Energy Conservation Equipment
Lease-Purchase Agreement and Equipment Schedule both dated <Date>(collectively, the “Lease Agreement”),
between the Lessee and Holman Capital Corporation, as lessor (“Lessor”), the form of the Escrow Agreement,
together the Disbursement Request Form and Certificate of Acceptance (collectively, the “Escrow Agreement”), and
the proceedings taken by the Governing Body of the Lessee to authorize on behalf of the Lessee the execution and
delivery of the Lease Agreement and the Escrow Agreement. The Lease Agreement and the Escrow Agreement are
herein collectively referred to as the “Transaction Documents.” Based upon the foregoing examination and upon an
examination of such other documents and matters of law as I have deemed necessary or appropriate, I am of the
opinion that:
1. The Lessee is a political subdivision of the State of California and operates under a Governing Board,
and the laws of the State of California with full power and authority to enter into the Transaction Documents.
2. The Transaction Documents have each been duly authorized, executed, and delivered by the Lessee.
Assuming due authorization, execution and delivery thereof by Lessor, the Transaction Documents constitute legal,
valid, and binding obligations of the Lessee, enforceable against the Lessee in accordance with their respective
terms, subject to any applicable bankruptcy, insolvency, moratorium or other laws or equitable principles affecting
the enforcement of creditors’ rights generally.
3. The Equipment to be leased pursuant to the Lease Agreement constitutes personal property and, when
subjected to use by the Lessee, will not be a fixture under applicable law.
4. The Lessee has complied with any applicable public bidding requirements in connection with the
Transaction Documents and the transactions contemplated thereby. By proper action, the Governing Body of the
Lessee authorizing the execution and delivery of the Transaction Documents and certain other matters was adopted
at a meeting that was held in compliance with all applicable laws relating to the holding of open and public
meetings.
5. No litigation or proceeding is pending or, to the best of my knowledge, threatened to restrain or enjoin
the execution, delivery, or performance by the Lessee of the Transaction Documents or in any way to contest the
validity of the Transaction Documents, to contest or question the creation or existence of the Lessee or the
Governing Body of the Lessee or the authority or ability of the Lessee to execute or deliver the Transaction
Documents or to comply with or perform its obligations thereunder. There is no litigation pending or, to the best of
my knowledge, threatened seeking to restrain or enjoin the Lessee from annually appropriating sufficient funds to
pay the rental payments or other amounts contemplated by the Lease Agreement.
6. The entering into and performance of the Transaction Documents do not and will not violate any
judgment, order, law, or regulation applicable to the Lessee or result in any breach of, or constitute a default under,
Item 9.f. - Page 26
or result in the creation of any lien, charge, security interest, or other encumbrance upon any assets of the Lessee or
on the Equipment (as such term is defined in the Lease Agreement) pursuant to any indenture, mortgage, deed of
trust, bank loan or credit agreement, or other instrument to which the Lessee is a party or by which it or its assets
may be bound. Notwithstanding the foregoing, upon the due and timely filing of a UCC-1 and a Title Application
and/or Certificate of Title (the latter solely with respect to Equipment constituting titled vehicles), the Lessor will
have a perfected security interest in the Equipment.
This opinion may be relied upon by purchasers and assignees of Lessor’s interests in the Lease Agreement.
Respectfully submitted,
___________________________________________
Item 9.f. - Page 27
EXHIBIT G
BANK-QUALIFIED DESIGNATION
The <LESSEE>, as lessee, (the “Lessee”) under that certain Equipment Lease-Purchase Agreement and
Equipment Schedule (collectively, the “Lease”) both dated as of September 10, 2015 to which this Designation is
attached, hereby designates the Lease as a “qualified tax-exempt obligation” for the purposes and within the
meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. The Lessee hereby represents that
the Lessee reasonably anticipates that the Lessee and other entities that the Lessee controls will not issue tax-exempt
obligations (including the Lease) the aggregate principal amount of which exceed $10,000,000 during the calendar
year in which the Lease is executed and delivered and interest commences to accrue thereunder.
This Designation is attached to and made a part of the Lease and inures to the benefit of the Lessor and its
successors and/or assigned.
