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HomeMy WebLinkAboutRES 92-01RESOLUTION NO.92-01 RESOLUTION AUTHORIZING THE EXECUTION AND DELIVERY OF A GROUND LEASE AND SUBLEASE,LEASE -PURCHASE AGREEMENT, ESCROW AGREEMENT,AGENCY AGREEMENT AND ASSIGNMENT AGREEMENT; MAKING CERTAIN COVENANTS AND AGREEMENTS WITH RESPECT THERETO;AUTHORIZING THE TAKING OF ALL OTHER ACTIONS NECESSARY TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS RESOLUTION AND DECLARING AN EMERGENCY. WHEREAS,the City of Apache Junction,Arizona,a municipal corporation duly incorporated and validly existing under the laws of the State of Arizona (hereinafter called the "City"),is authorized to purchase,and to lease,as lessee or lessor,property real and personal,necessary or proper to carry out its purposes,within or without its limits;and WHEREAS, the City has determined that to carry out its purposes it should provide for the acquisition of fee title in certain real property from the Arizona State Land Department which it currently leases and the acquisition of certain vehicles (collectively,the "Project");and WHEREAS,the City has determined that in order to complete the Project at the lowest reasonable cost,i t is necessary and desirable to acquire the Project pursuant to a lease -purchase agreement;and WHEREAS, PHSG Holdings, Inc,a corporation duly incorporated and validly existing under the laws of the State of Arizona (hereinafter called "PHSG"),shall cause to be provided moneys for the acquisition of the Project pursuant to the provisions of a Lease -Purchase Agreement,dated as of February 1,1992 (hereinafter referred to as the "Lease -Purchase Agreement"),by and between the City and PHSG;and WHEREAS, the City has determined that it is necessary to lease such real property (the "Real Property")simultaneously with acquisition thereof to PHSG pursuant to a Ground Lease and Sublease,dated as of February 1,1992 (the "Ground Lease"),by and between the City and PHSG,and PHSG shall sublease the Real Property to the City pursuant to the Ground Lease;and RESOLUTION NO.92-01 PAGE ONE OF FOUR WHEREAS,the Clerk of the City has presented to the City Council of the City at this meeting (i)the proposed form of the Ground Lease;(ii)the proposed form of Lease -Purchase Agreement;(iii) the proposed form of Escrow Agreement, dared as of February 1,1992 (hereinafter referred to as the "Escrow Agreement"),by and among the Escrow Agent named therein,PHSG and the City;(iv)the proposed form of Agency Agreement,dated as of February 1,1992 (hereinafter referred to as the "Agency Agreement"),by and between PHSG and the City;and (v)the proposed form of Assignment Agreement, dated as of February 1,1992 (hereinafter referred to as the "Assignment Agreement"),by and between PHSG and the City; NOW,THEREFORE,BE IT RESOLVED by the City Council of the City of Apache Junction,Arizona, that: SECTION I The City Council of the City hereby finds and determines that the financing of the cost of acquisition of the Project pursuant to the terms of the Ground Lease, the Lease -Purchase Agreement,the Escrow Agreement, the Agency Agreement and the Assignment Agreement is in the furtherance of the purposes of the City and in the public interest and is hereby approved and authorized in all respects. SECTION I I The form, terms and provisions of the Ground Lease, the Lease -Purchase Agreement, the Escrow Agreement, the Agency Agreement and the Assignment Agreement,in the form of such documents (including exhibits thereto)presented at the meeting at which this Resolution was considered, are hereby approved, with such insertions, omissions,and changes as shall be approved by the Mayor of the City,the execution of such documents being conclusive evidence of such approval,and the Mayor and Clerk of the City are hereby authorized and directed to execute and deliver the Ground Lease,the Lease -Purchase Agreement, the Escrow Agreement, the Agency Agreement and the Assignment Agreement.The Mayor and the Clerk of the City are hereby appointed as the City Representative for all purposes of the Lease -Purchase Agreement,the Escrow Agreement,the Ground Lease,the Agency Agreement and the Assignment Agreement. SECTION III The City hereby pledges to and for payment of the Lease Payments (as defined in the Lease -Purchase Agreement)all excise,transaction,privilege,franchise and income taxes which it now collects,which it may collect in the future or which are allocated or apportioned to the City by the State of Arizona or any political subdivision thereof,or by any other governmental unit or agency,EXCEPT the City's share of any excise and franchise taxes which by State law,rule or regulation must be expended for other purposes pledged pursuant to the Lease- Purchase Agreement and Purchase Agreement, and to its successors or assigns under the Lease -Purchase Agreement,the Lease Payments and all other amounts required to be paid by the City pursuant to the provisions of the Lease -Purchase Agreement. RESOLUTION NO.92-01 PAGE TWO OF FOUR SECTION IV After the execution and delivery of the Lease -Purchase Agreement to PHSG,this Resolution shall be and shall remain irrepealable until the Lease Payments and all other amounts required to be paid by the City pursuant to the provisions of the Lease -Purchase Agreement shall have been fully paid, cancelled and discharged or until the Lease -Purchase Agreement shall have been terminated pursuant to the provisions thereof. SECTION V If any section,paragraph,clause or provision of this Resolution shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such section,paragraph,clause or provision shall not affect any remaining provisions of this Resolution. SECTION VI All resolutions or parts thereof inconsistent herewith, are hereby waived to the extent only of such inconsistency.This waiver shall not be construed as reviving any ordinance or resolution or any part thereof. SECTION VII This Resolution shall be in full force and effect from and after its passage, adoption and approval by the Mayor and the City Council of the City. SECTION VIII The immediate operation of this Resolution is necessary for the preservation of the public health and welfare,and an emergency is hereby declared to exist. This Resolution shall be in full force and effect from and after its passage and approval by the Mayor and City Council of the City,as required by law,and is hereby exempt from the referendum provisions of the constitution and laws of the State of Arizona. RESOLUTION NO.92-01 PAGE THREE OF FOUR PASSED AND ADOPTED BY THE MAYOR AND CITY COUNCIL OF THE CITY OF APACHE JUNCTION, ARIZONA,THIS 21ST DAY OF JANUARY ,1992. SIGNED AND ATTESTED TO THIS 22ND DAY OF JANUARY ,1992. THOMAS DAMIANO Mayor ATTEST: KATHLEEN CONNELLY City Clerk API:f/ A S 1,ftM:/ / / / / U M //A111//,/ "‘maw ...LtNN J. CitS,Attorney RESOLUTION NO.92-01 PAGE FOUR OF FOUR DRAFT 01/10/92 When recorded mail to: Michael Cafiso, Esq. Suite 1100 One East Camelback Road Phoenix, Arizona 85012 LEASE -PURCHASE AGREEMENT by and between PHSG HOLDINGS, INC., as Lessor, and CITY OF APACHE JUNCTION, ARIZONA, as Lessee Dated as of February 1, 1992 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND EXHIBITS SECTION 1.1 Definitions . . . . . . . . . . . . . . . . .2 SECTION 1.2 E x h i b i t s . . . . . . . . . . . . . . . . . . .5 ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 2.1 Representations, Covenants and Warranties of the City ................6 SECTION 2.2 Representations, Covenants and Warranties o f P H S G . . . . . . . . . . . . . . . . . .7 ARTICLE III DEPOSIT OF MONEYS AND COMPLETION OF THE PROJECT SECTION 3.1 SECTION 3.2 SECTION 3.3 Deposit of Moneys Completion of the Project Disposition after Acquisition ARTICLE IV AGREEMENT TO LEASE; TERMINATION OF THIS AGREEMENT; RIGHTS UPON TERMINATION; LEASE PAYMENTS; TITLE TO THE PROJECT 7 7 8 SECTION 4.1 Lease . . . . . . . . . . . . . . . . . . . .8 SECTION 4.2 Term of Agreement . . . . . . . . . . . . . .8 SECTION 4.3 Termination of this Agreement . . . . . . . .9 SECTION 4.4 Lease Payment; Lease Payments to Be Unconditional . . . . . . . . . . . . .9 SECTION 4.5 Possession and Enjoyment ...........10 SECTION 4.6 Title to the Project .............10 SECTION 4.7 Effect of Termination . . . . . . . . . . . .11 SECTION 5.1 SECTION 5.2 SECTION 5.3 SECTION 5.4 SECTION 5.5 SECTION 5.6 SECTION 5.7 SECTION 5.8 SECTION 5.9 SECTION 5.10 SECTION 6.1 SECTION 6.2 SECTION 6.3 SECTION 6.4 SECTION 7.1 SECTION 7.2 SECTION 7.3 Page ARTICLE V MAINTENANCE; TAXES; INSURANCE; AND OTHER MATTERS Maintenance and Modification by the City ................12 Taxes, Other Governmental Charges and Utility Charges ............13 Liability Insurance; Indemnification .....14 Property Insurance ..............15 Requirements for All Insurance ........15 A d v a n c e s . . . . . . . . . . . . . . . . . . .15 Installation of City's Property . . . . . . .15 Liens Against the Real Property . . . . . . .16 Loss or Damage to the Project . . . . . . . .16 Transfers, Liens and Encumbrances Relating to the Project ..........16 ARTICLE VI DAMAGE, DESTRUCTION AND CONDEMNATION; USE OF NET PROCEEDS Damage, Destruction and Condemnation .....17 Application of Net Proceeds . . . . . . . . .17 Insufficiency of Net Proceeds . . . . . . . .17 Cooperation of PHSG . . . . . . . . . . . . .18 ARTICLE VII DISCLAIMER OF WARRANTIES; ACCESS; USE Disclaimer of Warranties ...........18 PHSG's Access to the Real Property and the Vehicles . . . . . . . . . . . . .19 Use of the Project ..............19 ii Page ARTICLE VIII PURCHASE OPTION, EXERCISE OF OPTION AND RELEASE OF PHSG'S INTEREST SECTION 8.1 Purchase Option . . . . . . . . . . . . . . .20 SECTION 8.2 Exercise of Option ..............20 SECTION 8.3 Release of PHSG's Interest ..........20 ARTICLE IX ASSIGNMENT AND SUBLEASING; INDEMNIFICATION SECTION 9.1 Assignment by PHSG ..............20 SECTION 9.2 Assignment by the City ............21 SECTION 9.3 Subleasing by the City ............21 SECTION 9.4 Release and Indemnification Covenants . . .21 ARTICLE X EVENTS OF DEFAULT AND REMEDIES SECTION 10.1 Events of Default Defined . . . . . . . . . .22 SECTION 10.2 Remedies on Default . . . . . . . . . . . . .23 SECTION 10.3 No Remedy Exclusive . . . . . . . . . . . . .23 SECTION 10.4 Agreement to Pay Attorneys' Fees and Expenses . . . . . . . . . . . . . . .23 SECTION 10.5 No Additional Waiver Implied by One Waiver . . . . . . . . . . . . . . . .23 ARTICLE XI FEDERAL TAX LAW PROVISIONS SECTION 11.1 Federal Tax Law Covenants . .24 SECTION 11.2 Private Activity Bonds; Matters Relating t o R e b a t e . . . . . . . . . . . . . . . . .24 iii SECTION 12.1 SECTION 12.2 SECTION 12.3 SECTION 12.4 SECTION 12.5 SECTION 12.6 SECTION 12.7 SECTION 12.8 SECTION 12.9 SECTION 12.10 EXHIBITS - - EXHIBIT A EXHIBIT B EXHIBIT C EXHIBIT D Page ARTICLE XII ADMINISTRATIVE PROVISIONS Notices ...................24 Binding Effect ................25 Severability .................25 Amendments,Changes and Modifications ...25 Further Assurances and Correction Instruments ................25 Execution i n Counterparts ..........25 Applicable Law ................25 PHSG and City Representative .........25 Headings ...................26 Cancellation .................26 Description of the Vehicles ........A-1 Description of the Real Property ......B-1 Schedule o f Payments ............C-1 Form o f Completion Certificate .......D-1 i v LEASE -PURCHASE AGREEMENT THIS LEASE -PURCHASE AGREEMENT, dated as of February 1, 1992 (hereinafter referred to as this "Lease -Purchase Agreement"), by and between PHSG Holdings, Inc., a corporation duly incorporated and validly existing under the laws of the State of Arizona, as lessor (hereinafter called "PHSG"),and the City of Apache Junction, Arizona,a municipal corporation duly incorporated and validly existing under the laws of the State of Arizona, as lessee (hereinafter called the "City"); W I T N E S S E T H : WHEREAS,the City is authorized by law to lease, as lessee and lessor, property real and personal, necessary or proper to carry out its purposes, within or without its limits; and WHEREAS,the City has determined that to carry out its purposes it should (i)provide for the acquisition of certain personal property a s described in Exhibit A hereto (the "Vehicles") and certain real property as described in .Exhibit B hereto (the "Real Property" and collectively with the Vehicles, the "Project"); (ii) lease the real property described in Exhibit B hereto (the "Real Property")to PHSG pursuant to a Ground Lease and Sublease, dated as of February 1, 1991 (the "Ground Lease"), by and between the City and PHSG;and (iii) sublease the Real Property and lease- purchase the Project from PHSG as provided in this Lease -Purchase Agreement; and WHEREAS, PHSG shall (i) cause to be provided moneys for the acquisition of the Project as provided in this Lease -Purchase Agreement, (ii)lease the Real Property from the City pursuant to the Ground Lease,and (iii) sublease the Real Property and lease- purchase the Project to the City pursuant to this Lease -Purchase Agreement; NOW,THEREFORE,in the joint and mutual exercise of their powers,and in consideration of the above premises and of the mutu- al covenants herein contained and for other valuable consideration, the parties hereto recite and agree that: ARTICLE I DEFINITIONS AND EXHIBITS SECTION 1.1 Definitions.Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Lease -Purchase Agreement, the Escrow Agreement and the Ground Lease executed concurrently herewith,have the meanings herein specified. Agency Agreement:The term "Agency Agreement" means the Agency Agreement of even date herewith by and between the City and PHSG. Agreement:The term "Agreement" shall have the same meaning as "Lease Purchase Agreement" herein. Assignment Agreement:The term "Assignment Agreement" means the Assignment Agreement of even date herewith by and between the City and PHSG. Certificate of Completion:The term "Certificate of Com- pletion" means a certificate or certificates of the City Represent- ative in substantially the form of Exhibit D. hereto that all parts of the Project have been acquired, substantially in conformity with the requirements therefor and with the provisions of this Lease- Purchase Agreement. City:The term "City" means the City of Apache Junction, Arizona,a municipal corporation duly incorporated and validly existing under the laws of the State. City Representative:The term "City Representative" means the Mayor and the Clerk of the City or a person authorized by the City Council of the City to act on behalf of the City under or with respect to this Agreement or the Escrow Agreement, as evi- denced by a resolution of the City Council of the City conferring such authorization given to PHSG or a PHSG Representative and the Escrow Agent. Closing Date:The term "Closing Date" means the day when PHSG deposits with the Escrow Agent the moneys required to be deposited pursuant to Article II of the Escrow Agreement. Code: The term "Code" means the Internal Revenue Code of 1986, as amended, and the regulations, proposed or existing, from time to time promulgated thereunder. Contractor(s):The term "Contractor(s)" means the con- tractors or vendors from whom the City,as agent of PHSG, has ordered or with whom the City, as agent of PHSG, has contracted for the acquisition of the Vehicles. 