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HomeMy WebLinkAboutRES 2005-25 - Board TRUCKEE DONNER Public Utility District Resolution No. 2005 - 25 APPROVING AGREEMENT TO FINANCE THE ACQUISITION OF EQUIPMENT, HARDWARE AND SOFTWARE WHEREAS, the Board of Directors of the Truckee Donner Public Utility District (Lessee) has determined that a true and very real need exists for the acquisition of the equipment, hardware and software described in the Individual Payment Schedule No. 11 and the Master Municipal Lease and Option Agreement No. 909 (the "Agreement") presented at this meeting; and WHEREAS, the Board of Directors of Lessee has taken the necessary steps, including any legal bidding requirements, under applicable law to arrange for the acquisition of such equipment, hardware and software; and WHEREAS, the Board of Directors hereby directs its legal counsel to review the Agreement and negotiate appropriate modifications to said Agreement so as to assure compliance with state law and local statutory law, prior to execution of the agreement by those persons so authorized by the Board of Directors for such purpose; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors as follows: 1. The Board of Directors finds that the terms of said agreement are in the best interests of the Lessee for the acquisition of such equipment, hardware and software and the Board of Directors of the Lessee hereby authorizes the execution, delivery, and performance by Lessee of the Agreement and designates and confirms the Board President and the District Clerk to execute and deliver the Agreement and any related documents necessary for the consummation of the transactions contemplated by the agreement. 2. That the acquisition of the equipment, hardware and software under the terms and conditions provided for in the Agreement, is necessary, convenient, in the furtherance of and will at all times be used in connection with the District's governmental and proprietary purposes and functions and are in the best interests of the Lessee and no portion of the equipment, hardware and software will be used directly or indirectly in any trade or business carried on by any person other than a governmental unit of the State on a basis different from the general public. 1 Resolution 2005-25 ,. 3. The Lessee covenants that it will perform all acts within its power which are or may be necessary to insure the maintenance of its legal status as being a duly organized and existing entity under the laws of the Sate, which status is the basis for the interest portion of the rental payments coming due under the Agreement to at all times remain exempt from federal income taxation under the laws and regulations of the United States of America as presently enacted and construed or as hereafter amended. BE IT FURTHER RESOLVED that the Board of Directors of the Lessee declares its official intent to be reimbursed from the proceeds of the Agreement approved herein for prior expenditures in the event Lessee elects to disburse moneys from its own reserves for acquiring the equipment hardware and software. Such declaration of official intent to be reimbursed is issued pursuant to Section 1.103- 18 of the Federal Income Tax Regulations. J . Ron Hemig President , Board of Directors Name of the Party to Execute Individual Title Payment Schedule No. 11 Peter Holzmeister General Manager/District Clerk Name of the Party to Sign Acceptance Title Certificate PASSED AND ADOPTED by the Board of Directors at a meeting duly called and held within the District on the seventh day of September, 2005 by the following roll call vote: AYES: Directors Aguera, Hemig, Sutton, Taylor and Thomason NOES: None ABSENT: None TRUCKEE DO ER PUBLI UTILITY DISTRICT itl5pKHemig, President ATTEST: Peter L. Holzmeister, District Clerk 2 Resolution 2005-25 INDIVIDUAL PAYMENT SCHEDULE#11 TO MASTER MUNICIPAL LEASE AND OPTION AGREEMENT NUMBER 909 Entered into September 1,2005,(the"Dated Date")by and between the Lessor and the Lessee,this Individual Payment Schedule#11 is made a part of Master Municipal Lease and Option Agreement Number 909 and hereby incorporates all terms and conditions of said Agreement with respect to Lessee's and Lessor's rights in the personal property described in this Schedule. This Individual Payment Schedule consists of: Exhibit A Resolution of Governing Body Exhibit B Opinion of Lessee's Counsel Exhibit C Certificate as to Arbitrage Exhibit D Description of Equipment Exhibit E Schedule of Payments Exhibit F Acceptance Certificate Exhibit G Insurance Coverage Requirements Supplements: 8038-G IRS Filing LESSOR: Municipal Services Group,Inc. LESSEE: Truckee Donner Public Utility District B By: y: Title: Title: Date: Date: EXHIBIT A - Page 2 of 2 trade or business carried on by any person other than a governmental unit of the State on a basis different from the general public. 