EXECUTED as of this DD day of MONTH, 20YY.
<LESSEE>, as Lessee
By:________________________
Name: <AUTHORIZED SIGNATORY>
Title: <SIGNATORY TITLE>
Item 9.f. - Page 28
EXHIBIT H
POST-ISSUANCE TAX COMPLIANCE PROCEDURES
Dated: <Date>
The following certificate is delivered in connection with the execution and delivery of the Energy
Conservation Equipment Lease-Purchase Agreement dated <Date>(the "Lease Agreement"), entered into between
the <Lessee Name> (the "Lessee") and Holman Capital Corporation (the "Corporation"). Capitalized terms used
herein have the meanings defined in the Lease Agreement.
Section 1. In General.
1.1. This Certificate is executed for the purpose of establishing the reasonable expectations of Lessee as to
future events regarding the financing of certain equipment (the “Equipment”) to be acquired by Lessor and leased to
Lessee pursuant to and in accordance with the Equipment Schedule executed under the Agreement (together with all
related documents executed pursuant thereto and contemporaneously herewith, the "Financing Documents"). As
described in the Financing Documents, Lessor shall apply $0.00 (the “Principal Amount”) toward the acquisition of
the Equipment and closing costs, and Lessee shall make Rental Payments under the terms and conditions as set forth
in the Financing Documents.
1.2. The individual executing this Certificate on behalf of Lessee is an officer of Lessee delegated with the
responsibility of reviewing and executing the Financing Documents, pursuant to the governing board’s approval or
other official action of Lessee adopted with respect to the Financing Documents, a copy of which has been delivered
to Lessor.
1.3. The Financing Documents are being entered into for the purpose of providing funds for financing the cost
of acquiring, equipping and installing the Equipment which is essential to the governmental functions of Lessee,
which Equipment is described in the Equipment Schedule. The Principal Amount will be deposited in escrow by
Lessor on the date of issuance of the Financing Documents and held by <BANK>, as escrow agent (the "Escrow
Agent") pending acquisition of the Equipment under the terms of that certain Escrow Agreement dated as of
<Date>(the "Escrow Agreement"), by and between Lessor, Lessee and Escrow Agent.
1.4. Lessee will timely file for each payment schedule issued under the Lease a Form 8038-G (or, if the invoice
price of the Equipment under such schedule is less than $100,000, a Form 8038-GC) relating to such Lease with the
Internal Revenue Service in accordance with Section 149(e) of the Internal Revenue Code of 1986, as amended (the
“Code”).
1.5. The Lease is a “qualified tax-exempt obligation” for the purposes and within the meaning of Section 265(b)(3)
of the Internal Revenue Code of 1986, as amended.
Section 2. Non-Arbitrage Certifications.
2.1. The Rental Payments due under the Financing Documents will be made with monies retained in Lessee's
general operating fund (or an account or subaccount therein). No sinking, debt service, reserve or similar fund or
account will be created or maintained for the payment of the Rental Payments due under the Financing Documents
or pledged as security therefor.
2.2. There have been and will be issued no obligations by or on behalf of Lessee that would be deemed to be (i)
issued or sold within fifteen (15) days before or after the date of issuance of the Financing Documents, (ii) issued or
sold pursuant to a common plan of financing with the Financing Documents and (iii) paid out of substantially the
same source of funds as, or deemed to have substantially the same claim to be paid out of substantially the same
source of funds as, the Financing Documents.
2.3. Lessee does not and will not have on hand any funds that are or will be restricted, segregated, legally
required or otherwise intended to be used, directly or indirectly, as a substitute, replacement or separate source of
financing for the Equipment.
2.4. No portion of the Principal Amount is being used by Lessee to acquire investments which produce a yield
materially higher than the yield realized by Lessor from Rental Payments received under the Financing Documents.
2.5. The Principal Amount does not exceed the amount necessary for the governmental purpose for which the
Financing Documents were entered into. Such funds are expected to be needed and fully expended for payment of
the costs of acquiring, equipping and installing the Equipment.
2.6. Lessee does not expect to convey, sublease or otherwise dispose of the Equipment, in whole or in part, at a
date which is earlier than the final Payment Date under the Financing Documents.
