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3. Resolution 5240 - Refinancing - New City Hall/Wells Fargo BuildingCity of Kalispell Post Office Box 1.997 - Kalispell, Montana 59903-1997 - Telephone (406)758W7700 Fax (406)758-7758 REPORT To: Mayor Kennedy and City Council Members FROM: Amy Robertson, Finance Director James Patrick, City Manager SUBJECT: Refinance well Fargo Building — fixed rate MEETING DATE: September 17, 2007 BACKGROUND: At the request of the City Council fixed rate financing has been secured through All Points Public Financing LLC for the wells Fargo Building. The rate is fixed at 4.85% for 12 years. The escrow account will provide funds for the remodel of the City Hall building for police and court. Dorsey & Whitney LLP of Missoula is the attorney providing the lease documents. Council is asked to approve the form and draft of the documents giving the City Manager authority to enter into the agreements. RECOMMENDATION: Approve agreements. FISCAL EFFECTS: Interest rate is fixed at the current Board of Investments rate. Legal costs of $8,000 will be rolled into the new lease. It is anticipated that the B01 variable rate will increase and our fixed rate will be an advantage. XOZO Amy Robertson Finance Director Report compiled: September 13, 2007 4 James atrick City Manager RESOLUTION No. 5240 RESOLUTION AUTHORIZING- THE IMPROVEMENT AND EXPANSION OF THE EXISTING CITY OFFICES FACILITIES AND APPROVING LEASE -PURCHASE AGREEMENT AND RELATED DOCUMENTS IN CONNECTION THEREWITH WHEREAS, the City of Kalispell (the "City„) has determined to undertake the expansion of its City office facilities by improving the building facilities at 201 First Avenue East, Kalispell, Montana, and including related site improvements (the "Project"); and WHEREAS, the City has determined that the most cost-effective manner of undertaking the Project is to enter into a lease -purchase arrangement in connection therewith, pursuant to a Lease -Purchase Agreement (the "Lease -Purchase Agreement75) to be entered into between the City, as lessee (sometimes referred to in such capacity as the "Lessee"), and All Points Public Funding, LLC, as lessor (the "Lessor"), and a copy of the proposed form of the Lease -Purchase Agreement has been placed on file in the offices of the City Clerk and presented to this meeting, and WHEREAS, the property to be leased pursuant to the Lease -Purchase Agreement will be leased by the City to the Lessor pursuant to a Site Lease (the "Site Lease") to be entered into between the City, as lessor, and All Points Public Funding, LLC, as lessee, and the funds to be applied to payment of the costs of the Project are to be held, invested and disbursed pursuant to the teens and provisions of an Escrow Agreement (the `Escrow Agreement") to be entered into between the City and the Lessor, and copies of the proposed forms of Site Lease and Escrow Agreement have been placed on file in the offices of the City Clerk and presented to this meeting; NOW, THEREFORE, BE 1T RESOLVED by the City Council (the "Council") of the City, as follows: Section 1. Approval of Project and Documents 1.1 A,p royal of Pro_ iec . The City hereby approves the Project. All actions heretofore taken by officers of the City in connection with the Project, to the extent not inconsistent with the provisions of the Resolution, are hereby ratified, approved and confirmed. 1.2 Approval of Documents. The City hereby approves the forms of the Site Lease, the Lease -Purchase Agreement and the Escrow Agreement. one or more officers of the City are authorized and directed to execute and deliver the Site Lease, the Lease -Purchase Agreement and the Escrow Agreement in substantially the forms now on file, together with such modifications thereto as may be approved by the officer or officers executing the same, which approval shall be conclusively evidenced by the execution thereof. officers of the City are also authorized to enter into and deliver such other documents and certificates as may be necessary or desirable in connection therewith, in the opinion of Dorsey & Whitney LLP, as Bond Counsel, or as may be reasonably required by the Lessor. Section 2. Tax Matters. 2.1 Use of Facilities. The facilities to be leased pursuant to the Site Lease and the Lease -Purchase Agreement (sometimes referred to as the "Facilities") are and will be owned and operated by the City and used by the City as offices for City departments. No user of the Facilities is granted any concession, license or special arrangement with respect to the Facilities. Except for the Site Lease and the Lease -Purchase Agreement, the City shall not enter into any lease, use or other agreement with any non -governmental person relating to the use of the Project or the Facilities or security for the payment of the Lease Payments due under the Lease -Purchase Agreement which might cause the Lease -Purchase Agreement or any payments to be made in connection therewith to be considered an `arbitrage bond" or "private loan bond" within the meaning of Sections 148 and 141 of the Internal Revenue Code of 1986, as amended (the "Code"). 2.2 Arbitrage Rebate. The City acknowledges that the Lease -Purchase Agreement (except as otherwise provided hereby or by the Lease -Purchase Agreement) is subject to the rebate requirements of Section 148(f) of the Code. The City covenants and agrees to retain such records, make such determinations, file such reports and documents and pay such amounts at such times as are required under said Section 148(fl and applicable Treasury Regulations to preserve the exclusion of interest on the Lease -Purchase Agreement from gross income for federal income tax purposes, except to the extent that the City qualifies as a qualified small issuer pursuant to the provisions of Section 148(f)(4)(D) of the Code or except as may otherwise be provided in Section 148(f) of the Code. 2.3 Information Reportin4. The City shall file with the Secretary of the Treasury, not later than the time required by the Code, a statement concerning the Bonds containing the information required by Section 149(e) of the Code. Section 3. Transcript Certification. The officers of the City are directed to furnish to the Lessor certified copies of all proceedings and information in their official records relevant to the authorization of the Site Lease, the Lease -Purchase Agreement and the Escrow Agreement, and such certificates and affidavits as to other matters appearing in their official records or otherwise known to them as may be reasonably required to evidence the validity and enforceability of the Lease -Purchase Agreement, and all such certified copies, certificates and affidavits, including any heretofore furnished, shall constitute representations and recitals of the City as to the correctness of all facts stated therein and the completion of all proceedings stated therein to have been taken. Section 4. Effective Date. This resolution shall become effective upon passage and all provisions of ordinances, resolutions and other actions and proceedings of the City which are in any way inconsistent with the terms and provisions of this Resolution are repealed, amended and rescinded to the full extent necessary to give full force and effect to the provisions of this Resolution. PASSED by the City Council of the City of Kalispell, Montana, this day of September 2007. Attest: Theresa white City Clerk Pamela B. Kennedy Mayor (SEAL) Draft 9/I1/07 After Recordation Please Return to: ALL POINTS PUBLIC FUNDING, LLC 275 Broadhollow Road Melville, NY 11747 LEASE -PURCHASE AGREEMENT Bated as of , 2007 by and between CITY OF KA.LISP'ELL and ALL POINTS PUBLIC FUNDING, LLC Recorded as INSTRUMENT NO. this day of , 2007, in Flathead County, Montana TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS, EXHIBITS; RULES OF CONSTRUCTION ...................................I Section1.1 Definitions..........................................................................................................I Section1.2 Exhibits..............................................................................................................4 Section 1.3 Rules of Construction........................................................................................ Section 1.4 Reference to Lease -Purchase Agreement..........................................................4 ARTICLE 2 REPRESENTATIONS, COVENANTS AND WARRANTIES................................5 Section 2.1 Representations, Covenants and Warranties of Lessee......................................5 Section 2.2 Representations, Covenants and Warranties of Lessor......................................6 Section 2.3 Related Agreements...........................................................................................7 Section 2.4 Conditions Precedent.........................................................................................7 ARTICLE 3 PAYMENT OF COSTS OF THE PROJECT .............................................................7 ARTICLE 4 LEASE OF LEASED PROPERTY............................................................................7 Section4.1 Lease..................................................................................................................7 Section4.2 Term...................................................................................................................8 Section 4.3 Possession and Enjoyment.................................................................................8 Section 4.4 Title to the Leased Property...............................................................................8 Section 4.5 Transfer of Title to Personal Property; Release of Liens...................................8 ARTICLE5 LEASE PAYMENTS..................................................................................................9 Section5.1 Lease Payments..................................................................................................9 Section5.2 Time of Payment................................................................................................9 Section 5.3 Interest Component ............................................................................................9 Section 5.4 Manner of Payment............................................................................................9 Section 5.5 Lease Payments to Constitute Current Expense of Lessee; No Pledge .............9 Section 5.6 Lease Payments to be Unconditional.................................................................9 Section 5.7 Termination by Lessee.....................................................................................10 Section 5.8 Intent to Continue Lease Term; Appropriations .................................... A........ 0 10 Section 5.9 Effect of Termination.................................►..................................................... 10 ARTICLE 6 MAINTENANCE; TAXES; MODIFICATION; AND OTHER MATTERS ..........10 Section 6.1 Maintenance and Utilities by Lessee...............................................................10 Section 6.2 Taxes and other Governmental Charges.........................................................11 Section 6.3 Good Faith Contest.......................................................................................... I I Section 6.4 Modification cation of Leased Property ■ ....... ►........ . • ........... . . .. • ..... , ....... 9 ..... ► ... ► • . .... .... 11 Section 6.5 Installation of Lessee's Equipment..................................................................12 Section6.6 Liens.................................................................................................................12 ARTICLE7 INSURANCE............................................................................................................12 Section 7.1 Insurance Policies Required.............................................................................12 Section 7.2 Insurance Net Proceeds; Form of Policies.......................................................12 -1- Section 7.3 Public Liability and Property Damage Insurance............................................13 Section 7.4 Fire and Extended Coverage Insurance...........................................................13 Section 7.5 Worker's. Compensation Insurance..................................................................13 Section 7.6 Title Insurance.................................................................................................13 Section 7.7 Cooperation of Lessor......................................................................................14 Section 7.8 Use of Insurance Proceeds...............................................................................14 Section 7.9 Waiver of Covenant to Rebuild or Replace.....................................................14 Section 7.1 o Notice to Lessor...............................................................................................14 ARTICLE 8 CONDEMNATION..................................................................................................14 Section 8.1 Eminent Domain..............................................................................................14 Section 8.2 Cooperation of Lessor......................................................................................15 Section 8.3 Condemnation of Property Owned by the Lessee............................................15 Section 8.4 Waiver of Covenant to Rebuild or Replace.....................................................15 Section 8.5 Notice to Lessor................................................................ ...............................15 ARTICLE 9 DISCLAIMERS; USE OF LEASED PROPERTY..................................................15 Section9.1 Disclaimers......................................................................................................15 Section 9.2 Use of Leased Property....................................................................................1 6 ARTICLE 10 OPTION TO PREPAY...........................................................................................16 Section10.1 Option..............................................................................................................1 Section 10.2 Notice of Intention; Payment of Prepayment Option Price .............................1 ARTICLE 11 ASSIGNMENT, SUBLEASING AND INDEMNIFICATION .............................17 Section 11.1 Assignment and Subleasing by Lessee............................................................17 Section 11.2 Assignment and Reassignment by Lessor........................................................1.7 Section 11.3 Release and Indemnification Covenants..........................................................17 ARTICLE 12 EVENTS OF DEFAULT AND REMEDIES.........................................................18 Section 12.1 Events of Default.............................................................................................18 Section 12.2 Remedies on Default........................................................................................19 Section 12.3 Return of Possession of Leased Property.........................................................19 Section 12.4 No Remedy Exclusive ........................ ►.............................................................20 Section 12.5 Agreement to Pay Attorneys' Fees and Expenses...........................................20 Section12.6 Late Charge......................................................................................................20 ARTICLE 13 TAX COVENANTS...............................................................................................20 Section 13.1 Intention of Covenants.....................................................................................20 Section 13.2 Tax Covenants.................................................................................................20 ARTICLE 1.4 MISCELLANEOUS...............................................................................................22 Section14.1 Amendments....................................................................................................22 Section 14.2 Filings, Reports and Financial Information ..................................................... Section 14.3 Applicable Law................................................................................................22 Section 14.4 Successors and Assigns....................................................................................22 Section14.5 Severability......................................................................................................22 Section14.6 Headings......r....►...................►...........►.►...a..►..■............►.►......►........■.........■........■ 22 Section14►7 Net Lease..►............rr►•..►.►...►........■•rr.■..a...►.►.......■•........►•■.•.►•■....►..►...►.............r..22 Section 14.8 Payments Due on Sundays and Holidays.........................................................22 Section14.9Waiver..............................................................................................................22 Section 14.1 D Execution in Counterparts ............... ........................ r ................., ...................... 22 Section14.11 Notices............................................................................................................. 23 EXHIBIT A - DESCRIPTION OF PROJECT AND PERSONAL PROPERTY ................ A-1 EXHIBIT B. - DESCRIPTION OF SITE..............................................................................B-1 EXHIBITC - PAYMENT SCHEDULE..............................................................................C-1 EXHIBIT D - PREPAYMENT OPTION PRICE SCHEDULE .......................................... D-1 LEASE -PURCHASE AGREEMENT THIS LEASE -PURCHASE AGREEMENT is made and entered into as of this day of 2007, by and between the CITY OF KALISPELL, a municipal corporation duly organized and existing under the laws of the State of Montana (the `'Lessee") and ALL POINTS PUBLIC FUNDING, LLC, a New York limited liability company (the "Lessor"). RECITAALS WHEREAS, the Lessor is prepared to provide or cause to be provided funds for the public facilities described on Exhibit A (the "Project") [including certain personal property described on Exhibit A (the"Personal Property").]; and WHEREAS, the Project is located on real property owned by the Lessee as described on Exhibit B (the "Site"); and WHEREAS, the Lessee has determined that, in order to accomplish such purposes, it is necessary and desirable to finance the Project, including the Personal Property, by leasing the Site, to the Lessor pursuant to the Site Lease described herein and then leasing the Project, including the Personal Property, and leasing back the Site, from the Lessor pursuant to this Lease -Purchase Agreement, and the Lessee is authorized under the Constitution and laws of the State of Montana to enter into lease agreements for such purposes pursuant to, inter alia, Montana Code Annotated, Section 7-1-41 24(3 ). COVENANTS NOW, THEREFORE, for and in consideration of the premises and the covenants and conditions hereinafter contained, the parties agree as follows: ARTICLE 1 DEFINITIONS EXHIBITS • RULES OF CONSTRUCTION Section 1.1 Definitions. The following terms will have the meanings indicated below unless the context clearly requires otherwise: "Assignee" means any assignee or assignees of the Lessor's right, title and interest in and to this Lease -Purchase Agreement. "Assignment Agreement" means any agreement of assignment with respect to this Lease - Purchase Agreement entered into by the Lessor, including any Servicing and Participation Agreement entered into by the Lessor in connection with the transfer by the Lessor of participation interests herein. "Authorized Officer" when used with respect to the Lessor, means any officer or officers of the Lessor authorized to act on behalf of the Lessor under this Lease -Purchase Agreement. The terra "Authorized Officer" when used with respect to the Lessee, means any officer or officers of the Lessee authorized to act on behalf of the Lessee under this Lease -Purchase Agreement "Business Day" means a day which is not a Saturday or Sunday or a bank holiday under the laws of the United States or the State of Montana. "Closing Date" means the date upon which funds are paid to the Prior Lessor by the Lessor or the Assignee, pursuant to Article III of this Lease -Purchase Agreement. "Closing Proceeds" means those funds paid by the Lessor to the Lessee on the Closing Date pursuant to Article III of this Lease -Purchase Agreement. "Code" means the Internal Revenue Code of 1986, as amended. "Costs of Issuance" mean all costs and expenses of execution and delivery of the Financing Agreements and other documents incident to the deposit of the Closing Proceeds on the Closing Date, including, without limitation, fees of the Lessor, legal fees and expenses and recording fees. "Costs of the Project" means all costs of acquisition and construction of the Project, including the Personal Property, and all Costs of Issuance. "Environmental Law" means "Escrow Agent" means the [Lessor, acting in the capacity of Escrow Agent under the Escrow Agreements]. "Escrow Agreement" means the Escrow Agreement of even date herewith by and between the Lessor and the Lessee, as amended or supplemented from time to time. "Event of Default 1 means one or more events of default as defined in Article XIII of this Lease -Purchase Agreement. "Execution Date"" means the date of execution of the Financing Agreements and all related agreements and documents. "Federal Securities" means United States Treasury notes, bonds, bills or certificates of indebtedness or obligations for which the full faith and credit of the United States are pledged for the payment of principal and interest, including United States Treasury book -entry certificates, notes, and bonds, state and local government series. "Financing Agreements" means: (a) this Lease -Purchase Agreement; and (b) the Site Lease; and (c) the Escrow Agreement. -2- "Independent Counsel" means an attorney duly admitted to the practice of law before the highest court of the State in which he maintains an office and who is not an employee of the Lessee. "Lease Payments" means the payments payable by the Lessee exclusively from current or other legally available funds, pursuant to Article V of this Lease -Purchase Agreement, during the Lease Term which such funds are budgeted and appropriated or otherwise made legally available. "Lease -Purchase Agreement" means this Lease -Purchase Agreement, dated as of the date hereof, by and between the Lessor and the Lessee and any duly authorized and executed amendment hereto. "Lease Term" means the duration of the leasehold estate created in the Project and the Site, as provided in Article IV of this Lease -Purchase Agreement. "Lease Yield" means the aggregate yield on the Lease Payments made by the Lessee under the Lease -Purchase Agreement, which is determined on the basis of issue price (within the meaning of Section 1273 and 1274 of the Internal Revenue Code of 1986, as amended) as certified by the Assignee to the Lessee on the Closing Date. "Leased Property" means the Site and the Project, including the Personal Property. "Lessee" means the City of Kalispell, a municipal corporation duly organized and existing under the laws of the State of Montana. "Lessor" means All Points Public Funding, LLC, a New York limited liability company. "Net Proceeds" means any insurance proceeds or condemnation award, paid with respect to the Leased Property, remaining after payment therefrom of all expenses incurred in the collection thereof. "Non -Appropriation" means the failure of the Lessee or the Lessee's governing body to appropriate money for any fiscal year of the Lessee sufficient for the continued performance of this Lease -Purchase Agreement by the Lessee. "Payment Date" means the date upon which any Lease Payment is due and payable to the Lessor, as set forth on Exhibit C of this Lease -Purchase Agreement. "Permitted Encumbrances" means, at any particular time: (a) liens for taxes and assessments not then delinquent, or which the Lessee, pursuant to this Lease -Purchase Agreement, may permit to remain unpaid; (b) this Lease -Purchase Agreement and the Site Lease; (c) utility access and other easements and rights -of -way, restrictions and exceptions that the Lessee certifies will not interfere with or impair the Project; and (d) such minor defects, irregularities, encumbrances and clouds on title as normally exist with respect to property affected thereby for the purpose for which it was acquired or held by the Lessee. -3- "Personal Property" means the personal property acquired and leased to the Lessee hereunder, as described in Exhibit A of this Lease -Purchase Agreement. "Prepayment option Price" means that amount payable during the Lease Term, at the sole option of the Lessee, for the purpose of terminating this Lease -Purchase Agreement and prepaying all future Lease Payments, as set forth in Exhibit D of this Lease -Purchase Agreement. "Project" means the public facilities [constructed and renovated] on the Site and leased to the Lessee pursuant hereto, as more particularly described in Exhibit A of this Lease -Purchase Agreement. "Site" means the real property on which the Project is located, as described on Exhibit B of this Lease -Purchase Agreement. "Site Lease" means the Site Lease, dated as of the date hereof, by and between the Lessee and the Lessor and any duly authorized and executed amendment thereto. "Special Counsel" means any nationally recognized bond counsel. Section 1.2 Exhibits. The following exhibits are attached to this hereto and made a part hereof: (a) Exhibit A - a description of the Project, including the Personal Property, to be leased by the Lessor to the Lessee. (b) Exhibit B - a description of the Site upon which the Project is located. (c) Exhibit C - a schedule of the Lease Payments to be made by the Lessee. (d) Exhibit D - a schedule of the Prepayment Option Prices available to the Lessee. Section 1.3 Rules of Construction. Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders. Unless the context otherwise indicates, words importing the singular number shall include plural numbers and vice versa, and words importing persons shall include corporations and associations, including public bodies, as well as natural persons. Section 1.4 Reference to Lease -Purchase Agreement. The terms "hereby", "hereof" "hereto", "herein", "hereunder" and any similar terms, as used in this Lease -Purchase Agreement, refer to this Lease -Purchase Agreement. -4- ARTICLE 2 REPRESENTATIONS COVENANTS AND WARRANTIES Section 2.1 Reresentations Covenants and Warranties of Lessee. The Lessee represents, covenants and warrants for the benefit of the Lessor and the Assignee as follows: (a) The Lessee is a municipal corporation and political subdivision of the State of Montana, duly organized and existing under the Constitution and laws of the State of Montana. (b) The constitution and laws of the State of Montana authorize the Lessee to enter into this Lease -Purchase Agreement and the Site Lease, to enter into the transactions contemplated thereby, to carry out its obligations under all of the aforesaid agreements, and the Lessee has duly authorized and executed all of the aforesaid agreements. (c) Neither the execution and delivery of this Lease -Purchase Agreement or the Site Lease, nor the fulfillment of or compliance with the terms and conditions therein, nor the consummation of the transactions contemplated therein, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which the Lessee is now a party or by which the Lessee is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrances whatsoever upon any of the property or assets of the Lessee, or upon the Project or the Site. (d) The Lessee has good and marketable fee simple title to the Site, and such title was acquired by Lessee in [20051. No lien or encumbrance on the Leased Property materially impairs the Lessee's use of the Site for the purposes for which it is, or may reasonably be expected to be, held. (e) The insured replacement value of the public facilities that are renovated on the Site as part of the Project is $ (f) The Lessee has experienced no material change in its financial condition since June 30, [2006]. (g) To the best of Lessee's knowledge, the Leased Property is not located in a flood hazard area and has never been subject to material damage from flooding. (h) The Leased Property is currently in full compliance with all applicable Environmental Laws. To the best of the Lessee's knowledge, the Leased Property is free of all Hazardous Substances, as such term is defined in the Site Lease. The Lessee will comply with all applicable Environmental Laws with respect to the Leased Property and will not use, store, generate, treat, transport, or dispose of any Hazardous Substances thereon or in a manner that would cause any Hazardous Substance to later flow, migrate, leak, leach, or otherwise come to rest on or in the Leased Property. -5- G) The Lessee will transmit copies of all notices, orders, or statements received from any governmental entity concerning violations or asserted violations of applicable Environmental Laws with respect to the property and any operations conducted thereon or any conditions existing thereon to Lessor, and the Lessee will notify Lessor in writing immediately of any release, discharge, spill, or deposit of any Hazardous Substance that has occurred or is occurring that in any way affects or threatens to affect the property, or the people, structures, or other property thereon, provided that no such notification shall create any liability or obligation on the part of Lessor. } The Lessee will permit Lessor, its agents, or any experts designated by Lessor, to have full access to the Leased Property during reasonable business hours for purposes of such independent investigation of compliance with all applicable Environmental Laws, provided that Lessor has no obligation to do so, or any liability for any failure to do so, or any liability should it do so. (k) The Lessee has duly authorized and executed this Lease -Purchase Agreement in accordance with the laws of the State of Montana. Section 2.2 Representations, Covenants and Warranties of Lessor. The Lessor represents, covenants and warrants for the benefit of the Lessee and the Assignee as follows: (a) The Lessor is duly organized, existing and in good standing under the laws of the State of ; has the power to enter into this Lease -Purchase Agreement, the Assignment Agreement and the Site Lease; is possessed of full power to own and hold real and personal property, and to lease and sell the same; and has duly authorized the execution and delivery of all of the aforesaid agreements. (b) The Lessor will not pledge the Lease Payments or other amounts derived from the Leased Property and from its other rights under this Lease -Purchase Agreement, and will not mortgage or encumber the Leased Property, except as provided under the terms of this Lease -Purchase Agreement and the Assignment Agreement. (c) Neither the execution and delivery of this Lease -Purchase Agreement, the Assignment Agreement or the Site Lease, nor the fulfillment of or compliance with the terms and conditions therein, nor the consummation of the transactions contemplated therein, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreements or instrument to which the Lessor is now a party or by which the Lessor is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Lessor, or upon the Leased Property. (d) Except as provided in this Lease -Purchase Agreement and the Site Lease, the Lessor will not assign this Lease -Purchase Agreement, its right to receive Lease Payments from the Lessee, or its duties and obligations hereunder to any other person, firm or corporation. Notwithstanding any provision hereof or of the Site Lease, however, the Lessor may, and the Lessee hereby acknowledges that the Lessee expects to, sell participation interests in this Lease -Purchase Agreement, and the right of the Lessor to H receive Lease Payments hereunder; provided, however, that each such participation interest must be in a minimum denomination of $100,000 and each such sale of a participation interest must be made in compliance with all applicable securities or Blue Sky laws of the State or States in which such sales are made. Section 2.3 Related „Agreements. The parties acknowledge the following agreements and hereby approve of, and consent to, the terms of: (a) The Assignment Agreement, pursuant to which the Lessor assigns its rights and interest in this Lease -Purchase Agreement; (b) The Site Lease, pursuant to which the Lessee agrees to lease to the Lessor the Project and the Site; and (c) The Escrow Agreement, pursuant to which the Escrow Agent maintains the Escrow Fund thereunder, to be held, invested and disbursed for the purpose of providing funds to pay the Costs of the Project. Section 2.4 Conditions Precedent. None of the obligations, duties, covenants, representations, warranties, rights and remedies arising under or set forth in this Lease -Purchase Agreement shall have any force and effect or be enforceable against the parties hereto until the Lessor shall have made the deposit of funds required by Article III thereof. ARTICLE 3 PAYMENT OF COSTS OF THE PROTECT In order to induce the Lessee to lease the Leased Property from the Lessor, and to provide funds for the Lessee to pay the costs of the Project, the Lessor, on the Closing Date, shall deposit or cause to be deposited moneys into the Escrow Fund maintained under the Escrow Agreement in an amount equal to $[ 1,415,9f 5.46]. Payment of the Costs of the Project shall be made from amounts available from time to time in the Escrow Fund, pursuant to the provisions of the Escrow Agreement. The Lessee represents and warrants that all contracts let in connection with the Project shall be let by competitive bid in the manner required by the applicable laws of the State of Montana, and the parties hereto acknowledge and agree that the Lessor shall have no responsibility to see to compliance with or to monitor compliance with any such laws. ARTICLE 4 LEASE of LEASED PROPERTY Section 4.1 Lease. The Lessor hereby leases to the Lessee and the Lessee hereby leases from the Lessor the Leased Property, subject only to Permitted Encumbrances, upon the terms and conditions set forth in this Lease -Purchase Agreement. -7- Section 4.2 Term. The terra of this Lease -Purchase Agreement shall commence upon the Closing Date and shall continue to the occurrence of the earliest of any of the following events: (a) The exercise of the Lessee of its option to pay the Prepayment option Price granted under the provisions of Article X and the application of the amounts paid under Article X to the prepayment in full of all remaining Lease Payments, (b) An Event of Default by the Lessee and the Lessor's election to terminate this Lease -Purchase Agreement under Article XII; (c) The termination of this Lease -Purchase Agreement by the Lessee in accordance with Section 5.7; or (d) The payment by the Lessee of all Lease Payments becoming due during the Lease Term. Section 4.3 Possession and Enjoyment. During the Lease Term, the Lessor shall provide the Lessee with quiet use and enjoyment of the Leased Property and the Lessee shall peaceably and quietly have and hold and enjoy the Leased Property, without suit, trouble or hindrance from the Lessor or its assigns, except as expressly set forth in this Lease -Purchase Agreement. The Lessor will, at the request and cost of the Lessee, join in any legal action in which the Lessee asserts its right to such possession and enjoyment to the extent the Lessor may lawfully do so; provided that, at the Lessor's option, the Lessee shall undertake legal representation on behalf of the Lessor. Notwithstanding the foregoing, the Lessor shall have the right to inspect Leased Property at all reasonable times. Section 4.4 Title to the Leased Property_. During the Lease Term, legal title to the Personal Property, and any and all additions which constitute repairs, replacements or modifications, shall be in the Lessor. The Lessee shall not have any right, title or interest in the Personal Property or in any additions, repairs, replacements or modifications thereto except as expressly provided in this Lease -Purchase Agreement. Title to the Project and the Site shall at all times during the Lease Term remain in the Lessee, subject to the terms of this Lease -Purchase Agreement and the Site Lease. Section 4.5 Transfer of Title to Personal Property-, Release of Liens. If the Lessee: (a) Exercises its option to pay the Prepayment Option Price, as provided in Article X; or (b) Has paid all Lease Payments due during the term of this Lease -Purchase Agreement; then all right, title and interest of the Lessor in the Personal Property shall be transferred to and shall rest in the Lessee and the interest of the Lessor in the Project and the Site shall terminate. In such case, the Lessor or the Assignee shall cause to be authorized, executed and delivered to the Lessee all documents reasonably requested by the Lessee to evidence such transfer, and a release of any and all liens created under the provisions of this Lease -Purchase Agreement and the Site Lease, and any other documents required to terminate this Lease -Purchase Agreement and the Site Lease and consummate such transfer of title and release of liens. ARTICLE 5 LEASE PAYMENTS Section 5.1 Lease Pa ments. The Lessee shall pay to the Lessor the Lease Payments set forth in Exhibit C. Each Lease Payment shall be for use and occupancy of the Site and the Project, including the Personal Property, for the semi-annual lease period ending on the last day of the months of and of each calendar year. Lease Payments for each semi-annual lease period during the term of this Lease -Purchase Agreement shall constitute the total amount due for the lease period, and shall be paid by the Lessee for and in consideration of the