2 Default:The term "default" shall have the meaning ascribed thereto in Section 10.1 hereof. Escrow Agent:The term "Escrow Agent" means , a national banking association organized and operating under the laws of the United States, or any successor thereto as Escrow Agent, pursuant to the Escrow Agreement. Escrow Agreement:The term "Escrow Agreement" means the Escrow Agreement of even date herewith by and among the Escrow Agent,PHSG and the City, and any duly authorized and executed amendment thereto. Event(s)o f default:The term "event(s) of default" shall have the meaning ascribed thereto in Section 10.1 hereof. Excise Tax Collections:The term "Excise Tax Collection" shall have the meaning ascribed thereto in Section 4.4(c) hereof. Force majeure:The term "force majeure" shall mean, without limitation,the following:acts of God; strikes; lockouts or other industrial disturbances; acts of public enemies; order or restraints of any kind of the government of the United States of America or the State o r their respective departments, agencies or officials,or any civil or military authority;insurrections; riots; landslides;earthquakes;fires; storms; droughts; floods; explosions; breakage o r accident to machinery, transmission pipes or canals; or any other cause or event not reasonably within the control of the City and not resulting from its negligence.The City agrees, however, to remedy, to the extent that it is legally able and with all reasonable dispatch, the cause or causes prevent- ing the City from carrying out its agreement; provided that the settlement of strikes,lockouts and other industrial disturbances shall be entirely within the discretion of the City; and the City shall not be required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties when such course is, in the judgment of the City,unfavorable to the City. Ground Lease:The term "Ground Lease" means the Ground Lease and Sublease of even date herewith by and between the City and PHSG. Independent Counsel:The term "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, who is not an employee of PHSG,the Escrow Agent or the City. Insurance Fund:The term "Insurance Fund" means the insurance fund established by the Escrow Agent pursuant to Article III of the Escrow Agreement. 3 Lease Payment or Lease Payments:The terms "Lease Pay- ment" or "Lease Payments" mean any payment due from the City to PHSG under Article IV of this Agreement. Lease -Purchase Agreement or Agreement:The terms "Lease- Purhase Agreement" means this Lease -Purchase Agreement and any duly authorized and executed amendment hereto. Net Proceeds:The term "Net Proceeds" means any insur- ance proceeds or condemnation award, paid with respect to any part of the Project, remaining after payment therefrom of all expenses incurred in the collection thereof. Payment Date:The term "Payment Date" means,with respect to Exhibit C, the date upon which any Lease Payment is due and payable, and with respect to the payment of the Prepayment Price, the date upon which the City may exercise its option to pur- chase the Project. Permitted Encumbrances:The term "Permitted Encum- brances" means, as of any particular time:(i) liens for general ad valorem taxes and assessments, if any, not delinquent, or which the City may, pursuant to provisions of Article V hereof, permit to remain unpaid; (ii)in the case of the Real. Property, the Ground Lease, this Agreement and any sub -leases which are made in accor- dance with the provisions hereof; (iii) easements, rights -of -way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the date of this Agreement; and (iv) any other encumbrance agreed to by PHSG and the City. PHSG:The term "PHSG" means PHSG Holdings, Inc., a corporation duly incorporated and validly existing under the laws of the State, its successors and assigns. PHSG Representative:The term "PHSG Representative" means the President or any Vice President of PHSG, or any person authorized to act on behalf of PHSG under or with respect to this Agreement or the Escrow Agreement, as evidenced by a certificate conferring such authority executed by the President or any Vice President of PHSG, given to the Escrow Agent and the City or a City Representative. Prepayment Price:The term "Prepayment Price" means, as of any date before payment of the total of all principal components indicated in Exhibit C, an amount equal to the total of all unpaid principal components indicated in Exhibit C plus the amount of interest indicated in Exhibit C accrued to the date of such prepay- ment on such unpaid amounts as calculated by PHSG and confirmed by the City on the basis of a 360 day year composed of 12 months of 30 days each. 4 Proiect:The term "Project" means the Vehicles and the Real Property. Project Costs:The term "Project Costs" means (i) with respect to the Vehicles, the contract price paid or to be paid to the Contractors therefor upon delivery of any portion of the Vehicles,in accordance with the purchase order or contract therefor, and shall be not greater than $, which sum may be increased if any additional amount is due the Contractors by reason of any properly authorized change orders thereto approved by PHSG and the City and (ii) with respect to the Real Property, the amount to be paid to the Arizona State Land Department pursuant to the State Land Department Contract, and shall not be greater than Project Costs include the administrative, engineering, legal, financial and other costs incurred by the City, PHSG and the Contractors in connection with the completion and financing by PHSG of the Project. Prolect Fund:The term "Project Fund" means the fund of such name established and held by the Escrow Agent pursuant to Article II of the Escrow Agreement. Real Property:The term "Real Property" means the real property described in Exhibit B attached hereto. State:The term "State" means the State of Arizona. State Land Department Contract:The term "State Land Department Contract" means the agreement between the City and the Arizona State Land Department, relating to Sale No. -Term of this Agreement or Term:The term "Term of this Agreement" or "Term" means the time during which this Agreement is in effect, as provided for in Section 4.2 of this Agreement. Vehicles:The term "Vehicles"means the vehicles described in Exhibit A attached hereto. SECTION 1.2 Exhibits.The following Exhibits are attached to, and by reference made a part of, this Agreement: Exhibit A:The description of the Vehicles. Exhibit B:The legal description of the Real Property. Exhibit C:The schedule of Lease Payments to be paid by the City to PHSG,showing the date and amount of each Lease Payment. Exhibit D:The form of Certificate of Completion. 5 ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 2.1 Representations, Covenants and Warranties of the City.The City represents, covenants and warrants as follows: (i)the City is a municipal corporation of the State, duly incorporated and validly existing under the Constitution and laws of the State; (ii)the Constitution and the laws of the State do not prohibit the City from entering into the Ground Lease, this Agreement, the Agency Agreement, the Assign- ment Agreement nor the Escrow Agreement and the transac- tions contemplated thereby, nor from carrying out its obligations under all of the aforesaid agreements, and the City has duly authorized and executed all of the aforesaid agreements; (iii)neither the execution and delivery of the Ground Lease, this Agreement, the Agency Agreement, the Assignment Agreement or the Escrow Agreement nor the fulfillment of or compliance with the terms and condi- tions hereof and thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instru- ment to which the City is now a party or by which the City 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 City, or upon the Real Property,except Permitted Encumbrances; (iv)all Lease Payments and other payments hereunder have been, or shall be, duly authorized and paid, when, due out of funds then on hand and legally pledged and available for such purposes; (v)the City has good and marketable title to the Real Property in fee simple absolute, free and clear of all liens and encumbrances (subject to Permitted Encum- brances),and the City has obtained all consents and approvals required for the lease and sublease of the Real Property pursuant to the Ground Lease; (vi)the Project shall be used by the City during the term of this Agreement only for such governmental purposes as shall be, from time to time, designated by the City Council of the City; and 6 (vii) . the City has duly authorized and executed this Agreement in accordance with the laws of the State. SECTION 2.2 Representations. Covenants and Warranties of PHSG.PHSG represents, covenants and warrants as follows: (i)PHSG is a corporation duly organized, existing and in good standing under and by virtue of the laws of the State; has power to enter into the Ground Lease, this Agreement, the Agency Agreement, the Assignment Agreement and the Escrow Agreement; 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, and (ii)neither the execution and delivery of the Ground Lease, this Agreement, the Agency Agreement, the Assignment Agreement or the Escrow Agreement, nor the fulfillment of or compliance with the terms and condi- tions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instru- ment to which PHSG is now a party or by which PHSG is bound, or constitutes a default under any of the forego- ing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of PHSG, or upon the Real Property, except Permitted Encumbrances. ARTICLE III DEPOSIT OF MONEYS AND COMPLETION OF THE PROJECT . SECTION 3.1 Deposit of Moneys.On the Closing Date, PHSG shall cause to be deposited into the Project Fund $ which amount represents the principal amount of this Agreement, less an underwriting discount of $,legal fees of and escrow agent fees of $which shall be paid on the Closing Date by PHSG. SECTION 3.2 Completion of the Protect. (a)(i)Simultaneously with the deposit provided for in Section 3.1 hereof, the City shall instruct the Escrow Agent pursuant to the Escrow Agreement to apply the portion of the Project Costs allowable to the acquisition of the Real Property pursuant to the State Land Department Contract.Failure of any party to perform pursuant to the State Land Department Contract shall not affect the obligation of the City to make Lease 7 Payments under this Agreement.Upon completion of the acquisition of the Real Property, the City shall take possession of and occupy the Real Property pursuant to the terms and provisions of this Agreement. (b)(i)PHSG shall acquire the Vehicles pursuant to the specifications of the City.The City shall, as agent for PHSG, supervise, provide for and acquire the Vehicles pursuant to the terms of the Agency Agreement. Failure by the Contractors to perform shall not affect the obligation of the City to make Lease Payments under this Agreement. (ii)Payment to the Contractors of the cost of acquiring the Vehicles shall be made from the moneys deposited with the Escrow Agent, as provided in Section 3.1,which shall be disbursed for this purpose in accor- dance and upon compliance with Article II of the Escrow Agreement. (c)Acquisition of the Project shall be substan- tially completed on or prior to February 1, 1994.Upon completion of the acquisition of the Project satisfactory to the City and PHSG, but in an event not later than thirty (30) days following completion thereof, the City and PHSG shall deliver to the Escrow Agent a Certificate of Completion. SECTION 3.3 Disposition after Acguisition.Any balance remaining in the Project Fund after completion of the Project shall be paid to PHSG and applied to pay the Lease Payments as the same become due and payable. ARTICLE IV AGREEMENT TO LEASE; TERMINATION OF THIS AGREEMENT;RIGHTS UPON TERMINATION; LEASE PAYMENTS; TITLE TO THE PROJECT SECTION 4.1 Lease.PHSG hereby subleases the Real Prop- erty,and leases the Project,to the City, and the City hereby subleases the Real Property,and leases the Project, from PHSG, upon the terms and conditions set forth in this Agreement. SECTION 4.2 Term of Agreement.The Term of this Agree- ment shall commence as of the date hereof and continue through and including , unless terminated prior thereto, in accor- dance with Section 4.3 of this Agreement. 