3. The Lessee covenants that it will perform all acts within its power which are or may be necessary to insure the maintenance of its legal status as being a duly organized and existing entity under the laws of the Sate, which status is the basis for the interest portion of the rental payments coming due under the Agreement to at all times remain exempt from federal income taxation under the laws and regulations of the United States of America as presently enacted and construed or as hereafter amended. BE IT FURTHER RESOLVED that the Board of Directors of the Lessee declares its official intent to be reimbursed from the proceeds of the Agreement approved herein for prior expenditures in the event Lessee elects to disburse moneys from its own reserves for acquiring the equipment hardware and software. Such declaration of official intent to be reimbursed is issued pursuant to Section 1.103- 18 of the Federal Income Tax Regulations. Name of the Party to Execute Individual Title Payment Schedule No. 11 Name of the Party to Sign Acceptance Title Certificate PASSED AND ADOPTED by the Board of Directors at a meeting duly called and held within the District on the seventh day of September, 2005 by the following roll call vote: AYES: NOES: ABSENT: TRUCKEE DONNER PUBLIC UTILITY DISTRICT J. Ron Hemig, President ATTEST: Peter L. Holzmeister, District Clerk Agreement No.909-11 ... EXHIBIT C CERTIFICATE AS TO ARBITRAGE I, the undersigned officer of the Truckee Donner Public Utility District in the state of California (the "Lessee") being the person duly charged, with others, with responsibility of issuing Lessee's obligation in the form of that certain Master Municipal Lease and Option Agreement Numbered 909(the"Agreement")by and between Lessee and Municipal Services Group,Inc.as lessor(the"Lessor")HEREBY CERTIFY that: 1. The Agreement was executed and delivered by Lessee under and pursuant to existing law to finance the acquisition of the Equipment as described in the Agreement. 2. Pursuant to the Agreement,Lessee is entitled to the use and possession of the Equipment in consideration for the obligations of Lessee under and pursuant to the Agreement. The Equipment will be used in furtherance of the public purposes of Lessee and only for the performance of one or more governmental or proprietary functions of Lessee consistent with the permissible scope of Lessee's authority. 3. Lessee does not intend to sell the Equipment during the term of the Agreement. Lessee will not receive any monies,funds or other "proceeds"as a result of the execution or delivery of the Agreement. 4. Lessee has not established any sinking fund from which it intends to make payment under the Agreement, and no monies are pledged other than legally available funds of Lessee in amounts equal to the required payments under the Agreement. The remaining general funds of Lessee are not reasonably expected to be used to make such payments,and no other monies,except as set forth herein,are pledged to the payments due under the Agreement or reasonably expected to be used to pay principal and interest payments due under the Agreement. 5. Lessee certifies that the Equipment(as defined in the Agreement)is or will be owned and operated by Lessee and will not be used in the trade or business of any person on a basis different from the general public. To the best of my knowledge,information,and belief the expectations herein expressed are reasonable and there are no facts,estimates or circumstances other than those expressed herein that would materially affect the expectations. IN WITNESS WHEREOF,I have hereunto set my hand this day of ,20 LESSEE: Truckee Donner Public Utility District By: Title: Agreement No.909-11 ..