right of use and occupancy of, and the continued quiet use and enjoyment of, the Leased Property during each such semi-annual lease period. Section 5.2 Time of Pa ment. An amount equal to each Lease Payment shall be due and payable on the Payment Dates specified in Exhibit C. Section 5.3 Interest Component. A portion of each Lease Payment is paid as, and represents payment of, interest. The interest component of each Lease Payment during the term of this Lease -Purchase Agreement is set forth in Exhibit C. Section 5.4 Manner of Payment. Each Lease Payment and the Prepayment option Price shall be paid from funds legally available to the Lessee and in lawful money of the United States of America to the Assignee at such place as the Assignee may from time to time designate by written notice to the Lessee. Section 5.5 Lease Pa ments to Constitute Current Ex ense of Lessee; No Pledge. The Lessor and the Lessee understand and intend that the obligation of the Lessee to pay Lease Payments shall constitute a current expense of the Lessee and shall not in any way be construed to be a debt of the Lessee in contravention of any applicable constitutional or statutory limitation or requirements concerning the creation of indebtedness by the Lessee, nor shall anything contained herein constitute a pledge of the general tax revenues, funds or money of the Lessee. Lease Payments due shall be payable only from current funds which are budgeted and appropriated, or otherwise legally available, for the purpose of paying Lease Payments or other payments due as consideration for use of the Leased Property during the fiscal year of the Lessee for which such funds were budgeted and appropriated or otherwise made legally available for such purpose. The Lessee has not pledged the full faith and credit of the Lessee, the State of Montana or any agency or department of the Lessee to the payment of the Lease Payments or any other payment due under this Lease -Purchase Agreement. Section 5.6 Lease Payments to be Unconditional. Except as provided in Section 5.7, the obligations of the Lessee to make Lease Payments and any other payments and to perform and observe all other covenants and agreements contained herein shall be absolute and unconditional, except as expressly provided in this Lease -Purchase Agreement. Notwithstanding any dispute between the Lessee, the Lessor and any other person, the Lessee shall make all Lease Payments and any other payments required hereunder not later than the date due and shall not BE withhold any such payments pending final resolution of such dispute nor shall the Lessee assert any right of set-off or counterclaim against its obligation to make such payments under this Lease -Purchase Agreement. Section 5.7 Termination by Lessee. In the sole event of Non -Appropriation, the Lessee shall have the right to terminate this Lease -Purchase Agreement at the end of any fiscal year of the Lessee, in the manner and subject to the terms specified in this Section and Sections 5.8 and 5.9. The Lessee may effect such termination by giving the Lessor a written notice of termination and by paying to the Lessor any Lease Payments and other amounts which are due and have not been paid at or before the end of its then current fiscal year. The Lessee shall endeavor to give notice of such termination not less than sixty (60) days prior to the end of such fiscal year, and shall notify the Lessor of any anticipated termination. In the event of termination of this Lease -Purchase Agreement as provided in this Section, the Lessee shall smTender possession of the Project and the Site, including the Personal Property, to the Lessor, in accordance with Section 12.3, within thirty (30) days after the termination of this Lease -Purchase Agreement. Section 5.8 Intent to Continue Lease Term; Appropriations. The Lessee presently intends to continue this Lease -Purchase Agreement for the entire Lease Term and to pay all Lease Payments. The person or entity in charge of preparing the Lessee's budget will include in the budget request for each fiscal year the Lease Payments to become due in such fiscal year, and will use all reasonable and lawful means available to secure the appropriation of money for such fiscal year sufficient to pay all such Lease Payments coming due therein, and the Lessee reasonably believes that moneys in an amount sufficient to make all such Lease Payments can and will lawfully be appropriated and made available for this purpose. Section 5.9 Effect of Termination. Upon termination of this Lease -Purchase Agreement as provided in Section 5.7, the Lessee shall not be responsible for the payment of any additional Lease Payments relating thereto coming due in succeeding fiscal years, but if the Lessee has not surrendered possession of the Project and the Site, including the Personal Property, to the Lessor, in accordance with Section 12.3 within thirty (30) days after the termination of this Lease -Purchase Agreement, the termination shall nevertheless be effective, but the Lessee shall be responsible for the payment of damages in an amount equal to the amount of the Lease Payments thereafter conning due which are attributable to the number of days after such thirty (30) day period during which the Lessee fails to take such actions and for any other loss suffered by the Lessor as a result of the Lessee's failure to take such actions as required. ARTICLE G MAINTENANCE • TAXES • MODIFICATION* AND OTHER MATTERS Section 6.1 Maintenance and Utilities by Lessee. During the Lease Term, as part of the consideration for the lease of the Leased Property, all improvement, repair and maintenance of the Leased Property shall be the responsibility of the Lessee and the Lessee shall pay for or otherwise arrange for the payment of all utility services supplied to the Project and the Site which may include, without limitation, janitor service, security, power, gas, telephone, light, heating, water and all other utility services, and shall pay for or otherwise arrange for the payment of the cost of repair and replacement of the Leased Property resulting from ordinary _ l0- wear and tear or want of care on the part of the Lessee or any assignee or sublessee thereof. In exchange for the Lease Payments, the Lessor agrees to provide only the Leased Property. Section 6.2 Taxes and other Governmental Char es. The parties to this Lease - Purchase Agreement contemplate that the Leased Property will be used for a governmental or proprietary purpose of the Lessee and that the Leased Property will be exempt from all taxes presently assessed and levied with respect to real or personal property, except assessments. If the use, possession or acquisition of the Leased Property is found to be subject to taxation in any form (except for income or franchise taxes of the Lessor), the Lessee shall pay during the Lease Term such amounts in each year as shall be required by the Lessor for the payment of all taxes and assessments of any type or nature charged to the Lessor or the Assignee affecting the Leased Property or the respective interests or estates of the Lessee or the Lessor or the Assignee therein, or affecting the amount of Lease Payments received by the Lessor (including taxes or assessments assessed or levied by any governmental agency having power to levy taxes or assessments); provided that, with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the Lessee shall be obligated to pay only such installments as are accrued during the Lease Term. Section 6.3 Good Faith Contest. The Lessee or any sublessee or assignee may, at the Lessee's or such sublessee's or assignee's expense and in its name, in good faith contest any such taxes, assessments and other charges and, in the event of any such contest, may permit the taxes} assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Lessor shall notify the Lessee or such sublessee or assignee that, in the opinion of Independent Counsel, by nonpayment of any such items, the interest of the Lessor in the Leased Property will be materially endangered or the Leased Property or any part thereof will be subject to loss or forfeiture. Upon such notice, the Lessee or such sublessee or assignee shall promptly pay such taxes, assessments or charges or provide the Lessor with full security against any loss which may result from nonpayment, in a form satisfactory to the Lessor. Section 6.4 Modification of Leased Property. The Lessee, and any sublessee or assignee, shall, at their own expense, have the right to remodel the Leased Property or to mane additions, modifications and improvements thereto. All such additions, modifications and improvements shall thereafter comprise part of the Leased Property and be subject to this Lease - Purchase Agreement. Such additions, modifications and improvements shall not in any way damage the Leased Property or cause it to be used for purposes other than those authorized under the provisions of state and federal law; and the Leased Property, upon completion of such additions, modifications and improvements, shall be of a value which is not substantially less than the value of the Leased Property immediately prior to the making of such additions, modifications, and improvements. The Lessee will not permit any mechanic's or other lien to be established or remain against the Leased Property for labor or materials furnished in connection with any remodeling, additions, modifications, improvements, repairs, renewals or replacements. Upon termination of this Lease -Purchase Agreement, the Lessee may remove any fixture, structure or sign added by the Lessee, but such removal shall be accomplished so as to leave the Leased Property, except for ordinary wear and tear, in substantially the same condition as it was in before the fixture, structure or sign was attached. -11- Section 6.5 Installation of Lessee's Equipment. The Lessee may, at any time in its sole discretion and at its own expense, install or permit to be installed other items of equipment or other personal property in or upon the Site. All such items shall remain the sole property of the Lessee and may be modified or removed by the Lessee at any time provided that the Lessee shall repair and restore any and all damage to the Leased Property resulting from the installation, modification or removal of any such items. Nothing in this Lease -Purchase Agreement shall prevent the Lessee from purchasing items to be installed pursuant to this Section under a conditional sale or lease purchase contract, or subject to a vendor's lien or security agreement, as security for the unpaid portion of the purchase price thereof, provided that no such lien or security interest shall attach to any part of the Leased Property. Section 6.6 Liens. If the Lessee shall at any time during the Lease Term cause any changes, alterations, additions, improvements, or other work to be done or performed or materials to be supplied, in or upon the Leased Property, the Lessee shall pay, when due, all sums of money that may become due for, any labor, services, materials, supplies or equipment furnished to or for the Lessee in, upon or about the Leased Property and which may be secured by an mechanic's, materialman's or other lien against the Leased Property or the Lessor's interest therein. The Lessee will cause each such lien to be fully discharged and released at the time performance of any obligation secured by any such lien matures or becomes due, expect that, if the Lessee desires to contest any such lien, it may do so. If any such lien shall be reduced to final judgment and such judgment or such process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and such stay thereafter expires, the Lessee shall forthwith pay and discharge such judgment and discharge such judgment. ARTICLE 7 INSURANCE Section 7.1 Insurance Policies Re aired. The Lessee covenants to maintain or cause to be maintained the following types of insurance to cover the Leased Property: (a) Public liability and property damage insurance as more fully set forth in Section 7.3; (b) Fires, extended coverage and earthquake insurance as more fully set forth in Section 7.4; and (c) Worker's compensation insurance as more fully set forth in Section 7.5; (d) Title insurance as more fully set forth in Section 7.6. Section 7.2 Insurance Net Proceeds • Foram of Policies. All policies of insurance maintained pursuant to Sections 7.4 and 7.6 shall provide that all Net Proceeds thereunder shall be payable to the Lessor. The Lessee may cause the Lessor to adjust, collect and receive all money which may become due and payable under any such policies and to compromise any and all claims thereunder. All policies of insurance shall provide that the Lessor and the Lessee shall be given sixty (60) days' notice of any intended cancellation thereof or reduction of the coverage provided thereby. -12- (a) The Lessee shall deliver to the Lessor in the month of in each year a schedule, in such detail as the Lessor may request, setting forth the insurance policies then in force pursuant to this Lease -Purchase Agreement, the names of the insurers which have issued the policies, the amounts thereof and the property and risks covered thereby. If requested in writing by the Lessor, the Lessee shall deliver to the Lessor duplicated originals or certified copies of each insurance policy described in such schedule; provided, however, that delivery of the insurance policies under this Section shall not confer responsibility upon the Lessor as to the sufficiency of coverage or amount of such policies. Section 7.3 Public Liabilit and Property_Damajze Insurance. The Lessee shall maintain or cause to be maintained, throughout the Lease Term, a standard comprehensive general liability insurance policy or policies in protection of the Lessor and its directors, officers, agents and employees. Such policy or policies shall provide for indemnification of the parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the construction or operation of the Leased Property. The Lessor shall be named as an additional insured. Section 7.4 Fire and Extended Covera e Insurance. The Lessee shall maintain or cause to be maintained, throughout the Lease Term, fire and lightning insurance and special extended coverage endorsement which includes vandalism and malicious mischief endorsement and extended coverage endorsement on the Personal Property and on all structures above ground constituting any part of the Project and the Site in an amount (less the appropriate deductible amount) equal to the replacement cost of such structures. The Lessor shall be named as loss payee. All insurance required to be maintained pursuant to this Section may be subject to deductible clauses providing for deductible amounts not exceeding $10,000.00 for any one loss available on the date of purchase of such insurance. Each such policy of insurance shall contain an inflation clause, a standard replacement cost endorsement providing for no deduction for depreciation, and a stipulated amount endorsement. Such insurance may be maintained by conjunction with or separate from any other similar insurance carried by the Lessee. Section 7.5 Worker's Compensation Insurance. The Lessee shall maintain or cause to be maintained, throughout the Lease Term, Workers' Compensation insurance to cover all persons employed in connection with the Leased Property who are not otherwise covered. Such protection shall be provided by a responsible insurance carrier authorized under the laws of the State of Montana to insure employers against such liability. Section 7.6 Title Insurance. The Lessee will, at its expense, provide or cause to be provided to the Lessor, unless specifically waived by the Lessor. - (a) With respect to fee title to any portion of the Site, a policy or policies of title insurance, or a firm commitment to issue such policy, in the form of American Land Title Association Policy, with endorsement so as to be payable to the Lessor, insuring the fee title of the Lessee and leasehold interest of the Lessor, subject only to Permitted Encumbrances. The policy or policies shall be in the principal amount of $ [ l,4 15,965]. -13- The title insurance policy shall be issued by a title insurance company licensed to do business in Montana; and (b) With respect to any portion of the Project and the Site located in, under or upon easements, a Certificate from Independent Counsel certifying that the estate or interest of the Lessee in the easements is sufficient to assure the undisturbed use and possession of the easements for purposes of construction and operation of the Project and the Site for not less than the Lease Term. Section 7.7 Cooperation_ of Lessor. The Lessor shall cooperate fully with the Lessee at the expense of the Lessee in filing any proof of loss with respect to any insurance policy covering the casualties described in Article VII hereof and in the defense of any prospective or pending eminent domain proceeding with respect to the Project or the Site or any part thereof and will, to the extent it may lawfully do so, permit the Lessee to litigate in any proceeding resulting therefrom in the name and on behalf of the Lessor. In no event will the Lessor voluntarily settle, or consent to the settlement of, any proceeding arising out of any insurance settlement of, any proceeding arising out of any insurance claim or any prospective or pending eminent domain proceeding with respect to the Project or the Site or any part thereof without the written consent of the Lessee. Section 7.8 Use of Insurance Proceeds. The Lessee covenants that upon the payment of the Net Proceeds of insurance required by Sections 7.4 and 7.6, to the Lessor, that it will cause the Lessor to deposit, and the Lessor agrees to deposit, the net proceeds plus any funds necessary and legally available therefor in a special fund established by the Lessor for that purpose and shall cause the Lessor to use the funds so deposited to repair or rebuild the Leased Property. The Lessee and the Lessor shall cause the Leased Property to be repaired or rebuilt to at least the same good order, repair and condition as it was prior to the damage or destruction, and the Lessor, at the direction of the Lessee shall withdraw moneys from the special fund from time to time to pay for such repair and rebuilding. Any Net Proceeds of insurance in excess of the amount needed to repair or rebuild the Leased Property shall be paid to the Lessee. Section 7.9 waiver of Covenant to Rebuild or Replace. The Lessor agrees to waive the Lessee's covenant to rebuild or replace pursuant to Section 7.8 if the Lessee pays all Lease Payments then due and the Prepayment Option Price as set forth in Exhibit D. The Lessee may apply the Net Proceeds of insurance required by Sections 7.4 and 7.6 toward the payment of such amounts. Section 7.10 Notice to Lessor. The Lessee agrees to provide the Lessor with notice of its intention to use the Net Proceeds of insurance as set forth in Section 7.9 not less than (30) days prior to such exercise. ARTICLE S CONDEMNATION Section 8.1 Eminent Domain. In the event that all or a portion of the