8 SECTION 4.3 Termination of this Agreement.The Term of this Agreement shall terminate upon the earliest of any of the following events: ditional. (i)the exercise by the City of its option to pur- chase the Project granted under the provisions of Article VIII of this Agreement; (ii)a default by the City and PHSG's election to terminate this Agreement under Article X of this Agree- ment; or (iii)the payment by the City of all Lease Payments due during the Term of this Agreement. SECTION 4.4 Lease Payment: Lease Payments to Be Uncon- (a)Subject to the provisions of Sections 4.2 and 4.3 and Article VIII hereof, the City shall pay to PHSG, its successors and assigns, as rental for the sublease of the Real Property and the lease of the Project, the Lease Payments (denominated into components of principal due on each indicated Payment Date and. interest due on such principal component on each indicated Payment Date) for the Project in the respective amounts specified in Exhibit C attached hereto to be due and payable five (5) business days immediately preceding the respective Pay- ment Dates specified in Exhibit C attached hereto.In the event the City should fail to make any of the pay- ments required in this Section 4.4,the payment in default shall continue as an obligation of the City until the amount in default shall have been fully paid, and the City agrees to pay the same with interest thereon; to the extent permitted by law, from the date of default to the date of payment at the rate of twelve percent (12%) per annum. (b)Subject to the provisions of Section 4.2 and 4.3 hereof, the obligation of the City to make payment of the Lease Payments required under this Article IV and to perform and observe the other covenants and agreements contained herein shall be absolute and unconditional during the Term of this Agreement.Notwithstanding any dispute between the City and PHSG, any of the Contractors or any other person, the City shall make all payments of Lease Payments when due and shall not withhold any Lease Payments pending final resolution of such dispute nor shall the City assert any right of set-off or counter- claim against its obligation to make such payments re- quired under this Agreement.The obligation of the City to make Lease Payments during the Term of this Agreement 9 shall not be abated through accident or unforeseen cir- cumstances. (c)To secure the payment of the Lease Payments provided for in this Section and the other amounts re- quired to be paid by the City pursuant to the provisions hereof,the City hereby pledges for the payment of the Lease Payments hereunder all excise, transaction, priv- ilege, franchise and income taxes which it now collects, which it may collect in the future or which are allocated or apportioned to the City by the State or any political subdivision thereof, or by any other governmental unit or agency,EXCEPT the City's share of any excise and franchise taxes which by State law, rule or regulation must be expended for other purposes (hereinafter referred to as collectively the "Excise Tax Collections").The City shall make such payments from the Excise Tax Collec- tions, except to the extent that it chooses to make such payments from other funds legally available for such pur- poses.This pledge of the Excise Tax Collections shall be a first lien upon the Excise Tax Collections. (d)The obligation of the City to make the Lease Payments provided for herein and to make other payments due hereunder is limited to payment from the sources of the Excise Tax Collections pledged therefor, and the ob- ligations of the City under this Lease -Purchase Agreement shall not constitute nor give rise to a general obliga- tion of the City or any claim against its ad valorem taxing powers or constitute an indebtedness within the meaning o f any statutory or constitutional debt limita- tion applicable to the City. SECTION 4.5 Possession and Eniovment of the Real Prop- erty; Possession of the Vehicles.During the Term of this Agree- ment,PHSG shall provide the City with quiet use and enjoyment of the Real Property and with use and possession of the Vehicles, and the City shall during such Term peaceably and quietly have and hold and enjoy the Real Property and use and possess the Vehicles, without suit,trouble or hindrance from PHSG, except as expressly set forth in this Agreement.PHSG shall, at the request of the City and at the City's cost,join in any legal action in which the City asserts its right to such possession, enjoyment and use to the extent PHSG may lawfully do so.PHSG shall have the right to inspect the Vehicles and the Real Property as provided in Section 7.2 hereof. SECTION 4.6 Title to the Project. (a)(i)During the Term of this Agreement, the City shall hold fee title to the Real Property and any and all additions which comprise fixtures,repairs, 10 replacements or modifications thereof, and PHSG, or its assigns, shall hold leasehold title to the Real Property and any and all additions which comprise fixtures, re- pairs, replacements or modifications thereof, except for those fixtures,repairs replacements or modifications which are added to the Real Property by the City at its own expense and which may be removed without damaging the Real Property. (ii)During the Term of this Agreement, title to the Vehicles shall remain in the City and evidence a first lien retained by PHSG.The lien in favor of PHSG shall be evidenced in the registration or re -registration of any of the Vehicles.PHSG may provide the City with labels which shall be affixed and maintained by the City at a visible place on the Vehicles.The City, at its expense,shall protect and defend PHSG's title to the Vehicles.The City shall execute and deliver to PHSG, upon PHSG's request, such instruments and assurance as PHSG deems necessary for confirmation or perfection of the rights of PHSG and the City hereunder.In further- ance thereof,PHSG may file or record this Agreement (or memorandum thereof) or a financing statement with respect thereto so as to give notice to any interested parties. (b)I f the City (i) exercises its option to pur- chase all of the Project as provided in Section 4.3(i) hereof and Article VIII of this Agreement or (ii) has paid all Lease Payments as provided in Section 4.3(iii) hereof during the Term of this Agreement, PHSG shall deliver to the City any and all documents necessary to vest title to the Vehicles in the City and to terminate the Ground Lease.Additionally, if necessary, PHSG shall authorize,execute and deliver to the City a release of any and all liens created under the provisions of this Agreement,the Ground Lease and the Escrow Agreement. PHSG shall defend and eliminate any claims adverse to the title to the Project and shall save and hold the City harmless therefrom,provided that the obligations of PHSG under this sentence shall not extend to claims arising out of actions by the City or persons asserting claims under it. SECTION 4.7 Effect of Termination.Upon termination of this Agreement pursuant to Section 4.3(ii) hereof, the City shall provide possession of the Real Property to PHSG and shall return possession of and deliver to PHSG, the Vehicles at such location as PHSG shall provide or designate at or within a three hundred (300) mile radius of the City.If the City fails to make the Real Prop- erty available to PHSG or to make available and deliver the Vehicles to PHSG as provided in this Section on or before the date of termination of this Agreement, the City shall pay to PHSG upon 11 demand, for the hold -over period, a portion of the total payment for the applicable period as set forth in Exhibit C prorated from the date of termination of this Agreement to the date the City either provides possession of the Real Property or returns posses- sion of,and delivers to PHSG, the Vehicles or PHSG otherwise possesses or repossesses the Real Property or Vehicles, as the case may be.The City hereby waives any right which it now has or which may be acquired or conferred upon it by any law or order of any court or other governmental authority to terminate this Agreement or its obligations hereunder, except in accordance with the express provisions hereof. ARTICLE V MAINTENANCE; TAXES;-INSURANCE; AND OTHER MATTERS SECTION 5.1 Maintenance and Modification by the City. (a)The City shall, at its own expense, maintain, preserve and keep the Project in good repair, working order and condition and shall from time to time make all repairs, replacements and improvetents necessary to keep the Project in such condition. (b)PHSG shall have no responsibility for any of these repairs,replacements or improvements.In addition,the City shall, at its own expense, have the right to remodel any improvements on the Real Property or to make additions,modifications and improvements thereto.All such additions,modifications and improvements shall thereafter comprise part of the Real Property and be subject to the provisions of this Agreement or the Ground Lease, as the case may be.Such additions,modifications and improvements shall not in any way damage the Real Property or cause the Real Property t o be used for purposes other than those authorized under the provisions of State and federal law. The Real Property, upon completion of any additions, modifications and improvements made pursuant to this Section, shall be of a value which is not substantially less than the value of the Real Property immediately prior to the making of such additions, modifications and improvements.The City shall not permit any mechanics or other lien to be established or remain against the Real Property for labor or materials furnished in connection with any remodeling,additions,modifications, improvements, repairs, renewals or replacements made by the City pursuant to this Section; provided that if any such lien is established and the City shall first notify PHSG of the intention of the City to do so, the City may 12 in good faith contest any lien filed or established against the Real Property, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide PHSG with full security against any loss or forfeiture which might arise from the nonpayment of any such item,in form satisfactory to PHSG. Upon the request and at the expense of the City, PHSG shall cooperate fully with the City in any such contest. SECTION 5.2 Taxes, Other Governmental Charges and Util- ity Charges. (a)The City shall pay all taxes,assessments, (however designated) and governmental charges of any kind whatsoever that may at any time be lawfully levied or assessed against or with respect to the Lease Payments, this Agreement or the Project,or the use or the operation thereof,including but not limited to any taxes, assessments and governmental charges paid or pay- able by PHSG in respect to the foregoing, exclusive of franchise taxes and taxes measured by the net income of PHSG. Without limiting the generdlity of the foregoing, unless otherwise requested by PHSG, the City shall, on behalf and in the name of PHSG, pay all transaction priv- ilege taxes to the proper State authorities; failing such request, the City shall pay an amount equal to such taxes to PHSG. (b)I n furtherance of the provisions of subsection (a) of this Section, it is agreed that the City shall occupy and operate the Real Property for authorized gov- ernmental o r proprietary functions, and for this reason, it is contemplated that taxes shall not be assessed against the Real Property.However, in the event taxes are assessed against the Real Property, the City shall pay all property and excise taxes and other charges of any kind whatsoever which are at any time lawfully assessed o r levied against, or with respect to, the Real Property o r any part of either,or which become due during the Term of this Agreement with respect thereto. (c)The City shall also pay when due all gas, water,sewer,steam, electricity, heat, power, telephone, and other utility charges incurred in the operation, maintenance, use, occupancy and upkeep of the Real Prop- erty, and all special assessments and charges lawfully made by any governmental body for public improvements that may b e secured by a lien on the Real Property; pro- vided that with respect to special assessments or other governmental charges that may lawfully be paid in in- 13 stallments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the Term of this Agreement, as and when the same become due.The City shall not be required to pay any federal,State or local income,inheritance, estate, succession, transfer, gift, franchise, gross re- ceipts, profit, excess profit, capital stock, corporate, or other similar tax payable by PHSG, its successors or assigns, unless such tax is made in lieu of or as a sub- stitute for any real estate or other tax upon property. (d)The City may, at the expense and in the name of the City,in good faith contest any such taxes, assess- ments, utility 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 PHSG shall notify the City that, in the opinion of Independent Counsel, by nonpayment of any such items, the interest of PHSG in the Project or any part thereof shall be materi- ally endangered or the Project or any part thereof shall be subject to loss or forfeiture, in which event the City shall promptly pay such taxes, assessments or charges from funds lawfully available or.provide PHSG with full security against any loss which may result from nonpay- ment, in form satisfactory to PHSG. SECTION 5.3 Liability Insurance; Indemnification.To the extent that the City may be liable for injuries to or death of any person, or damage or loss of any property, the City shall take such measures as may be necessary to insure that any such liability for injuries to or death of any person or damage to or loss of property arising out of or in any way relating to the condition or the operation of the Project or any part thereof, is covered by a general liability policy or the blanket general liability insurance policy required to b e maintained by the City hereunder.The City shall maintain general liability insurance against liabilities for injury to or death of any person or damage to or loss of property arising out of or i n any way relating to the Project or any part thereof,in amounts not less than $1,000,000 for death of or personal injury to any one person, $2,000,000 for all injuries and death resulting from any one accident, and $1,000,000 for property damage in any one occurrence.The Net Proceeds of all such insur- ance shall be applied toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds may be paid. It is understood that this insurance covers any and all liability of the City and its officers, employees and agents.The City agrees to indemnify PHSG for any loss, damage or expense incurred, paid or suffered by PHSG as a result of any suit or claim of a nature covered by such insurance to the full extent permitted by State law. 14 SECTION 5.4 Property Insurance.The City shall assume the risk of loss and shall procure and maintain continuously in effect during the Term of this Agreement, with respect to the Project and any part thereof, all-risk insurance and flood insur- ance,subject only to the standard exclusions contained in the policy, in such amount as shall be at least sufficient so that a claim may be made for the full replacement cost of any part thereof damaged or destroyed.Any policy, rider, or endorsement evidencing insurance required in this paragraph shall be carried in the names of the City, PHSG, and the Escrow Agent, with the proceeds thereof made payable to the Escrow Agent.Such insurance may be written with a deductible amount of $1,000 on all-risk, flood and liability insurance.The Net Proceeds of insurance required by this paragraph shall be applied as provided in Section 6.2. SECTION 5.5 Requirements for All Insurance.All insur- ance policies required by this Article shall be taken out and main- tained with responsible insurance companies organized under the laws of one of the states of the United States and qualified to do business in the State or such other entity which is otherwise ac- ceptable to PHSG; shall contain a provision that the insurer shall not cancel or revise coverage thereunder without giving written notice to the City,PHSG and the Escrow Agent at least 10 days before the cancellation or revision become t effective; provided, however,that if such notice may only be given to the City, the City shall provide a copy of any such notice to PHSG and the Escrow Agent and shall name the City, PHSG and the Escrow Agent as insured parties; provided, however, that if the foregoing is not possible, the City shall apply proceeds of any insurance to absolve liability for any of the