� EXHIBIT E SCHEDULE OF PAYMENTS Base Interest Rate: 4.24% U.S.Treasury Note Yield: 3.63% U.S.Treasury Note Index Percent: l l 6.80% Adjusted Base Interest Rate: Dated Date: September 1,2005 PMT# Payment Payment Principal Interest Purchase Date Portion Portion Price 1 Jan-1-2006 20,275.43 15,097.41 5,178.02 356,498.50 2 Apr-1-2006 20,275.43 16,594.47 3,680.96 339,030.50 3 Jut-1-2006 20,275.43 16,770.38 3,505.05 321,424.93 4 Oct-1-2006 20,275.43 16,948.14 3,327.29 303,680.72 5 Jan-1-2007 20,275.43 17,127.79 3,147.64 285,796.78 6 Apr-1-2007 20,275.43 17,309.35 2,966.08 267,772.00 7 Jul-1-2007 20,275.43 17,492.83 2,782.60 249,605.27 8 Oct-1-2007 20,275.43 17,678.25 2,597.18 231,295.49 9 Jan-1-2008 20,275.43 17,865.64 2,409.79 212,841.51 10 Apr-1-2008 20,275.43 18,055.01 2,220.42 194,242.20 11 Jul-1-2008 20,275.43 18,246.40 2,029.03 175,496.43 12 Oct-1-2008 20,275.43 18,439.81 1,835.62 156,603.04 13 Jan-1-2009 20,275.43 18,635.27 1,640.16 137,560.85 14 Apr-1-2009 20,275.43 18,832.81 1,442.62 118,368.72 15 Jul-1-2009 20,275.43 19,032.43 1,243.00 99,025.44 16 Oct-1-2009 20,275.43 19,234.18 1,041.25 79,529.84 17 Jan-1-2010 20,275.43 19,438.06 837.37 59,880.70 18 Apr-1-2010 20,275.43 19,644.10 631.33 40,076.83 19 Jul-1-2010 20,275.43 19,852.33 423.10 20,117.01 20 Oct-1-2010 20,275.43 20,062.76 212.67 0.00 TOTAL: 405,508.60 362,357.42 43,151.18 Provided all documents have been returned in a form acceptable to Lessor within thirty (30) days of the Dated Date(the "Period"), then the Base Interest Rate can remain in effect during the Period. In the event all documents have not been returned within the Period, in a form acceptable to Lessor,and/or if the U. S.Treasury Note Yield for a maturity comparable to the Lease Term increases significantly,the Lessor reserves the right to adjust and determine a new Base Interest Rate(the"Adjusted Base Interest Rate")pursuant to the provisions hereof. The Adjusted Base Interest Rate shall be determined by multiplying the U. S.Treasury Note Yield for a maturity comparable to the Lease Term(as of the business day immediately preceding the receipt of the documents by the Lessor)by the U. S. Treasury Note Index Percent. Such Adjusted Base Interest Rate shall be the applicable interest rate for the principal balance of the Equipment that is the subject of this Individual Payment Schedule,and the Lessor and the Lessee shall execute a revised Exhibit E to this Individual Payment Schedule to acknowledge such change. LESSEE: Truckee Donner Public Utility District By: Title: Agreement No.909-11 ,., EXHIBIT G INSURANCE COVERAGE REQUIREMENTS TO: Municipal Services Group,Inc. 5125 South Kipling Parkway Suite 300 Littleton,CO 80127 FROM: Truckee Donner Public Utility District P.0.Box 309 Truckee,CA 96161 SUBJECT: INSURANCE COVERAGE REQUIREMENTS 1. In accordance with Section 8.03 of the Master Municipal Lease and Option Agreement No.909,we have instructed the insurance agent named below(please fill in name,address,and telephone number) Keith Grand Marsh Risk & Insurance Services One California San Francisco, CA 94111 to issue: a. All Risk Physical Damage Insurance on the leased Equipment of Unit thereof(as defined in the Agreement) evidenced by a Certificate of Insurance and Long Form Loss Payable Clause naming Lessor"and/or its assigns"Loss Payee. b. Public Liability Insurance evidence by a Certificate of Insurance naming"Lessor and/or its assigns"as an Additional Insured. Minimum Coverage Required: $500,000.00 per person $500,000.00 aggregate bodily injury liability $300,000.00 property damage liability OR 2. Pursuant to Section 8.03 of the Agreement,we are self-insured for all risk physical damage and public liability and will provide proof of such self-insurance in letter form together with a copy of the statute authorizing this form of insurance. 3. Proof of insurance coverage will be provided to Lessor prior to the time that the Equipment or Unit thereof is delivered to us. LESSEE: Truckee Donner Public Utility District By: Title: �., 2005 LOAN: 2005 Total Electric Water WO# Vehicle Description Budget Spent Difference Share Share 05-35030 Meter Reader Vehicle 26,000 29,125.99 (3,125.99) 21,553.23 7,572.76 05-65038 1/2 ton pickup truck 35,000 17,799.38 17,200.63 17,799.38 05-65039 3/4 ton diesel truck with cab&chasis 36,000 27,292.38 8,707.63 27,292.38 05-65040 1 ton diesel truck with cab and chasis 31,000 27,939.63 3,060.38 27,939.63 05-65041 SUV 28,000 29,125.99 (1,125.99) 29,125.99 05-65042 1/2 ton 4X4 pickup truck 35,000 17,799.38 17,200.63 17,799.38 05-65044 Heavy duty wire puller trailer 44,000 50,377.63 (6,377.63) 