Project and/or the Site shall be taken under the power of eminent domain, the Lessee covenants that it will cause the Lessor to deposit the condemnation award plus any funds necessary and legally -14- available therefore in a special fund established by the Lessor for that purpose and shall cause the Lessor to use the funds so deposited to rebuild or replace the Project or the Site or any portion thereof taken under the power of eminent domain. The Lessee shall cause the Project to be rebuilt or replaced to at least the same good order, repair and condition as it was prior to the taking under the power of eminent domain, and shall direct the Lessor to withdraw money from the special fund from time to time to pay for such rebuilding or replacement. Any Net. Proceeds of condemnation in excess of the amount needed to rebuild or replace the Project shall be paid to the Lessee. The covenant by the Lessee to rebuild or replace the Project or the Site may be waived and in consideration for such waiver, the Lessee agrees to apply the proceeds of the condemnation award in the manner set forth in Section 8.4. Section 8.2 Cooperation of Lessor. The Lessor shall cooperate fully with the Lessee or the Assignee at the expense of the Lessee in the defense of any prospective or pending eminent domain proceeding with respect to the Project or the Site or any part thereof and will, to the extent it may lawfully do so, permit the Lessee to litigate in any proceeding resulting therefrom in the name and on behalf of the Lessor. In no event will the Lessor voluntarily settle, or consent to the settlement of, any prospective or pending eminent domain proceeding with respect to the Project or the Site or any part thereof without the written consent of the Lessee. Section 8.3 Condemnation of Proveqy Owned b the Lessee. The Lessee shall be entitled to the Net Proceeds of condemnation for taping of its property not included in the Project. Section 8.4 waiver of Covenant to Rebuild or Replace. The Lessor agrees to waive the Lessee's covenant to rebuild or replace pursuant to Section 8.1 if the Lessee pays all Lease Payments then due and the Prepayment Option Price as set forth in Exhibit D. The Lessee may apply the Net Proceeds of condemnation toward the payment of such amounts. Section 8.5 Notice to Lessor. The Lessee agrees to provide the Lessor with notice of its intention to use the Net Proceeds of condemnation as set forth in Section 8.4 not less than (30) days prior to such exercise. ARTICLE 9 DISCLAIMERS10 ; USE OF LEASED PROPERTY Section 9.1 Disclaimers. THE LESSOR MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY LESSEE OF THE LEASED PROPERTY OR ANY ITEM THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE LEASED PROPERTY OR ANY PART THEREOF. In no event shall the Lessor be liable for incidental, indirect, special or consequential damages, in connection with or arising out of this Lease -Purchase Agreement, or the existence, furnishing, functioning and use of the Leased Property. The Lessee hereby covenants that no representations, statements or warranties, expressed or implied, have been made by or on behalf of the Lessor in connection with or relating to the title to the Leased Property or with respect to -15- its future condition, use, or occupation that may be made thereof. The Lessor shall not in any way be responsible for any matters relating to the use of the Leased Property, suitability for use or any latent defect therein. THE PARTIES AGREE THAT ANY IMPLIED WARRANTIES AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND ALL OTHER WARRANTIES EXPRESS OR IMPLIED ARE EXCLUDED FROM THIS LEASE - PURCHASE AGREEMENT. Section 9.2 Use of Leased Pro ert . The Lessee will not use, operate or maintain the Leased Property improperly, carelessly, in violation of any applicable law or in a manner contrary to that contemplated by this Lease -Purchase Agreement. The Lessee shall provide all permits and licenses, if any, necessary for the operation of the Leased Property. In addition, the Lessee agrees to comply in all respects (incluchtng, without limitation, with respect to the use, maintenance and operation of the Leased Property) with all laws of all jurisdictions in which its operations involving the Leased Property may extend and any legislative, executive, administrative or judicial body exercising any power or jurisdiction over the Leased Property, provided, however, that the Lessee may contest in good faith the validity or application of any such law or rule in any reasonable manner which does not, in the opinion of Lessor, adversely affect the estate of the Lessor in and to the Leased Property or its interest or rights under this Lease -Purchase Agreement. ARTICLE 10 OPTION To PREPAY Section 10.1 Option. At the request of the Lessee, the Lessor's interest in the Site and the Project under the Site Lease will be terminated and this Lease -Purchase Agreement shall terminate with respect to the Leased Property: (a) At the end of the Lease Term, upon payment in full of all Lease Payments and any other payments due hereunder; (b) During the Lease Term, upon payment by the Lessee of the then applicable Prepayment Option Price and any other payments due hereunder; or (c) Upon payment of the amount provided in Sections 7.9 or 8.4, if this Lease - Purchase Agreement is terminated due to total damage, destruction or condemnation of the Leased Property. Section 10.2 Notice of Intention; Pavment of Prepayment Option Price. The Lessee shall send written notice to the Lessor of its intention to make payments pursuant to either subsections (b) or (c) of Section 10.1 not less than sixty (60) days prior to the date of such payments and shall provide written notice to the Lessor within five (5) days of making such payments; provided that failure to provide such notice shall not affect the termination of the Site Lease or this Lease -Purchase Agreement pursuant to Section 10.1. -16- ARTICLE 11 ASSIGNMENT SUBLEASING AND INDEMNIFICATION Section 11.1 Assignment and Subleasiwz bv Lessee. The Lessee may sublet all or any part of the Leased Property to one or more public agencies, provided that the entire Project remains on the Site and the use of the entire Project and the Personal Property continues to be for governmental purposes. The Lessee shall furnish to the Lessor a copy of each sublease relating to the Leased Property, and hereby assigns to the Lessor all of its right, title and interest in and to each such sublease, all rent and other amounts due thereunder, and the right to exercise all rights conferred upon the Lessee as sublessor thereunder; and the Lessor hereby accepts such assignment. The Lessor shall have the right, upon default hereunder by the Lessee, to collect the rent and other amounts due directly from each sublessee of the Leased Property and apply the net amount collected to Lease Payments required herein, but no such collection shall be deemed a waiver of any agreement, term, covenant or condition hereof, or an acceptance of such sublessee, or a substitution of such sublessee as lessee hereunder, or a release of the Lessee from the performance of the agreements, terms, covenants and conditions of this Lease -Purchase Agreement. Each sublease shall contain a provision acknowledging the existence and validity of the assignment herein made and acknowledging the Lessor's right to the exercise of the rights conferred upon it hereunder with respect to the sublease and the lessee thereunder. Section 11.2 Assignment and Reassignment by Lessor. This Lease -Purchase Agreement and the obligations of the Lessee to make payments hereunder may be assigned or reassigned and the Leased Property transferred to any successor of the Lessor. The Lessee agrees to keep a record of all future assignments or sub -assignments in the form necessary to comply with Section 149(a) of the Code and no such future assignments or sub -assignments shall be effective as against the Lessee without notice to the Lessee. Section 11.3 release and Indemnification Covenants. The Lessee shall indemnify, protect and hold the Assignee and the Lessor and their respective directors, officers, agents and employees harmless from and against any and all liability, obligations, losses, claims and damages whatsoever, regardless of cause thereof, and expenses in connection therewith, including, without limitation, counsel fees and expenses, penalties and interest arising from or as the result of the entering into of this Lease -Purchase Agreement, the ownership of the Leased Property, the acquisition, installation, use, operation, condition, purchase or delivery of the Leased Property or any accident in connection with the operation, use, condition or possession of the Leased Property resulting in damage to property or injury to or death to any person including, without limitation, any claim alleging latent and other defects, whether or not discoverable by the Lessor or the Lessee; any claim for patent, trademark or copyright infringement; and any claim arising out of strict liability in tort. The indemnification arising under this Section shall continue in full force and effect notwithstanding the full payment of all obligations hereunder or the termination of this Lease -Purchase Agreement for any reason. The Lessee agrees not to withhold or abate any portion of the Lease Payments required hereunder by reason of any defects, malfunctions, breakdowns or infirmities of the Leased Property. The Lessee and the Lessor mutually agree to promptly give notice in writing to each other of any claim or liability hereby indemnified against following the learning thereof. -17- The Assignee and the Lessor and their respective directors, officers, agents and employees shall not be liable to the Lessee or to any other party whomsoever for any death, injury or damage that may result to any person or property by or from any cause whatsoever in, on or about the Leased Property. The Lessee, to the extent permitted by law, shall indemnify and hold the Assignee and the Lessor and their respective directors, officers, agents and employees harmless from, and defend each of them against, any and all claims, liens and judgments for death of or injury to any person or damage to property whatsoever occurring in, on or about the Leased Property, and, to the extent permitted by law, any extraordinary reasonable attorneys' fees and expenses incurred in connection with litigation against the Lessor or the Assignee challenging or questioning the validity of this Lease -Purchase Agreement or any of the obligations of the Lessee hereunder. ARTICLE 12 EVENTS OF DEFAULT AND REMEDIES Section 12.1 Events of Default. Any one or more of the following events shall constitute an Event of Default: (a) Failure by the Lessee to pay any Lease Payment or other payment required to be paid hereunder at the time specified herein; (b) Failure by the Lessee to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in Subsection (a) of this Section, for a period of thirty (30) days after written notice by the Lessor; provided, however, that the Lessor may, upon written request of the Lessee prior to the expiration of such thirty (30) day period, consent to an extension of such time in order to cure such failure if corrective action has been instituted by the Lessee and is being diligently pursued and will, in the judgment of the Lessor, be diligently pursued until the default is corrected; (c) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Lessee in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Lessee or for any substantial part of its property, or ordering the winding up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of sixty (60) days; or (d) The Lessee shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official) of the Lessee for any substantial part of its property, or shall mare any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due or shall tape any corporate action in furtherance of any of the foregoing. Section 12.2 Remedies on Default. Whenever any Event of Default referred to in Section 12.1 hereof shall have happened and be continuing, the Lessor shall have the right, at its option and without any further demand or notice, to take one or any combination of the following remedial steps: (a) with or without terminating this Lease -Purchase Agreement, declare all Lease Payments due or to become due during the fiscal year of Lessee in effect when the default occurs to be immediately due and payable by the Lessee, whereupon such Lease Payments shall be immediately due and payable. (b) with or without terminating this Lease -Purchase Agreement, take possession of the Leased Property by giving the Lessee written notice to surrender the Project and the Site, and deliver the Personal Property, to the Lessor, whereupon the Lessee shall surrender possession of the Project and the Site, and deliver the Personal Property to the Lessor in accordance with Section 12.3, at the Lessee's expense; or in the event the Lessee fails to do so within ten (10) days after receipt of such notice, the Lessor, at its option, may enter upon the Site and the Lessee's premises where the Personal Property is located without liability to the Lessor or its agents for such entry or for damage to property or otherwise, and take possession of the Leased Property and charge the Lessee for costs incurred in such repossession, including reasonable attorneys' fees. Notwithstanding the fact that the Lessor has taken possession of the Leased Property, the Lessee shall continue to be responsible for the Lease Payments due with respect thereto during its fiscal year then in effect. If this Lease -Purchase Agreement has not been terminated, the Lessor shall return the Leased Property to the Lessee at the Lessee's expense when the Event of Default is cured. (c) Exercise its right to sublease the Project and the Site pursuant to and in accordance with the provisions of the Site Lease. (d) If the Lessor terminates this Lease -Purchase Agreement and takes possession of the Personal Property, the Lessor shall within thirty (30) days thereafter use its best efforts to sell the Personal Property or any portion thereof in a commercially reasonable manner at public or private sale in accordance with State law. The Lessor shall apply the proceeds of such sale to pay the following items in the following order: (a) all costs incurred in securing possession of such Personal Property; (b) all expenses incurred in completing the sale; (c) the applicable Prepayment Option Price; (d) the balance of any Lease Payments owned by the Lessee during the Lessee's then current fiscal year. (e) Exercise any other right, remedy or privilege which may be available to it under applicable law or in equity. Section 12.3 Return of Possession of Leased Propel. Upon the expiration or termination of this Lease -Purchase Agreement prior to the payment of all Lease Payments or the Prepayment Option Price, the Lessee shall surrender possession of the Project and the Site to the Lessor for the remaining term of the Site Lease and shall return the Personal Property to the Lessor in good condition, working order, repair and appearance, in the following manner as may _19- be specified by the Lessor: (i) by delivering the Personal Property at the Lessee's costs and expense to such place within the State of Montana as the Lessor shall specify; or (ii) by loading the Personal Property at the Lessee's cost and expense, on board such carrier as the Lessor shall specify and shipping the same, freight prepaid, to the place specified by the Lessor. If the Lessee fails to return the Personal Property in the manner designated, the Lessor may repossess the Personal Property and charge the Lessee the cost of such repossession or pursue by other remedy described in Section 12.2. Section 12.4 No Remedy Exclusive. No remedy conferred upon or reserved to the Lessor by this Article is intended to be exclusive and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Lease -Purchase Agreement. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof but any such right and power may be exercised from time to time and as often as may be deemed expedient by the Lessor. Section 12.5 Agreement to Pa Attorne s' Fees and Ex enses. In the event either party to this Lease -Purchase Agreement should default under any of the provisions hereof and the nondefaulting party should employ attorneys and/or incur other expenses for the collection of moneys or for the enforcement of performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it will be responsible for all reasonable costs and expenses, including attorneys' fees, as determined by court order or mutual agreement. Section 12.6 Late Charge. whenever any Event of Default referred to in Section 12.1, Clause (a) hereof shall have happened and be continuing, the Lessor shall have the right, at its option and without any further demand or notice, to require a late payment charge for each thirty (30) day period or part thereof during which such event of default occurs equal to four percent (4%) of the delinquent amount, and the Lessee shall be obligated to pay the same immediately upon receipt of the Lessor's written invoice therefor; provided, however, that this Section 12.6 shall not be applicable if or to the extent that the application thereof would affect the validity of this Lease -Purchase Agreement. ARTICLE 13 TAX COVENANTS Section 13.1 Intention of Covenants. It is the intention of the Lessee, the Lessor and the Assignee that the interest portion of the Lease Payments be exempt from federal income taxation and, therefore, the Lessee and the Lessor agree to the covenants contained in this Article. Section 13.2 Tax Covenants. The Lessee represents, covenants and warrants, for the benefit of the Lessor, as follows: (a) The Lessee is a governmental unit with general taxing powers. (b) The Closing Proceeds will not be used in a manner that would cause this Lease -Purchase Agreement and the Lease Payments hereunder to become a "private activity bond" within the meaning of Section 141 of the Code including: -20- (i) No part of the Closing Proceeds will be used for any private business use within the meaning of Section 141 of the Code. GO None of the Lease Payments is directly or indirectly secured by any interest in: (1) Property used or to be used for a private business use; or (2) Payments in respect to such property, or to be derived from such payments (whether or not made to the Lessee) in respect of property, or borrowed money, used or to be used for a private business use, all within the meaning of Section 141 of the Code. (iii) None of the Closing Proceeds will be used directly, or indirectly, or make or finance loans to persons other than governmental units, within the meaning of Section 141 of the Code. (c) The Lessee proceeded with due diligence to complete the Project and acquire the Personal Property and the Project is completed and the Personal Property acquired. (d) The Lessee shall expend all of the Closing Proceeds on the Costs of the Project. (e) The Lease Payments are not directly or indirectly guaranteed in whole or