Okaloosa County BOCC — January 7, 2014 — grader-lease-Contracts — reading text

EICOWIN EQUIPMENT COMPANY, INC. BIRMINGHAM MOBILE HUNTSVILLE MONTGOMERY OXFORD PENSACOLA ATLANTA Mr. John Hofstad December 2, 2013 Public Works Director Okaloosa County Florida Re: Lease Documents for 4 Volvo G930B Graders Dear Mr. Hofstad, As you know, the first four Volvo G930B graders were delivered and are doing a great job from what | hear and see. The operators really seem to like the added features | ordered such as the 11 speed transmission and the anti stall function it has. We are anticipating the arrival of the next four G930B units in late December. Knowing that you will need to present the second set of lease Documents to the Board of County Commissioners for approval, | have provided them for your use as well as some other documents you may need. | know the commission meets a few times in December, so as you know, time is of the essence so that the delivery of the new units is not delayed. These lease documents are identical to the documents that were approved by the board for the first units. If you have any questions, please let me know. Again, we appreciate the opportunity to serve your needs and would value being trusted with your business. Thanks, ae ee John Edwards Governmental Sales Manager Cowin Equipment Company 850-685-7055 Jolin Edwards, Governmental Sales Manager 850-685-7055 jedwards@cowin.com , solutionje@gmaif.com EIGCOWIN BIRMINGHAM MOBILE HUNTSVILLE MONTGOMERY OXFORD PENSACOLA ATLANTA John Hofstad August 1, 2013 Okaloosa County Re: Grader Lease Good morning Mr. Hofstad, First let me say that | appreciate you making time in your schedule for us to meet yesterday. | would like to recap the main item we talked about and offer a solution that should resolve the question at hand. From the beginning of this lease process, the goa! has been to give Okaloosa County the opportunity to operate motor graders at the lowest possible cost, both on a monthly basis and on a life cycle cost basis. To accomplish this, together, we utilized a finance document that allows Okaloosa County the ability to pay a balloon at the end of the term and thereby reducing the budgetary needs on a monthly basis. At the end of the term, Okaloosa County has the following options: 1, Submit payment of the balloon and fully receive ownership of the motor graders 2. Refinance the balloon and operate the motor graders for a longer period of time 3. Exercise your buyback option and have the dealer pay Okaloosa County for the motor graders after you have made payment to the leasing company, or directly to the leasing company and then the dealer takes ownership of the motor graders. With the first group of motor graders coming off lease, the dealer, ASC Construction Equipment, paid the leasing company directly at your request, and took ownership of those graders. Those are the graders that we have rented to allow you to continue to use until your new graders arrive. By Okaloosa County retaining these options with the intent to own, you will once again have the option to keep the graders at the end of the term, refinance them at the end of the term or once again explore what the cost to replace the graders will be and possibly exercise your buyback options. In each option, you can control your budgetary needs and still provide valuable services to the public. Almost two years ago, Cowin Equipment Company purchased the Volvo Construction Equipment Dealership for this area. It has been a very smooth and seamless transition. Cowin Equipment is no stranger to Okaloosa County, so it was easy for your folks to experience the same great service with your Volvo Motor Graders that you are accustomed to receiving. Cowin has been in business for over 75 years and | can personally attest that it is the best company | have ever worked for. The Cowin family has bulit a strong legacy and financial standing in our industry. Jamie Cowin has allowed his people to grow the business and offer exceptional customer service. | can tell you that he is one of few these days and that is a man who keeps his word and insists that his people keep theirs. With that being said, we understand that you must do everything possible to reduce or eliminate all risk in the transaction of providing services. Okaloosa County attorney, Mr. John Dowd has expressed concern over the obligation of future funds with the buyback agreement and that ultimately, Okaloosa Jolin Edwards, Governmental Sales Manager 850-685-7055 jedwards@cowin.com , solutionje@gmail.com FEICOWIN EQUIPMENT COMPANY, INC. BIRMINGHAM MOBILE HUNTSVILLE MONIGOMERY OXFORD PENSACOLA ATLANTA Page 2 County is liable for the balloon. He is correct in that in order for Okaloosa County to take advantage of the low municipal lease rates, there has to be an intent to own the equipment. If there is no intent, you are just renting the equipment and the rental rates are much higher because the dealer retains ownership. In order for us to be able to offer you the lease with the balloon that offers the lowest possible cost per month, we offered Okaloosa County a buyback agreement and submitted a copy to the leasing company, Kansas State Bank. This is the same leasing company we used for the graders with the same lease document 3 years ago and they are great to work with. Leasing companies will offer higher balloons on municipal leases based on the strength of the dealer and their offer of a buyback. Kansas State Bank has allowed Mr. Dowd to suggest some changes such as non appropriation and some other items that further protect the interest of Okaloosa County. Kansas State Bank has agreed to those changes just as they did three years ago. The issue of ownership and intent came up and the only way to completely protect Okaloosa County is with a performance bond. This is a bond that is purchased and protects Okaloosa County in the event that the dealer can’t or won’t make the final balloon payment in the event Okaloosa