5.2. SR 12-07-1998ity of
iver
Item 5.2.
MEMORANDUM
TO:
FROM:
DATE:
Mayor & City Council
Pat Klaers, City Ad~rator
December 7, 1998
SUBJECT:
Consider Lease Between the City and
the Boys and Girls Club for Property
Within Lions Park
Attached for your review and consideration is the Elk River Ground Lease
between the Boys and Girls Club of Elk River, Inc., and the City of Elk River.
Attorney Dave Sellergren has been working on this project on behalf of the
city. This item is before the City Council at this meeting as it is the desire of
the local financial institutions and the Boys and Girls Club to have the City
Council approve this lease as soon as possible in order to help them both
move this project forward for groundbreaking in December 1998. Aside from
this ground lease, John Weicht has been working with the city on submitting
the necessary material in order to obtain a building permit, but all of the
material has not yet been received at City Hall.
As previously discussed, the land which is to be leased to the Boys and Girls
Club is in the southeast corner of Lions Park and the lease terms are for $1
per year. Attached are sketches of the area requested to be leased. One
sketch also shows the proposed building footprint. I am not sure what the
area dimensions are or how they were determined, but it seems that the
proposed leased area could be smaller (less area on the west side of the
building which would exclude the city trail) and it may be in the city's best
interest to lease as small of a parcel as possible and to expand the leased
area later, if necessary. However, the proposed area is consistent with what
the Council reviewed when the CUP was approved on May 18, 1998.
Boys and Girls Club Director John Fitzgerald will be present at this meeting
to discuss two issues in the lease. These two issues are policy issues which
need to be decided by the City Council. The first issue is the length of term of
the lease (Page 2). Currently the draft ground lease is set up as a 30 year
lease with two 10 year options. Fifty (50) years seems like a long time to me,
but the Boys and Girls Club desire a longer term lease.
13065 Orono Parkway * P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425
The second issue which Mr. Fitzgerald would like to discuss with the City
Council is the addition of the "right of first refusal" if the city were to ever
dispose of the Lions Park property (Page 15, Item 11.1). Currently the lease
does not allow for the Boys and Girls Club to have the right of first refusal if
the property is sold as this type of provision may very well restrict a future
City Council and any policy decisions they may want to make regarding park
management and ownership. Additionally, regardless ff the park is sold by
the city, the existing lease would still be valid and would not impact the Boys
and Girls Club use of the property. The future is unknown and there may be
some better way of park management in existence in 10,20, or 30 years, and
we may not want to restrict a future City Council by having the right of first
refusal included in this lease.
By far, the most important lease issue for the City Council to consider relates
to the concern that exists over the "worst case scenario" and, for whatever
reason, the Boys and Girls Club doesn't survive in Elk River. First of all, ff
the Boys and Girls Club can't make their loan payments, the city doesn't
want to be the one that closes them down. Additionally, ff the Club doesn't
survive, then there is a building remaining in a city park which has bank
loans due. The current draft lease tries to not have the city subordinate to
the bank agreement and to have the city operate independent of a bank
agreement whereby it would be the city's option to take over the Boys and
Girls Club obligations. If the banks are going to ask the city to take over the
note and mortgage in the event of mortgage default, then very close attention
should be paid to Exhibit D which is the mortgage agreement terms and
conditions.
The draft lease is in pretty good shape and only a few issues are still under
debate. These issues need City Council decisions and then the lease can be
finalized assuming that all of the other narrative and terms and conditions in
the lease meet with the City Council's approval.
AREA PROPOSED TO BE LEASED BY BOYS AND GIRLS CLUB
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BIT~INOU$ DRIVEWAY
SCHOOL $iREET
LI'ON
AREA PROPOSED TO BE LEASED
BY BOYS AND GIRLS CLUB
PARK
HANDKE
GROUND LEASE AGREEMENT
THIS LEASE AGREEMENT is made on or as of the day of
., 199_,by and
between THE CITY OF ELK RIVER, a public body corporate and politic under the laws of the State
of Minnesota (Lessor) and THE BOYS AND GIRLS CLUB OF ELK RIVER, INC., a nonprofit
corporation (Lessee).
Lessor and Lessee, intending to be legally bound, hereby covenant and agree as follows:
ARTICLE 1.
DEFINITIONS
1.1)
the context:
Definitions - In this Lease Agreement, unless a different meaning clearly appears from
(01) "Additional Rent" means all sums payable by Lessee in connection with its occupancy
of the Leasehold Property in addition to the annual rental payments set forth in Section 2.3
hereof.
(02) "Building" means the primary structure to be located on the Leasehold Property and
to be used for the purposes set forth in Section 7.5 of this Lease Agreement.
(03) "City" means the City of Elk River, Minnesota.
(04) "Construction Plans" means the plans, specifications, drawings and related documents
for development of the Leasehold Property and construction of the Improvements, sufficient
to support a projected appraisal by an appraiser approved by Lessor of the value of the
complete Improvements (excluding the value of the Leasehold Property) in an amount not
less than Six Hundred Thirty Thousand Dollars ($630,000.00).
(05) "Event of Default" means an action by the Lessee listed in Section 13.1 of this Lease
Agreement.
(06) "Hazardous Substances" means toxic or hazardous substances or wastes, pollutants
or contaminants (including, without limitation, asbestos, urea formaldehyde, the group of
organic compounds known as polychlorinated biphenyls, petroleum products including
gasoline, fuel oil, crude oil and various constituents of such products, and any hazardous
substance as defined in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Sec. 9601-9657, as amended ("CERCLA") or any similar
federal, state or local law, regulation or ordinance; substances or conditions that may support
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a claim or cause of action under the Resource Conservation and Recovery Act of 1976, 42
U.S.C. Sec. 6901 et seq., as amended from time to time ("RCRA"), or any similar federal,
state or local law, regulation or ordinance; pollutants, effluents or emissions subject to
regulation pursuant the Federal Water Pollution Control Act, 33 U.S.C. Sec. 1251 et seq.,
or the Clean Air Act, 42 U.S.C. Sec. 7401 et ~eq., or any similar federal, state or local law,
regulation or ordinance, or any substances or conditions, pollutants, effluents or emissions
subject to regulation pursuant to the Minnesota Environmental Response and Liability Act,
Minn. Stat. 115B ("MERLA") or the Minnesota Petroleum Tank Release Cleanup Act, Minn.
Stat. 115C; or any other state, federal or local environmental statutes, regulations, ordinances
or other environmental regulatory requirements that are now or may in the future be enacted.
(07) "Improvements" means all improvements, including the Building, parking lots,
utilities, landscaping, lighting and all other structures and improvements to be located on the
Leasehold Property as described in the Construction Plans.
(08) "Leasehold Property" means the real property described in Exhibit A of this Lease
Agreement.
(09) "Substantial Completion" or "Substantially Complete" shall mean completion of
construction of the Improvements by Lessee in accordance with the Construction Plans, as
verified by an inspection of the Improvements by Lessor or its designee, together with an as-
built appraisal by an appraiser acceptable to Lessor, provided at Lessee's sole expense,
certifying that the completed value of the Improvements (excluding the value of the Leasehold
Property) is no less than One Million Dollars ($1,000,000.00).
ARTICLE 2.