in part by the United States or any agency or instrumentality of the United States so as to cause the Lease Payments to be federally guaranteed within the meaning of Section 149(b) of the Code. (f) No significant portion of the Closing Proceeds will be used to make any loan, the payment of principal or interest of which is to be guaranteed (in whole or in part) by the United States or any agency or instrumentality of the United States so as to cause the Lease Payments to be federally guaranteed within the meaning of Section 149(b) of the Code. (g) This Lease -Purchase Agreement and the Lease Payments are not and will not be part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code: (1) Enabling the Lessee to exploit the difference between tax-exempt and taxable interest rates to gain material financial advantage; and (ii) Increasing the burden on the market for tax-exempt obligations. (h) The Lessee will not allow any of the Closing Proceeds to be used in a manner that would cause this Lease -Purchase Agreement or the Lease Payments to become an "arbitrage bond" within the meaning of the Code. -21- (i) [Not bank qualified] ARTICLE 14 MISCELLANEOUS Section 14.1 Amendments. This Lease -Purchase Agreement may be amended in writing as may be mutually agreed by the Lessor and the Lessee. Section 14.2 Filings, Reports and Financial Information. The Lessee agrees to prepare and deliver to the Lessor within a reasonable time prior to the required date of filing (or, to the extent permissible, file on behalf of the Lessor) any and all reports, including income tax returns, if any, required to be filed by reason of this Lease -Purchase Agreement. Section 14.3 Applicable Law. This Lease -Purchase Agreement shall be governed b� and construed in accordance with the laws of the State of Montana either now or hereafter. Section 14.4 Successors and _A_ssgns. The agreements, terms, covenants and conditions herein shall bind and inure to the benefit of the Lessor, the Assignee and the Lessee, and their respective successors and, except as otherwise provided herein, their assigns. Section 14.5 Severabilit r. In the event any provision hereunder shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provisions hereof. Section 14.6 Headings. All headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision hereunder. Section 14.7 Net Lease. This Lease -Purchase Agreement shall be deemed and construed to be a "net lease" and the Lessee hereby agrees that the rent provided for herein shall be an absolute net return to the Lessor, free and clear of any expenses, charges or set -offs whatsoever. Section 14.8 Payments Due on Sundays and Holida s. In case any payment hereunder is required to be made on a day which is not Business Day, then such payment need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on the date required. Section 14.9 waiver. The waiver by the Lessor of any breach by the Lessee of any term, covenant or condition hereof shall not operate as a waiver of any subsequent breach of the same or any other term, covenant or condition hereof. Section 14.1 0 Execution in Counterparts. This Lease -Purchase Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all together shall constitute but one and the same agreement. It is also agreed that separate counterparts of this Lease -Purchase Agreement may separately be executed by the Lessor and the Lessee, all with the same force and effect as though the sane counterpart had been executed by both the Lessor and the Lessee. -22- Section 14.11 Notices. Any notices or filings required to be given or made under this Lease -Purchase Agreement shall be served, given or made in writing upon the Lessee by personal delivery or registered mail addressed to: CITY OF KALISPELL P.O. Box 1997 Kalispell, Montana 59903 Attention: Finance Officer and upon the Lessor by personal delivery or registered mail addressed to: ALL POINTS PUBLIC FUNDING, LLC 275 Broadhollow Road Melville, New York 11747 Attention: Senior Vice President/Manager or at such other place as may be designated by either party in writing. -23- IN WITNESS WHEREOF, the parties have executed this Agreement by their officers duly authorized as of the day and year first written above. CITY of KALISPELL By Mayor And b y City Clerk ALL. POINTS PUBLIC FUNDING, LLC a Its -24- STATE OF MONTANA ) ss. COUNTY OF FLATHEAD ) On this day of in the year 2007, before me the undersigned, a Notary Public in and for said State, personally appeared and , proved to me on the basis of satisfactory evidence, to be the persons who executed this instrument, respectively, as the Mayor and the City Clerk of the City of Kalispell and acknowledged to me that the City of Kalispell executed it. WITNESS my hand and official seal. Notary Public (SEAL) STATE OF NEW YORK ) ss. COUNTY OF ) On this day of in the year 2007, before me the undersigned, a Notary Public in and for said State, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed this instrument as the of All Points Public Funding, LLC and acknowledged to me that All Points Public Funding, LLC executed it. WITNESS my hand and official seal. (SEAL) Notary Public -25- EXHIBIT A DESCRIPTION OF PROJECT AND PERSONAL PROPERTY Project. Personal Pro ert uantit Description w EXHIBIT B DESCRIPTION OF SITE Those tracts or parcels situated in the County of Flathead, State of Montana, described as follows: Payment # 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 EXHIBIT C LEASE PAYMENT SCHEDULE Due Date Lease Payment Principal Lease Payments are computed at a 4.85% annual percentage rate. Interest C-1 EXHIBIT D PREPAYMENT OPTION PRICE SCHEDULE Reference is made to Section 10. 1 of the Lease -Purchase Agreement dated as of , 2007. The following schedule sets forth periodic Prepayment option Prices, as referred to in the Lease -Purchase Agreement: 1. Prepayment Options may be exercised commencing on , [2015] and annually on each thereafter. 2. The scheduled Prepayment Option Price on a particular date is equal to the regularly scheduled Lease Payment due on said date, plus an amount equal to the After Payment Termination Value, as set forth in the Table below: Payment Due Date After_ Payment Termination Value D-1 Draft 9111107 After Recordation Please Return to: ALL POINTS PUBLIC FUNDING, LLC 275 Broadhollow Road Melville, NY 11747 SITE LEASE Dated as of 12007 by and between CITY OF KALISPELL And ALL POINTS PUBLIC FUNDING, LLC Recorded as INSTRUMENT NO. this day of , 2007, in Flathead County, Montana TABLE OF CONTENTS Page ARTICLE1 DEFINITIONS............................................................................................................I Section1.1 Definitions..........................................................................................................I ARTICLE2 LEASE........................................................................................................................1 Section2.1 Lease.................................................................................................................. I Section2.2 Rental................................................................................................................. 2 Section2.3 Purpose ............................................................................................................... 2 Section2.4 Term...................................................................................................................2 Section 2.5 Reimbursement Amount■ ........................ ►. ►..........►.............................................2 Section 2.6 Use of Sublease Rentals.....................................................................................3 Section 2.7 Return of Project and Site Subject to Sublease..................................................3 Section2.8 Reports...............................................................................................................3 Section2.9 Title....................................................................................................................5 Section2.1 o Termination........................................................................................................ 5 Section2.11 Eminent Domain................................................................................................5 ARTICLE 3 QUIET ENJOYMENT AND RIGHT OF ENTRY....................................................5 Section3.1 Quiet Enjoyment................................................................................................5 Section3.2 Right of Entry.................................................................................................... 5 Section 3.3 Additional Covenant.......................................................................................... 5 ARTICLE 4 ASSIGNMENT, SUBLEASING, MORTGAGING AND SELLING .......................6 Section 4.1 Assignment and Subleasing............................................................................... 6 Section 4.2 Restrictions on Agency......................................................................................6 ARTICLE5 DEFAULT..................................................................................................................6 Section5.1 Default ................................................................................................................ 6 ARTICLE6 SPECIAL COVENANTS...........................................................................................6 Section6.1 owner in Fee......................................................................................................6 Section6.2 Taxes..................................................................................................................6 Section6.3 Waste.................................................................................................................. 6 Section 6.4 Hazardous Materials..........................................................................................6 Section 6.5 Further Assurances and Corrective Instruments................................................8 Section 6.6 No Abandonment or Substitution......................................................................8 ARTICLE7 MISCELLANEOUS...................................................................................................8 Section 7.1 Waiver of Personal Liability..............................................................................8 Section7.2 Partial Invalidity.................................................................................................8 Section7.3 Notices............................................................................................................... 8 i Section7.4 Binding Effect....................................................................................................9 Section 7.5 Amendments, Changes and Modifications........................................................9 Section 7.6 Execution in Counterparts..................................................................................9 Section7.7 Applicable Law..................................................................................................9 Section7.8 Headings............................................................................................................9 EXHIBIT A DESCRIPTION OF PROJECT...................................................................................I EXHIBIT B DESCRIPTION of SITE ........... ......................................................... ................. .... ..I ii SITE LEASE THIS SITE LEASE is made and entered into as of this day of , 2007, by and between the CITY OF KALISPELL, a municipal corporation duly organized and existing under the laws of the State of Montana (the "Municipality"') and ALL POINTS PUBLIC FUNDING, LLC., a limited liability company organized and operating under the laws of the State of New York (the "Site Lessee"). RECITALS WHEREAS, the Site Lessee wishes to assist the Municipality in financing the costs of construction of certain public facilities as described on Exhibit A (the "Project") [including the costs of acquisition of certain personal property (the "Personal Property")] and the Municipality is authorized under the Constitution and laws of the State of Montana to enter into lease agreements for such purposes; and WHEREAS, the Project is located on a parcel of real property owned in fee by the Municipality as described on Exhibit B (the "Site"); and WHEREAS, the Municipality has determined that, in order to accomplish such purposes, it is necessary and desirable to provide for the financing of the acquisition and construction of the Project by leasing the Project and the Site to the Site Lessee pursuant to this Site Lease and by leasing the Project, the Site and the Personal Property from the Site Lessee pursuant to a Lease -Purchase Agreement dated as of the date hereof, between the Site Lessee, as lessor, and the Municipality, as lessee (the "Lease -Purchase Agreement"); and WHEREAS, the Site Lessee will cause funds to be provided for the financing of the Project, including the Personal Property, to be leased pursuant to the Lease -Purchase Agreement: COVENANTS NOW, THEREFORE, for and 'n consideration of the premises and covenants and conditions hereinafter contained, the parties agree as follows: ARTICLE 1 DEFINITIONS Section 1.1. Definitions. All words and phrases defined in Article 1 of the Lease - Purchase Agreement shall have the same meaning in this Site Lease. ARTICLE 2 LEASE Section 2.1 Lease. The Municipality leases to the Site Lessee, and the Site Lessee leases from the Municipality, on the terms and conditions set forth herein and subject only to Permitted Encumbrances, the Site situated in: County of Flathead State of Montana as such Site is more specifically described on Exhibit B, and the Project. Section 2.2 Rental. The Site Lessee shall pay to the Municipality as and for rental for the entire term of this Site Lease the sum of One Dollar ($1.00), on or before the execution hereof. Section 2.3 Purpose. Prior to a termination of the Lease -Purchase Agreement due to Nonappropriation or an Event of Default thereunder, the Site Lessee shall use the Site and the Project solely for the purpose of leasing the Site and the Project to the Municipality, pursuant to the Lease -Purchase Agreement. After such termination, the Site Lessee may use the Site and the Project for any lawful purpose. Section 2.4 Term. The term of this Site Lease shall commence as of the date hereof and shall remain in full force and effect from such date to and including: , 2031 unless such term is extended or earlier terminated as hereinafter provided: (1) If the Municipality exercises its option to prepay the Lease Payments due with respect to the Site, the Project and the Personal Property, pursuant to Article X of the Lease -Purchase Agreement, by paying the then applicable Prepayment option Price set forth in Exhibit "D" of the Lease -Purchase Agreement, then the term of the Site Lease shall end on the date of exercise of the option; or (2) If the Lease -Purchase Agreement is terminated due to Nonappropriation or an Event of Default thereunder, then the term of this Site Lease shall be extended until the Reimbursement Amount (as defined in Section 2.5) is received by the Site Lessee in full, except that the term of this Site Lease shall in no event be extended beyond: , 20 Section 2.5 Reimbursement Amount. The "Reimbursement Amount" is that amount which is received by the Site Lessee from the sublease of the Site Lessee's leasehold interest in the Project and the Site and the lease or sale of the Personal Property sufficient to: (1) reimburse the Site Lessee for all administrative costs and expenses, including reasonable attorneys' fees, incurred by the Site Lessee as a result of the termination of the Lease -Purchase Agreement and the sublease of the Project and the Site and the lease or sale of the Personal Property; and (2) reimburse the Site Lessee for all capital costs and expenses in any manner incurred by the Site Lessee with respect to the Project and the Site reasonably necessary in order to render the Project and the Site suitable for sublease for commercial or other lawful purposes; and (3) pay to the Site Lessee an amount which will equal the Prepayment Option Price (as that term is defined in the Lease -Purchase Agreement) under the Lease - Purchase Agreement applicable on the last day of the fiscal year of the 2 Municipality during which the Nonappropriation or Event of Default under the Lease -Purchase Agreement occurred; and (4) pay to the Site Lessee an amount which will equal all Lease Payments due under the Lease -Purchase Agreement through the end of the fiscal year of the Municipality in effect when the Event of Default, if any, occurred and which remain unpaid by the Municipality as well as any other amounts owing under the Lease -Purchase Agreement and unpaid by the Municipality as of the end of such fiscal year. Nothing contained herein shall obligate the Municipality to pay any amounts other than as set forth in the Lease -Purchase Agreement. Section 2.6 Use of Sublease Rentals. The Reimbursement Amount shall be recovered by allowing the Site Lessee first to retain from any sublease rentals an amount equal to five percent (5%) thereof, to allow for ongoing administrative costs. Thereafter, the Site Lessee shall be entitled to interest on the outstanding Reimbursement Amount at the rate per annum applicable to the Lease -Purchase Agreement, or, in the event that the Site Lessee shall receive an opinion of an attorney or firm of attorneys nationally recognized as bond counsel to the effect that such interest is includable in gross income of the recipient thereof for federal income tax purposes as a result of the Event of Default or Nonappropriation and the sublease of the Project and the Site, a rate per annum two percent (2%) greater than that applicable to the Lease - Purchase Agreement, during the period of time from the Payment Date in the fiscal year of the Municipality for which the Lease -Purchase Agreement was in effect until the time when the full Reimbursement Amount is received from sublease rentals. Any amounts of sublease rentals distributed to the Site Lessee after payment of administrative costs and interest shall be credited to the payment of the Reimbursement Amount. Use of the Project and the Site by the Site Lessee or any subsidiary or affiliate of the Site Lessee, other than for the purpose of assuming control, making necessary changes in the Project and the Site, and the initial subleasing thereof, shall be treated as the sublease thereof on a monthly basis at the then prevailing fair market value. In the event that the Lease -Purchase Agreement is terminated by the Municipality due to Nonappropriation or terminated by the Site Lessee as a result of the occurrence of an Event of Default by the Municipality thereunder, the Municipality may subsequently pay the Reimbursement Amount. Section 2.7 Return of Project and Site Subject to Sublease. In the event that the Reimbursement Amount is received by the Site Lessee in full, and the Site Lessee's interest in the Project and the Site has been subleased to any sublessee pursuant to any subleases that are still in effect, this Site Lease shall not terminate but the Site Lessee shall assign and set over to the Municipality all of the Site Lessee's interest in the Project and the Site granted under the Site Lease, subject to all existing rights created in such sublessees of the Project and the Site by any such subleases. Section 2.8 Reports. In the event that the Lease -Purchase Agreement is terminated by the Municipality due to Nonappropriation or terminated as a result of the occurrence of an Event of Default by the Municipality thereunder, the Site Lessee shall keep complete and accurate records regarding any sublease of the Project and the Site and shall, within sixty (60) days of the 3 end of the fiscal year of the Municipality deliver a written report to the Municipality showing: (a) all amounts received by the Site Lessee from any sublease of Project and the Site; (b) an analysis as to whether the Site Lessee has received the Reimbursement Amount, with all supporting calculations; and (c) the date, if any, in the next fiscal year of the Municipality on which the Site Lessee expects to receive the Reimbursement Amount. Such written report shall be verified by a certified public accountant or firm of certified public accountants not within the regular employ of the Site Lessee. In the event that on the last day of any fiscal year of the Municipality the Site Lessee has received the Reimbursement Amount, then all rentals with respect to any sublease of the Project and the Site payable after the close of such fiscal year, as well as any rentals payable during such fiscal year in excess of the amounts the Site Lessee is entitled to receive pursuant to Section 2.6, shall be the property of the Municipality. The Municipality shall have the right, at its own expense, to examine the Site Lessee's records in so far as they relate to the Project and the Site, such examination shall be made at the Site Lessee's offices during normal business hours. 