Surety Bonds; Lessee to Pursue Remedies Against Contractors and Sub- Contractors and Their Sureties. Lessee shall secure from each Vendor directly employed by Lessee in connection with the acquisition, construction, installation, improvement or equipping of the Equipment under any Lease, a payment and performance bond (a “Surety Bond”) executed by a surety company authorized to do business in the State, having a financial strength rating by A.M. Best Company of “A-” or better, and otherwise satisfactory to Lessor and naming Lessor as a co-obligee in a sum equal to the entire amount to become payable under each Vendor Agreement. Each bond shall be conditioned on the completion of the work in accordance with the plans and specifications for the Equipment and upon payment of all claims of subcontractors and suppliers. Lessee shall cause the surety company to add Lessor as a co-obligee on each Surety Bond, and shall deliver a certified copy of each Surety Bond to Lessor promptly upon receipt thereof by Lessee. Any proceeds from a Surety Bond shall be applied in accordance with such Surety Bond to the payment and performance of the Vendor’s obligations in accordance with the related Vendor Agreement and, if for whatever reason such proceeds are not so applied, then first to amounts due Lessor under this Agreement, and any remaining amounts shall be payable to Lessee. In the event of a material default of any Vendor under any Vendor Agreement in connection with the acquisition, construction, maintenance and/or servicing of the Equipment under any Lease or in the event of a material breach of warranty with respect to any material workmanship or performance guaranty with respect to the Equipment under any Lease, Lessee will promptly proceed to exhaust its remedies against the Vendor in default, to the extent such exhaustion of remedies is financially reasonable, which determination shall be made by the Lessee with the consent of the Lessor, which consent shall not be unreasonably withheld. Lessee shall advise Lessor of the steps it intends to take in connection with any such default. Any amounts received by Lessee in respect of damages, refunds and adjustments or otherwise in connection with the foregoing shall be paid to Lessor and applied against Lessee’s obligations under the applicable Lease in the event that Lessee is in arrears in its payment obligations to Lessor.