Item 9.f. - Page 29
Section 3. Disbursement of Funds; Reimbursement to Lessee.
3.1 It is contemplated that the entire Principal Amount will be used to pay the acquisition cost of Equipment to
the vendors or manufacturers thereof or for any financial advisory or closing costs, provided that, if applicable, a
portion of the principal amount may be paid to Lessee as reimbursement for acquisition cost payments already made
by it so long as the conditions set forth in Section 3.2 below are satisfied.
3.2. Lessee shall not request that it be reimbursed for Equipment acquisition cost payments already made by it
unless each of the following conditions have been satisfied:
(a) If applicable, Lessee adopted a resolution or otherwise declared its official intent in accordance with
Treasury Regulation § 1.150-2 (a copy of which will be provided to Lessor, if applicable, the “Declaration of
Official Intent”), wherein Lessee expressed its intent to be reimbursed from the proceeds of a borrowing for all or a
portion of the cost of the Equipment, which expenditure was paid to the Vendor not earlier than sixty (60) days
before Lessee adopted the Declaration of Official Intent;
(b) The reimbursement being requested will be made by a written allocation before the later of eighteen (18)
months after the expenditure was paid or eighteen (18) months after the items of Equipment to which such payment
relates were placed in service;
(c) The entire payment with respect to which reimbursement is being sought is a capital expenditure, being a
cost of a type properly chargeable to a capital account under general federal income tax principles; and
(d) Lessee will use any reimbursement payment for general operating expenses and not in a manner which
could be construed as an artifice or device under Treasury Regulation § 1.148-10 to avoid, in whole or in part,
arbitrage yield restrictions or arbitrage rebate requirements.
Section 4. Use and Investment of Funds; Temporary Period.
4.1. Lessee has incurred or will incur, within six (6) months from the date of issuance of the Financing
Documents, binding obligations to pay an amount equal to at least five percent (5%) of the Principal Amount toward
the costs of the Equipment. An obligation is not binding if it is subject to contingencies within Lessee’s control.
The ordering and acceptance of the items of Equipment will proceed with due diligence to the date of final
acceptance of the Equipment.
4.2. An amount equal to at least eighty-five percent (85%) of the Principal Amount will be expended to pay the
cost of the Equipment by the end of the three-year period commencing on the date of this Certificate. No portion of
the Principal Amount will be used to acquire investments that do not carry out the governmental purpose of the
Financing Documents and that have a substantially guaranteed yield of four (4) years or more.
4.3.(a) Lessee covenants and agrees that it will rebate an amount equal to excess earnings on the Principal Amount
deposited under the Escrow Agreement to the Internal Revenue Service if required by, and in accordance with,
Section 148(f) of the Code, and make the annual determinations and maintain the records required by and otherwise
comply with the regulations applicable thereto. Lessee reasonably expects to cause the Equipment to be acquired by
<Date>.
(b) Lessee will provide evidence to Lessor that the rebate amount has been calculated and paid to the Internal
Revenue Service in accordance with Section 148(f) of the Code unless (i) the entire Principal Amount is expended
on the Equipment by the date that is the six-month anniversary of the Financing Documents or (ii) the Principal
Amount is expended on the Equipment in accordance with the following schedule: At least fifteen percent (15%) of
the Principal Amount and interest earnings thereon will be applied to the cost of the Equipment within six months
from the date of issuance of the Financing Documents; at least sixty percent (60%) of the Principal Amount and
interest earnings thereon will be applied to the cost of the Equipment within 12 months from the date of issuance of
the Financing Documents; and one hundred percent (100%) of the Principal Amount and interest earnings thereon
will be applied to the cost of the Equipment prior to eighteen (18) months from the date of issuance of the Financing
Documents.
(c) Lessee hereby covenants that (i) Lessee is a governmental unit with general tax powers; (ii) the Lease is not
a “private activity bond” under Section 141 of the Code; (iii) at least ninety-five percent (95%) of the Principal
Amount is used for the governmental activities of Lessee; and (iv) the aggregate principal amount of all tax-exempt
obligations (including the Lease) issued by Lessee and its subordinate entities, if any, during the current calendar
year is not reasonably expected to exceed $5,000,000. Accordingly, the rebate requirements of Section 148(f) of the
Code are treated as being met, in lieu of the spending exceptions set forth in paragraph (b) above.