4 Section 2.9 Title. During the term hereof, title to the Site and the Project and any and all additions which comprise fixtures, repairs, replacements or modifications thereto will remain in the Municipality subject to the terms of this Site Lease and the Lease -Purchase Agreement. Section 2.10 Termination. The Site Lessee agrees, upon termination of this Site Lease, to quit and surrender the Project and the Site in the same good order and condition as the same was in at the time of commencement of the term hereunder, reasonable wear and tear excepted, and free and clear of all liens and encumbrances created by or arising under the Site Lessee or any assignee of the corporation, except Permitted Encumbrances (as such term is defined in the Lease -Purchase Agreement); provided that in the event that the Project and the Site are subject to the rights of any sublessee of the Site Lessee granted under any sublease entered into in accordance with the terms of this Site Lease after the termination of the Lease -Purchase Agreement for Nonappropriation by the Municipality or as a result of an Event of Default by the Municipality thereunder, the Site Lessee agrees to assign and set over to the Municipality the Site Lessee's entire interest in the Project and the Site granted under this Site Lease subject only to Permitted Encumbrances and the rights of such sublessees under any such subleases. Section 2.11 Eminent Domain. In the event the whole or any part of the Project, the Site or the improvements thereon is taken by eminent domain, the interest of the Site Lessee shall be recognized and is hereby determined to be the immediately preceding Prepayment Option Price plus interest to the next Payment Date as shown on Exhibit C to the Lease -Purchase Agreement. The balance of the award, if any, shall be paid to the Municipality. ARTICLE 3 QUIET ENJOYMENT AND RIGHT OF ENTRY Section 3.1 Quiet, Enjoyment. The Municipality covenants and agrees that it will not take any action to prevent the Site Lessee from having quiet and peaceable possession and enjoyment of the Site and the Project during the term hereof. Further, the Municipality will, at the request of the Site Lessee, and at the Municipality's cost, to the extent that it may lawfully do so, join in any legal action in which the Site Lessee asserts its right to such possession and enjoyment. Section 3.2 Right,of Entry. The Municipality reserves the right for any of its duly authorized p representatives to enter upon the Site at any reasonable time to inspect the same or to P make any repairs, improvements or changes necessary for the preservation thereof. Section 3.3 Additional Covenant. In the event that any person or entity, however organized (other than the Site Lessee or any assignee of the Site Lessee), shall be determined to hold any interest that in any manner affects the Municipality's good and merchantable title to the Site, the Municipality shall use its best efforts to acquire the interest in the Site so held, such acquisition to be made at the Municipality's sole cost and expense. The Municipality hereby agrees to save and keep harmless the Site Lessee, or any assignee of the Site Lessee, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, costs and - expense (including reasonable attorney's fees) of whatever kind and nature, imposed on, incurred by or asserted against the Site Lessee, or any assignee of the Site Lessee, that in any way relate to or arise out of the assertion of any interest affecting the good and merchantable title to the Site R by any person or entity, however organized (other than the Site Lessee or any assignee of the Site Lessee). ARTICLE 4 ASSIGNMENT SUBLEASING MORTGAGING AND SELLING Section 4.1 Ass,iggMent and Subleasing. Unless the Lease -Purchase Agreement has been terminated due to Nonappropriation or an Event of Default thereunder, the Site Lessee may not assign its rights under this Site Lease or sublet the Site and the Project, without the prior written consent of the Municipality, except as provided in the Lease -Purchase Agreement. The Municipality hereby consents to the assignment of this Sublease to the Assignee. Section 4.2 Restrictions on Aizencv. The Municipality agrees that it will not mortgage, sell, encumber, assign, transfer or convey the Site, the Project or any portion thereof during the term of this Site Lease, without the prior written consent of the Site Lessee. ARTICLE 5 T )FFA T IT .T Section 5.1 Default. In the event the Site Lessee shall be in default in the performance of any obligation on its part to be performed under the terms of this Site Lease, which default continues for thirty (30) days following notice and demand for correction thereof to the Site Lessee, the Municipality may exercise any and all remedies granted by law, except that no merger of this Site Lease and of the Lease -Purchase Agreement shall be deemed to occur as a result thereof; provided, however, that so long as any of the principal remains unpaid under the Lease -Purchase Agreement, the Lease Payments payable thereunder shall continue to be paid by the Municipality. ARTICLE 6 SPECIAL COVENANTS Section 6.1 owner in Fee. The Municipality covenants that it is the owner in fee of the Site. Section 6.2 Taxes. The Municipality covenants and agrees to pay any and all assessments of any kind or character and also all taxes, including possessory interest taxes, levied or assessed upon the Site, including any improvements thereon. Section 6.3 Waste. The Site Lessee covenants and agrees that at all times that it is in possession of the Site, it will not commit, suffer or permit any waste on the Site, and that it will not willfully or knowingly use or permit the use of the Site for any illegal purpose or act. Section 6.4 Hazardous Materials. The Municipality represents, covenants and warranties that, on the date of execution of this Site Lease, except for as disclosed in the environmental audit performed by the State of Montana Department of Environmental Quality (the "MT DEQ") on the Site on [date] (the "Phase II Audit"), no toxic or hazardous substances or wastes, pollutants or contaminants (including, without limitation, asbestos, urea formaldehyde, polychlorinated b iphenyl s, petroleum products, and any hazardous substance as defined in any state, local or federal law, regulation, rule, policy or order relating to the protection of the environment) (collectively, "Hazardous Substances") have been generated, treated, stored, m transferred from., released or disposed of, or otherwise placed, deposited in or located on the Site. Except as disclosed in the Phase II Audit, the Site is not now, and to the best knowledge of the Municipality, never has been used as a landfill, dump or other disposal, storage, transfer or handling area for Hazardous Substances or for industrial, military or manufacturing purposes, or as a gasoline service station or a facility for selling, dispensing, storing, transferring or handling petroleum and/or petroleum products. To the extent that the Phase II Audit disclosed contaminated soils on the Site, such contaminated soils have been removed under the direction of the MT DEQ, and the Municipality has complied with all remedial action required by the MT DEQ, pursuant to the work plan designed by the MT DEQ for the Site. No above ground or underground tanks, are located in or about the Site, or have been located under, in or about the Site and have subsequently been removed or filled. To the extent storage tanks exist on or under the Site, such storage tanks have been duly registered with all appropriate regulatory and governmental bodies and otherwise are in compliance with applicable federal, state and local statutes, regulations, ordinances, and other regulatory requirements. The Mun.i.cipality has delivered to the Site Lessee copies of all environmental reports and other documents relating to the environmental condition of the Site which are in the possession of the Municipality. The Municipality agrees to, and does hereby, indemnify, defend (with counsel retained by the Municipality and reasonably acceptable to the Site Lessee) and hold harmless the Site Lessee, its affiliates, shareholders, directors, officers, employees and agents, and their heirs, successors and assigns (all being included in the word "the Site Lessee" for the purposes of this subparagraph 6) from any and all claims, causes of action, damages, demands, liabilities, losses, penalties, expenses and/or costs, however defined (including, but not limited to, attorneys' fees, consultants' fees, and related expenses, all of which shall be reasonable), which may be asserted against, imposed on, or incurred by, the Site Lessee arising out of or due to, or allegedly arising out of or due to, any misrepresentation by the Municipality in this Section 6.4, whether such misrepresentation is discovered before or after the execution of this Site Lease. Such duty to indemnify and defend includes, but is not limited to, proceedings or actions commenced before any court or administrative agency and applies to expenses incurred by the Site Lessee as they become due rather than as accumulated after the ultimate outcome of any litigation or administrative proceeding. The representations, warranties and indemnities contained in this Section 6.4 shall survive the termination of this Site Lease and continue thereafter in full force and effect. W Section 6.5 Further Assurances and Corrective Instruments. The Municipality and the Site Lessee covenant and agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Site hereby leased or intended to be leased or for carrying out the expressed intention of this Site Lease and the Lease -Purchase Agreement. Section 6.6 No Abandonment or Substitution. The Municipality covenants and agrees, during the term hereof, that it shall not abandon the Site or the Project for the use for which it is currently required by the Municipality. ARTICLE 7 MISCELLANEOUS Section 7.1 Waiver of Personal Liability. All liabilities under this Site Lease on the part of the Site Lessee are solely liabilities of the Site Lessee, and the Municipality hereby releases each and every incorporator, member, director and officer of the Site Lessee of and from any personal or individual liability under this Site Lease. No incorporator, member, director or officer of the Site Lessee shall at any time or under any circumstances be individually or personally liable for anything done or omitted to be done by the Site Lessee under this Site Lease. Section 7.2 Partial Invalidity. If any one or more of the terms, covenants or conditions or this Site Lease shall to any extent be declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, none of the remaining terms, provisions, covenants and conditions of this Site Lease shall be affected thereby, and each provision of this Site Lease shall be valid and enforceable to the fullest extent permitted by law. Section 7.3 Notices. Any notices or filings required to be given or made under this Site Lease shall be served, given or made in writing upon Municipality by personal delivery or registered mail addressed to: CITY OF KALIS PELL P.O. Box 1997 Kalispell, Montana 59903 Attention: Finance Officer and upon Site Lessee by personal delivery or registered mail addressed to: ALL POINTS PUBLIC FUNDING, LLC 275 Broadhollow Road Melville, New York 11747 Attention: Senior Vice President/Manager or at such other place as may be designated by either party in writing. Section 7.4 Dinding Effect. This Site Lease shall inure to the benefit of and shall be binding upon the Municipality, the Site Lessee and their respective successors and assigns. Section 7.5 Amendments Chan es and Modifications. This Site Lease shall not be effectively amended, changed, modified, altered or terminated without the written agreement of both parties hereto. Section 7.6 Execution in Countelparts. This Site Lease may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 7.7 Ap able Law. This Site Lease shall be governed by and construed in accordance with the laws of the State of Montana. Section 7.8 Headings. The captions or headings in this Site Lease are for convenience only no wa and in define, limit or describe the scope or intent of any provisions or sections of �' this Site Lease. IN WITNESS WHEREOF, the parties have executed this Site Lease by their officers duly authorized as of the day and year first written above. CITY OF KALISPELL By Mayor And by City Clerk ALL POINTS PUBLIC FUNDING, LLC. 21 Its STATE OF MONTANA ) ss. COUNTY OF FLATHEAD ) On this day of in the year 2007, before me the undersigned, a Notary Public in and for said State, personally appeared and personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons who executed this instrument as the Mayor and City Clerk, respectively, of the City of Kalispell and acknowledged to me that the Municipality executed it. (SEAL) WITNESS my hand and official seal. Notary Public 10 STATE OF NEW YORK ss. COUNTY OF On this day of , in the year 2007, before me the undersigned, a Notary Public in and for said State, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed this instrument as the of All Points Public Funding, LLC and acknowledged to me that All Points Public Funding, LLC executed it. (SEAL) WITNESS my hand and official seal. Notary Public 11 EXHIBIT A DESCRIPTION OF PROJECT EXHIBIT B DESCRIPTION of SITE Those tracts or parcels situated in the County of Flathead, State of Montana described, as follows: NO Draft 9/11/07 ESCROW AGREEMENT Dated as of 92007 by and between CITY OF KALISPELL and as Escrow Agent TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS; RULES OF CONSTRUCTION......................................................2 Section1.1 Definitions ..................................................................................................... 2 Section 1.2 Rules of Construction................................................................. ►.. ►............ ►. 6 Section 1.3 Reference to Agreement ....................... ►....................................................... 6 ARTICLE 2 RECITALS AND REPRESENTATIONS ....................... ... . . ..................... 7 Section 2.1 Lease -Purchase Agreement........................................................................... 7 Section 2.2 Conditions Precedent Satisfied..................................................................... ARTICLE 3 APPOINTMENT OF ESCROW AGENT................................................................. 8 Section 3.1 Appointment of Escrow Agent .............. ►...................................................... 8 Section 3.2 Acceptance of Appointments and Escrow .................................................... 8 ARTICLE4 ESCROW AGENT....................................................................................................9 Section 4.1 Acceptance of Duties and Responsibilities................................................... 9 Section 4.2 Removal of Escrow Agent ..................................................... . ...................... 9 Section 4.3 Resignation of Escrow Agent....................................................................... Section 4.4 Appointment of Agent.................................................................................. 9 Section 4.5 Merger or Consolidation............................................................................... 9 Section 4.6 Protection and Rights of the Escrow Agent ................................................ 10 Section 4.7 Compensation of Escrow Agent................................................................. 1 ARTICLE 5 ESTABLISHMENT AND ADMINISTRATION OF FUNDS AND ACCOUNTS.............................................................................................................12 Section5.1 Escrow Fund............................................................................................... 12 Section5.2 Deposit of Money....................................................................................... 12 Section 5.3 Construction Account................................................................................. 1 Section 5.4 No Unauthorized Transfers......................................................................... 13 Section 5.5 Deposit and Investment of Money.............................................................. 13 Section 5.6 Credit Against Lease Payments.................................................................. 14 ARTICLE 6 LIMITATION OF LIABILITY................................................................................15 Section 6.1 Limitation of Obligation of Municipality................................................... 15 Section 6.2 No Obligation with Respect to Performance by Escrow Agent ................. 15 Section 6.3 No Responsibility for Sufficiency or Investment Losses ........................... 15 Section 6.4 Indemnification to Escrow Agent............................................................... 