DEMISE OF PROPERTY
2.1) Demise of Property - Lessor agrees to and hereby does demise and lease to Lessee,
and Lessee agrees to and hereby does lease from Lessor, the Leasehold Property for the rental and
pursuant to the terms of this Lease Agreement.
2.2) Term of the Lease - This Lease Agreement shall be dated and shall become effective
upon its execution by Lessor and Lessee. The leasehold estate created in this Lease Agreement shall
begin and remain in full force and effect from the date of this Lease Agreement and, subject to the
terms, covenants, agreements and conditions contained in this Lease Agreement, shall expire thirty
(30) calendar years from the date of this Lease Agreement (the "Term"); provided, however, that so
long as no Event of Default has occurred and remains uncured pursuant to this Lease Agreement, the
Lessee shall have the right to extend the Term for two (2) consecutive periods of ten (10) years each.
Lessee may exercise its right to so extend the Term by providing to Lessor written notice of Lessee's
intent so to extend ninety (90) days prior to the expiration of the original Term, and thereafter upon
providing Lessor such written notice within ninety (90) days prior to the expiration of the first
extension of the Term. As long as this Lease Agreement and the leasehold estate created in this
Lease Agreement have not expired or have not been terminated, the leasehold estate created in this
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Lease Agreement shall be subject to the terms, covenants, agreements and conditions of this Lease
Agreement.
2.3) Rental Payrnents for Leasehold Property. - Lessee shall pay as and for the rental of the
Leasehold Property, beginning on the date hereof, annual rental payments in the sum of One Dollar
($1.00), which may be payable by the Lessee for the entire Term or any renewal thereof in advance
in one lump sum. Lessee hereby waives any right to a refund or abatement of the rental payable
pursuant to this lease, whether pursuant to Lessor's default hereunder or termination of this Lease
prior to the expiration of the Term or any renewal thereof.
2.4) Rent Abatement - The rental payments to be made by Lessee to Lessor pursuant to
this Lease Agreement shall not be abated, either in whole or in part, by reason of any damage to or
destruction of, the Leasehold Property, the Improvements, or any other improvement presently
located on or to be constructed or placed on the Leasehold Property.
2.5) Waiver - It is understood by the parties hereto that the Leasehold Property is being
leased by Lessee from Lessor "as is." Lessor makes no representations or warranties that the
Leasehold Property will be suitable for the uses to which Lessee intends to put it. Lessee hereby
waives all statutory, common law, or any other implied warranty of habitability or use and agrees that
Lessor shall not be liable to repair, replace, or pay for any damage to the Leasehold Property or any
improvements located on or to be constructed on such property, whether such damage has occurred
prior to or occurs after the date of this Lease Agreement.
2.6) Surveys and Tests - Lessee shall obtain whatever surveys, soil tests, and other reports
and analyses it deems necessary, including without limitation, any environmental analyses and reports
referred to at Section 7.9 of this Lease Agreement, at its sole cost and expense. Lessee shall make
all such surveys, tests and reports available to Lessor for examination, upon request and during
normal business hours, in connection with and as an integral part of Lessor's review and approval of
the Construction Plans and Lessor's inspection of the Improvements.
ARTICLE 3.
NET LEASE
3.1) Net Lease - It is the intention and purpose of the parties hereto that this Lease
Agreement shall be a "Net Lease" t° Lessor. All costs and expenses of whatever character or kind,
general and special, ordinary and extraordinary, foreseeable or unforeseeable, and of every kind and
nature whatsoever that may be necessary in or about the operation of the Leasehold Property and
Improvements, including all hazard and liability insurance, taxes or payments required by any
governmental authority in lieu thereof, special assessments, utilities and maintenance and repairs,
except as may be otherwise expressly provided herein, shall be paid by Lessee as "Additional Rent"
hereunder.
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3.2) Lessor's Right to Perform - Except as may be otherwise expressly provided herein,
Lessee covenants and agrees that if at any time it fails to pay any amount required by this Lease
Agreement, or to obtain, pay for, maintain or deliver any of the insurance policies herein provided
for, or fails to make any other payment or perform any other act required to be made or performed
by this Lease Agreement, then Lessor, without notice to or demand upon Lessee, without waiving
or releasing Lessee from any obligation of Lessee contained in this Lease Agreement, and without
any obligation to so do, may effect any such insurance coverage and pay premiums therefor and may
make any other payment or perform any other act on the part of Lessee to be made and performed
as provided in this Lease Agreement, in such manner and to such extent as Lessor may deem
desirable, and in exercising such right to pay necessary and incidental costs and expenses, employ
counsel and incur reasonable attorneys' fees. All sums so paid by Lessor and all necessary and
incidental costs and expenses in connection with performance of any such act by Lessor, together
with interest thereon at a rate of eight percent (8%) per annum from the date of making such
expenditure by Lessor shall be payable to Lessor as Additional Rent and, except as otherwise
provided for in this Lease Agreement, shall be payable on demand or, at the option of Lessor, may
be added to any monthly rental payment then due or thereafter becoming due under this Lease
Agreement. Lessee covenants to pay any such sum or sums with interest as aforesaid and Lessor shall
have (in addition to any other right or remedy of Lessor) the same rights and remedies in the event
of nonpayment by Lessee as in the case of default by Lessee in payment of rent.
ARTICLE 4.
TAXES AND ASSESSMENTS
4.1) Real Estate Taxes and AssessmenB - Lessee shall pay directly to the appropriate
governmental authorities, as Additional Rent hereunder, before any fine, penalty, interest or costs may
be added thereto for the nonpayment thereof, all real estate taxes or payments required by any
governmental authority in lieu thereof and installments of special assessments payable during the
Term of this Lease Agreement, which shall during the Term be laid, assessed, levied or imposed upon
or become payable or a lien upon the Leasehold Property and the Improvements or any part thereof
("Impositions"). If, by law, any such Imposition is payable or may at the option of the taxpayer be
payable in installments (whether or not interest shall accrue on the unpaid balance of such
Imposition), Lessee may pay the same together with any accrued interest on the unpaid balance of
such Imposition in installments as the same respectively become payable and before any fine, penalty,
interest or cost may be added thereto for the nonpayment of any such installment and interest.
Lessee, upon request, shall forward to Lessor written evidence of payment of the Impositions.
4.2) Right to Contest - Lessee shall have the right to contest or appeal any Imposition in
Lessee's or Lessor's name, at Lessee's sole cost and expense. If nonpayment of the Imposition
creates a lien upon the Leasehold Property or Improvements, Lessor may, at its option, request
Lessee to deposit with it an amount equal to one hundred ten percent (110%) of the contested and
unpaid Imposition. Such amount shall be returned to Lessee upon the successful appeal of the
Imposition or upon payment of it. Lessee shall give Lessor written notice of Lessee's intention to
contest or appeal any Imposition at least twenty (20) days prior to the delinquency thereof. Lessee
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shall hold Lessor harmless a6ainst all loss, cost, expense, attorneys' fees or damages resulting from
such contest or appeal.
