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a <br />and appropriately throughout the useful life of that property. Upon the end of the period of <br />useful life, the Contractor may dispose of Project property after notifying and receiving <br />disposition instructions from the Department. <br />(7) Proiect Propertv Whose Useful Life Has Expired. When the useful life <br />of Project property has expired, the Contractor agrees to comply with the Department's <br />disposition requirements. <br />(2) Proiect Propertv Prematurelv Withdrawn from Use. For Project <br />property withdrawn from appropriate use before its useful life has expired, the Contractor agrees <br />as follows: <br />(a) Notification Requirement. The Contractor agrees to notify the <br />Department immediately when any Project property is prematurely withdrawn from appropriate <br />use, whether by planned withdrawal, misuse, or casualty loss. <br />(b) Calculating the Fair Market Value of Prematurelv Withdrawn <br />Proiect Propertv. The Contractor agrees that the State Government retains a State interest in <br />the fair market value of Project property prematurely withdrawn from appropriate use. The <br />amount of the State interest in the Project property shall be determined by the ratio of the State <br />assistance awarded for the property to the actual cost of the property. The Contractor agrees <br />that the fair market value of Project property prematurely withdrawn from use will be calculated <br />as follows: <br />1. Equipment and Supplies. The Contractor agrees that the <br />fair market value of Project equipment and supplies shall be calculated by straight-line <br />depreciation of that property, based on the useful life of the equipment or supplies as <br />established by the Department. The fair market value of Project equipment and supplies shall <br />be the value immediately before the occurrence prompting the withdrawal of the equipment or <br />supplies from appropriate use. In the case of Project equipment or supplies lost or damaged by <br />fire, casualty, or natural disaster, the fair market value shall be calculated on the basis of the <br />07-SC-056 Page 44 of 59 <br />Orange County <br />