15 ARTICLE 7 AMENDMENT; DEFEASANCE; ADMINISTRATIVE PROVISIONS .............. . .17 Ell Section7. 1 Amendment . . . .. ......................... f . . . 0 ................ i . . ....... 0 0 0 r . r ............................ i . 17 Section 7.2 Suits in Interpleader.................................................................................... 17 Section 7.3 Recording and Filing................................................................................... 17 Section 7.4 Escrow Agent to Deep Records.................................................................. 17 Section7.5 Notices........................................................................................................ 17 Section7.5 Montana Law.............................................................................................. 18 Section 7.7 Severability................................................................................................. 18 Section 7.8 Binding on Successors................................................................................ 18 Section7.9 Headings..................................................................................................... 18 Section 7.1 o Execution in Counterparts......................................................................... 18 EXHIBIT A CERTIFICATE REQUESTING- DISBURSEMENT ................................................. I ESCROW AGREEMENT THIS ESCROW AGREEMENT is made and entered into as of this day of , 2007, by and between , an institution qualified to accept escrows of the type herein set forth (the "Escrow Agent"), and the CITY OF KALISPELL, a municipal corporation duly organized and existing under the laws of the State of Montana (the "Municipality"). COVENANTS NOW, THEREFORE, for and in consideration of the premises and covenants and conditions hereinafter contained, the parties agree as follows: -I- ARTICLE 1 DEFINITIONS• RULES OF CONSTRUCTION Section 1.1 Definitions. The following terms will have the meanings indicated below unless the context clearly requires otherwise: "Authorized Officer" when used with respect to the Escrow Agent, means any officer or officers of the Escrow Agent authorized to act on behalf of the Escrow Agent under this Escrow Agreement. The term `Authorized Officer" when used with respect to the Municipality, means any officer or officers of the Municipality authorized to act on behalf of the Municipality under this Escrow Agreement. "Business Day" means a day which is not a Saturday or Sunday or a bank holiday under the laws of the United States or State of Montana. "Certificate of Completion" means a certificate of an architect or engineer, approved by an Authorized Officer of the Escrow Agent and the Municipality, that the Project has been completed in substantial conformity with the Plans and Specifications therefore. "Closing Date" means the date upon which funds are deposited in the Construction Account by the Project Lessor, pursuant to Section 3.1 of the Lease -Purchase Agreement. "Closing Proceeds" means those funds to be deposited by the Project Lessor or the Escrow Agent on the Closing Date pursuant to Section 3.1 of the Lease -Purchase Agreement. "Code" means the Internal Revenue Code of 1986, as amended. "Completion Date" means the date of substantial completion of the Project as evidenced by the filing with the Escrow Agent of a Certificate of Completion executed by an Authorized Officer of the Municipality. "Construction Account" means the account by that name established under and held by the Escrow Agent and established under Section 5.1 of this Escrow Agreement. "Construction Contracts" means any construction contract between the Municipality and any contractor and between any such contractor and his immediate subcontractor regarding construction of the Project or improvement of the Site. "Construction Period" means the period between the commencement of the improvement of the Site or the date on which the Lease -Purchase Agreement is executed, whichever is earlier, and the Completion Date. "Costs of the Project." shall be deemed to include, but not be limited to, the following items: (a) Obligations incurred or assumed for labor, materials and equipment in connection with the improvement of the Site and construction and equipping of the Project; (b) Cost of performance, labor and material bonds and of insurance of all kinds that may be required or necessary during the course of improvement of the Site or -2- construction and equipping of the Project, to the extent not purchased by contractors or subcontractors for the Projects (c) All costs of engineering services, including the costs incurred or assumed for preliminary design and development work, test borings, surveys, estimates, plans and specifications, and for supervising improvements as well as for the performance of all of the duties required by or consequent upon the proper improvement of the Site, and all costs or architectural services in connection with the preparation of plans and specifications for the Project; (d) All expenses incurred in connection with preparation and execution of the Lease - Purchase Agreement and the performance of the duties hereunder and related hereto including, without limitation, overhead and administrative expenses, the initial compensation and expenses of the Project Lessor, the Municipality, legal and accounting expenses and fees and costs incurred, cost of insurance, cost of publication, printing and recording and filing fees, (e) All costs incurred in preparing or obtaining permits or approval from regulatory agencies in connection with the improvement of the Site and construction and equipping of the Project; (f) All other costs which are considered to be a part of the cost of the Project in accordance with generally accepted accounting principles and which will not affect the exemption from federal income taxes of interest on any of the Lease Payments; and (g) All Delivery Expenses. "Delivery Expenses" mean all costs and expenses of execution and delivery of the Financing Agreements and other documents incident to the deposit of the Closing Proceeds on the Closing Date. "'Municipality" means the City of Kalispell, a municipal corporation organized and existing under the laws of the State of Montana. "Escrow Agents' means as Escrow Agent pursuant to the Escrow Agreement. , or any successor thereto acting "Escrow Agreement" means this Escrow Agreement, dated as of the date hereof, by and between the Municipality and the Escrow Agent and any duly authorized and executed amendment thereto. "Event of Default" means one or more events of default as defined in Article XI of the Lease -Purchase Agreement. "Execution Date" means the date of execution of the Financing Agreements and all related agreements and documents. -3- "Federal Securities" means United States Treasury notes, bonds, bills or certificates of indebtedness or obligations for which the full faith and credit of the United States are pledged for the payment of principal and interest, including United States Treasury book entry certificates, notes, and bonds, state and local government series. "Financing Agreements" mean: (a) the Lease -Purchase Agreement; (b) the Site Lease; and (c) this Escrow Agreement. "Independent Engineer" means an engineer or architect or firm of engineers or architects approved by the Municipality and having no interest direct or indirect, in or with the Project Lessor, the Escrow Agent or the Municipality and in the case of an individual, not being an officer or employee of the Project Lessor, the Escrow Agent or the Municipality and, in the case of a firm, not having as a partner, director, owner, officer or employee, an officer or employee of the Project Lessor, the Escrow Agent or the Municipality, but, in the case of either an individual or firm, who may be regularly retained by the Municipality. "Independent Counsel" means an attorney duly admitted to the practice of law before the highest court of the State in which he maintains an office and who is not an employee of Project Lessor or the Municipality. "Lease Payments" means the payments payable by the Municipality exclusively from current or other legally available funds, pursuant to Article V of the Lease -Purchase Agreement, during the Lease Term which constitute payments for and in consideration of the right to use the Project and the Site during the Lease Term for which such funds are budgeted and appropriated or otherwise made legally available. "Lease -Purchase Agreement" means the Lease -Purchase Agreement, dated as of the date hereof, by and between the Project Lessor and the Municipality and any duly authorized and executed amendment thereto. "Lease Term" means the duration of the leasehold estate created in the Project and the Site as provided in Article IV of the Lease -Purchase Agreement. "Lease Yield" means the aggregate yield on the Lease Payments made by the Municipality under the Lease -Purchase Agreement, which is determined on the basis of issue price (within the meaning of Section 1273 and 1274 of the Internal Revenue Code of 1986, as amended) as certified by the Assignee to the Escrow Agent on the Closing Date. "Net Proceeds" means any insurance proceeds or condemnation award, paid with respect to the Project, remaining after payment therefrom of all expenses incurred in the collection thereof. "Payment Date" means the date upon which any Lease Payment is due and payable to the Project Lessor, as set forth on Exhibit C of the Lease -Purchase Agreement. -4- "Permitted Encumbrances" means, at any particular time: (a) liens for taxes and assessments not then delinquent, or which the Municipality, pursuant to the Lease -Purchase Agreement, may permit to remain unpaid; (b) the Lease -Purchase Agreement and the Site Lease; (c) utility access and other easements and rights -of -way, restrictions and exceptions that the Municipality certifies will not interfere with or impair the Project; and (d) such minor defects, irregularities, encumbrances and clouds on title as normally exist with respect to property affected thereby for the purpose for which it was acquired or held by the Municipality. "Permitted Investments" means. (a) Marketable obligations issued or guaranteed by the United States of America or its agencies or instrumentalities; (b) Certificates of deposit, time deposits or demand deposits that qualify as collateralized public funds or meet parameters as described above in paragraph (a); (c) Banker's acceptances issued by a state or national bank that qualify as collateralized public funds or meet parameters as described above in paragraph (a); (d) Commercial paper of an issuer that enjoys ratings of Moody's Prime 1 or Standard &. Poor' s At; or (e) Obligations the interest on which is exempt from federal income taxation pursuant to Section 103 of the Code and the regulations thereunder, which bear a rating at least equal to A issued by Standard & Poor's Ratings Division. "Plans and Specifications" means the plans and specifications for the Project to be completed and leased hereunder approved by the Municipality and prepared under the direction of the Municipality. "Principal Office" when used with respect to the Escrow Agent, means the principal offices of the Escrow Agent, which are located in "Project" means the public improvements to be made on the Site and leased to the Municipality, as more particularly described in Exhibit A of the Lease -Purchase Agreement. "Project Documents" means, without limitation: (a) All plans, drawings and specifications for the Project, when and as they are approved by the Municipality, including all change orders, if any; -5- (b) All necessary permits for completion of the Project, if required, including any building permits and the certificate of occupancy for the Project; (c) The Construction Contracts; (d) Policies of title, casualty, public liability and workers' compensation insurance, or certificates thereof, with respect to the Project, and (e) Performance and payment bonds with respect to the completion of the Project. "Project Lessor" means the Escrow Agent, acting in the capacity of lessor under the Lease -Purchase Agreement. "Purchase option Price" means that amount payable during the Lease Term, at the sole option of the Municipality, for the purpose of terminating the Lease -Purchase Agreement and purchasing the Project, as set forth in Exhibit D of the Lease -Purchase Agreement. "Site" means the real property on which the Project is to be completed, as described on Exhibit B of the Lease -Purchase Agreement including any fixtures or improvements thereon, excepting the Project. "Site Lease" means the Site Lease, dated as of the date hereof, by and between the Municipality and the Project Lessor and any duly authorized and executed amendment thereto. "Special Counsel" means any nationally recognized bond counsel. Section 1.2 Rules of Construction. Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders. Unless the context otherwise indicates, words importing the singular number shall include plural numbers and vice versa, and words importing persons shall include corporations and associations, including public bodies, as well as natural persons. Section 1.3 Reference to Agreement. The terms `hereby", "hereof', "hereto", "herein", "hereunder" and any similar terms, as used in this Escrow Agreement, refer to this Escrow Agreement. 0 ARTICLE 2 RECITALS AND REPRESENTATIONS Section 2.1 Lease -Purchase Agreement. The Project Lessor and the Municipality have entered into the Lease -Purchase Agreement, whereby Project Lessor has agreed to lease to the Municipality and the Municipality has agreed to lease from the Project Lessor the Project and the Site. Section 2.2 Conditions Precedent Satisfied. All acts, conditions and things required by law to exist, happen and be performed precedent to and in connection with the execution and entering into of this Escrow Agreement exist, have happened and have been performed in regular and due time, form and manner as required by law and the parties are now duly empowered to execute and enter into this Escrow Agreement. -7- ARTICLE 3 APPOINTMENT OF ESCROW AGENT Section 3.1 Appointment of Escrow A nt. In consideration of the recitals hereinabove set forth and for other valuable consideration, the Municipality hereby appoint the Escrow Agent to: (a) Receive, hold, invest and disburse the Net Proceeds to be paid to it pursuant to the Lease -Purchase Agreement in escrow for credit to the various funds and accounts established by this Escrow Agreement for the benefit of Municipality; and (b) To perform certain other functions; all as hereinafter provided and subject to the terms and conditions of this Escrow Agreement. Section 3.2 Acce tance of Appointments and Escrow. In consideration of the compensation hereinafter provided, the Escrow Agent accepts the appointment specified in Section 3.19 hereof subject to the terms and conditions of this Escrow Agreement. In ARTICLE 4 ESCROW AGENT Section 4.1 Accel2tance of Duties and Responsibilities. By executing and delivering this Escrow Agreement, the Escrow Agent accepts the duties and obligations of the Escrow Agent set forth in the terms and conditions of this Escrow Agreement. Section 4.2 Removal of Escrow Agent. The Municipality may by written agreement or instrument at any time and for any reason remove the Escrow Agent and any :successor thereto, but only with the written approval of the Project Lessor and only if it has first provided for the appointment of a successor or successors thereto, but any such successor shall be a bank or trust company with a combined capital (exclusive of borrowed capital) and surplus of at least $10,000,000, and subject to supervision or examination by federal or state authority. If such bank or trust publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus set forth in its most recent report of condition so published. Section 4.3 Resignation of Escrow.A The Escrow Agent or any successor may at any time resign by giving written notice to the Municipality of its intention to resign and of the proposed date of resignation, which shall be a date not less than sixty (60) days after such notice, unless an earlier resignation date and the appointment of a successor Escrow Agent shall have been or are approved. Upon receiving such notice of resignation, the Municipality shall promptly appoint a successor Escrow Agent by an instrument in writing; provided that in the event the Municipality fails to appoint a successor Escrow Agent within thirty (30) days following receipt of such written notice of resignation, the Project Lessor may appoint a successor Escrow Agent, and in the event that the Project Lessor fails to appoint a successor Escrow Agent within thirty (30) days following the expiration of such initial 30-day period the resigning Escrow Agent may petition the appropriate court having jurisdiction to appoint a successor Escrow Agent. Any resignation or removal of the Escrow Agent shall become effective upon acceptance of appointment by the successor Escrow Agent. Section 4.4 Appointment of Agent. The Escrow Agent may appoint an agent to exercise any of the powers, rights or remedies granted to the Escrow Agent under this Escrow Agreement, and to hold title to property or to tape any other action which may be desirable or necessary. Section 4.5 Merger or Consolidation. Any company into which the Escrow Agent may be merged or converted, or with which it may be consolidated, or any company resulting from any merger, conversion or consolidation to which it shall be a party, or any company to which the Escrow Agent may sell or transfer all or substantially all of its corporate trust business (provided that such company shall be eligible hereunder) shall be the successor to the Escrow 0 Agent without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. Section 4.6 Protection and Rights of the Escrow A ent. The Escrow Agent shall be protected and shall incur no liability in acting or proceeding m good faith upon any resolution, notice, telegram, request, consent, waiver, certificate, statement, affidavit, voucher, bond, requisition or other paper or document which it shall in good faith believe to be genuine and to have been passed or signed by the proper board or person or to have been prepared and furnished pursuant to any of the provisions of this Escrow Agreement, and the Escrow Agent shall be under no duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements. The Escrow Agent shall have no obligation to make inquiry as to the identity or authority of any person signing any such documents referred to in the first sentence of this The Escrow Agent may consult with counsel, who may be counsel to the Project Lessor or the Municipality, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith in accordance therewith. Whenever in the administration of its duties under this Escrow Agreement, the Escrow Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action thereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed), shall be deemed to be conclusively proved and established by the