4.3) Other Taxes - Lessee shall pay directly to the appropriate governmental authorities,
as Additional Rent hereunder, before any fine, penalty, interest or costs may be added thereto for the
nonpayment thereof, any tax or excise imposed or assessed on rent, on any leasehold interest, any
right of occupancy, any investment of Lessee in the Leasehold Property and Improvements, any
personal property of any kind owned, installed or used by Lessee, including Lessee's leasehold
improvements, any privilege tax, sales tax, gross proceeds tax, etc., however described, by any
federal, state, county or municipal governmental authority or any subdivision thereof or other
governmental authority. Lessee shall not be required to pay any federal or state or local income tax
for which Lessor may become liable during the Term of the Lease.
ARTICLE 5.
UTILITIES
5.1) Utilities - Lessee shall directly pay or cause to be paid, as Additional Rent hereunder,
all charges for cleaning and building services, steam water, gas, sewer, electricity, light, heat, air
conditioning, power, telephone or other service or utility used, rendered or supplied upon, or in
connection with the Leasehold Property and Improvements (the Utilities) during the Term hereof.
Lessee shall contract for the Utilities in Lessee's own name and shall indemnify and hold Lessor
harmless from any liability or expense for any such charge. Upon Lessor's request, Lessee shall
furnish to Lessor paid statements, invoices or cancelled checks evidencing the payment of all
obligations undertaken by Lessee under this Article 5.
ARTICLE 6.
INSURANCE
6.1) Insurance During Construction - Lessee will provide and maintain or cause to be
provided or maintained at all times during the process of constructing the Improvements and, from
time to time at the request of Lessor, fumish Lessor with proof of payment of premiums on insurance
policies which Lessor deems necessary to protect its interest in the Leasehold Property including
without limitation:
(01) Builder's risk insurance, written on the so-called "Builder's Risk -- Completed Value
Basis," in an amount equal to one hundred percent (100%) of the insurable value of the
Improvements at the date of completion, and with coverage available in nonreporting form
on the so-called "all risk" form of policy. The interest of Lessor shall be protected in
accordance with a clause in form and content satisfactory to Lessor. All policies evidencing
insurance required by this subdivision (01) with respect to the Improvements shall be carried
in the names of Lessee and Lessor, as their respective interests may appear, and shall contain
standard clauses which provide for any proceeds paid by an insurer to Lessee or Lessor and
remaining after deducting all expenses, including fees and disbursements of counsel, incurred
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in the collection of such proceeds (the "Net Proceeds") resulting from claims for casualty
thereunder to the Improvements for loss or damage covered thereby to be made jointly
payable to Lessee and Lessor.
(02) Comprehensive general liability insurance (including operations, contingent liability,
operations of subcontractors, completed operations and contractual liability insurance)
together with an Owner's Contractor's Policy with limits against bodily injury and property
damage of not less than $1,000,000 for each occurrence (to accomplish the above-required
limits, an umbrella excess liability policy may be used).
(03) Worker's compensation insurance, with statutory coverage.
(04) Acceptance of insurance policies delivered pursuant to this Section 6.1 shall not bar
Lessor from requiring reasonable amounts of additional insurance which it deems necessary
to protect its interest in the Leasehold Property.
6.2) Insurance After Construction - Upon completion of construction of the Improvements,
Lessee shall maintain, or cause to be maintained, at its cost and expense, and from time to time at the
request of Lessor shall furnish proof of the payment of premiums on, insurance as follows:
(01) Insurance against loss and/or damage to the Improvements under a policy or policies
covering such risks as are ordinarily insured against by similar businesses, including (without
limiting the generality of the foregoing) fire, extended coverage, vandalism and malicious
mischief, boiler explosion, water damage, demolition cost, debris removal, and collapse in an
amount not less than the full insurable replacement value of the Improvements. No policy of
insurance shall be so written that the proceeds thereof will produce less than the minimum
coverage required by the preceding sentence, by reason of co-insurance provisions or
otherwise, without the prior consent thereto in writing by Lessor. The term "full insurable
replacement value" shall mean the actual replacement cost of the Improvements (excluding
foundation and excavation costs and costs of underground flues, pipes, drains and other
uninsurable items) and equipment. All policies evidencing insurance required by this
subdivision (01) with respect to the Improvements shall be carried in the names of Lessee and
Lessor, as their respective interests may appear, and shall contain standard clauses which
provide for any proceeds paid by an insurer to Lessee or Lessor and remaining after deducting
all expenses, including fees and disbursements of counsel, incurred in the collection of the Net
Proceeds resulting from claims for casualty thereunder to the Improvements for loss or
damage covered thereby to be made jointly payable to Lessee and Lessor.
(02) Comprehensive general public liability insurance, including personal injury liability
(with employee exclusion deleted), and automobile insurance, including owned, nonowned
and hired automobiles, against liability for injuries to persons and/or property, in the minimum
amount for each occurrence and for each year of $1,000,000, for public liability not arising
from ownership or operation of automobiles (or other motor vehicles), and in the minimum
amount of $100,000 for each occurrence and for each year for liability arising out of
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ownership or operation of automobiles (or other motor vehicles) and shall be endorsed to
show Lessor as additional insured.
(03) Such other insurance, including worker's compensation insurance respecting all
employees of Lessee, in such amount as is customarily carried by like organizations engaged
in like activities of comparable size and liability exposure.
6.3) Insurance Policies - All insurance required by this Article 6 shall be in form and
content satisfactory to Lessor and taken out and maintained in financially sound and responsible
insurance companies selected by Lessee which are authorized under the laws of Minnesota to assume
the risks covered thereby. Lessee will deposit annually with Lessor policies evidencing all such
insurance, or a certificate or certificates or binders of the respective insurers stating that such
insurance is in force and effect. Unless otherwise provided in this Article 6, each policy shall contain
a provision that the insurer shall not cancel or modify it without giving written notice to Lessee and
Lessor at least thirty (30) days before the cancellation or modification becomes effective. Not less
than fifteen (15) days prior to the expiration of any policy, Lessee shall furnish Lessor evidence
satisfactory to Lessor that the policy has been renewed or replaced by another policy conforming to
the provisions of this Article 6, or that there is no necessity therefor under the terms hereof. In lieu
of separate policies, Lessee may maintain a single policy, blanket or umbrella policies, or a
combination thereof, having the coverage required herein, in which event Lessee shall deposit with
Lessor a certificate or certificates of the respective insurers as to the amount of coverage in force
upon the Improvements.
6.4) Insurance Proceeds - Lessee will notify Lessor immediately in the case of damage to,
or destruction of, the Improvements or any portion thereof resulting from fire or other casualty.
(01) If the Improvements or any portion thereof are destroyed by fire or other casualty
Lessee shall, within thirty (30) days after such damage or destruction, proceed forthwith to
repair, reconstruct and restore the damaged Improvements to substantially the same condition
or utility value as they existed prior to the event causing such damage or destruction and, to
the extent necessary to accomplish such repair, reconstruction and restoration, Lessee will
apply the Net Proceeds of any insurance relating to such damage or destruction received by
Lessee from Lessor to the payment or reimbursement of the costs thereof.
(02) If Lessee is in compliance with the terms and conditions of this Lease Agreement, then
any Net Proceeds of insurance relating to such damage or destruction received by Lessor shall
be released from time to time by Lessor to Lessee upon the receipt of:
(a)
A certificate of an authorized representative of Lessee specifying the
expenditures made or to be made or the indebtedness incurred in connection
with such repair, reconstruction and restoration and stating that such Net
Proceeds, together with any other moneys legally available for such purposes,
will be sufficient to complete such repair, construction and restoration; and
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(b)
If Net Proceeds equal or exceed Ten Thousand Dollars ($10,000) in amount,
the written approval of such certificate by an independent engineer.
