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the Project property appropriately, through a written lease between the Contractor and lessee. The Contractor agrees to use the standard lease agreement form.provided by the Department and to provide a copy of the signed, executed lease agreement to the Department. In accordance with Subsection 6 of this Agreement,' regardless of assignment of work to be completed under this Project or lease of Project assets to a third party, it is the Contractor's primary responsibility to comply with Federal and State requirements of this Agreement and assure the compliance of any third party contractors. (b) Lease of Vehicles The lease of vehicles acquired with financial assistance authorized for 49 U.S.C. 5310 to any third party is contingent upon approval of the Department. It is allowable to lease vehicles to another Community Transportation System providing general public service in the State of North Carolina, upon approval of the Department. It is also allowable for vehicles to be leased to a third party operator or transportation management company that operates the transit service within a county /region under contract to the Contractor, upon approval of the Department. The Contractor agrees to use the vehicle lease agreement provided by the Department when vehicles are leased, even if on a short-term basis, to another Community Transportation System or a management company. The Contractor agrees to obtain written approval from the Department before the lease is executed and forward a copy of the signed, executed lease agreement to the Department. The Contractor, as a Community Transportation System, shalt not lease vehicles to human service agencies, county agencies/government, community agencies or school systems. The Contractor agrees not to loan vehicle(s) to other agencies /individuals for short - term use, even during hours that the transportation system is not providing service, as the vehicle(s) will generally be used to provide service that is "closed- door," i.e., not open to the general public. i. Disposition of Project Property With prior Department approval, the Contractor may sell, transfer, or lease Project property and use the proceeds to reduce the gross project cost of other eligible capital public transportation projects to the extent permitted by 49 U.S.C. §-5334(h)(4). The Contractor also agrees that the Department shall determine "useful life" for all Project property and that the Contractor will use Project property continuously and appropriately throughout the useful life of that property. Upon the end of the period of useful life, the Contractor may dispose of Project property after notifying and receiving disposition instructions from the Department. (1) Project Property Whose Useful Life Has Expired When the useful life of Project property has expired, the Contractor agrees to comply with the Department's disposition requirements. (2) Project Property Prematurely Withdrawn from Use For Project property withdrawn from appropriate use before its useful life has expired, the Contractor agrees as follows: (a) Notification Requirement The Contractor agrees to notify the Department immediately when any Project property is prematurely withdrawn from appropriate use, whether by planned withdrawal, misuse, or casualty loss. (b) Calculating the Fair Market Value of Prematurely Withdrawn Proiect Pro ert . The Contractor agrees that the Federal /State Government retains a Federal /State interest in the fair market value of- Project property prematurely withdrawn from appropriate use. The amount of the Federal /State interest in the Project property shall be determined by the ratio of the Federal /State assistance awarded for the property to the actual cost of the property. The Contractor agrees that the fair market value of Project property prematurely withdrawn from use will be calculated as follows: 1. Equipment and Supplies The Contractor agrees that the fair market value of Project equipment and supplies shall be calculated by straight -line depreciation of that property, based on the useful life of the equipment or supplies as Updated 3101/11 Page 25 of 41 Attachment number 2 F_g Page 159