Section 5. Escrow Account.
Item 9.f. - Page 30
The Financing Documents provide that the monies deposited in escrow shall be invested until payments to the
vendor(s) or manufacturer(s) of the Equipment are due. Lessee will ensure that such investment will not result in
Lessee's obligations under the Financing Documents being treated as an "arbitrage bond" within the meaning of
Section 148(a) of the Internal Revenue Code of 1986, as amended (the "Code"), respectively. Any monies which
are earned from the investment of these funds shall be labeled as interest earned. All such monies will be disbursed
on or promptly after the date that Lessee accepts the Equipment. Lessee acknowledges that the provisions of
Sections 2 and 4 herein are particularly applicable when the Principal Amount is funded into an Escrow Fund
subject to the Escrow Agreement.
Section 6. No Private Use; No Consumer Loan.
6.1. Lessee will not exceed the private use restrictions set forth in Section 141 of the Code. Specifically, Lessee
will not permit more than 10% of the Principal Amount to be used for a Private Business Use (as defined herein) if,
in addition, the payment of more than ten percent (10%) of the Principal Amount plus interest earned thereon is,
directly or indirectly, secured by (i) any interest in property used or to be used for a Private Business Use or (ii) any
interest in payments in respect of such property or derived from any payment in respect of property or borrowed
money used or to be used for a Private Business Use.
6.2 In addition, if both (A) more than five percent (5%) of the Principal Amount is used as described above
with respect to Private Business Use and (B) more than five percent (5%) of the Principal Amount plus interest
earned thereon is secured by Private Business Use property or payments as described above, then the excess over
such five percent (5%) (the “Excess Private Use Portion”) will be used for a Private Business Use related to the
governmental use of the Equipment. Any such Excess Private Use Portion of the Principal Amount will not exceed
the portion of the Principal Amount used for the governmental use of the particular project to which such Excess
Private Use Portion is related. For purposes of this paragraph 6.3, “Private Business Use” means use of bond
proceeds or bond financed-property directly or indirectly in a trade or business carried on by a natural person or in
any activity carried on by a person other than a natural person, excluding, however, use by a state or local
governmental unit and excluding use as a member of the general public.
6.4. No part of the Principal Amount or interest earned thereon will be used, directly or indirectly, to make or
finance any loans to non-governmental entities or to any governmental agencies other than Lessee.
Section 7. No Federal Guarantee.
7.1. Payment of the principal or interest due under the Financing Documents is not directly or indirectly
guaranteed, in whole or in part, by the United States or an agency or instrumentality thereof.
7.2. No portion of the Principal Amount or interest earned thereon shall be (i) used in making loans the payment
of principal or interest of which are to be guaranteed, in whole or in part, by the United States or any agency or
instrumentality thereof, or (ii) invested, directly or indirectly, in federally insured deposits or accounts if such
investment would cause the financing under the Financing Documents to be "federally guaranteed" within the
meaning of Section 149(b) of the Code.
Section 8. Miscellaneous.
8.1. Lessee shall keep a complete and accurate record of all owners or assignees of the Financing Documents in
form and substance satisfactory to comply with the registration requirements of Section 149(a) of the Code unless
Lessor or its assignee agrees to act as Lessee's agent for such purpose.
8.2. Lessee shall maintain complete and accurate records establishing the expenditure of the Principal Amount
and interest earnings thereon for a period of five (5) years after payment in full under the Financing Documents.
8.3. To the best of the undersigned’s knowledge, information and belief, the above expectations are reasonable
and there are no other facts, estimates or circumstances that would materially change the expectations expressed
herein.
8.4. The Lessee’s Tax Identification Number is: 33-0765218.
Item 9.f. - Page 31
IN WITNESS WHEREOF, this Post-Issuance Tax Compliance Procedures Certificate has been executed on behalf
of Lessee as of <Date>.