(03) Lessee shall complete the repair, reconstruction and restoration of the Improvements,
whether or not the Net Proceeds of insurance received by Lessee for such purposes are
sufficient to pay for the same.
(04) No destruction of or damage to the Improvements or any part thereof by fire or any
other casualty shall permit Lessee to surrender this Lease Agreement or shall relieve Lessee
from its liability to pay the full rent and Additional Rent and other charges payable under this
Lease Agreement or from any of its other obligations under this Lease Agreement; and Lessee
waives any rights now or hereafter conferred upon it by statute or otherwise to quit or
surrender this Lease Agreement or the Leasehold Property or any part thereof, or to any
suspension, diminution, abatement or reduction of rent or Additional Rent on account of any
such destruction or damage.
(05) Anything herein to the contrary notwithstanding if, during the last five (5) years of the
term hereof, the Improvements are so damaged by fire or otherwise that the cost of
replacement or restoration thereof shall exceed fifty percent (50%) of the then replacement
value of the Improvements or portion thereof so damaged, then Lessee may decline to rebuild
and this Lease Agreement shall terminate upon written notice by Lessee to Lessor. In the
event of any such termination, this Lease Agreement and the term hereof shall end as of the
effective date of such termination, the Net Proceeds shall be the property of Lessor and
Lessee shall have no right or claim with respect thereto. No such termination shall release
Lessee from any obligation hereunder for rent, Additional Rent, taxes and insurance premiums
accrued or payable for or during any period prior to the effective date of such termination,
and any prepaid rent, taxes and insurance premiums beyond the effective date of such
termination shall be adjusted.
ARTICLE 7.
THE IMPROVEMENTS
7.1) Construction - Lessee will construct the Improvements on the Leasehold Property and
in accordance with the Construction Plans approved by Lessor. Lessee shall begin construction of
the Improvements within thirty (30) days from the date on which Lessor approves the Construction
Plans, and shall diligently prosecute to completion the development of the Leasehold Property
through the construction of the Improvements thereon, and shall achieve Substantial Completion of
the Improvements no later than Lessee shall construct the Improvements
in a safe and secure manner that minimiz~,~ any risk of injury or damage to persons or property and
that causes the least possible disruption of the use of the adjoining city park. Lessee shall not cause
or permit the storage or deposit of any debris, equipment or materials on the adjoining city park
property.
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(01) If Lessee (or any successor or assign) shall, prior to Substantial Completion:
(a)
Default in or violate its obligations with respect to the construction of the
Improvements, or shall abandon or substantially suspend construction work,
and any default or violation, abandonment or suspension shall not be cured,
ended or remedied within thirty (30) days after written demand by Lessor so
to do, or does not provide evidence satisfactory to Lessor that such Event of
Default is not curable within thirty (30) days but will be cured as soon as
reasonably possible; or
(b)
Fail to pay the Impositions or any part thereof when due, or shall place
thereon any encumbrance or lien unauthorized by this Lease Agreement, or
shall suffer any levy or attachment to be made, or any materialmen's or
mechanic's liens, or any other unauthorized encumbrance or liens to attach,
and such Impositions shall not have been paid or the encumbrance or lien
removed or discharged, or provisions satisfactory to Lessor made for such
payments, removal or discharge, within thirty (30) days after written demand
by Lessor so to do; or
(c)
Sell or assign, in violation of this Lease Agreement, its interest in this Lease
Agreement, the Improvements, the Leasehold Property or any part thereof,
and such violation shall not be cured within thirty (30) days after written
demand by Lessor to Lessee, or does not provide evidence satisfactory to
Authority that such Event of Default is not curable within thirty (30) days but
will be cured as soon as reasonably possible; or
(d)
Fail to comply with any covenants under this Lease Agreement and fail to cure
any such noncompliance within thirty (30) days after written demand to do so,
or does not provide evidence satisfactory to Lessor that such Event of Default
is not curable within thirty (30) days but will be cured as soon as reasonably
possible; or
(e)
Default under the terms of a mortgage loan authorized by Lessor, for which
the mortgagee elects to pursue a remedy or expresses an intent to pursue a
remedy, and shall fail to cure such default within thirty (30) days after written
notice from Lessor to do so;
then Lessor shall have all of the rights set forth in Article 12 of this Lease Agreement.
7.2) Other Improvements - Lessee will not construct or reconstruct any improvements or
alter any existing improvements on the Leasehold Properly (other than the Improvements constructed
in accordance with approved Construction Plans) without the express prior written consent of Lessor.
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7.3) Operation and Use - At all times during the term of this Lease Agreement, Lessee will
operate and maintain the Improvements as a Boys and Girls Club for the purpose of providing
recreational and educational opportunities to the youth of the city of Elk River. The permitted uses
of the Leasehold Property are more particularly described on Exhibit B attached hereto and
incorporated herein by reference ("Permitted Use"). Lessee will not discriminate on the basis of race,
color, creed, national origin, or sex in the sale, lease, rental, or in the use or occupancy of the
Improvements or the Leasehold Property, or any part thereof. Lessee will not use or operate the
Leasehold Property in any manner that might interfere with the use and enjoyment of the adjacent real
property for public park and recreational purposes, or for any other purpose than a Permitted Use or
suspend or discontinue the use of the Leasehold Property, without Lessor's prior written consent.
7.4) Covenants Running With the Leasehold Property - It is intended and agreed that the
agreements and covenants set forth in this Article 7 shall be binding for the benefit and in favor of,
and enforceable by, Lessor, its successors and assigns, and any successor in interest to the Leasehold
Property, or any part thereof against Lessee, its successors and assigns, and every successor in
interest to the Leasehold Property, or any part thereof or any interest therein, and any party in
possession or occupancy of the Leasehold Property or any part thereof, for the Term of this Lease
Agreement.
In amplification, and not in restriction of, the provisions of this Article 7, it is intended and
agreed that Lessor and its successors and assigns shall be deemed beneficiaries of the agreements and
covenants provided herein, both for and in their own right, and also for the purposes of protecting
the interest of the community and the other parties, public or private, in whose favor or for whose
benefit these agreements and covenants have been provided. Such agreements and covenants shall
run in favor of Lessor without regard to whether Lessor has at any time been, remains, or is an owner
of the Leasehold Property or interest therein to, or in favor of, which such agreements and covenants
relate. Lessor shall have the right, in the event of any breach of any such agreement or covenant, to
exercise all the rights and remedies, and to maintain any actions or suits at law or in equity or other
proper proceedings to enforce the curing of such breach of agreement or covenant, to which it or any
other beneficiaries of such agreement or covenant may be entitled.
7.5) Liens - Lessee will: (a) duly and punctually pay for all labor performed and materials
furnished in connection with the construction of the Improvements; (b) keep the Leasehold Property
and every improvement thereon free and clear from all liens for labor performed and materials
furnished; provided, however, that Lessee shall not be required to pay any claim for labor performed
or materials furnished so long as Lessee shall contest, in good faith, the existence, amount or the
validity thereof by appropriate proceedings, which shall operate during the pendency to prevent a
breach of this Section 7.5; (c) defend, at its own cost and expense, each and every lien asserted or
filed against the Leasehold Property or any improvement thereon; and (d) indemnify and save Lessor
harmless from all and every claim, demand, action or cause of action (including fees of attorneys)
arising out of and connected with any act or omission occurring on the Leasehold Property or any
improvements thereon.
