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<br />as to which an Event of Loss has occurred, a payment in an amount equal to the "Stipulated Loss Value" (defined below) of such
<br />Equipment determined as of the date such Casualty Payment is due and payable less the net amount of recovery, if any, actually
<br />received by Lessor on or prior to the date such Casualty Payment is due and payable from insurance or otherwise in respect of such
<br />Event of Loss.
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<br />In the event that the Equipment or any portion thereof is damaged, but not in a manner that constitutes an Event of Loss under
<br />this Lease, then Lessee shall promptly notify Lessor of the occurrence of such damage and shall payor cause to be paid to Lessor
<br />all insurance proceeds, if any, received by Lessee and payable as a result of such damage, not later than the earlier of (a) the date
<br />that is sixty (60) days subsequent to the date such damage occurred or (b) the date of receipt of the insurance proceeds. Lessee
<br />shall thereafter or simultaneously therewith submit to Lessor a written cost estimate to repair any damaged item of Equipment to
<br />a condition equal to the condition of the Equipment before the damage occurred, from a repair facility selected by Lessee, and
<br />Lessor shall disburse to Lessee, or directly to such repair facility, at Lessor's discretion, from the insurance proceeds the amount
<br />necessary to effect the repair. In the event that the costs thereof are paid by Lessor directly to Lessee, then all costs of such repair
<br />~1-.n 11 be promptly paid by Lessee and Lessee shall not permit any liens to attach or remain attached to such Equipment.
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<br />15. TAXES. Lessee shall pay promptly, when the same become due, and shall indemnify and hold harmless Lessor from
<br />and against payment of, all license fees, registration fees, assessments, and sales, use, property, excise and other taxes now or
<br />hereafter imposed by any federal, state or local government on or against the Equipment based on the ownership, lease, rental, sale,
<br />possession or use of the Equipment, whether the charge is assessed against Lessor or Lessee, as well as any related penalties or
<br />interest, and Lessee will do everything required of Lessor in connection with said fees, assessments and taxes.
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<br />Notwithstanding anything to the contrary in this Lease, the Lessee and Lessor agree the Equipment is exempt from taxation
<br />in accordance with the laws of the State of Texas, and that Lessee shall have the full right to administratively or judicially challenge
<br />any tax or assessment levied or attempted to be levied on the Equipment. Save and except to the extent it becomes necessary to
<br />pay any tax or assessment to protect the property and security interests of the Lessee, Lessor and Assignee, the Lessee may, in its
<br />sole discretion, elect not to pay any tax or assessment until such time as the tax or assessment is determined to be due and owing
<br />on the Equipment by a final and unappealed judgment issued by a court of competent jurisdiction.
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<br />16. LESSEE'S F AlLURE TO PAY TAXES. INSCRANCE, ETC. If Lessee fails to make any payment or to do any act
<br />required hereunder, then Lessor shall have the right, but not the obligation, to make the payment or do the act, without notice to
<br />or demand on Lessee, and without releasing Lessee from any contract obligation, and to pay, purchase, contest or compromise any
<br />encumbrance, charge or lien which Lessor judges to affect the Equipment or Lessor's rights therein.
<br />
<br />17. TAX MATTERS. Lessee hereby represents, warrants, covenants and agrees that:
<br />
<br />a. Lessee is a public entity of the State, the interest on whose obligations of indebtedness is exempt from federal
<br />('l"cl state income taxation.
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<br />b. Lessee will take no action that would cause the interest portion of the rental payments that will become due
<br />under this Lease (the "Interest Portion") to become subject to federal or State income taxation, and will take or cause its officials,
<br />officers, employees and agents to take all action lawfully within its powers necessary to cause the Interest Portion to remain so tax-
<br />exempt. Should the IRS disallow the tax-exempt status of the Interest Portion as a result of any act or omission by Lessee,
<br />including, but not limited to, Lessee's ceasing to be a tax-exempt entity, then, to the extent permitted by law, Lessee shall be
<br />required to pay additional sums to the Lessor or its assignees so as to bring the after-tax yield to the same level as the Lessor or
<br />its assignees would attain if the Interest Portion continued to be tax-exempt.
<br />
<br />c. Lessee hereby designates this Lease as a "qualified tax-exempt obligation" as defined in Section 265(b)(3)
<br />of the Internal Revenue Code of 1986, as amended (the "Code"). To preserve the validity of such designation, Lessee (i) will take
<br />no action or not fail to take action if such action so taken or not taken, respectively, would cause this Lease to be a "private activity
<br />bond" as defined in Section 141 of the Code; (ii) reasonably expects that the aggregate face amount of all tax-exempt obligations
<br />issued or to be issued by Lessee and all subordinate entities thereof during the calendar year in which this Lease is dated, including
<br />this Lease, will not exceed $10,000,000.00 (excluding (A) "private activity bonds" as defined in Section 141 of the Code, except
<br />qualified 501(c)(3) bonds as defined in Section 145 of the Code, and (B) current refunding obligations, to the extent that the
<br />amount of the refunding obligation does not exceed the outstanding amount of the refunded obligation); and (iii) Lessee will not
<br />designate more than $10,000,000.00 of obligations issued by Lessee and all subordinate entities thereof as "qualified tax exempt
<br />obligations" for purposes of Section 265(b )(3) of the Code.
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