<LESSEE NAME>
By: _________________________________
Name: <Name>
Title: <Title>
Item 9.f. - Page 32
EXHIBIT I
ESCROW AGREEMENT
LESSOR:
Holman Capital Corporation
25201 Paseo de Alicia, Suite 290
Laguna Hills, CA 92653
ESCROW AGENT:
<Bank Name>
<Address>
<City, State, ZIP>
LESSEE:
<Lessee Name>
<Address>
<Address 2>
<City, State, ZIP>
THIS ESCROW AGREEMENT (this “Escrow Agreement”) is made as of <Date>, between Holman
Capital Corporation (“Lessor”), the <Lessee Name> (“Lessee”), and <Bank Name> (the “Escrow Agent”).
Lessor and Lessee have heretofore entered into that certain Energy Conversation Equipment Lease-
Purchase Agreement and Equipment Schedule both dated <Date>(the “Lease Agreement”). The Lease
Agreement contemplates that certain Equipment described therein (the “Equipment”) is to be acquired from the
vendor(s) or manufacturer(s) thereof.
After acceptance of the Equipment by Lessee, the Equipment is to be leased by Lessor to Lessee pursuant
to the terms of the Lease Agreement.
The Lease Agreement contemplates that Lessor will deposit with the Escrow Agent cash in the amount of
<$0.00> (the “Deposit Amount”), for deposit into the escrow fund (the “Escrow Fund”), to be held in escrow by
the Escrow Agent and applied on the express terms and conditions set forth herein. Such deposit into the Escrow
Fund, together with all interest and additions received with respect thereto, is to be applied from time to time to
pay the vendor(s) or manufacturer(s) of the Equipment its invoice cost (a portion of which may, if required, be
paid prior to final acceptance of the Equipment by Lessee). The Escrow Fund is to be held for the account and
benefit of Lessee, and Lessee has granted to Lessor a first priority and perfected lien on and security interest in the
Escrow Fund and any all proceeds, interest and other earnings thereon and investments therein to the Lessor by
virtue of the execution of this Escrow Agreement without the need for any additional filings or financing
statements.
The parties desire to set forth the terms on which the escrow is to be created and to establish the rights
and responsibilities of the parties hereto.
NOW, THEREFORE, the parties agree as follows:
1. The Escrow Agent hereby agrees to serve as escrow agent upon the terms and conditions set forth herein. The
Escrow Agent agrees that the Escrow Fund shall be held irrevocably in trust for the account and benefit of
Lessee and all interest earned with respect to the Escrow Fund shall accrue to the benefit of Lessee and shall be
applied as expressly set forth herein.
To the limited extent required to perfect the first, priority security interest hereby granted by Lessee to Lessor in
the cash and negotiable instruments from time to time held in the Escrow Fund, Lessor hereby appoints the
Escrow Agent as its security agent, and the Escrow Agent hereby accepts the appointment as security agent, and
agrees to hold physical possession of such cash and negotiable instruments on behalf of Lessor.
2. On such day as determined to the mutual satisfaction of the parties (the “Commencement Date”), Lessor shall
deposit with the Escrow Agent cash in the amount of the Deposit Amount to be held by the Escrow Agent on
the express terms and conditions set forth herein. The Escrow Agent agrees to accept the deposit of the Deposit
Item 9.f. - Page 33
Amount by Lessor with the Escrow Agent, and further agrees to hold the amount so deposited together with all
interest and other additions received with respect thereto in escrow on the express terms and conditions set forth
herein.
3. The Escrow Agent shall at all times segregate the Escrow Fund into an account maintained for that express
purpose, which shall be clearly identified on the books and records of the Escrow Agent as being held in its
capacity as Escrow Agent. Securities and other negotiable instruments held in the Escrow Fund from time to
time shall be held or registered in the name of the Escrow Agent (or its nominee). The Escrow Fund shall not,
to the extent permitted by applicable law, be subject to levy or attachment or lien by or for the benefit of any
creditor of any of the parties hereto (except with respect to the security interest therein held by Lessor).