BURNIS 566679.3 10 of 22
7.6) Use in Compliance with Laws - Lessee shall not use or occupy the Leasehold Property
and Improvements or knowingly permit the Leasehold Property and Improvements to be used or
occupied contrary to any statute, rule, order, ordinance, requirement or regulation applicable thereto
or in any manner which would violate any certificate of occupancy affecting the same, or which would
cause structural injury to the Improvements or cause the value or usefulness of the Improvements and
Leasehold Property or any part thereof to substantially diminish (reasonable wear and tear excepted)
or which would con.st.itute a public or private nuisance or waste. Lessee shall promptly upon
discovery of any such use take all necessary steps to compel the discontinuance of such use.
7.7) Permits - Lessee shall maintain in force and effect all permits, licenses and similar
authorizations to use the Leasehold Property and Improvements for the aforesaid purposes required
by any governmental authority having jurisdiction over the use thereof. Lessee' s failure to maintain
such permits, licenses and similar authorizations shall not relieve Lessee from the performance of its
obligations and covenants hereunder (except obligations and covenants as may be prohibited by law),
nor from the obligations to pay rent or Additional Rent, as set forth herein. Lessee shall, at Lessor's
request, join with Lessor in executing, acknowledging and delivering any and all petitions, consents,
subordinations, plats, or easement deeds that may be required for the installation of any utilities,
Public improvements, roads, water lines, sewer lines, storm drainage facilities, subdivision, rezoning,
variance, special use, platting or other similar development of the Leasehold Property, which do not
affect Lessee's use of the Leasehold Property during the term of this Lease Agreement.
7.8) Compliance With Law - Lessee, at its sole expense, shall promptly comply with all
laws, ordinances and requirements or federal, state, county and municipal authorities, and with any
lawful order or direction of any public officer relating to the use and occupation of the Leasehold
Property and Improvements during the term of this Lease Agreement. Nothing herein contained,
however, shall prohibit Lessee from appealing from or contesting the validity or legality of such laws,
ordinances, requirements, orders or directions and, notwithstanding the foregoing provisions of this
article, Lessee shall not be deemed to be in default hereunder so long as Lessee diligently prosecutes
such appeal or contest.
7.9) Environmental Matters - Lessor knows of no wells, individual sewage treatment
systems or above ground or underground tanks located on the Leasehold Property; and Lessor knows
of no Hazardous Substances that have been generated, released, treated, stored, released or disposed
of, or otherwise placed, deposited in or located on the Leasehold Property. Lessee shall make its own
inspection of the Leasehold Property for Hazardous Substances and environmental matters, at its own
cost and expense, and is not relying on any reports or information regarding environmental matters
provided by Lessor. Lessee shall not, directly or indirectly, cause or permit the generation, treatment,
storage, release, disposal, placement deposit or location on the Leasehold Property of any Hazardous
Substances, or directly or indirectly undertake or permit activity on the Leasehold Property that
would cause or contribute to (i) the Leasehold Property's becoming a treatment, storage or disposal
facility within the meaning of, or otherwise bring the Leasehold Property within the ambit of, RCRA
or any similar federal or state law, regulation or local ordinance, (ii) a release or threatened release
or discharge of Hazardous Substances into any water source or system, (iii) the dredging or filling
of any waters, or otherwise cause or permit, by act or omission of Lessee, its employees, agents,
contractors, licensees, successors or assigns the violation of any present or future federal, state or
BURNIS 566679.3 1 1 of 22
local law, regulation or ordinance relating to Hazardous Substances or environmental matters. It is
the intent of the parties hereto that Lessee shall enjoy the use and possession of the long-term
leasehold estate created by this Lease Agreement, and shall be fully and solely responsible for all risks
associated with the present and future regulation of and all claims by any parties whatsoever relating
to environmental matters.
ARTICLE 8.
MAINTENANCE, REPAIRS AND ALTERATIONS
8.1) Maintenance. Repairs and Altcrati0n~ - Except as herein provided, Lessee shall during
the term of this Lease Agreement, at its sole cost and expense, keep and maintain the Leasehold
Property and Improvements and appurtenances and every part thereof in good order, condition and
repair, including without limitation, the sidewalks, parking lots, entrances, passages, courts,
vestibules, stairways, corridors, halls, elevators, air conditioning equipment, heating equipment, water
system, toilet facilities, all other machinery and equipment in the Building or located on the Leasehold
Property and interior and exterior painting. Except as herein provided, Lessee shall make all repairs
to the exterior of the Building, shall make all structural repairs and shall keep and maintain parking
lots and all landscaped areas in a neat, orderly and trim condition at its expense. If Lessee does not
keep and maintain the Leasehold Property and Improvements as herein provided, Lessor may, but
need not, make such repairs and replacements, and Lessee shall pay Lessor the cost thereof forthwith
upon being billed for the same. All damage or injury to the Leasehold Property or Building caused
by Lessee moving property in or out of the Building or by installation, removal of furniture, fixtures,
equipment or other property by Lessee, its agents, contractors, servants or employees, or resulting
from any other cause of any other kind or nature whatsoever due to carelessness, omission, neglect,
improper conduct or other causes of Lessee, its servants, employees, agents, visitors or licensees,
shall be repaired, restored or replaced promptly by Lessee at its sole cost and expense to the
satisfaction of Lessor. All repairs, restorations and replacements shall be in quality and class equal
to the original work. If Lessee fails to make such repairs, restorations or replacements, the same may
be made by Lessor and the same shall be at the expense of Lessee and collectible as Additional Rent
or otherwise, and shall be paid by Lessee to Lessor within five (5) days after rendition of a bill or
statement therefor.
ARTICLE 9.
CONDEMNATION
9.1) Participation in Award - If the Leasehold Property or any part thereof shall be taken
in condemnation proceedings or by exercise of any fight of eminent domain or by agreement between
Lessor, Lessee, and those authorized to exercise such right (any such matters being hereinafter
referred to as a taking), Lessor, Lessee and any person or entity having an interest in the award or
awards shall have the fight to participate in any such condemnation proceedings or agreement for the
purpose of protecting their interests hereunder. Each party so participating shall pay its own expenses
therein.
BURNIS 566679.3 12 of 22
9.2) Taking - If, at any time during the term of this Lease Agreement, there shall be a
taking of the whole or substantially all of the Leasehold Property, this Lease Agreement shall
terminate and expire on the date of such taking and the rent and Additional Rent hereunder shall be
apportioned and paid to the date of such taking. For the purpose of this Article "substantially all of
the demised premises" shall be deemed to have been taken if the untaken part of the demised premises
shall be insufficient for the economic and feasible operation thereof by Lessee for the purposes set
forth in this Lease Agreement.
(01) If this Lease Agreement shall have terminated as a result of such taking:
(a)
If at the time of such taking Lessee shall have erected or be engaged in the
erection of the Improvements, Lessee shall be entitled to that part of the
award which shall be specifically attributable by the condemnation court (or
condemnation commissioner or other body authorized to make the award) to
the Improvements (the "Improvements Award").