50,377.63 05-95025 SUV 28,000 29,125.99 (1,125.99) 14,563.00 14,563.00 05-75035 3/4 ton diesel service truck 4X4-ordered a 1 ton 34,000 33,603.06 396.94 33,603.06 05-75036 SUV 28,000 29,125.99 (1,125.99) 29,125.99 05-75037 1 ton diesel service truck 42,000 33,603.06 8,396.94 33,603.06 05-95022 Field computers&software 32,540 37,438.96 (4,898.96) 18,719.48 18,719.48 Total 399,540 362,357.42 37,182.58 225,170.08 137,187.35 62% 38% Agenda Item # sUCKEE s PUblic Utility District Memorandum To: Board of Directors From: Mary Chapman, Administrative Services Manager/Treasurer Date: August 31, 2005 SUBJECT: Consideration of approving the necessary documents to finance the acquisition of equipment, hardware and software listed in the 2005 budget 1. WHY THIS ITEM IS BEFORE THE BOARD The 2005 budget listed several items in the electric and water capital budgets that would be paid by installment payments. The Board authorizes all financing documents for the District. A list of the items to be financed is attached. 2. HISTORY Municipal Services Group, Inc. provides tax-exempt installment purchase agreement financing for municipals, school districts, public utilities and other public agencies. Several years ago, the District entered into a master services agreement with Municipal Services Group, Inc. A copy is attached, however, no action is required relating to it. Each time we use them to finance equipment, the process is very quick. Each financing is done through an addendum to the original master services agreement. 3. NEW INFORMATION Municipal Services Group, Inc. will finance the purchase of the vehicles, hardware and software in the amount of $362,357.42. Attached are the documents which will need to be executed in order to complete the financing process. Also attached is a list of the costs that will be financed. The interest rate is 4.24%. The term of the lease purchase is five years (20 quarterly payments of$20,275.43). RECOMMENDATION: 1. To approve the attached resolution entitled Approving Agreement to Finance the Acquisition of Equipment, Hardware and Software. 2. Authorize the board President and District Clerk to execute the loan documents ..� after approval of the documents by legal counsel. Form 8038-G Information Return for Tax-Exempt Governmental Obligations ► Under Internal Revenue Code section 149(e) OMB No.1545-0720 (Rev. November 2000) ► See separate Instructions. Department of the Treasury Internal Revenue Service Caution:if the issue price is under$100,000,use Form 8038-GC. Reporting Authority If Amended Return,check here ► ❑ 1 Issuer's name 2 Issuer's employer identification number Truckee Donner Public Utility District 3 Number and street(or P.O. box if mail is not delivered to street address) Room/suite 4 Report number P.O.Box 309 3 5 City,town,or post office, state, and ZIP code 6 Date of issue Truckee,CA 96161 7 Name of issue 8 CUSIP number Master Municipal Lease&Option Agreement No.909,Schedule No.11 None 9 Name and title of officer or legal representative whom the IRS may call for more information 10 Telephone number of officer or legal representative Mary Chapman,Manager of Administrative Services ( 530 )587.3896 Type of Issue(check applicable box(es)and enter the issue rice) See instructions and attach schedule 11 ❑ Education . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 12 ❑ Health and hospital . . . . . . . . . . . . . . . . . . . . . . . . . 12 13 ❑ Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14 ❑ Public safety. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15 ❑ Environment(including sewage bonds) . . . . . . . . . . . . . . . . . . 15 16 ❑ Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 17 ❑ Utilities . . . . . . . , , , , , , , , , , , , , 17 18 © Other. Describe ► maintenance equipment/vehicles 18 19 If obligations are TANS or RANs, check box ► ❑ If obligations are BANS, check box ► ❑ 20 If obliciations are in the form of a lease or installment sale,check box ► Description of Obligations. Complete for the entire issue for which this form is beinq filed. (a)Final maturity date (b)Issue price (c)Stated redemption (cQ Weighted (e)Yield price at maturity average maturity 21 $ $ NIA years % em Uses of Proceeds of Bond Issue(including underwriters'discount 22 Proceeds used for accrued interest . . . . . . . . . . . . . . . . . . . . . (30 NIA 23 Issue price of entire issue(enter amount from line 21, column(b)) . . . . . . , , NIA 24 Proceeds used for bond issuance costs(including underwriters'discount) . 