4. Lessee hereby directs the Escrow Agent to invest the cash held in the Escrow Fund from time to time in a
<Bank Name> non-interest bearing demand deposit account with no fees or costs or, in the event such fund is
not at the time available, such other investments as Lessee may specify in writing, to the extent the same are at
the time legal for investment of the funds being invested. Interest or other amounts earned and received by the
Escrow Agent with respect to the Escrow Fund shall be deposited in and become a part of the Escrow Fund. No
investment shall be made that would cause the Lease Agreement to be deemed to be an arbitrage bond within
the meaning of Section 148(a) of the Internal Revenue Code of 1986, as amended.
5. Lessor and Lessee hereby authorize the Escrow Agent to take the following actions with respect to the Escrow
Fund:
a. From time to time, the Escrow Agent shall pay the vendor or manufacturer of the Equipment payments then due
and payable, or reimburse Lessee for amounts that it has paid to the vendor or manufacturer of the Equipment,
upon receipt of the following: (a) a duly executed Certificate of Acceptance and Payment Request in the form
attached as Exhibit A hereto, (b) the vendor(s) or manufacturer(s) invoice(s) specifying the acquisition price of
the Equipment described in the requisition request, and (c) any additional documentation required by Lessor.
b. If Lessor provides to the Escrow Agent written notice of the occurrence of an Event of Default or an Event of
Nonappropriation by Lessee under the Lease Agreement, the Escrow Agent shall thereupon promptly remit to
Lessor the entire balance of the Escrow Fund.
c. Upon receipt by the Escrow Agent of a duly executed Certificate of Acceptance and Payment Request identified
as the final such request, the Escrow Agent shall transfer the then remaining balance of the Escrow Fund to
Lessee, upon the express condition that Lessee hereby agrees to use such excess amount solely for capital
expenditures as shall be approved by Lessee or, at the written direction of Lessee, for application against the
interest component of the Lessee’s payment obligation under the Lease Agreement, as provided therein, unless
otherwise agreed by Lessor.
6. The Escrow Agent shall have no liability for acting upon any written instruction presented by Lessee and Lessor
in connection with this Escrow Agreement that the Escrow Agent in good faith believes to be genuine.
Furthermore, the Escrow Agent shall not be liable for any act or omission in connection with this Escrow
Agreement except for its own gross negligence, willful misconduct, or bad faith. The Escrow Agent shall not
be liable for any loss or diminution in value of the Escrow Fund as a result of the investments made pursuant to
Section 4.
7. To the extent authorized by law, Lessee hereby agrees to indemnify and save the Escrow Agent harmless
against any liabilities that it may incur in the exercise and performance of its powers and duties hereunder and
that are not due to the Escrow Agent’s gross negligence or willful misconduct. No indemnification will be
made under this Section or elsewhere in this Escrow Agreement for damages arising solely out of gross
negligence, willful misconduct, or bad faith by the Escrow Agent, its officers, agents, employees, successors or
assigns.
8. The Escrow Agent may at any time resign by giving at least 30 days’ prior written notice to Lessee and Lessor,
but such resignation shall not take effect until the appointment of the successor Escrow Agent. The substitution
of another bank or trust company to act as Escrow Agent under this Escrow Agreement may occur by written
Item 9.f. - Page 34
agreement of Lessor and Lessee. In addition, the Escrow Agent may be removed at any time, with or without
cause, by instrument in writing executed by Lessor and Lessee. Such notice shall set forth the effective date of
the removal. In the event of any resignation or removal of the Escrow Agent, a successor Escrow Agent shall
be appointed by an instrument in writing executed by Lessor and Lessee. Such successor Escrow Agent shall
indicate its acceptance of such appointment by an instrument in writing delivered to Lessor, Lessee and the
predecessor Escrow Agent.
Upon the effective date of resignation or removal, the Escrow Agent will transfer the Escrow Fund then held by
it to the successor Escrow Agent selected by Lessor and Lessee.
9. This Escrow Agreement shall terminate upon receipt by the Escrow Agent of the written notice from Lessor
specified in Section 5(c) or Section 5(d) hereof.
10. All notices hereunder shall be in writing, sent by certified mail, return receipt requested, or by mutually
recognized overnight carrier addressed to the other party at its respective address shown on page 1 of this
Escrow Agreement or at such other address as such party shall from time to time designate in writing to the
other parties; and shall be effective on the date or receipt.
