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<br /> Equipment is in good order and in substantial confonnance with any applicable purchase order, Lessee shall
<br /> be liable to Lessor for, and shall indemnify Lessor against, all direct and consequential damages and/or costs
<br /> incurred by Lessor in connection with such failure or refusal.
<br /> 4. TERl\.1. RENT AND EARLY TERNllNATION. The tenD of this Lease, and the respective rental
<br /> amounts, divided into principal and interest components, and the payment dates, are set forth in the Equipment
<br /> Schedule. Overdue installments shall bear interest at the lesser of (a) a rate of interest equal to the prime rate
<br /> announced by American Bank ITom time to time plus five percent (5%) which rate shall change when and as
<br /> such prime rate changes or (b) the maximum lawful rate allowable by law (the "Overdue Rate") and shall be
<br /> due and payable immediately without notice for each installment of rent not paid when due and payable. The
<br /> Overdue Rate shall in no event exceed fifteen percent (15%) per annum.
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<br /> In the event that during any fiscal year of Lessee, sufficient funds are not appropriated for the
<br /> payment ofall rental payments required to be paid during Lessee's next succeeding fiscal year, then Lessee may
<br /> terminate this Lease as of the end of its then-current fiscal year, and shall not be obligated to make the rental
<br /> payments beyond the then-current fiscal year. Lessee agrees to give Lessor written notice of such termination
<br /> at least 60 days prior to the end of the then-current fiscal year or, if nonappropriation has not occurred by that
<br /> date, immediately upon nonappropriation. If this Lease is terminated under this section, Lessee agrees to
<br /> peaceably deliver the Equipment to Lessor at any location within 200 miles of the City of San Marcos, Texas
<br /> designated by Lessor, at Lessee's sole cost and expense. To the extent lawful and permitted by public policy,
<br /> Lessee agrees that in the event that it terminates this Lease under this section, it will not expend or comnút any
<br /> funds for the purchase or use of other equipment performing similar functions or having a purpose similar to
<br /> the Equipment during the fiscal year that follows termination of this Lease under this section.
<br /> 5. RENT AL P A YrvŒNTS. Except as provided in Section 4 above, Lessee's obligation to make
<br /> installment payments hereunder for each fiscal year for the tenD of this municipal lease shall be absolute and
<br /> unconditional and shall not be subject to any contractual defenses, offsets, counterclaims, or withholdings
<br /> based upon disputes or claims that Lessee may have against Lessor, whether arising under this Lease or
<br /> othenvise.
<br /> A portion of each rental payment hereunder is paid as, and represents payment of, interest, and
<br /> Schedule A of Exhibit "A" hereto sets forth the interest component of each rental payment.
<br /> 6. OWNERSHIP: GRANT OF SECURITY INTEREST. The Equipment shall be registered in the
<br /> - name of Lessee and, if applicable, title thereto shall be evidenced by a certificate(s) of title, or such other
<br /> instrument(s) as may be required by or utilized under the laws of the State (as hereinafter defined) to
<br /> demonstrate ownership (the "C ertificate(s) "). Such Certificate(s) shall be held at all times during the tenD of
<br /> this Lease by Lessor and shall expressly state thereon (a) that Lessor holds a lien on the Equipment, (b) that
<br /> Lessee's possession of the Equipment is subject to this Lease, and (c) any other infonnation required by
<br /> applicable law and that may be necessary or convenient, as determined by Lessor, to establis~ Lessor's rights,
<br /> title and interest as the first secured lienholder of the Equipment. With respect to replacement parts, additions,
<br /> modifications, repairs and accessories hereafter incorporated in and/or attached to the Equipment, Lessor shall
<br /> have a secured interest therein upon such incorporation or attachment to the Equipment and lien-free title
<br /> thereto (not including the lien of Lessor) shall be transferred to Lessor, without compensation to Lessee, upon
<br /> termination of this Lease, except as otherwise expressly provided herein. Lessee does hereby grant to Lessor
<br /> a security interest in all of its right, title and interest in, to and arising hereunder, the Equipment described
<br /> herein and the proceeds of both to secure the payment and perfonnance by Lessee of all of its liabilities and
<br /> obligations arising hereunder and, in addition, all other obligations, liabilities or indebtedness of Lessee to
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