24 NI 25 Proceeds used for credit enhancement . . . . . . . . . . . 25 NI 26 Proceeds allocated to reasonably required reserve or replacement fund 26 NI 27 Proceeds used to currently refund prior issues . . . . . . . . , 27 N/ 28 Proceeds used to advance refund prior issues . . . . . . . . 28 N/ 29 Total (add lines 24 through 28). . . . . . . . . . . . . . . . . . . . . . N/A 30 Nonrefundin proceeds of the issue subtract line 29 from line 23 and enter amount here). . NIA Description of Refunded Bonds(Complete this part only for refunding bonds.) 31 Enter the remaining weighted average maturity of the bonds to be currently refunded . . . ► NIA years 32 Enter the remaining weighted average maturity of the bonds to be advance refunded . . . ► N/A years 33 Enter the last date on which the refunded bonds will be called . . . . . . . . . . . ► N/A 34 Enter the date(s)the refunded bonds were issued ► N/A '. Miscellaneous 35 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) 35 N/A 36a Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract(see instructions) 36a NIA b Enter the final maturity date of the guaranteed investment contract► 37 Pooled financings: a Proceeds of this issue that are to be used to make loans to other governmental units 37a N/A b If this issue is a loan made from the proceeds of another tax-exempt issue, check box ► ❑ and enter the name of the issuer ► and the date of the issue ► 38 If the issuer has designated the issue under section 265(b)(3)(B)(i)(III)(small issuer exception), check box . . . ► ❑ 39 If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box . . . . . . . . . . . . .No. ❑ 40 If the issuer has identified a hedge, check box Ill- El. . . . . . . . . . . . . . . . . . . . . . . . Under penalties of perjury,I declare that I have examined this return and accompanying schedules and statements,and to the best of my knowledge and belief,they are true,correct,and complete. Sign Here ' Signature of issuer's authorized representative Date 'Type or print name and We For Paperwork Reduction Act Notice, see page 2 of the Instructions. Cat.No.63773S Form 8038-G (Rev.11-2000) Agreement No.909-11 EXHIBIT F ACCEPTANCE CERTIFICATE The undersigned, as Lessee under the Master Municipal Lease and Option Agreement(the "Agreement")numbered 909, with Municipal Services Group, Inc.("Lessor"),acknowledges receipt in good condition of the Equipment described in the Agreement or in the applicable Individual Payment Schedule attached thereto this day of and certifies that Lessor has fully and satisfactorily performed all of its covenants and obligations required under the Agreement. Lessee confirms that it will commence payments in accordance with Article 6 of the Agreement or the provisions of the applicable Individual Payment Schedule. The undersigned officer of the Lessee hereby reaffirms in all respects the Certificate as to Arbitrage attached as Exhibit C to the Agreement, and represents that,to the best of his or her knowledge,information and belief, the expectations therein expressed were reasonable as of the Accrual Date on which they were made,and are reasonable as of this date,and that there were,and are as of this date,no facts,estimates or circumstances other than those expressed therein that would materially affect the expectations expressed therein. LESSEE: Truckee Donner Public Utility District By: Title: Agreement No.909-11 EXHIBIT D DESCRIPTION OF EQUIPMENT The Equipment which is the subject of the Individual Payment Schedule No. 11 to the Master Municipal Lease and Option Agreement is as follows: One(1)New Meter Reader Vehicle One(1)New'/Z Ton Pick-up Truck One(1)New'/.Ton Diesel Truck with Cab and Chassis One(1)New One Ton Diesel Truck with Cab and Chassis Three(3)New Sport Utility Vehicles One(1)New'/2 Ton 4 x 4 Pick-up Truck One(1)New Heavy-duty Wire Puller Trailer One(1)New'/.Ton or One Ton Diesel Service Truck 4 x 4 One(1)New One Ton Diesel Service Truck Field Computers and Software Together with all additions,accessions and replacements thereto. Lessee hereby certifies that the description of the Equipment set forth above constitutes an accurate description of the "Equipment", as defined in the attached Master Municipal Lease and Option Agreement applicable Individual Payment Schedule. LESSEE: Truckee Donner Public Utility District By: Title: Address of Equipment Upon Delivery and Acceptance: EXHIBIT B OPINION OF COUNSEL (On Attorney's Letterhead) ' Municipal Services Group,Inc. 5125 South Kipling Parkway Suite 300 Littleton,CO 80127 Ladies and Gentlemen: As Counsel for the Truckee Donner Public Utility District ("Lessee"),we have examined duly executed originals of Individual Payment Schedule No. I 1 and the Master Municipal Lease and Option Agreement No.909(the"Agreement")by and between Lessee as lessee and Municipal Services Group, Inc.