foregoing under any circumstances.The City shall deposit with the Escrow Agent policies evidencing any such insur- ance procured by it or a certificate or certificates of the respec- tive insurers stating that such insurance is in force and effect. Before the expiration of any such policy, the City shall furnish to PHSG and the Escrow Agent evidence that the policy has been renewed or replaced by another policy conforming to the provisions of this Article, unless such insurance is no longer obtainable, in which event,the City shall notify PHSG and the Escrow Agent of this fact. SECTION 5.6 Advances.If the City shall fail to perform any of its obligations under this Article, PHSG may, but shall not be obligated to, take such action as may be necessary to cure such failure, including the advancement of money, and the City shall be obligated to repay all such advances from funds lawfully available as soon as possible, with interest at the rate of 10 percent per annum from the date of the advance to the date of repayment. SECTION 5.7 Installation of City's Property.The City may at any time and from time to time, in its sole discretion and at its own expense,install items of property in or upon the Real Property.All such items shall remain the sole property of the 15 J. City, in which PHSG,shall have no interest, and may be modified or removed by the City at any time; provided that the City shall re- pair and restore any and all damage to the Real Property resulting from the installation, modification or removal of any such items. Nothing in this Agreement shall prevent the City 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 pur- chase price thereof; provided that no such lien or security inter- est shall attach t o any part of the Real Property. SECTION 5.8 Liens Against the Project.The City shall not,directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to the Project or any part thereof, other than the respective rights of PHSG and the City as herein provided and Per- mitted Encumbrances.Except as expressly provided in this Article, the City shall promptly, at its own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is respon- sible, if the same shall arise at any time.The City shall reim- burse PHSG for any expense incurred by PHSG in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim in the event that the City, after notice by PHSG, fails to discharge or remove any such mortgage,pledge,lien,charge, encumbrance or claim. SECTION 5.9 Loss or Damage to the Proiect.The City shall bear the entire risk of loss, theft, destruction, damage or disrepair of the Project or any part thereof for any cause whatso- ever.No such loss, theft, destruction, damage or disrepair to the Project or any part thereof shall relieve the City of the obliga- tion t o pay Lease Payments or from any other obligation under this Agreement.In the event of any of the above, unless the City shall have elected to exercise its option to purchase the Project pursu- ant to Section 8.1, the City shall repair the Project or any appli- cable part thereof restoring it to its previous condition.There shall be applied for such purpose as much as may be necessary of any Net Proceeds of insurance resulting from claims for such losses, as well as any additional moneys of the City necessary and legally available therefore,to the repair of the Project or any applicable part thereof. SECTION 5.10 Transfers, Liens and Encumbrances Relating to the Proiect.The City shall not rent, sublet (except as pro- vided herein), pledge,loan, mortgage or attempt in any manner to dispose of the Project or any part thereof or create or suffer or permit to be created any lien of any kind or legal process upon the Project or any part thereof and shall forthwith remove and procure the release of any levies,liens or encumbrances, voluntary or involuntary, attaching to the Project or any part thereof, other than Permitted Encumbrances. 16 ARTICLE VI DAMAGE, DESTRUCTION AND CONDEMNATION; USE OF NET PROCEEDS SECTION 6.1 Damage. Destruction and Condemnation.Un- less the City shall have exercised its option to purchase the Proj- ect as provided in Article VIII of this Agreement, if, prior to the termination of this Agreement (i) the Project or any part thereof is destroyed (in whole or in part) or is damaged by fire or other casualty or (ii) title to or the temporary use of the Project or any part thereof or the interest of the City or PHSG in the Project or any part thereof shall be taken under the exercise of the power of eminent domain by any governmental body or by any person, firm or corporation acting under governmental authority, then the City shall have the rights with respect to the Net Proceeds of any insurance or condemnation award specified in this Section, but only if the City undertakes to use such proceeds for the repair of the Project or the applicable part thereof or to exercise its option to purchase the Project in accordance with Article VIII, and subject to the provisions of Sections 6.2 and 6.3 hereof, and the City shall be obligated to continue to pay all Lease Payments due with respect to this Agreement. SECTION 6.2 Application of Net Proceeds.The City and PHSG shall cause the Net Proceeds of any insurance or condemnation award resulting from any event described in Section 6.1 hereof to be deposited in the Insurance Fund with the Escrow Agent.If the City determines that repair of the Project or the applicable part thereof is economically or practicably feasible, then all Net Pro- ceeds so deposited shall be applied to the prompt repair, restora- tion, modification and improvement of the Project or the applicable part thereof, by the City upon receipt of a requisition signed by a City Representative stating, with respect to each payment to be made,(i) the requisition number, (ii) the name and address of the person,firm or corporation to whom payment is due,(iii) the amount to be paid, and (iv) that each obligation mentioned herein has been properly incurred, is a proper charge against the fund, has not been the basis of any previous withdrawal and specifying in reasonable detail the nature of the obligation, and accompanied by a bill or a statement or account for such obligation.Any balance of the Net Proceeds remaining after such work has been completed or after the exercise by the City of the option to purchase the Proj- ect shall be paid to the City. SECTION 6.3 Insufficiency of Net Proceeds.If the Net Proceeds are insufficient to pay in full the cost of any repair, restoration, modification or improvement of the Project or the applicable part thereof, in accordance with Sections 6.1 and 6.2, subject to the allocation of other funds that are lawfully avail- able, the City shall either: (i) complete the work and pay any cost in excess of the amount of the Net Proceeds, with the understanding 17 that the City shall not be entitled to any reimbursement for any such payments made,pursuant to the provisions of this Section, from PHSG nor any diminution of the Lease Payments due with respect to the Project or (ii) exercise its option to purchase the Project in accordance with Article VIII, in which event the Net Proceeds shall be used therefor. SECTION 6.4 Cooperation of PHSG.PHSG shall cooperate fully with the City,at the expense of the City, in filing any proof of loss with respect to any insurance policy covering the casualties described in Section 6.1 hereof and in the defense of any prospective or pending condemnation proceeding with respect to the Project or any part thereof and shall, to the extent it may lawfully do so,permit the City to litigate in any proceeding resulting therefrom in the name of and on behalf of PHSG. In no event shall PHSG voluntarily settle, or consent to the settlement of, any proceeding arising out of any insurance claim or any pro- spective or pending condemnation proceeding with respect to the Project, or any part thereof, without the written consent of the City. ARTICLE VII DISCLAIMER OF WARRANTIES; ACCESS; USE SECTION 7.1 Disclaimer of Warranties. (a)PHSG 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 the City of the Vehicles,or any part thereof,or any, other representation or warranty with respect to the Vehicles or any part thereof. (b)The City agrees by the execution of this Agree- ment that the Vehicles to be purchased pursuant to this Agreement shall be in good operating order.THE CITY AGREES THAT THE VEHICLES LEASED HEREUNDER ARE LEASED "AS IS" AND ARE OF A SIZE, DESIGN, AND CAPACITY SELECTED BY THE CITY,THAT THE CITY IS SATISFIED THAT THE SAME IS SUITABLE FOR THE PURPOSES OF THE CITY, AND THAT PHSG HAS MADE NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE SUITABILITY OR DURABILITY OF THE VEHICLES FOR THE PUR- POSES AND USES OF THE CITY, OR ANY OTHER REPRESENTATION OR WARRANTY,EXPRESS OR IMPLIED, WITH RESPECT THERETO, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.PHSG, to the extent permitted, hereby assigns to the City for an during the term of this Agreement any applicable factory or manu- facturer's warranty covering the Vehicles,and PHSG 18 authorizes the City to obtain services furnished in connection with such warranties at the expense of the City, subject to the obligation of the City to reassign all such warranties upon repossession by PHSG of the Vehicles in accordance with this Agreement. All proceeds of any warranty recovery by the City from the manufac- turer or supplier of the Vehicles shall first be used to repair or replace the affected Vehicles.The City agrees to settle all such claims with the Contractor 'supplying of the Vehicles and agrees further not to set up against the Vehicles's obligations any such claims as a defense, counterclaim, set-off, or otherwise. (c)Except for damages caused by gross negligence of PHSG, PHSG shall not be liable for incidental, indi- rect, special or consequential damages, in connection with or arising out of this Agreement, the Ground Lease, the Agency Agreement, the Assignment Agreement or the Escrow Agreement or,for the existence,furnishing, functioning of the City or the use of the Project by the City. SECTION 7.2 PHSG's Access to the Real Property and the Vehicles.PHSG, any PHSG Representative and PHSG's successors or assigns shall have the right at all reasonable times to inspect the Vehicles and to enter upon and to examine and inspect the Real Property.PHSG, any PHSG Representative and PHSG's successors or assigns shall have such rights of inspection as may be reasonably necessary to cause the proper maintenance of the Project or any part thereof in the event of failure by the City to perform its obligations hereunder. SECTION 7.3 Use of the Project. (a)The City shall comply with all laws, regula- tions, and ordinances relating to, and shall provide all permits and licenses necessary for, the installation, possession, use or maintenance of the Project or any part thereof and shall use the Project or any part thereof only in the regular course of the governmental or propri- etary functions of the City. (b)The City shall use and service the Vehicles in a careful and proper manner in accordance with any manu- facturer's or supplier's instructions and in such a man- ner as to preserve all warranties and guarantees with respect to the Vehicles and within normal capacity. 19 ARTICLE VIII PURCHASE OPTION, EXERCISE OF OPTION AND RELEASE OF PHSG'S INTEREST SECTION 8.1 Purchase Option.The City shall have the option to purchase all of the Project prior to the termination of this Agreement, but only if it is not in default under Section 10.1(a) of this Agreement with respect to the Project and only in the manner provided in this Article. SECTION 8.2 Exercise of Option.The City may exercise its option to purchase all of the Project on any date given prior to the payment in full of all Lease Payments by paying the Prepay- ment Price on any such date.The City shall give PHSG notice of its intention to exercise its option not less than thirty (30) days in advance of the date of exercise and shall deposit with PHSG on the date of exercise an amount equal to the Prepayment Price.If the City exercises its option to purchase all of the Project pur- suant to this Article, the amount to be paid by the City under this Section shall be reduced by any amount then on hand in the Project Fund and any Net Proceeds to be applied to the amount to be so paid by the City in accordance with Section 6.3 hereof. SECTION 8.3 Release of PHSG's Interest.Upon exercise by the City of the option granted by this Article, PHSG shall transfer and convey all right, title and interest of PHSG in the Vehicles to the City by delivery of all necessary documents and shall terminate the Ground Lease. ARTICLE IX ASSIGNMENT AND SUBLEASING; INDEMNIFICATION SECTION 9.1 Assignment by PHSG. (a)The rights of PHSG under this Agreement, in- cluding the right to receive and to enforce payment of the Lease Payments to be made by the City under this Agreement, may be assigned at any time without the con- sent of the City. (b)No assignment or reassignment of any of the right, title or interest of PHSG in this Agreement shall be effective unless and until the City shall have re- ceived a duplicate original counterpart of the document by which the assignment or reassignment is made, disclos- ing the 'lame and address of each such assignee; provided, however, that if such assignment is made to a bank, trust company or other appropriate entity as paying or escrow agent for holders of certificates of participation in 20 this Agreement, a copy of the agency agreement relating to such assignment as well as a copy of each assignment of a certificate of participation shall be deposited with the City. (c)During the Term of this Agreement, the City shall keep a complete and accurate record of all such assignments in form necessary to comply with the provi- sions of Section 149(a) of the Code. SECTION 9.2 Assignment by the City.This Agreement may not be assigned by the City without the written consent of PHSG. SECTION 9.3 Subleasing by the City.The Real Property or any portion thereof may be subleased by the City, without the consent of PHSG, subject to all of the following conditions: (i)this Agreement and the obligation of the City to make Lease Payments hereunder shall remain obligations of the City; (ii)the sublessee shall assume the obligations of the City hereunder to the extent of the interest sub- leased; (iii)the City shall, within 30 days after the deliv- ery thereof, furnish or cause to be furnished to PHSG and the Escrow Agent a true and complete copy of such sub- lease; (iv)no sublease by the City shall cause the Real Property t o be used for a purpose other than a govern- mental or proprietary function authorized under the pro- visions of the Constitution and laws of the State; and (v)no