11. This Escrow Agreement shall inure to the benefit of and shall be binding upon the parties hereto and their
respective successors and assigns. No rights or obligations of the Escrow Agent under this Escrow Agreement
may be assigned without the prior written consent of Lessor and Lessee.
12. This Escrow Agreement constitutes the entire agreement between the parties hereto with respect to the subject
matter hereof, and no waiver, consent, modification, or change of terms hereof shall bind any party unless in
writing signed by all parties.
13. The Escrow Agent may employ agents, attorneys and accountants in connection with its duties hereunder and
shall not be liable for any action taken or omitted in good faith in accordance with the advice of counsel,
accountants, or other skilled persons.
14. This Escrow Agreement shall be governed by and be construed and interpreted in accordance with the internal
laws of the State of California.
[Remainder of page intentionally left blank]
Item 9.f. - Page 35
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be duly executed as
of the day and year first above set forth.
LESSOR: HOLMAN CAPITAL
CORPORATION
By:
Lance S. Holman
President & CEO
LESSEE: <LESSEE NAME>
By:
<Name>
<Title>
<BANK>
By:
<Name>
<Title>
Item 9.f. - Page 36
EXHIBIT A TO ESCROW AGREEMENT
CERTIFICATE OF ACCEPTANCE AND PAYMENT REQUEST
The following payment request is directed to <BANK> (the “Escrow Agent”), as escrow agent under that
certain Escrow Agreement dated <Date>(the “Escrow Agreement”), between the <Lessee Name> (“Lessee”),
Holman Capital Corporation (“Lessor”), and the Escrow Agent. Because Holman Capital Corporation has assigned
all of its right, title, and interest in and to the Escrow Agreement to <BANK>, all references herein to “Lessor” shall
mean <BANK>.
The Escrow Agent is hereby requested to pay from the Escrow Fund established and maintained under the
Escrow Agreement the amount set forth below to the named payee(s). The amount shown is due and payable under
a purchase order or contract (or has been paid by and not previously reimbursed to Lessee). The equipment
described below is part or all of the Equipment leased pursuant to that certain Energy Conversation Equipment
Lease-Purchase Agreement and Equipment Schedule both dated <Date>(the “Lease Agreement”), between Lessor
and Lessee:
QUANTITY
DESCRIPTION OF
UNITS OF EQUIPMENT
AMOUNT
PAYEE
Lessee hereby certifies and represents to and agrees with Lessor as follows with respect to the Equipment
described above: (i) the Equipment has been delivered to the location(s) set forth in the Lease Agreement; (ii) a
present need exists for the Equipment, which need is not temporary or expected to diminish in the near future;
(iii) the Equipment is essential to and will be used by Lessee only for the purpose of performing one or more
governmental functions of Lessee consistent with the permissible scope of Lessee’s authority; (iv) the estimated
useful life of the Equipment based upon the manufacturer’s representations and Lessee’s projected needs is not less
than the term of the Lease Agreement; (v) Lessee has conducted such inspection and/or testing of the Equipment as
it deems necessary and appropriate and hereby acknowledges that it accepts the Equipment for all purposes as of the
date of this Certificate; (vi) the Equipment is covered by insurance in the types and amounts required by the Lease
Agreement; (vii) no Event of Default or Event of Nonappropriation, as those terms are defined in the Lease
Agreement, and no event that with the giving of notice or lapse of time or both, would become an Event of Default
or an Event of Nonappropriation, has occurred and is continuing on the date hereof; and (viii) sufficient funds have
been appropriated by Lessee for the payment of all rental payments due under the Lease Agreement during Lessee’s
current Fiscal Year.
Based on the foregoing, the Escrow Agent is hereby authorized and directed to fund the acquisition of the
Equipment set forth above by paying, or causing to be paid, the manufacturer(s)/vendor(s) the amounts set forth on
the attached invoices from the Escrow Fund held under the Escrow Agreement in accordance with its terms.
The following documents are attached hereto and made a part hereof: (a) Original Invoice(s) and (b) Copies
of Certificate(s) of Ownership, designating Lessor as legal owner, and evidence of filing.
