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REGULAR MEETING <br />PRIL 1, 1985 <br />ACCEPTANCE: Lessee must acknowledge its approval of this <br />lease proposal by signing and returning the <br />enclosed copy of this letter to Lessor by <br />April 15, 1985. <br />MARQUETTE LEASE SERVICES, INC. <br />A subsidiary of Bank Shares, Incorporated ■ <br />John Biezuns, President <br />Sixth and Marquette <br />Minneapolis, Minnesota 55480 <br />Marquette Lease Services, Inc. is please to submit a tax- <br />exempt lease proposal based on the following terms and <br />conditions: <br />Lease Type: Master lease/purchase financing agreement. <br />Lease Term: Five (5) years. <br />Lease Rate: 8.63% simple interest per annum. <br />Payment Frequency: Shall be paid semi-annually in <br />arrears (first due 6 months after Marquette funds escrow). <br />Funding Amount: On or about May 1,.1985, Marquette will <br />deposit $2,000,000 in an equipment escrow account at F&M <br />Marquette National Bank in Minneapolis, Minnesota. These <br />funds will be invested by the escrow trustee in short and <br />medium term securities yielding approximately 8.50% (U.S. <br />Treasury Bills; 13 and 26 week). These interest earnings <br />will be paid to South Bend on a semi-annual basis. <br />The equipment escrow account funds will be disbursed over <br />several months (as long as 18 months may be taken to <br />deplete this fund) as South Bend accepts equipment from <br />vendors. <br />Reserve Fund Amount: Simultaneous with Marquette's <br />funding of the equipment escrow account, Marquette will <br />deposit $300,000 in a special reserve escrow account. <br />This special account is set up to enable South Bend to <br />use Federal Arbitrage Regulations to borrow from Marquette <br />at the stipulated lease rate (8.63%) and then invest those <br />monies at a substantially higher interest rate to derive <br />a "positive Arbitrage". This concept is described more <br />fully in the following sections of this proposal. <br />Payment Amounts: South Bend will make semi-annual <br />principal and interest payments on the.$2,000,000 in <br />the equipment escrow account. Each semi-annual lease <br />payment will be in the amount of $250,463.74. <br />South Bend will also make semi-annual interest payments <br />on the $300,000 in the reserve escrow account. Each <br />semi-annual interest payment will be in the amount of <br />$12,945.00. <br />Reserve Escrow Account: Immediately after Marquette <br />deposits $300,000 into this special account, the escrow <br />trustee will invest the $300,000 in 5-year Federal Home <br />Loan Bank Bonds which currently yield,11.50%. The <br />interest earnings from this safe (U.S. Government Agency) <br />investment will be $17,250.00 every 6 months. <br />This reserve escrow account will actually earn money <br />for South Bend as follows: <br />