sublease shall cause the interest component of the Lease Payments to become subject to federal income taxation. SECTION 9.4 Release and Indemnification Covenants.The City shall indemnify and save PHSG harmless from and against all claims,losses and damages, including legal fees and expenses, arising out of (i) the use, maintenance, condition or management of, or from any work or thing done on, the Project or any part thereof by the City,(ii) any breach or default on the part of the City in the performance of any of its obligations under this Agree- ment,(iii) any act or negligence of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Project or any part thereof,(iv)any act or negligence of any assignee or sublessee of the City, or of any agents, contrac- tors, servants, employees or licensees of any assignee or sublessee or the City with respect to the Project or any part thereof or 21 (v) the acquisition of Project or the authorization of payment of the Project Costs by the City, to the maximum extent permitted by law.The indemnification provided for in this Section shall be limited to the extent and in the amounts provided for by State law. No indemnification is made under this Section or elsewhere in this Agreement for willful misconduct, negligence or breach of duty hereunder by PHSG,its officers, agents, employees, successors or assigns. ARTICLE X EVENTS OF DEFAULT AND REMEDIES SECTION 10.1 Events of Default Defined.The following shall be "events of default" under this Agreement and the terms "events of default" and "default" shall mean, whenever they are used in this Agreement any one or more of the following events: (i)Failure by the City to pay any Lease Payment or other payment required to be paid hereunder at the time specified herein and the continuation of said failure for a period of three business days after written or tele- graphic notice given by PHSG or the Escrow Agent that the payment referred to in such notice has not been received; (ii)Failure by the City to observe and to perform any covenant, condition or agreement on its part to be observed or performed,other than as referred to in clause (i) of this Section, for a period of 30 days after written notice specifying such failure and requesting that it be remedied has been given to the City by PHSG or the Escrow Agent;provided,however,if the failure stated in the notice cannot be corrected within the applicable period, PHSG and the Escrow Agent shall not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the City within the applicable period and diligently pursued until the default is corrected; and (iii)The filing by the City of a voluntary petition in bankruptcy, failure by the City to promptly lift any execution,garnishment or attachment relating to the City, adjudication of the City as a bankrupt, assignment by the City for the benefit of creditors, entry by the City into an agreement of composition with creditors or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings insti- tuted under the provisions of the Federal Bankruptcy Statutes, as amended, or under any similar acts which may hereafter be enacted. 22 With regard to this Section 10.1 and to Section 10.2 hereof, if by reason of force majeure the City is unable, in whole or in part, to carry out it obligations under this Agreement with respect to the Project or any part thereof, other than its obligation to pay Lease Payments with respect thereto, the City shall not be deemed in default during the continuance of such inability. SECTION 10.2 Remedies on Default.Upon the occurrence and continuance of any event of default specified in Section 10.1, PHSG may proceed to: (i)Commence legal action against the City for all Lease Payments past due hereunder, or (ii)Take whatever action at law or in equity may appear necessary or desirable to enforce its rights as the owner of the Project and as the lessor of the Real Property. SECTION 10.3 No Remedy Exclusive.No remedy herein con- ferred upon or reserved to PHSG is intended to be exclusive and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity.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.In order to entitle PHSG to exercise any remedy reserved to it by this Article, it shall not be necessary to give any notice, other than such notice as may be required in this Article or by law. SECTION 10.4 Agreement to Pay Attorneys' Fees and Ex- penses.In the event either party to this Agreement should default under any of the provisions hereof and the nondefaulting party should bring suit and employ attorneys or incur other expenses for the collection of moneys or the enforcement or performance or ob- servance of any obligation or agreement on the part of the default- ing party herein contained,the defaulting party agrees that it will on demand therefor pay to the nondefaulting party the reason- able fees of such attorneys and such other expenses so incurred by the nondefaulting party in the litigation of such suit. SECTION 10.5 No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed t o waive any other breach hereunder. 23 ARTICLE XI FEDERAL TAX LAW PROVISIONS SECTION 11.1 Federal Tax Law Covenants.In considera- tion of the purchase and acceptance of this Agreement by PHSG and of retaining the exclusion from gross income for federal income taxes of the portion of each Lease Payment designated as interest, and as authorized by Title 35, Chapter 3, Article 7, Arizona Re- vised Statutes, as amended, the City covenants, and the appropriate officials of the City are hereby directed,to take all action required, or to refrain from taking any action prohibited, by the Code, which would adversely affect in any respect such exclusion, including, particularly, but not by way of limitation, (i) to cause this Agreement to not be a "private activity bond" within the meaning of the Code (Section 141(a) of the Code),(ii) to cause this Agreement to not be an "arbitrage bond" within the meaning of the Code (Section 148(a) of the Code),(iii) to comply with the provisions of the Code relating to rebate (Section 148(f) of the Code),(iv) to cause this Agreement not to be "federally guaran- teed" within the meaning of the Code (Section 149(b) of the Code), (v) to make the required information filing pursuant to the Code (Section 149(e) of the Code), and (vi) to make the required expend- itures so that this Agreement shall not be' deemed to be a "hedge bond" within the meaning of the Code (Section 149(g) of the Code). SECTION 11.2 Private Activity Bonds; Matters Relating to Rebate.The City hereby represents and warrants that (i) the City has general taxing powers,(ii) this Agreement is not a private activity bond within the meaning of the Code, (iii) 95 percent or more of the net proceeds of this Agreement shall be used for local governmental activities of the City and (iv) the aggregate face amount of all tax—exempt bonds or obligations (other than private activity bonds within the meaning of the Code) issued by the City during the 1991 calendar year is not reasonably expected to exceed $5,000,000. ARTICLE XII ADMINISTRATIVE PROVISIONS SECTION 12.1 Notices.All notices,certificates or other communications hereunder shall be sufficiently given and shall be deemed to have been received 48 hours after deposit in the United States mail in registered or certified form with postage fully prepaid: 24 If to the City: City of Apache Junction, Arizona 1001 North Idaho Road Apache Junction, Arizona 85219 Attention:City Manager If to PHSG: PHSG Holdings, Inc. 100 Concord Place 2999 North 44th Street Phoenix, Arizona 85018 Attention:B. Mark Reader, Vice President PHSG and the City, by notice given hereunder, may designate differ- ent addresses to which subsequent notices, certificates or other communications will be sent. SECTION 12 .2 Binding Effect.This Agreement shall inure to the benefit of, and shall be binding upon, PHSG and the City and their respective successors or assigns. SECTION 12.3 Severabilitv.In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision thereof. SECTION 12.4 Amendments, Changes and Modifications.This Agreement may be amended or• any of its terms modified with the written consent of the City and PHSG. SECTION 12.5 Further Assurances and Correction Instru- ments.PHSG and the City shall, from time to time, execute, ac- knowledge 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 incor- rect description of the Project hereby leased or intended so to be or for carrying out the expressed intention of this Agreement. SECTION 12.6 Execution in Counterparts.This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 12.7 Applicable Law.This Agreement shall be governed by and construed in accordance with the laws of the State. SECTION 12.8 PHSG and City Representative.Whenever under the provisions of this Agreement the approval of PHSG or the City is required, or PHSG or the City is required to take some action at the request of the other, such approval or such request 25 • shall be given for PHSG by a PHSG Representative and for the City by a City Representative, and any party hereto shall be authorized to rely upon any such approval or request. SECTION 12.9 Headings.The headings or titles of the several Articles and Sections hereof, and any table of contents appended to copies hereof,shall be solely for convenience of reference and shall not affect the meaning, construction or effect of this Agreement.All references herein to "Articles," "Sec- tions," and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Agreement; and the words "herein," "hereof," "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Sec- tion or subdivision hereof. SECTION 12.10 Cancellation.To the extent applicable by provision of law,the parties hereto acknowledge that this Agreement is subject to cancellation pursuant to Section 38-511, Arizona Revised Statutes, as amended, the provisions of which are incorporated herein. IN WITNESS WHEREOF, PHSG has caused this Agreement to be executed in its corporate name by its authorized officer; and the City has caused this Agreement to be executed and attested in its name by its authorized officers, as of the day and year first above written. ATTEST: Clerk APPROVED AS TO BDIU4: City Attorney WOWTOIAGAMM PHSG HOLDINGS, INC. By Senior Vice President CITY OF APACHE JUNCTION, ARIZONA By ................................ Mayor 26 State of Arizona County of Pinal )ss. On this,the .....day of .........., 1992, before me, the undersigned Notary Public, personally appeared Tom Damiano and Kathy Connelly who acknowledged themselves to be the Mayor and Clerk, respectively, of City of Apache Junction, Arizona, a munic- ipal corporation of the State of Arizona, and that they, as such officers, being duly authorized so to do, executed the foregoing Lease -Purchase Agreement for the purposes therein contained by signing the name of the municipal corporation by themselves as such officers. IN WITNESS mumuu,I have hereunto set my hand and official seal. My Commission Expires: State of Arizona County of Maricopa ) ss. Notary Public On this,the .....day of .........., 1992, before me, the undersigned Notary Public,personally appeared Robert A. Casillas, who acknowledged himself to be a Senior Vice President of PHSG Holdings, Inc., an Arizona corporation, and that he, as such officer,being duly authorized so to do, executed the foregoing Lease -Purchase Agreement for the purposes therein contained by signing the name of the corporation by himself as such officer. IN WITNESS WHEREOF,I have hereunto set my hand and official seal. My Commission Expires: Notary Public 27 EXHIBIT A DESCRIPTION OF VEHICLES A-1 EXHIBIT B DESCRIPTION OF REAL PROPERTY B-1 Payment Date EXHIBIT C SCHEDULE OF PAYMENTS 10/01/9 Component Amount Amount Total Attributable Attributable Payment To Interest To Principal 10/01/9 04/01/9 . Component Amount Amount Total Attributable Attributable Payment Date Payment To Interest To Principal 10/01/9_$$$-- 04/01/9_ Payment Date 10/01/9 Component Amount Amount Total •Attributable Attributable Payment To Interest To Principal 10/01/9_$$$. 04/01/9_ 10/01/9_ Payment Date 04/01/9 Component Amount Amount Total Attributable Attributable Payment To Interest To Principal 10/01/9 $$$-- 04/01/9_-- 10/01/9_-- 04/01/9_ C-1 Payment Date 10/01/9_ 04/01/9_ 10/01/9_ 04/01/9_ 10/01/9_ Payment Date 10/01/9 04/01/9_ 10/01/9 04/01/9_ 10/01/9_ 04/01/9_ Payment Date 10/01/9_ 04/01/9_ 10/01/9_ 04/01/9_ 10/01/9_ 04/01/9_ 10/01/9_ 10/01/9 Component Amount Amount Total Attributable Attributable Payment To Interest To Principal OM IMP 04/01/9 Component Amount Amount Total Attributable Attributable Payment To Interest To Principal MI S 10/01/Component Amount Amount Total Attributable Attributable Payment To Interest To Principal C-2 04/01/9 Component Amount Amount Total Attributable Attributable Payment Date Payment To Interest To Principal 10/01/9_ 04/01/9_ 10/01/9_ 04/01/9_ 10/01/9_ 04/01/9_ 10/01/9_ 04/01/9_ Payment Date 10/01/9_ 04/01/9_ 10/01/9_ 04/01/9_ 10/01/9_ 04/01/9_ 10/01/9_ 04/01/9_ 10/01/9_ 10/01/Component Amount Amount Total Attributable Attributable Payment To Interest To Principal 04/01/96 Component ems Amount Amount Total Attributable Attributable Payment Date Payment 'To Interest To Principal 10/01/9_$$$-- 04/01/9_-- 10/01/9 -- 04/01/9 —-- 10/01/9 —-- 04/01/9 —-- 10/01/9 —-- 04/01/9 —-- 10/01/9 --_ 04/01/9_ C-3 EXHIBIT D FORM OF CERTIFICATE OF COMPLETION The Project described in the Lease Purchase Agreement, dated as of February 1, 1992, by and between the City of Apache Junction,Arizona,and PHSG Holdings,Inc.has been completed substantially in conformity with the requirements therefor and with the provision of such Lease -Purchase Agreement. Dated this .....day of ...................., 199.... CITY OF APACHE JUNCTION, ARIZONA By City Representative D-1 DRAFT 01/10/92 ESCROW AGREEMENT by and among CITY OF APACHE JUNCTION, ARIZONA, • PHSG HOLDINGS, INC. and Dated as of February 1, 1992 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; APPOINTMENT OF ESCROW AGENT Section 1.1.Definiti ons ... ........ .......2 Section 1.2.Appointment of Escrow Agent ..........2 Section 1.3.Authorization .................2 Section 2.1. Section 2.2. Section 2.3. Section 2.4. Section Section Section Section Section Section Section Section Section Section Section Section Section Section Section ARTICLE II DEPOSIT OF MONEYS; PROJECT FUND Project Fund . . . . . . . . . . . . . . . . .2 Deposit of Moneys ...............2 Payment of Costs . . . . . . . . . . . . . . .3 Transfers Upon Completion ...........3 ARTICLE III INSURANCE; INSURANCE FUND 3.1.Maintenance of Insurance 3.2.Establishment and Application of Insurance Fund ........ 4.1. 4.2. 4.3. 4.4. 4.5. 4.6. 