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Item 9.f. - Page 37
IF REQUEST IS FINAL REQUEST, CHECK HERE . The undersigned hereby certifies that the items
of Equipment described above, together with the items of Equipment described in and accepted by Certificates of
Acceptance and Payment Requests previously filed by Lessee with Lessor constitute all of the Equipment subject to
the Lease Agreement.
Date: ______________
Approved:
<BANK>., as Lessor <LESSEE NAME>, as Lessee
By:
By:
Name: Name:
Title: Title:
Item 9.f. - Page 38
SCHEDULE A TO ESCROW AGREEMENT:
NOTICE AND ACKNOWLEDGEMENT OF
ASSIGNMENT OF ESCROW AGREEMENT
Holman Capital Corporation ("Lessor"), <Lessee Name> ("Lessee"), and <BANK> ("Escrow Agent") have entered
into an Escrow Agreement dated <Date>(the "Escrow Agreement'), pursuant to which Lessor, or its Assignee (as
defined below), has deposited cash into the Escrow Fund established thereunder, which funds are to be used by
Lessee to acquire certain Equipment.
Escrow Agent is hereby notified that Lessor has assigned all of its right, title, and interest in and to, but not its
obligations under, the Escrow Agreement to <BANK> ("Assignee"), including, in particular, but without limitation,
Lessor's security interest in the Escrow Fund and Lessor's right to approve all payment requests submitted by
Lessee.
Date: <Date>
LESSOR: HOLMAN CAPITAL
CORPORATION
By:
Lance S. Holman
President & CEO
LESSEE: <LESSEE NAME>
By:
<Name>
<Title>
ESCROW AGENT: <BANK>
By:
<Name>
<Title>
Item 9.f. - Page 39
IRS FORM 8038-G
[To be prepared by Holman Capital Corporation]
Item 9.f. - Page 40
CLOSING MEMORANDUM
<$0.00> LEASE FOR ENERGY CONSERVATION PROJECT – PHASE 2B
PURSUANT TO THAT ENERGY CONSERVATION EQUIPMENT LEASE-PURCHASE AGREEMENT AND EQUIPMENT SCHEDULE
THERETO BOTH DATED <DATE>
BETWEEN <LESSEE NAME>, AS LESSEE, AND
HOLMAN CAPITAL CORPORATION, AS LESSOR
Pre-Closing: Pre-Closing will be held at the Lessee’s convenience, on or before October 12, 2016. All documents
will be executed and two (2) blue ink originals will be overnighted to Holman Capital Corporation, Attn.: Aditya
Kajaria, 25201 Paseo de Alicia, Suite 290, Laguna Hills, CA 92653, for delivery no later than
9:00 am on the morning of October 12, 2016 and held in trust until such time as the wires and original documents
are released by the Parties.
Closing: (1) By wire transfer and pending receipt of original, executed Lease Documents, on the morning of
<Date>, the Investor is authorized by Lessee to wire the Principal Amount of Lease to Escrow Agent, an amount
equal to the Total Lease Proceeds, as defined below, pursuant to the Wire Instructions as follows:
Bank Name: <BANK>
ABA No:
Account No:
Account Name: <Lessee Name>
(2) By funds transfer and pending receipt of original, executed Lease Documents, on the morning of
<Date>, the Investor is authorized by Lessee to transfer via internal credit the Issuance Costs (as defined below) to
Lessor, pursuant to a general ledger credit to the Lessor as follows:
Bank Name: Community Business Bank
ABA Number: 121144191
Account Number: 201008281
Account Name: Holman Capital Corporation
Holman Capital Corporation will confirm disbursement of funds to the Lessee’s escrow account and then release all
of the original documents held in trust to the investor and forward a copy to the Lessee. Upon conformation by
Escrow Agent of the Lease Proceeds, Lessee will wire closing costs, legal fees and other amounts to the parties in
accordance with the invoices attached hereto.
Sources and Uses of Funds:
Principal Amount of Lease <$0.00>
TOTAL SOURCES <$0.00>
Total Equipment Cost: <$0.00>
Issuance Costs: $ 5,000.00
TOTAL LEASE PROCEEDS <$0.00>
Attest:
<LESSEE NAME>
By:_____________________________
Name: <Name>
Title: <Title>
Item 9.f. - Page 41
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Item 9.f. - Page 42