(b)
Lessor shall be entitled to the award for the Leasehold Property and for
consequential damages to and diminution of the assemblage or plottage value
of the Leasehold Property not so taken.
(c)
If this Lease Agreement is terminated as a result of such taking during the last
five (5) years of the term hereof, Lessor shall be entitled to the award for the
Leasehold Property and the entire Improvements Award and Lessee shall have
no interest in or fight to the Improvements Award.
(02) If this Lease Agreement is not so terminated, it shall remain unaffected except
(a)
The rent shall be reduced by an amount which bears the same proportion to
the annual rent immediately prior to the partial taking as the rental value of the
part of the Leasehold Property so taken bears to the rental value of the whole
Leasehold Property immediately prior to such taking.
(b)
Lessee shall, promptly after such taking and at its expense restore the
Improvements to a complete architectural unit.
(c)
Lessor shall be entitled to the award for the Leasehold Property taken and for
consequential damages to and diminution of the assemblage or plottage value
of the Leasehold Property not so taken.
(d)
If at the time of such taking Lessee shall have erected or be engaged in the
erection of the Improvements, the entire Improvements Award, as defined in
subdivision (a) of Section 9.2(01) hereof, shall be the property of Lessee. In
addition, Lessee shall be entitled to any award for consequential damages to
the part of the Improvements which shall be undertaken.
BURNIS 566679.3 13 of 22
(03) Lessee shall not be entitled to any payment based upon the value of the unexpired
term of this Lease Agreement or consequential damages to the Leasehold Property not so
taken, or the diminution of the assemblage or plottage value of the Leasehold Property not
so taken.
ARTICLE 10.
LESSOR'S ACCESS TO PREMISES
10.1) Lessor's Access - Lessee shall permit Lessor and the authorized representatives of
Lessor to enter the Leasehold Property and Improvements at all reasonable times for the purpose of
inspecting the same and making any necessary repairs to comply with any laws, ordinances, rules,
regulations or requirements of any public authority or of the Board of Fire Underwriters or any
similar board. Nothing herein shall imply any duty upon the part of Lessor to do any such work
which, under any provision of this Lease Agreement, Lessee may be required to perform and the
performance thereof by Lessor shall not constitute a waiver of Lessee's default in failing to perform
the same. Lessor may, during the progress of any work on the Leasehold Property and in the
Improvements, keep and store thereon and therein all necessary materials, tools and equipment.
Lessor shall not in any event be liable for inconvenience, annoyance, disturbance, loss of business or
other damage to Lessee by reason of making repairs or the performance of any work on the
Leasehold Property or in the Improvements, or on account of bringing materials, supplies and
equipment thereon or therein during the course thereof, and the obligations of Lessee under this
Lease Agreement shall not thereby be affected in any manner whatsoever. Lessor shall, however, in
connection with the doing of any such work cause as little inconvenience, annoyance, disturbance,
loss of business or other damage to Lessee as reasonably may be possible in the circumstances.
ARTICLE 11.
ASSIGNMENT AND SUBLETTING
1 1.1) Interests of Lessor - Lessor may convey its interest in the Leasehold Property to any
person or entity at any time and by whatever means chosen by Lessor, including without limitation
quit claim deed, contract for deed, or assignment of this Lease Agreement, without notice to or
approval b) Lessee.
11.2) Assignment by Lessee - Lessee shall not sell, assign, sublease, mortgage, pledge or
hypothecate, or otherwise transfer all or any part of its interest in this Lease Agreement or the
Improvements without the express written consent of Lessor. For the purpose hereof, any change
in the control of Lessee shall be deemed to be an assignment which shall require Lessor's consent.
No such assignment or subleasing shall relieve Lessee from any of its obligations contained in this
Lease Agreement, nor shall any assignment or transfer of this Lease Agreement be effective unless
the assignee or transferee shall, at the time of such assignment or transfer, assume in writing all the
terms, covenants and conditions of this Lease Agreement to be performed thereafter by Lessee and
shall agree in writing to be bound thereby. In the event that Lessee grants to any third party a license
for the use of all or any portion of the Improvements, which license shall be in writing and expressly
BURNIS 566679.3 14 of 22
and unilaterally revocable by either Lessee or Lessor for any reason, with or without cause, and which
license shall be for no longer than three (3) consecutive days, such license shall not be deemed an
assignment or transfer of Lessee's rights in violation of this Section 11.2. Lessee agrees to pay on
behalf of Lessor any and all costs of Lessor, including reasonable attorneys' fees, occasioned by such
any such assignment or transfer or by any such license.
11.3) Mortga~ng - Lessee may not give any person or entity a mortgage deed to or other
security interest in the Leasehold Property or Improvements, or any part thereof, without the express
written consent of Lessor.
(01) Lessor shall consent to Lessee's pledge of its rights and interests pursuant to this
Lease Agreement for one (1) construction mortgage loan to finance construction of the
Improvements on the general terms and conditions set forth on Exhibit C attached hereto and
incorporated herein by this reference, pursuant to documentation and additional or different
terms to be approved by Lessor at Lessor's sole reasonable discretion (the "Leasehold
Mortgage").
(02) In the event that the Lessee's proposed mortgagee for the Leasehold Mortgage
requires additional assurances by Lessor as a condition to making a commitment for the
Leasehold Mortgage, Lessor will give reasonable consideration to entering into an agreement
with said mortgagee (the "Mortgagee Agreement") in which Lessor agrees with said
mortgagee that, if said mortgagee institutes foreclosure proceedings pursuant to the
Leasehold Mortgage, Lessor will, upon the expiration of the applicable Lessee's right of
redemption pursuant to the Leasehold Mortgage, either (i) cure any default by Lessee
pursuant to the Leasehold Mortgage and assume Lessee' s obligations thereunder; or (ii) pay
the Leasehold Mortgage in full. The Mortgagee Agreement shall contain, among other
things, the provisions and conditions set forth on Exhibit D attached hereto and incorporated
herein by reference
(03) Lessor's agreement with Lessee hereunder regarding a Mortgagee Agreement is not
intended to constitute a present or future guaranty of any Leasehold Mortgage, and neither
Lessee nor any mortgagee pursuant to a Leasehold Mortgage shall have any rights or claims
against Lessor except as may arise pursuant to a fully executed Mortgagee Agreement that
complies with the terms and conditions stated on Exhibit D hereof.
ARTICLE 12.
EVENTS OF DEFAULT
12.1) Events of Default Defined - The following shall be "Events of Default" under this
Lease Agreement and the "Event of Default" shall mean, whenever used in this Lease Agreement, any
one or more of the following events:
BURNIS 566679.3 15 of 22
(01) Failure by Lessee to pay any rental payments or Additional Rents due under this Lease
Agreement;
(02) Failure by Lessee to construct the Improvements in accordance with the Construction
Plans, and in accordance with the terms of this Lease Agreement;
(03) Construction of improvements on the Leasehold Property other than the
Improvements, without the express written consent of Lessor;
(04) Suspending or discontinuing the use of the Improvements for the use specified in
Section 7.3 without the express written consent of Lessor;
(05) Failure to keep the Leasehold Property free and clear from all liens for labor
performed or materials furnished;
(06) Failure to pay any Impositions on the Leasehold Property;
(07) Failure to pay for two (2) consecutive months any charges for cleaning and building
services, gas, water, steam, electricity, light, heat, air conditioning, power, telephone, or other
service or utility used, rendered, or supplied to or in connection with the Leasehold Property
and Improvements;
(08) Failure to permit an inspection by Lessor as required in Article 10 of this Lease
Agreement;
(09) The execution of any conveyance, assignment, mortgage, contract or sublease by
Lessee in contravention of Article 11 of this Lease Agreement;
(10) Lessee is in default under any mortgage approved by Lessor pursuant to the terms of
the Lease Agreement; or
(11) Failure to comply with any other term, recital, or condition of this Lease Agreement.