4.7. ARTICLE IV MONEYS IN FUNDS; INVESTMENTS Held in Trust Investments Authorized . . . . . . . . . . . . Qualified Investments.. . . . . . . . . . . . Accounting . . . . . . . . . . . . . . . . . . Allocation of Earnings . . . . . . . . . . . . Valuation and Disposition of Investments . . Commingling; Repurchase Agreements . . . . . . ARTICLE V THE ESCROW AGENT 3 3 4 4 4 5 5 5 5 5.1.Compensation of the Escrow Agent . . . . . . .6 5.2.Removal of Escrow Agent ............6 5.3.Resignation of Escrow Agent ..........6 5.4.Appointment of Agent . . . . . . . . . . . . .7 5.5.Merger or Consolidation ............7 5.6.Protection and Rights of the Escrow Agent ..7 Section 6.1. Section 6.2. ARTICLE VI TRANSFER OF TITLE TO City Transfer of Title ...............8 Discharge of Lien; Further Assurances .....8 ARTICLE VII ASSIGNMENT; AMENDMENTS Section 7.1.Assignment Sect ion 7.2.Amendments Section 8.1. Section 8.2. Section Section Section Section Section Section Section Section Section Section Section Section Section Section Section Section for 9.4.Limited Liability of Escrow Agent ....... 9.5.Indemnification ................ 9.6.Opinion of Counsel . . . . . . . . . . . . . . 9.7.Limitation of Rights to Parties ........ ARTICLE X MISCELLANEOUS ARTICLE VIII COVENANTS; NOTICES 8 9 Compliance With and Enforcement of Lease -Purchase Agreement ...........9 Further Assurances . . . . . . . . . . . . . .9 ARTICLE IX LIMITATION OF LIABILITY 9.1.Limited Liability of City ........... 9.2.No Liability of PHSG or City for Escrow Agent Performance . . . . . . . . 9.3.No Liability of PHSG or Escrow Agent Lease Payments by City ............10 10 10 10 11 9 9 10.1.Filing; Bills of Sale . . . . . . . . . . . .11 10.2.Records . . . . . . . . . . . . . . . . . . .11 10.3.Notices . . . . . . . . . . . . . . . . . . .11 10.4.Governing Law . . . . . . . . . . . . . . . .12 10.5.Partial Invalidity ..............12 10.6.Binding Effect; Successors ..........12 10.7.Execution in Counterparts . . . . . . . . . .12 10.8.H e a d i n g s . . . . . . . . . . . . . . . . . . .12 10.9.Cancellation .................12 EXHIBITS - Exhibit A Payment Request Form - Construction . . . .A-1 1 1 ESCROW AGREEMENT THIS ESCROW AGREEMENT,dated as of February 1,1992 (hereinafter referred to as this "Agreement"),by and among a national banking association duly organized and existing under the laws of United States of America (hereinafter called the "Escrow Agent"),PHSG Holdings,Inc.,a corporation duly incorporated and validly existing under the laws of the State of Arizona (hereinafter called "PHSG"), and City of Apache Junction, Arizona, a municipal corporation and a political subdivision duly incorporated and validly existing under the laws of the State of Arizona (hereinafter called the "City"); W I T N E S S E T H : WHEREAS,the City and PHSG have entered into a Lease- Purchase Agreement, dated as of February 1, 1991 (hereinafter re- ferred to as the "Lease -Purchase Agreement"), a duplicate original of which has been furnished to each of the parties hereto, whereby PHSG has agreed to cause to be acquired the Vehicles and the Real Property described in Exhibit A and Exhibit B, respectively, at- tached thereto (collectively, hereinafter referred to as the "Proj- ect") and to sublease the Vehicles and lease -purchase the Project to the City, and the City has agreed to sublease the Vehicles and lease -purchase the Project from PHSG, in the manner and on the terms set forth in the Lease -Purchase Agreement; and WHEREAS, under the Lease -Purchase Agreement, the City is obligated to make Lease Payments to PHSG for the possession and use of the Project; and WHEREAS,in consideration of such obligation, PHSG has agreed to provide the moneys required herein to be deposited with the Escrow Agent; and WHEREAS,the City, as agent for PHSG under an Agency Agreement, dated as of February 1, 1992 (hereinafter referred to as the "Agency Agreement"), by and between PHSG and the City, shall cause the Vehicles to be acquired by the "Contractors" (as such term is defined in the Lease -Purchase Agreement), and the Agency Agreement provides that neither PHSG nor the Escrow Agent shall be obligated to assume or perform any obligation of the City or such Contractors with respect thereto or under the Lease -Purchase Agreement; NOW, THEREFORE, in the joint and mutual exercise of their powers, and in consideration of the above premises and the mutual covenants herein contained and for other valuable consideration, the parties hereto recite and agree that: ARTICLE I DEFINITIONS; APPOINTMENT OF ESCROW AGENT Section 1.1.Definitions.Unless otherwise indicated or the context otherwise requires, for all purposes of this Agreement, the terms used herein shall have the meanings specified in the Lease -Purchase Agreement. Section 1.2.Appointment of Escrow Agent.PHSG and the City hereby appoint and employ the Escrow Agent, upon direction of the City, to receive, hold, invest and disburse the moneys to be paid to it, pursuant to this Agreement, for credit to the various funds established by this Agreement, and to perform certain other functions, all as hereinafter provided.The appointment of the Escrow Agent shall remain in full force and effect until disburse- ment of all moneys from the Project Fund upon which said appoint- ment shall terminate.In the event Net Proceeds are collected by the City or remain in the Insurance Fund subsequent to termination of appointment as Escrow Agent, the Escrow Agent shall automatic- ally be appointed by PHSG and the City as depository to apply and disburse such monies as provided in this Agreement.By executing and delivering this Agreement, the Escrow Agent accepts the duties and obligations of the Escrow Agent provided herein, but only upon the terms and conditions herein set forth. • Section 1.3.Authorization.Each of the parties hereby represents and warrants that it has full legal authority and is duly empowered to enter into this Agreement and has taken all actions necessary to authorize the execution of this Agreement by the officers and persons signing it. ARTICLE II DEPOSIT OF MONEYS; PROJECT FUND Section 2.1.Project Fund.The Escrow Agent shall es- tablish a special fund designated as the "City of Apache Junction, Arizona Project Fund"(hereinafter referred to as the "Project Fund") ; shall keep such fund separate and apart from all other funds and moneys held by it and shall administer such fund as pro- vided in this Section and Article IV hereof. Section 2.2.Deposit of Moneys.On the Closing Date, PHSG shall deposit $in the Project Fund of which shall simultaneously be paid pursuant to the State Land Department Contract,and the balance of which shall be held, ap- plied and disbursed as hereinafter provided. Section 2 . 3.Payment of Costs. (a)After paying the amount described in Section 2.2 hereof on the Closing Date, the Escrow Agent shall pay from the 2 Project Fund the balance of the Project Costs,as hereinafter provided, upon receipt of a duly executed Payment Request Form in substantially the form attached hereto as Exhibit A, with a true copy of the statement of the Contractor attached or bills of sale or receipts for any component of the Project for which a bill of sale or receipt may be delivered (if available without unreasonable effort or expense)and where applicable, a duplicate original of any change order approved by the City increasing Project Costs in an amount in excess of the original purchase order or contract price. (b)Project Costs shall be paid directly to the Contrac- tor or payee, unless the City requests payment to be made to the Contractor or payee and another party jointly, in which case such costs shall be paid jointly.The Escrow Agent shall be responsible for the safekeeping and investment pursuant to direction of the City of the moneys held in the Project Fund and the payment thereof in accordance with this Section.The Escrow Agent shall not be responsible for the application of amounts paid pursuant to such Payment Request Forms or for the sufficiency of the moneys credited to the Project Fund to make all of the payments herein required. Section 2.4.Transfers Upon Completion.Upon payment of the Project Costs,and the filing with the Escrow Agent of the Certificate of Completion for the Project, or in any event on ,the Escrow Agent shall transfer all remaining moneys in the Project Fund to be applied by PHSG towards the next succeeding Lease Payment or Lease Payments. ARTICLE III INSURANCE; INSURANCE FUND Section 3.1.Maintenance of Insurance.The city shall maintain or cause to be maintained at all times public liability insurance and property insurance in the amounts,form and the coverage required by the provisions of the Lease -Purchase Agree- ment. Section 3.2.Establishment and Application of Insurance Fund. (a)Any Net Proceeds of any such insurance against acci- dent to or condemnation or destruction of any property constituting any part of the Project collected by the City in the event of any such accident, condemnation or destruction shall be deposited with the Escrow Agent in a special escrow fund designated as the "City of Apache Junction, Arizona Insurance Fund" (hereinafter referred to as the "Insurance Fund"), which shall be applied and disbursed by the Escrow Agent as provided in Sections 6.2 and 6.3 of the Lease -Purchase Agreement. 3 (b)If the City Representative shall file a certificate with the Escrow Agent stating that such proceeds are to be utilized for the repair or replacement of a damaged or destroyed part of the Project, then the City shall cause such portion of the Project to be repaired, reconstructed or replaced to at least the same good order,repair and condition as it was, by the use of the Net Proceeds.The Escrow Agent shall permit withdrawals of the Net Proceeds from time to time upon receiving a certificate of the City Representative,stating that the City has expended moneys or incurred liabilities in an amount equal to the amount therein requested to be paid over to it for the purpose of such repair or replacement and specifying the items for which such moneys were expended, or such liabilities were incurred, in such reasonable detail as the Escrow Agent may, in its discretion, require. ARTICLE IV MONEYS IN FUNDS; INVESTMENTS Section 4.1.Held in Trust.The moneys and investments held by the Escrow Agent under this Agreement are irrevocably held in trust for the benefit of the City and PHSG and for the purposes herein specified,and such moneys,and any income or interest earned thereon, shall be expended only as provided in this Agree- ment and shall not be subject to levy, attachment or lien by, or attachment for the benefit of, any creditor of either PHSG or the City. Section 4.2.Investments Authorized.Moneys held by the Escrow Agent hereunder, upon written order of the City Representa- tive,shall be invested by the Escrow Agent in investments described in Section 4.3 hereof.Such investments shall be regis- tered in the name of the Escrow Agent for the benefit of the City and held by the Escrow Agent.The Escrow Agent may purchase or sell to itself or any affiliate, as principal or agent, investments authorized by this Section.Such investments and reinvestments shall be made, giving full consideration for the time at which funds are required to be available.The Escrow Agent may act as -purchaser or agent in the making or disposing of any investment. Section 4.3.Qualified Investments.The investments per- mitted by Section 4.2 hereof shall consist of:(i) direct general obligations of the United States of America; (ii) obligations guar- anteed by the United States; (iii) general obligations of the agen- cies and instrumentalities of the United States; (iv) certificates of deposit, time deposits or demand deposits with any bank or sav- ings institution qualified as a depository of public funds in the State,including the Escrow Agent or any affiliate thereof, pro- vided that such certificates of deposit, time deposits or demand deposits, if not insured by the Federal Deposit Insurance Corpora- tion, are fully secured by obligations described in clause (i), (ii) or (iii) above; (v) a "no load", "open-end" management invest- 4 ment company or trust (mutual fund) which fund invests in U.S. Treasury obligations,agencies guaranteed by the U.S. Government and repurchase agreements secured by the same or (vi) bank repur- chase agreements issued by a bank described in clause (iv) above, the underlying securities of which are obligations described in clause (i), (ii) or (iii) above. Section 4.4.Accounting.The Escrow Agent shall furnish to the City, no less than quarterly, an accounting of all invest- ments made by the Escrow Agent.The Escrow Agent shall not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with this Section. Section 4.5.Allocation of Earnings.Subject to any other provision of this Agreement specifying any different credit or the transfer thereof to another fund, any income, profit or loss on such investments shall be deposited in, or charged to, the respective funds from which such investments were made, and any interest on any deposit of funds shall be deposited in the fund from which such deposit was made. Section 4.6.Valuation and Disposition of Investments. For the purpose of determining the amount in any fund, all invest- ments credited to such fund shall be valued, at cost (exclusive of accrued interest after the first interest payments following pur- chase).The Escrow Agent may sell at the best price obtainable, or present for redemption, any investment so purchased by the Escrow Agent, whenever it shall be necessary, in order to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund to which such investment is credited, and the Escrow Agent shall not be liable or responsible for any loss resulting from such investment. Section 4.7.Commingling; Repurchase Agreements'. (a)The Escrow Agent may, and upon the written request of the City shall, commingle any of the funds held by it pursuant to this Agreement into a separate fund or funds for investment purposes only; provided, however, that all funds or accounts held by the Escrow Agent hereunder shall be accounted for separately, notwithstanding such commingling by the Escrow Agent. (b)The Escrow Agent may enter into agreements with itself or others that provide for the repurchase of investments authorized under this Article IV at times which coincide with the times at which moneys are required to be expended.The investments that are the subject of such agreements shall be held as trust funds by the Escrow Agent or by a Federal Reserve Bank and shall be deemed at all times to be part of the fund or account from which moneys were used to purchase Qualified Investments.Such invest- ments shall be held under repurchase agreements that permit the Escrow Agent to sell such investments if the other party to such 5 agreement shall fail promptly to