certificate of the Municipality or the Project Lessor and such certificate shall be full warranty to the Escrow Agent for any action taken or suffered under the provisions of this Escrow Agreement upon the faith thereof, but in its discretion the Escrow Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. The recitals, statements and representations by the Municipality and the Project Lessor contained in this Escrow Agreement shall be taken and construed as made by and on the part of the Municipality and the Project Lessor, as the case may be, and not by the Escrow Agent, and the Escrow Agent does not assume, and shall not have, any responsibility or obligation for the correctness of any thereof. The Escrow Agent may execute any of the powers hereof and perform the duties required of it hereunder by or through attorneys, agents, or receivers, and shall be entitled to advice of counsel concerning its duty hereunder, and the Escrow Agent shall not be answerable for the default or misconduct of any such attorney, agent, or receiver selected by it with reasonable care; provided that any additional costs and expenses incurred shall be the sole obligation of the Escrow Agent. The Escrow Agent shall not be answerable for the exercise of any discretion or power under this Escrow Agreement or for anything whatever in connection with the funds and accounts established hereunder, except only for its own willful misconduct or gross negligence. Section 4.7 Compensation of Escrow Agent. The Municipality shall from time to time, on demand, pay or cause to be paid to the Escrow compensation Agent reasonable for its g normal contemplated services and shall reimburse the Escrow Agent for all of its advances and expenditures related thereto. -10- No provision of this Escrow Agreement shall require the Escrow Agent to expend or risk its awn funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights and powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. -11- ARTICLE 5 ESTABLISHMENT AND ADMINISTRATION of FUNDS AND ACCOUNTS Section 5.1 Escrow Fund. There is hereby established with the Escrow Agent a special escrow fund to be designated: City of Kalispell Escrow Fund: The Escrow Agent shall keep the Escrow Fund separate and apart from all other funds and moneys held by it. within the Escrow Fund, there are hereby established, for the benefit of the Municipality, the accounts specified as follows: Construction Account more particularly described in Section 5.3. Section 5.2 Deposit of Money. At the Closing Date, the Project Lessor shall cause to be deposited with the Escrow Agent the sum of $[1,415,965.46] and the Escrow Agent shall forthwith deposit and disburse such sum as follows: $[1,415,965.46] into the Construction Account representing the amount, together with interest earnings thereon, necessary to pay Costs of the Project. Section 5.3 Construction Account. (a) The Escrow Agent shall administer the Construction Account as provided in this Section. (b) Amounts in the Construction Account shall be disbursed for Costs of the Project. Disbursements from the Construction Account shall be made by the Escrow Agent upon receipt of a Certificate Requesting Disbursement executed by an Authorized Officer of the Municipality in substantially the form set forth in Exhibit A hereto. Subject to Subsections (c) and (d) hereof, each such certificate shall: (1) Set forth the amounts to be disbursed for payment or reimbursement of previous payments of Costs of the Project and the name and address of the person or persons to whom the amounts are to be disbursed; (ii) State that the amounts to be disbursed constitute Costs of the Project as the term is defined in the Lease -Purchase Agreement, that the amounts are required to be disbursed pursuant to a contract entered into therefor by the Municipality as agent of the Project Lessor and were necessarily and reasonably incurred and that the amounts are not being paid in advance of the time, if any, fixed for payment; State that no amount set forth in the certificate was included in any certificate requesting disbursement previously filed with the Escrow Agent pursuant to this Section; and -12- (iv) State that the amount remaining in the Construction Account, together with interest earnings thereon, will, after payment of the amount set forth in the certificate requesting disbursement, be sufficient to pay all remaining Costs of the Project as then estimated. (c) With the exception of disbursements for Delivery Expenses, any disbursements to be made from the Construction Account will be subject to the Escrow Agent receiving the following information and certificates: (i) a certificate of an Authorized Officer of the Municipality stating that (A) the final Plans and Specifications for the Project have been completed and approved by the Municipality; and (B) the Site to be improved is the Site described in Exhibit B of the Lease -Purchase Agreement; and GO unless specifically waived by the Project Lessor, a policy of title insurance insuring the Site, conforming to the terms of the Lease -Purchase Agreement, or a commitment letter from the title insurer confirming the intent to issue such policy. (b) Each Certificate Requesting Disbursement which is submitted pursuant to Subsection (b) and which relates to disbursement for improvement or completion of a portion of the Project shall be accompanied by the certificate of an Independent Engineer approving the certificate requesting disbursement and certifying that insofar as such certificate relates to payment for work., materials, equipment or supplies, such work was actually performed, or such materials, equipment or supplies were actually installed in furtherance of the improvement or completion of the Project for such purpose or delivered for storage or fabrication at a place approved by the Municipality. All certificates requesting disbursement for general disbursements which do not require the approval of the Independent Engineer are to be submitted upon the Certificate Requesting Disbursements without an accompanying approval of the Independent Engineer. (c) Any amounts remaining in the Construction Account on , 20 , shall be paid to the Project Lessor and applied as a credit against the principal component of the Lease Payments pursuant to Section 5.6 of this Escrow Agreement, and the Construction Account shall be closed. Section 5.4 No Unauthorized Transfers. No amount shall be withdrawn or transferred from or paid out of any fund or account except as expressly provided in this Escrow Agreement. Section 5.5 Deposit and Investment of Monte. (d) All money held by the Escrow Agent in any of the funds or accounts established pursuant to this Escrow Agreement shall be deposited or invested in Permitted Investments as instructed by the Municipality in writing. In the absence of such written instructions, the Escrow Agent shall hold such funds in a money market investment account bearing the highest rate of interest offered by the Escrow Agent. If the Municipality provides written instructions with respect to -13- investment in Permitted Investments, the Escrow Agent shall, as long as a breach of its fiduciary duty is not the result thereof, mare investments in accordance with such instructions. If the Escrow Agent is instructed to invest in obligations not issued by the Escrow Agent, it may purchase such investments through the Escrow Agent's Investment Department, subject to the normal fees of that department. (e) All interest and other income earned on amounts held in on the Construction Account shall be retained in the Construction Account until closed pursuant to Section 5.3 of this Escrow Agreement. f� Investments in any and all funds and accounts may be commingled in a separate fund or funds for purposes of making, holding and disposing of investments, notwithstanding provisions herein for transfer to or holding in or to the credit of particular funds or accounts of amounts received or held by the Escrow Agent hereunder. The Escrow Agent shall at all times account for such investments strictly in accordance with the funds and accounts to which they are credited and otherwise as provided in this Escrow Agreement. Section 5.6 Credit A ainst Lease Payments. on or prior to any Lease Payment Date, the Escrow Agent shall report to the Municipality the amount of any credit against Lease Payments available to the Municipality hereunder or under the Lease -Purchase Agreement. -14- ARTICLE 6 LIMITATION of LIABILITY Section 6.1 Limitation of obli ation of Municipality. Except for the payment of Lease Payments when due pursuant to the Lease -Purchase Agreement and the performance of the other covenants and agreements of the Municipality contained therein, the Municipality shall have no obligation or liability to any of the other parties with respect to this Escrow Agreement. Section 6.2 No Obligation with Res ect to Performance b Escrow Agent. Neither the Municipality nor the Project Lessor shall have any obligation or liability to any of the other parties with respect to the performance by the Escrow Agent of any duty imposed upon it under this Escrow Agreement. Section 6.3 No Res onsibilit for Sufficiency or Investment Losses. The Escrow Agent shall not be responsible for the value of or title to the Project. The Escrow Agent shall not , be responsible or liable for any loss suffered in connection with any investment of funds made by it at the direction of the Municipality under the terms of and in accordance with this Escrow Agreement. Section 6.4 Indemnification to Escrow A ent, The Municipality shall indemnify and save the Escrow Agent harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of: (a) The use, maintenance, condition or management of, or from any work or acts performed on the Project by the Municipality; (b) Any breach or default by the Municipality in the performance of any of its obligations under this Escrow Agreement; (c) Any act of negligence by the Municipality or by any of its agents, contractors, servants, employees or licensees with respect to the Project; (d) Any act of negligence by any assignee or sublessee of the Municipality or by any of its agents, contractors, servants, employees or licensees with respect to the Project; (e) The improvement of the Site, completion of the Project or the authorization of payment of the Costs of the Project by the Municipality; or (� The exercise and performance by the Escrow Agent of its powers and duties hereunder, including the costs and expenses of defending against claim of liability. Indemnification for any tort mentioned in this Section shall be limited to the extent and in the amounts provided for by Montana law. No indemnification will be created under this Section or elsewhere in this Escrow Agreement for willful misconduct, negligence, or breach of duty -15- under this Escrow Agreement by the Escrow Agent, its officers, agents, employees, successors or assigns. -1�- ARTICLE 7 AMENDMENT; DEFEASANCE` ADMINISTRATIVE PROVISIONS Section 7.1 Amendment. This Escrow Agreement may be amended in writing by agreement of the parties hereto. Notwithstanding the foregoing, this Escrow Agreement and the rights and obligations provided thereby may be modified or amended at any time, but only: (a) For the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in this Escrow Agreement; (b) In regard to questions arising under this Escrow Agreement which the Municipality may deem necessary or desirable and not inconsistent with this Escrow Agreement; (c) To add provisions, which, in the opinion of Bond Counsel or Special Counsel, are deemed necessary to comply with any enacted reform, revision or amendment of the Code affecting the exclusion from gross income of the interest component of the Lease Payments for federal income tax purposes. Section 7.2 Suits in Inteipleader. In the event conflicting demands are made or notices served upon the Escrow Agent with respect to this escrow, the parties hereto expressly agree that the Escrow Agent shall have the absolute right to do either or both of the following: withhold and stop all further proceedings in the escrow or file a suit in interpleader and obtain an order from the court requiring the parties to interplead and litigate their several claims and rights among themselves. Section 7.3 Recordin and Filinpz. The Escrow Agent shall not be responsible for the recording or filing of the Lease -Purchase Agreement or the Site Lease or any supplemental instruments or documents. Section 7.4 Escrow A ent to Keep Records. The Escrow Agent shall keep books and records of all money received and disbursed under this Escrow Agreement, which shall be available for inspection by the Municipality and the Project Lessor at any time during regular business hours, upon forty-eight (48) hours written notice. Section 7.5 Notices. All written notices to be given under this Escrow Agreement shall be given by mail or personal delivery to the party entitled thereto at its address set forth below, or to such other persons or at such other addresses as the party may provide to the other party in writing from time to time. Notice shall be effective upon deposit in the United States mail, postage prepaid or, in the case of personal delivery, upon delivery to the address set forth below: -17- If to Municipality. P.O. Box 1997 Kalispell, Montana 59903 Attention: Fiscal Services Department If to Escrow Agent: Section 7.6 Montana Law. This Escrow Agreement shall be construed and governed in accordance with the laws of the State of Montana. Section 7.7 5everability. Any provision of this Escrow Agreement found to be prohibited by law shall be ineffective only to the extent of such prohibition and shall not invalidate the remainder of this Escrow Agreement. Section 7.8 B indin on Successors. This Escrow Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Section 7.9 Headings. Headings preceding the text of the several Articles and Sections hereof, and the table of contents, are solely for convenience of reference and shall not constitute a part of this Escrow Agreement or affect its meaning, construction or effect. Section 7.1 o Execution in Counterparts. This Escrow Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. M IN WITNESS WHEREOF, the parties have executed this Escrow Agreement by their officers duly authorized as of the day and year first written above. CITY of KALISPELL By Mayor And by City Clerk [Escrow Agent] By Its -19- EXHIBIT A Certificate Requesting Disbursement (the Escrow Agent), as Escrow Agent under an Escrow .Agreement dated as of , 2007, between the Escrow Agent and the City of Kalispell, Montana (the Municipality) is hereby requested to pay from the Construction Account held under said Escrow Agreement, to the corporation or other payee designated below as Payee, the sum set forth below such designation, in payment of certain Costs of the Project described in the Lease -Purchase Agreement dated as of , 2007, between the Escrow Agent and the Municipality. The undersigned hereby certifies that (a) attached hereto is a duplicate original or certified copy of the following documents relating to the acquisition, construction and installation of the Project as described below: (1) for payment of development and/or construction costs, a contractor's, manufacturer's or dealer's invoice; (2) for payment of acquisition and/or installation costs with respect to equipment or personal property, a contractor's, manufacturer's or dealer's invoice, together with a bill of sale vesting legal title in the Project Lessor; and (3) for the final payment request, the Municipality's certificate of acceptance; and (b) that the amount requested for payment is for payment or reimbursement for the costs of the Project, has not formed the basis of a previous request for payment, is now due and owing, and has been approved by the Municipality for payment. The undersigned further certifies that the amount remaining in the Construction Account after payment of the amount requested is sufficient to pay any unpaid balance of the Costs of the Project due or to become due. In the event that the Payee named on this Payment Request Form is a person, firm or corporation to which reimbursement is due for payment previously paid by such person, firm or corporation to the contractor for such portion of the Project, evidence of such prior payment and the amount thereof is also attached to this Payment Request Form. Answer Items (A) And (B) Only If Applying For Reimbursement Of Expenditures Paid Before Closing. (A) with respect to reimbursement of expenditures incurred and paid prior to the execution and delivery of the Lease -Purchase Agreement, the Municipality further certifies, pursuant to Section 1.1 50-2 (the "Regulations") of the Income Tax Regulations under the Internal Revenue Code of 1986, as amended (the"Code"), that: (1) De minimis Expenditures. The expenditure for which reimbursement is hereby sought is/is not (circle one) a de minimis expenditure as defined and within the permitted limit described in paragraph (f)(1) of the Regulations (lesser of $100,000 or 5% of the proceeds). (2) Preliminary Expenditures. The expenditure for which reimbursement is hereby sought is/is not (circle one) a Preliminary Expenditure (as defined and within the permitted limit described in paragraph (f)(2) of the Regulations). MAN If the expenditure is described under (1) or (2), go to item (B) below. (3) Declaration of official Intent. The expenditure for which reimbursement is hereby sought is not described under (a) or (b) above. on , 2007, a date no later than 60 days after payment of the expenditure for which reimbursement is hereby sought, the Municipality made a written declaration of official intent, stating that: (i) the Municipality reasonably expects to reimburse the expenditure with the proceeds of the Lease -Purchase Agreement; (ii) a general description of the project for which reimbursement is sought or an identification by name and functional purpose of the fund or account from which the expenditure is to be paid; and (iii) the maximum principal amount of the Lease -Purchase Agreement expected to be issued for the project. (4) Reimbursement Period. The reimbursement is being sought for an expenditure which has already been paid and such reimbursement would be on or before the later of: (i) eighteen months after the expenditure was paid; or (ii) the date the property was placed in service or abandoned, but in no event more than three years after the expenditure was paid. (5) Capital Expenditure. The reimbursed expenditure is fora "capital expenditure" as defined in Section 1.150-2(d)(3) of the Code. (B) The Municipality hereby requests reimbursement for an expenditure which meets the requirements of (i) paragraph (A)(4) and (5) above, and (ii) one of the following [check one or provide specific information for multiple items on an attachment]: (a) de minimis expenditures (b) preliminary expenditures (c) declaration of official intent The Escrow Agent is, accordingly, hereby requested to make payment, as follows: Payee: Amount: Project: Dated: , 20 CITY OF IALISPELL 0 Its A-2