County wants to exercise its buyback option. When this bid was initiated, there was no request in the bid for a performance bond. For years now, the municipalities have opted out of asking for simple bid bonds on most equipment purchases, so performance bonds are very rarely asked for but can be employed in situations like we have now. If a performance bond is required and placed in the bid package up front, the costs is passed on to the customer as it is a requirement of the bid. For that reason, a performance bond requested now can be purchased and we will ask Okaloosa County to issue individual purchase orders for each grader as they are delivered. | have attached a quote for the bond so that you can see what the cost of the bond is. As a result of the strong financial strength of Volvo, there is substantial savings in the performance bonds through BB & T. This should remedy Okaloosa County’s need to mitigate the risk of future obligation in the event that Okaloosa County wishes to exercise its’ buyback option at the end of the lease. Again, the quote covers the cost of the bond per motor grader. Even with the cost of the bond, the cost per month to operate the G930B graders will save you money over the previous lease and much more than any other lease offered. Mr. Hofstad, again, | appreciate us being able to work through this question concerning the lease of the Volvo Motor Graders. If you have any questions about the performance bond please give me a call. Thanks he a0 John Edwards Governmental Sales Manager Cowin Equipment Company 850-685-7055 John Edwards, Governmental Sales Manager 850-685-7055 jedwards@cowin.com , solutionje@gmail.com PLATTE RIVER INSURANCE COMPANY SURETY BOND FOR THE REPURCHASE OF EQUIPMENT Bond Number: Bond Effective Date: KNOWN ALL MEN BY THESE PRESENTS, that the Surety and the Principat under this Surety Bond are the parties named and identified as follows: Surety Principal Name: Platte River Insurance Company Principal's Name: Address: PO Box 5900 Madison, WI 53705 Primary address: Incorporated: Nebraska Telephone: (678) 528-6600 BY THIS SURETY BOND, the above named and identified Surety and Principal are held and firmly bound to: in the amount of: g } to the payment of which said sum of money, well and truly to be made and done, the Principal himself, his heirs, executors, administrators, successors and assigns, and the Suraty binds itself, ifs successors and assigns, jointly and severally, firmly by ihese presents. WHEREAS, the above named and identified Principal has entered Into a written Contract with the Obligee dated the day of fo supply the fallowing: , In accordance with specifications prepared by the Obligee which Contract is by reference made part hereof, and is herein after referred to as the "Contract" WHEREAS, the Contract provides for an established guaranteed repurchase price for the Equipment for a peroid until from date units are placed in service and upon compliance with certain stipulated conditions, and WHEREAS, the Obligee requires and the Principal and Surety agree to provide this Surety Bond in support of the above stated guarantees. NOW, THE CONDITIONS of this Surety Bond obligation are that, if the Principal shall promptly and faithfully keep his promises and perform his duties as required under the terms and conditions of his Contract with the Obligee, then this Surety Bond obfigation shall be nulf and void: otherwise it shalt remain in full force and effect. tT IS FURTHER AGREED AND UNDERSTOOD THAT: (1) The llablity of the Surety under this Surety Bond shall in no avent exceed the Bond Amount shown above; (2) The Principal and the Surety have entered into a Bond indemnity Agreement which governs their respective rights, duties and obligations to one another and limitations on such rights, duties and obligations; (3) Any suits a! law or proceedings in equity for any clalm hereunder must be filed before the expiration of one year from which final payment under the Contract falls due; (4) No right of action shall accrue on this Surety Bond to or for the use of any person or corporation other than the Obligea named heraia, or the executors, administrators, successors or assigns of the Obligee. , BURETY Platte River Insurance Company PRINCIPAL Signature: _ Signature: x. Print name: Rachel Fell Print name: Title: Attorney-in-Fact Title: Form 14096 (Rev 24/2002) ‘Authorized Countersignature (Whee Required} EIGOWwIN BIRMINGHAM MOBILE HUNTSVILLE MONTGOMERY OXFORD PENSACOLA ATLANTA Mr. Don Amunds August 12, 2013 Chairman Okaloosa County Commission Re: Grader Lease Dear Mr. Amunds, This is to update our previously signed agreement concerning the buy back of the 8 Volvo G930B Motor Graders. | have attached the original agreement for your convenience. As you know, we have agreed to provide a buy back agreement for each of the graders in the amount of $148,967.00. The amount is subject to the same condition of return as with the lease. With this lease, you have three options at the end of the term. You can pay the balloon of $148,967.00 and retain ownership of the units, you can agree to finance the balloon for a longer term if you so desire or you can exercise the buyback option. If you decide to exercise the buyback option, Cowin Equipment Company can make payment directly to Kansas State Bank for the balloon and take ownership of the graders, thereby removing your responsibility for the payment of the balloon. !t is because of our stability and the stability of Volvo that we can offer such a high residual lease option. Although no performance bond was requested with the initial bid, one has been asked for to help alleviate any possible future financial risk to Okaloosa County. Again, because of our strength, we can offer performance bonds through BB&T. The cost of these performance bonds is .70% of the balloon amount, which amounts to $3128.00 per unit. As this is something that your legal counsel has requested, we are asking that you agree