repurchase such investments on the date required by the repurchase agreement.In such event, the Escrow Agent shall sell such investments at the best price obtain- able whenever it shall be necessary. ARTICLE V THE ESCROW AGENT Section 5.1.Compensation of the Escrow Agent.The City shall, from the proceeds of the Lease -Purchase Agreement, pay to the Escrow Agent the sum of $1,000 (being the set up and initial year's fees) as compensation for its services hereunder. All other fees and expenses (including subsequent annual fees) of the Escrow Agent arising hereunder shall be paid by the City. Section 5.2.Removal of Escrow Agent.The City and PHSG may by written agreement between themselves, at any time and for any reason, remove the Escrow Agent and any successor thereto and shall thereupon appoint a successor or successors thereto, but any such successor shall be a bank or trust company doing business and having an office in the State, having a combined capital (exclusive of borrowed capital) and surplus of at least $25,000,000 and sub- ject to supervision or examination by federal or State authority. If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any sup- ervising 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 5.3.Resignation of Escrow Agent. (a)The Escrow Agent or any successor may at any time resign by giving written notice to the City and PHSG of its inten- tion to resign and of the proposed date of resignation, which shall be a date not less than 60 days after such notice, unless an ear- lier resignation date and the appointment of a successor Escrow Agent shall have been or are approved by the City and PHSG. (b)Upon receiving such notice of resignation, the City shall promptly appoint a successor Escrow Agent having the qualifi- cations provided in Section 5.2 hereof by an instrument in writing; provided, however,that in the event the City fails to appoint a successor Escrow Agent within 30 days following receipt of such written notice of resignation,PHSG may appoint a successor Escrow Agent, and in the event that PHSG or its assignee fails to appoint a successor Escrow Agent within 30 days following the expiration of such initial thirty—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 6 Agent shall become effective upon acceptance of appointment by the successor Escrow Agent. Section 5.4.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 Agreement and to hold title to property or to take any other action which may be desirable or necessary. Section 5.5.Merger or Consolidation.Any company into which the Escrow Agent may be merged, converted or consolidated resulting from any merger, conversion or consolidation to which it shall be a party or 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 under Section 5.2 hereof), shall be the successor to the Escrow Agent without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. Section 5.6.Protection and Rights of the Escrow Agent. (a)The Escrow Agent shall be protected and shall incur no liability in acting or proceeding in good faith upon any reso- lution,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 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 may consult with counsel, who may be counsel to PHSG or the City, with regard to legal questions, and the opinion of such counsel shall be full and complete authori- zation and protection in respect of any action taken or suffered by it hereunder in good faith in accordance therewith. (b)Whenever, in the administration of its duties under this Agreement, the Escrow Agent shall deem it necessary or desir- able that a matter be proved or established prior to taking or suf- fering any action hereunder, 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 City Representative, and such certificate shall be full warranty to the Escrow Agent for any action taken or suffered under the pro- visions of this Agreement upon the faith thereof, but, in its dis- cretion, the Escrow Agent may, in lieu thereof, accept other evi- dence of such matter or may require such additional evidence as to it may seem reasonable. (c)The recitals, statements and representations by the City and PHSG contained in this Agreement shall be taken and con- 7 strued as made by and on the part of the City and PHSG, 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. (d)The Escrow Agent may execute any of the trusts or 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 all matters of trust and 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.The Escrow Agent shall not be answerable for the exercise of any discretion or power under this Agreement or for anything whatsoever in connection with the funds and accounts established hereunder, except only for its own willful misconduct or negligence. ARTICLE VI TRANSFER OF TITLE TO City Section 6.1.Transfer of Title.Upon the exercise by the City of its option to purchase all of the Project as provided in the Lease -Purchase Agreement or upon payment by the City of all Lease Payments during the Term of the Lease -Purchase Agreement, all right, title and interest of PHSG in and to the Vehicles shall be conveyed to and vested in the City and the Ground Lease shall be terminated without the necessity of any other instrument or docu- ment of conveyance, and the City shall be deemed to have received transfer and conveyance of title in and to the Project and all parts thereof from PHSG. Section 6.2.Discharge of Lien; Further Assurances. Upon the transfer to the City of title in and to the Project and all parts thereof pursuant to Section 6.1 hereof, PHSG shall take whatever action shall be necessary to discharge any lien on the Project and all parts thereof and shall execute and deliver any and all such further instruments and assurances as may be reasonably necessary or proper to consummate such transfer and such discharge. ARTICLE VII ASSIGNMENT; AMENDMENTS Section 7.1.Assignment.Except as provided in Article V hereof, the rights and duties of the parties under this Agreement shall not be assignable to any person or entity without the written consent of all of the other parties. Section 7.2.Amendments.This Escrow Agreement may be amended in writing by agreement among all of the parties.Notwith- standing the foregoing,this Agreement may also be modified or 8 amended at any time, but only (i) for the purpose of making such provision for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in this Agreement or (ii)in regard to questions arising under this Agreement which the City may deem necessary or desirable and not inconsistent with this Agreement and which shall not adversely affect the interests of PHSG or any assignees thereof; provided that PHSG, the City and the Escrow Agent may rely in entering into any such amendment hereof upon an opinion of nationally recognized bond counsel acceptable to the Escrow Agent,stating that the requirements of this sentence shall have been met with respect to such amendment. ARTICLE VIII COVENANTS; NOTICES Section 8.1.Compliance With and Enforcement of Lease- Purchase Agreement.The City shall perform all obligations and duties imposed on it under the Lease -Purchase Agreement and enforce such Agreement against PHSG in accordance with its terms. Section 8.2.Further Assurances.PHSG and the City shall make, execute and deliver any and ala such further resolu- tions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Agreement and for the better assuring and confirming the rights and benefits provided herein. ARTICLE IX LIMITATION OF LIABILITY Section 9.1.Limited Liability of City.Except for the payment of Lease Payments when due in accordance with the Lease- Purchase Agreement and the performance of the other covenants and agreements of the City contained in the Lease -Purchase Agreement and in this Agreement, the City shall have no obligation or lia- bility to any of the other parties to this Agreement or to any assignee of PHSG with respect to this Agreement. Section 9.2.No Liability of PHSG or City for Escrow Agent Performance.Neither the City nor PHSG shall have any obli- gation or liability to any of the other parties or to the assignees of PHSG with respect to the performance by the Escrow Agent of any duty imposed upon it under this Agreement. Section 9.3.No Liability of PHSG or Escrow Agent for Lease Payments by City.Except as provided herein, neither PHSG nor the Escrow Agent shall have any obligation or liability with respect to the payment of the Lease Payments by the City when due 9 or with respect to the performance by the City of any other cove- nant made by it in the Lease -Purchase Agreement. Section 9.4.Limited Liability of Escrow Agent.The Escrow Agent shall have no obligation or liability to any of the other parties with respect to this Agreement or the failure or refusal of any other party to perform any covenant or agreement made by any of them under this Agreement or the Lease -Purchase Agreement, but shall be responsible solely for the business -like performance of the duties expressly imposed upon it hereunder.The recitals of facts, covenants and agreements herein contained shall be taken as statements, covenants and agreements of the City or PHSG, as the case may be, and the Escrow Agent assumes no respon- sibility for the correctness of the same, makes no representations as t o the validity or sufficiency of this Agreement and shall incur no responsibility in respect thereof, other than in connection with the duties or obligations herein imposed upon it.The Escrow Agent shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful default. Section 9.5.Indemnification.To the extent permitted by applicable law,the City shall indemnify and save the Escrow Agent harmless from and against all claims,suits and actions brought against it,or to which it is made a party, and from all losses and damages suffered by it as a result thereof, where and to the extent such claim,suit or action arises out of the actions of any other party to this Agreement, including, but not limited to, the ownership,operation or use of the Project and the Real Property by the City.Such indemnification shall not extend to claims,suits and actions brought against the Escrow Agent for failure to perform and carry out the duties specifically imposed upon, and to be performed by, it pursuant to this Agreement.In the event the City is required to indemnify the Escrow Agent as herein provided,the City shall be subrogated to the rights of the Escrow Agent to recover such losses or damages from any other person or entity. Section 9.6.Opinion of Counsel.Before being required to take any action,the Escrow Agent may require an opinion of Independent Counsel acceptable to the Escrow Agent, which opinion shall be made available to the other parties hereto upon request, which counsel may be counsel to any of the parties hereto, or a verified certificate of any party hereto, or both, concerning the proposed action.I f it does so in good faith, the Escrow Agent shall be absolutely protected in relying thereon. Section 9.7.Limitation of Rights to Parties.Nothing in this Agreement,expressed or implied, is intended or shall be construed to give any person, other than the City, PHSG and the Escrow Agent, any legal or equitable right, remedy or claim under or with respect to this Agreement or any covenant, condition or provision hereof, and all such covenants, conditions and provisions 10 are and shall be for the sole and exclusive benefit of the City, PHSG and the Escrow Agent. ARTICLE X MISCELLANEOUS Section 10.1.Filing: Bills of Sale. (a)The City shall be responsible for the filing of any supplemental instruments or documents of further assurance as may be required by law in order to perfect the security interests created by this Agreement, and the Escrow Agent shall hold all financing documents and bills of sale,and transfer same, as required by the provisions of this Agreement and the Lease -Purchase Agreement. Section 10.2.Records.The Escrow Agent shall keep complete and accurate records of all moneys received and disbursed under this Agreement, which shall be available for inspection by the City and PHSG, or the agent of either of them, at any time during regular business hours. Section 10.3.Notices. (a)All written notices to be given under this Agreement shall be given by mail to the party entitled thereto at its address below, or at such address as the party may provide to the other parties in writing from time to time. City of Apache Junction, Arizona 1001 North Idaho Road Apache Junction, Arizona 85219 Attention:City Manager PHSG Holdings, Inc. 100 Concord Place 2999 North 44th Street Phoenix, Arizona 85018 Attention:B. Mark Reader, Vice President P. 0. Box Department Phoenix, Arizona 85 (b)Any such notice shall be deemed to have been received 48 hours after deposit in the United States mail in registered or certified form, with postage fully prepaid. Section 10.4.Governing Law.This Agreement shall be construed and governed in accordance with the laws of the State. 11 Section 10.5.Partial Invalidity.Any provision of this 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 Agreement. Section 10.6.Binding Effect; Successors.This Agree- ment shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.Whenever in this Agreement any party hereto is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all covenants and agreements contained in this Agreement by or on behalf of any party hereto shall bind and inure to the benefit of the successors and assigns thereof, whether so expressed or not. Section 10.7.Execution in Counterparts.This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same agreement. Section 10.8.Headings.The headings or titles of the several Articles and Sections hereof, and any table of contents appended to copies hereof, shall be solely for convenience of ref- erence and shall not affect the meaning, construction or effect of this Agreement.All references herein to "'Articles," "Sections," and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Agreement; and the words "herein," "here- of," "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or subdivision hereof. Section 10.9.Cancellation.To the extent applicable by provision of law,the parties hereto acknowledge that this Agreement is subject to cancellation pursuant to Section 38-511, Arizona Revised Statutes, as amended, the provisions of which are incorporated herein. 