12.2) Remedies on Default - Lessor may, but shall have no obligation to, exercise any one
or more of the following remedies after thirty (30) days' written notice to Lessee of the occurrence
of the Event of Default, but only if Lessee does not cure the Event of Default within such thirty (30)
days, or in the case of an Event of Default not capable of curing in thirty (30) days, does not
commence curing the Event of Default within thirty (30) days and diligently prosecute such curing
to completion:
(01) Terminate this Lease Agreement and the leasehold estate created in this Lease
Agreement and exclude Lessee from possession of the Leasehold Property, the
Improvements, and any other improvements thereon;
BURNIS 566679.3 16 of 22
(02) Reenter and take possession of the Leasehold Property without terminating this Lease
Agreement or the leasehold estate created in this Lease Agreement, sublease the Leasehold
Property, the Improvements (and any other improvements thereon) for the account of Lessee,
holding Lessee liable for any deficiency in rents;
(03) Cure any default by Lessee pursuant to any mortgage approved by Lessor pursuant
to this Lease Agreement and charge any sums paid in connection with curing such default as
Additional Rent payable by Lessee; or
(04) Take whatever action at law or in equity may appear necessary or appropriate to
collect rental payments or Additional Rent due under this Lease Agreement, or to obtain
performance and observance of any obligation, agreement or covenant to be performed by
Lessee under this Lease Agreement.
12.3) Exercise of Remedies - No remedy herein conferred upon or reserved to Lessor is
intended to be exclusive of any other available remedy or remedies, but each and every such remedy
shall be cumulative and shall be in addition to every other remedy given under this Lease Agreement
or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any
remedy shall be construed to be a waiver of the right to exercise such remedy. No waiver of the right
to exercise any particular remedy shall be construed to be a waiver of the right to exercise any other
remedy. No waiver of the exercise of all remedies with respect to an Event of Default shall be
construed to be a waiver of any remedies with respect to any other Event of Default.
ARTICLE 13.
SURRENDER
13.1) Surrender - Except as is herein otherwise provided, Lessee shall on the last day of the
Term or upon any earlier termination of this Lease Agreement, surrender and deliver up the
Leasehold Property and the Improvements to the possession and use of Lessor without delay and in
good order, condition and repair, except for reasonable wear and tear after the last necessary repair,
replacement, restoration or renewal made by Lessee, pursuant to its obligations hereunder, free and
clear of all lettings and occupancies other than subleases then terminable at the option of the lessor
thereof, and free and clear of all liens and encumbrances other than those, if any, presently existing
or created or suffered by Lessor, without any payment or allowance whatever by Lessor on account
of any improvements which may be on the Leasehold Property.
(01) Where furnished by or at the expense of Lessee or any subtenant, furniture, trade
fixtures and business equipment may be removed by Lessee at or prior to the termination of
this Lease Agreement or by such subtenant at or prior to the termination of its s~blease,
provided, however, that the removal thereof will not injure the Leasehold Property or the
Improvements or necessitate changes in or repairs to the same. Lessee shall pay or cause to
be paid to Lessor the cost of repairing any damage arising from such removal and restoration
of the Leasehold Property and Improvements to their condition prior to such removal.
BURNIS 566679.3 17 of 22
(02) Any personal property of Lessee or any subtenant which shall remain in the
Improvements or on the Leasehold Property at~er the termination of this Lease Agreement
and the removal of Lessee or such subtenant from the Improvements or Leasehold Property
may, at the option of Lessor, be deemed to have been abandoned by Lessee or such subtenant
and either may be retained by Lessor as its property or be disposed of, without accountability,
in such manner as Lessor may see fit, or if Lessor shall give written notice to Lessee to such
effect, such property shall be removed by Lessee at Lessee's sole cost and expense.
(03) If this Lease Agreement shall terminate pursuant to Section 6.4(05) or Section 9.2
hereof, then, notwithstanding Sections 14.1(01) and 14.1(02) hereof, Lessee or any subtenant
shall have a reasonable time thereafter to remove any property which it shall be entitled to
remove pursuant to Section 14.1 (02) hereof.
(04) Lessor shall not be responsible for any loss or damage occurring to any property
owned by Lessee or any subtenant.
ARTICLE 14.
MISCELLANEOUS
14.1) Indemnification of Lessor - Except with respect to willful misconduct by Lessor, its
agents or employees, Lessee will indemnify and hold harmless Lessor, its governing body members,
officers, agents and employees, from and against any claims, losses, or damages of any kind
whatsoever (including fees of attorneys) arising from Lessee's use of the Leasehold Property,
Improvements and Building (including any claims, losses or damages arising from any sublessee's or
occupant's use of such property) or arising from any actions taken by any person or entity pursuant
to this Lease Agreement. In particular, Lessee shall defend, indemnify and hold Lessor (and its
governing body members, officers, agents and employees) from and against any claims, losses, or
damages arising from: any defect in the Leasehold Property; any act, failure to act, or negligence of
any person resulting in damages or harm to any person on or about the Leasehold Property; any
failure of Lessee to perform its obligations pursuant to Section 7.9 hereof, or any actions taken by
Lessor (or its governing body members, officers, agents or employees) in good faith with respect to
the Leasehold Property.
In case any action or proceeding is brought against Lessor by reason of any such claim, Lessee
upon notice from Lessor shall resist or defend such action or proceeding by counsel reasonably
satisfactory to Lessor.
14.2) Estoppel Certificate - Lessee and Lessor shall, at any time and from time to time upon
not less than twenty (20) days' prior notice by one party to the other, execute, acknowledge and
deliver a statement in writing certifying that this Lease Agreement is unmodified and in full force and
effect (or if there shall have been modifications that this Lease Agreement is in full force and effect
as modified and stating the modifications) and the dates to which the rent and Additional Rent have
been paid in advance, if any, and stating whether or not (to the best knowledge of Lessor and Lessee)
Lessor or Lessee is in default in the performance of any covenant, agreement or condition contained
BURNIS 566679.3 18 of 22
in this Lease Agreement and, if so, specifying each such default of which Lessor or Lessee may have
knowledge, it being intended that any such statement delivered pursuant to this Article shall be in a
form approved by and may be relied upon by any prospective assignee ofLessor's or Lessee's interest
in the Lease or any mortgagee of the Leasehold Property or any assignee of any mortgage upon the
Leasehold Property.
14.3) Subordination - This Lease Agreement shall, at Lessor's election, be subject and
subordinate to the terms and conditions of all mortgages which may now or hereafter encumber the
Leasehold Property and to all renewals, modifications, consolidations, replacements and extensions
of such mortgages. In confirmation of such subordination, Lessee shall promptly execute any
certificate of subordination or other such documents which Lessor or its mortgagees may request.