("Lessor")as lessor,the proceedings taken by Lessee to authorize and execute the Agreement together with the other related documents,and the Constitution and laws of the state of California(the"State")as presently enacted and construed. Based upon said examination and upon such other examination as we have deemed necessary or appropriate,it is our opinion that: 1. Lessee was duly organized and validly exists under the Constitution and laws of the State as a political subdivision of the State. 2. The Agreement has been duly authorized, executed and delivered by Lessee, pursuant to Constitutional, statutory and/or home rule provisions that authorized this transaction and the Resolution attached as Exhibit A to the Agreement. 3. The Agreement is a legal,valid and binding obligation of Lessee,enforceable in accordance with its terms. To the extent lawful,in the event Lessor obtains a judgment against Lessee in money damages,as a result of an event of default under the Agreement,Lessee will be obligated to pay such judgment. 4. Applicable public bidding requirements have been complied with. 5. To the best of my knowledge,no litigation is pending or threatened in any court or other tribunal,state or Federal,in any way questioning or affecting the validity of the Resolution or the Agreement. 6. The signatures of the officers of Lessee that appear on the Agreement are true and genuine;I know said officers and know them to hold the offices set forth below their names. 7. The Equipment leased pursuant to the Agreement constitutes personal property under applicable law and when subjected to use by Lessee will not be construed as a fixture. This Opinion of Counsel may be relied upon by any permitted successor(s)and/or assignee(s)of Municipal Services Group,Inc. Attorney for Lessee EXHIBIT A - Page I of 2 Public Utility District Resolution No. 2005- APPROVING AGREEMENT TO FINANCE THE ACQUISITION OF EQUIPMENT, HARDWARE AND SOFTWARE WHEREAS, the Board of Directors of the Truckee Donner Public Utility District (Lessee) has determined that a true and very real need exists for the acquisition of the equipment, hardware and software described in the Individual Payment Schedule No. 11 and the Master Municipal Lease and Option Agreement No. 909 (the "Agreement") presented at this meeting; and WHEREAS, the Board of Directors of Lessee has taken the necessary steps, including any legal bidding requirements, under applicable law to arrange for the acquisition of such equipment, hardware and software; and --� WHEREAS, the Board of Directors hereby directs its legal counsel to review the Agreement and negotiate appropriate modifications to said Agreement so as to assure compliance with state law and local statutory law, prior to execution of the agreement by those persons so authorized by the Board of Directors for such purpose; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors as follows: 1. The Board of Directors finds that the terms of said agreement are in the best interests of the Lessee for the acquisition of such equipment, hardware and software and the Board of Directors of the Lessee hereby authorizes the execution, delivery, and performance by Lessee of the Agreement and designates and confirms the Board President and the District Clerk to execute and deliver the Agreement and any related documents necessary for the consummation of the transactions contemplated by the agreement. 2. That the acquisition of the equipment, hardware and software under the terms and conditions provided for in the Agreement, is necessary, convenient, in the furtherance of and will at all times be used in connection with the District's governmental and proprietary purposes and functions and are in the best interests of the Lessee and no portion of the equipment, hardware and software will be used directly or indirectly in any