12 IN WITNESS WHEREOF, the Escrow Agent and PHSG have caused this Agreement to be executed in their corporate names by their authorized officers, and the City has caused this Agreement to be executed and attested in its name by its authorized officers, all as of the day and year first above written. THE VALLEY NATIONAL BANK OF ARIZONA, as Escrow Agent By Authorized Officer PHSG MORTGAGE,INC. By Vice President CITY OF APACHE JUNCTION, ARIZONA By ATTEST: Clerk APPROVED AS TO FORM: City Attorney Mayor Attachments:Exhibit A Payment Request Form 14564006.AG/011392 13 EXHIBIT A Payment Request Form - Construction The Escrow Agent is hereby requested to pay from the Project Fund established by the Escrow Agreement,dated as of February 1, 1992, by and among the Escrow Agent, City of Apache Junction,Arizona and PHSG Holdings,Inc.,to the person or corporation designated below, as Payee,the sum set forth below such designation, in payment (of all/a portion) of the Project Costs described below.The amount shown below is due and payable under a purchase order or contract with respect to the Project item cost described below and has not formed the basis of any prior request for payment. Payee......................... Amount................... Description of Project Item Cost:... Dated........................... Approved by PHSG HOLDINGS, INC. By CITY OF APACHE JUNCTION, ARIZONA By City Representative PHSG Representative (Attach duplicate original of Payee's statement) A-1 When recorded mail to: Michael Cafiso, Esq. Suite 1100 One East Camelback Road Phoenix, Arizona 85012 DRAFT 0 1/10/92 GROUND LEASE AND SUBLEASE by and between CITY OF APACHE JUNCTION, ARIZONA, as Lessor, and PHSG HOLDINGS, INC., as Lessee Dated as of February 1, 1992 GROUND LEASE AND SUBLEASE THIS GROUND LEASE AND SUBLEASE, dated as of February 1, 1992 (hereinafter referred to as this "Ground Lease"),by and between City of Apache Junction, Arizona, a municipal corporation duly incorporated and validly existing under the laws of the State of Arizona (hereinafter called the "City") , and PHSG Holdings, Inc., duly incorporated and validly existing under the laws of the State of Arizona (hereinafter called "PHSG") ; W I T N E S S E T H : WHEREAS, PHSG proposes to lease from the City the real property described in Exhibit A attached hereto (hereinafter referred to as the "Real Property"), and simultaneously pursuant to this Ground Lease, the City agrees to sublease from PHSG the Real Property under the terms and conditions set forth in this Ground Lease; NOW, THEREFORE, in the powers, and in consideration of covenants hereinafter contained tion, the parties hereto recite joint and mutual exercise of their the above premises and the mutual and for other valuable considera- and agree that: 1.The City shall demise and lease unto PHSG, and PHSG shall take and hire, from the date hereof to and including I I o r for such longer or shorter period until payment in full or the making of provisions for the payment in full of the obligations of the City pursuant to the Lease -Purchase Agreement, dated as of February 1, 1992 (the "Lease -Purchase Agreement"), by and between the City and PHSG,the Real Property. 2.PHSG shall demise and sublease unto the City, and the City shall take and hire, from the date hereof to and including or for such longer or shorter period until payment in full or the making of provisions for the payment in full of the obligations of the City pursuant to the Lease -Purchase Agreement, the Real Property. 3.The City warrants and represents that it has good and marketable title to the Real Property in fee simple absolute, free and clear of all liens and encum- brances (subject to Permitted Encumbrances as such term is defined in the Lease -Purchase Agreement) and that it has obtained all consents and approvals required for the lease of the Real Property pursuant to this Ground Lease. 4.In consideration of the lease of the Real Property by the City to PHSG, PHSG has entered into the Lease -Purchase Agreement and deposited funds pursuant to an Escrow Agreement of even date herewith which are to be applied to acquire the Project (as such term is defined in the Lease -Purchase Agreement) . 5.PHSG shall, upon payment in full of the obliga- tions of the City pursuant to the Lease -Purchase Agree- ment and upon the termination of this Ground Lease, sur- render the Real Property to the City free and clear of all liens and encumbrances created by any act of PHSG, its successor and assigns. 6.The City shall not create, or permit to be created, any liens or encumbrances on the Real Property other than Permitted Encumbrances (as defined in the Lease Purchase Agreement). 7.If any term or provision of this Ground Lease or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Ground Lease or the application of such term or provision to persons or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby, and each term and provision of this Ground Lease shall be valid and enforceable to the fullest extent permitted by law.' 8.PHSG shall not sublease or create or permit to be created any lien or encumbrance on the Real Property nor assign this Ground Lease, except in connection with any sublease contemplated by the Lease -Purchase Agree- ment. 9.The City shall at all times have free, unlim- ited and unrestricted access, ingress and egress into and about the Real Property and use of the Real Property by virtue and for the Term (as such term is defined in the Lease -Purchase Agreement) of the Lease -Purchase Agree- ment. 10.No merger of title or estates is intended by the City or PHSG pursuant to the provisions of the Lease- Purchase Agreement or this Ground Lease. 11.To the extent applicable by provision of law, the parties hereto acknowledge that this Ground Lease is subject to cancellation pursuant to Section 38-511, Ari- zona Revised Statutes, as amended,the provisions of which are incorporated herein. IN WITNESS WHEREOF, the City and PHSG have caused this Ground Lease to be executed in their respective names, and the City has caused this Ground Lease to be attested,all by their authorized officers. CITY OF APACHE JUNCTION, ARIZONA By Mayor ATTEST: Clerk APPROVED AS TO FORM: City Attorney .. 14564005.LS/011392 PHSG HOLDINGS, INC. By Senior Vice President 3 State of Arizona •) County of Pinal On this, the .... day of ........... •, 1992, before me, the undersigned Notary Public, personally appeared Tom Damian° and Kathy Connelly, who acknowledged themselves to be the Mayor and Clerk, respectively, of City of Apache Junction, Arizona, a munici- pal corporation of the State of Arizona, and that they, as such officers, being duly authorized so to do, executed the foregoing Ground Lease for the purposes therein contained by signing the name of the municipal corporation by themselves as such officers. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. Notary Public My Commission Expires: State of Arizona County of Maricopa ) On this, the .... day of ............ , 1992, before me, the undersigned Notary Public,personally appeared Robert A. Casillas, who acknowledged himself to be a Vice President of PHSG Holdings, Inc., an Arizona corporation,and that he,as such officer, being duly authorized so to do, executed the foregoing Ground Lease for the purposes therein contained by signing the name of the corporation by himself as such officer. IN WITNESS WHEREOF, I have hereunto set my hand and official seal. My Commission Expires: Notary Public 4 EXHIBIT A LEGAL DESCRIPTION OF THE RINUJ PROPERTY A- 1 DRAFT 01/10/92 AGENCY AGREEMENT by and between PHSG HOLDINGS, INC. and CITY OF APACHE JUNCTION, ARIZONA Dated as of February 1, 1992 AGENCY AGREEMENT THIS AGENCY AGREEMENT, dated as of February 1, 1992 (hereinafter referred to as this "Agency Agreement"), by and between City of Apache Junction, Arizona, a municipal corporation duly incorporated and validly existing under the laws of the State of Arizona (hereinafter called the "City"), and PHSG Holdings, Inc., a corporation duly incorporated and validly existing under the laws of the State of Arizona (hereinafter called "PHSG"); WITNESS ET H: WHEREAS, the City and PHSG have entered into a Lease- Purchase Agreement of even date herewith (hereinafter referred to as the "Lease -Purchase Agreement"), whereby PHSG agrees, among other things, to lease -purchase certain 'property, described in Exhibit A thereto (hereinafter referred to as the "Vehicles"), to the City, and the City agrees to lease the Vehicles from PHSG; NOW, THEREFORE, in the joint and mutual exercise of their powers, and in consideration of the above premises and of the mutu- al covenants herein contained and for other valuable consideration, the parties hereto recite and agree that: Section 1.Definitions. The terms capitalized in this Agency Agreement shall have the meanings given to them in the Lease -Purchase Agreement. Section 2.Appointmen. PHSG hereby appoints the City as its agent to carry out all phases of the acquisition of the Vehicles described in Exhibit A attached to the Lease -Purchase Agreement.The City, as agent of PHSG, assumes all rights, duties and responsibilities of PHSG regarding acquisition of the Vehicles except as limited herein. Section 3.Contracts; Payments. The City, as agent, may enter directly into any purchase order or contract without the written approval of PHSG.The writ- ten approval of PHSG shall be required to authorize any payments by the Escrow Agent made from the Project Fund, in accordance with the Escrow Agreement. Section 4.Project Description. The City, as agent for PHSG, shall have the right to make any changes in the description of the Vehicles, or of any component or components thereof, whenever the City, in its sole discretion, deems such changes to be necessary; provided, however, that any such change shall not alter the nature of the Vehicles or affect the status of the interest income on the Lease Payments made pursuant to the Lease -Purchase Agreement and that any increase in the Project Costs resulting from such a change shall, to the extent the increased Project Costs exceed the total balance in the Project Fund, be payable solely from other funds of the City, which shall be deposited with the Escrow Agent for deposit into the Project Fund prior to the approval of any changes to the Project. Section 5.City's Right to Supervise With Regard to the Project. The City,as agent of PHSG,shall have the right to supervise acquisition of the Vehicles and to monitor the performance by the Contractors in whatever manner the City, in its sole discretion, deems appropriate. Section 6.City's Right to Enforce Contracts. PHSG hereby assigns to the City all of its rights and powers under all such purchase orders and contracts as it enters into with respect to the Vehicles, and the City shall have the right to enforce,in its own name or the name of PHSG,such purchase orders or contracts at law o r in equity;provided, however, that the assignment of PHSG shall not prevent PHSG from asserting said rights and powers in its own behalf. Section 7.Cancellation. To the extent applicable by provision of law, the parties hereto acknowledge that this Agency Agreement is subject to cancel- lation pursuant to Section 38-511, Arizona Revised Statutes, as amended, the provisions of which are incorporated herein. IN WITNESS WHEREOF, PHSG has caused this Agency Agreement to be executed in its corporate name by its duly authorized offi- cer, and the City has caused this Agreement to be executed and attested in its name by its duly authorized officers, all as of the day and year first above written. PHSG HOLDINGS,INC. By ............. Vice President CITY OF APACHE JUNCTION, ARIZONA By Mayor 2 .‘.' • ATTEST: Clerk APPROVED AS TO FORM: City Attorney 14564008.AG/011392 .,. DRAFT 01/10/92 ASSIGNMENT AGREEMENT by and between PHSG HOLDINGS, INC. and CITY OF APACHE JUNCTION, ARIZONA Dated as of February 1, 1992 ASSIGNMENT AGREEMENT This ASSIGNMENT AGREEMENT, dated as of February 1, 1992 (hereinafter referred to as this "Assignment Agreement"), by and between PHSG Holdings, Inc., a corporation duly incorporated and validly existing under the laws of the State of Arizona (herein- after called "PHSG"), and City of Apache Junction,Arizona,a municipal corporation duly incorporated and validly existing under the laws of the State of Arizona (hereinafter called the "City"); W I T N E S S E T H : WHEREAS, PHSG and the City have entered into a Lease- Purchase Agreement of even date herewith (hereinafter referred to as the "Lease -Purchase Agreement"), whereby PHSG has agreed to, among other things, lease -purchase to the City, and the City has agreed to lease -purchase from PHSG, certain property (hereinafter referred to as the "Vehicles") in the manner and on the terms set forth in the Lease -Purchase Agreement; and WHEREAS, PHSG and the City have entered into an Agency Agreement of even date herewith (hereinafter referred to as the "Agency Agreement"), whereby PHSG has appointed the City as its agent to carry out all phases of the acquisition of the Vehicles described in Exhibit A attached to the Lease -Purchase Agreement and to enter into purchase orders or contracts; and WHEREAS, the City shall enter into one or more contracts (hereinafter referred to as, collectively, the "Contract") for the acquisition of the Vehicles, which Contract is by reference made a part of, this Assignment Agreement; and WHEREAS, each of the parties has authority to enter into this Assignment Agreement and has taken all actions to authorize its officers to enter into it; NOW, THEREFORE, in the joint and mutual exercise of their powers, and in consideration of the above premises and of the mutu- al covenants herein contained and for other valuable consideration, the parties hereto recite and agree that: Section 1.Assignment. The City,for One Dollar ($1.00)and other good and valuable consideration in hand received, does hereby sell, assign and transfer to PHSG all of its rights under the Contract. Section 2.Acceptance. PHSG hereby accepts such assignment for the purpose of facilitating the financing of the acquisition of the Vehicles. Section 3.Conditions. This Assignment Agreement is subject to the terms of the Agency Agreement and the Lease -Purchase Agreement, and PHSG shall be liable only for payments to be made under the Contract from funds contained in the Project Fund established under an Escrow Agreement of even date herewith by and among PHSG, the City and the Escrow Agent named therein. Section 4.Cancellation. To the extent applicable by provision of law, the parties hereto acknowledge that this Assignment Agreement is subject to cancellation pursuant to Section 38-511, Arizona Revised Statutes, as amended, the provisions of which are incorporated herein. IN WITNESS WHEREOF,PHSG has caused this Assignment Agreement to be executed in its corporate name by its duly author- ized officer, and the City has caused this Agreement to be executed and attested in its name by its duly authorized officers, all as of the day and year first above written. ATTEST: Clerk APPROVED AS TO FORM: City Attorney 145(34003./01/011392 PHSG HOLDINGS,INC. By Senior Vice President CITY OF APACHE JUNCTION,ARIZONA By Mayor 2