14.4) Entire Agreement - This Lease Agreement contains the entire agreement between the
parties, and there are no other terms, obligations, covenants, representations, statements or
conditions, oral or otherwise, of any kind whatsoever. Any agreement hereafter made shall be
ineffective to change, modify, discharge or effect an abandonment of this Lease Agreement in whole
or in part unless such agreement is in writing and signed by the party against whom enforcement of
the change, modification, discharge or abandonment is sought.
14.5) Release 0f Lessor - If Lessor sells or otherwise transfers all of its interest in the
Leasehold Property, Lessor shall, without further action by any party, be released and discharged
from any further obligations or duty under this Lease Agreement, and no claim or demand upon
Lessor shall thereafter be made by Lessee arising out of any obligation or duty of Lessor hereunder.
Upon request by Lessor, Lessee shall execute an attornment agreement with such transferee in form
satisfactory to Lessor's transferee.
14.6) Severability - If any term, condition or provision of this Lease Agreement or the
application thereof to any person or circumstance shall, to any extent, be held to be invalid or
unenforceable, the remainder thereof and the application of such terms, provisions and conditions to
persons or circumstances other than those as to whom it shall be held invalid or unenforceable shall
not be affected thereby, and this Lease Agreement and all the terms, provisions and conditions hereof
shall, in all other respects, continue to be effective and to be complied with to the full extent permitted
by law.
14.7) Headings - The headings incorporated in this Lease Agreement are for convenience
in reference only and are not a part of this Lease Agreement and do not in any way limit or add to the
terms and provisions hereof.
14.8) Not Partnership or Joint Venture - Lessor and Lessee agree that this Lease Agreement
is not intended to be nor shall it be construed as a joint venture or partnership between Lessor and
Lessee, nor a loan from Lessor to Lessee. Nothing contained in this Lease Agreement, or in any
other document or instrument made in connection with this transaction, shall be deemed or construed
to create a partnership, loan, tenancy-in-common, joint tenancy, joint venture, other common
enterprise, or co-ownership by or between Lessor and Lessee. Lessor and Lessee have been
BURNIS 566679.3 19 of 22
represented by experienced legal counsel who have advised each of the rights and duties of a lessor
and lessee.
14.9) Binding Effect - All of the covenants, conditions and agreements herein contained shall
extend to, be binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Lessor and Lessee expressly disclaim, on their own behalf and on behalf of
their respective successors and assigns, any intent that a third party, claiming independently or by or
under the Lessor or Lessee, shall benefit from or have any rights whatsoever relating to the provisions
in this Lease Agreement regarding the Mortgagee Agreement or any other or similar agreement that
Lessor and Lessee may hereafter make.
14.10) Ouiet En_ioyment - Lessor represents and warrants that it is the lawful owner of the
Leasehold Property; that it has the full right and power to make this Lease Agreement; that if and so
long as Lessee shall not be in default hereunder, Lessee shall quietly hold, occupy and enjoy the
Leasehold Property during all of the term of this Lease Agreement.
14.11) Notices - Any notice required or permitted to be given shall be deemed to be given
when mailed by United States registered or certified mail, postage prepaid, properly addressed to the
address provided below. Lessor shall give Lessee a copy of any notice served, delivered or mailed
to Lessor which, in any manner, affects Lessee's interests in the Leasehold Property. Unless and until
changed by notice as herein provided, notices shall be addressed as follows:
To Lessor:
City of Elk River
13065 Orono Parkway
P.O. Box 490
Elk River, Minnesota 55330
Attn: City Administrator
With a copy to:
David C. Sellergren
Doherty, Rumble & Butler, P.A.
3500 Fifth Street Towers
150 South Fifth Street
Minneapolis, Minnesota 55402
To Lessee:
Boys and Girls Club of Elk River, Inc.
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IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Agreement to be
executed as of the date first above written.
THE CITY OF ELK RIVER
By:
Its: Administrator
THE BOYS AND GIRLS CLUB OF
ELK RIVER, INC.
By:
Its:
By:
Its:
STATE OF MINNESOTA )
) SS.
COUNTY OF )
The foregoing instrument was acknowledged before me this __ day of ., 199_, by
, the Administrator of The City of Elk River, a public body
corporate under the laws of the State of Minnesota, on behalf of said public body corporate.
Notary Public
BURNIS 566679.3 2 1 of 22
STATE OF MINNESOTA )
COUNTY OF )
The foregoing instrument was acknowledged before me this day of ,199_, by
and ., the
and ., respectively, of the Boys and Girls Club of Elk River, Inc., a
Minnesota nonprofit corporation, on behalf of the corporation.
Notary Public
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EXHIBIT A
Legal Description
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EXHIBIT B
Permitted Uses
Construction of the Improvements
Construction of a parking area containing sufficient parking spaces and handicapped parking
facilities, in Lessor's discretion, to provide public access to the Building
Use of the Improvements as a Boys and Girls Club for the education, recreation and social
development of the youth of the City of Elk River and the surrounding area
BURNIS 566679.3 B- 1
EXHIBIT C
Leasehold Mortgage Terms and Conditions
The Leasehold Mortgage shall be expressly subordinate to Lessor's rights pursuant to this Lease
Agreement.
The original principal balance of the Leasehold Mortgage shall be no more than Four Hundred Forty-
One Thousand Dollars ($441,000.00).
The Leasehold Mortgage shall be solely for purposes of construction of the Improvements on the
Leasehold Property by Lessee. The Leasehold Mortgage may convert to a permanent mortgage loan
upon Substantial Completion of the Improvements, so long as the term of the construction mortgage
loan and permanent mortgage loan, together, does not exceed fifteen (15) years and payments on the
permanent mortgage loan are evenly amortized at a fixed rate of interest. There shall be no premium
or penalty of any kind payable in connection with a full or partial prepayment of the Leasehold
Mortgage.
The mortgagee of the Leasehold Mortgage' shall agree not to assign or transfer all or any portion of
its fights and interests in and to the Leasehold Mortgage without Lessor's prior written consent.
The loan-to-value ratio of the Leasehold Mortgage shall be no more than seventy percent (70%),
based on a projected appraisal of the Improvements (excluding the value of the Leasehold Property)
conducted by an appraiser approved by Lessor within sixty (60) days prior to the closing of the
Leasehold Mortgage.
The debt service ratio for all of Lessee's debts, including the Leasehold Mortgage, shall be 1.15/1.0
or better, based on pro-forma post-tax operating revenues and current financial statements of the
Lessee certified to Lessor and the mortgagee of the Leasehold Mortgage by an independent certified
public accountant within thirty (30) days prior to the closing of the Leasehold Mortgage.
The Lessee shall be required to make monthly escrow payments for taxes and property and liability
insurance.
BURNIS 566679.3 C- 1
EXHIBIT D
Mortgagee Agreement Terms and Conditions
The Mortgagee Agreement shall contain, among other things, the following terms, provisions and
conditions:
The following basic terms:
The parties shall agree that nothing contained therein shall be intended or construed as a
subordination of Lessor's interests in the Leasehold Property to the Leasehold Mortgage,
including without limitation Lessor's option to reenter and sublease the Leasehold Property
pursuant to Section 12.2 of the Lease Agreement and all of Lessor's rights relating to
remedies set forth in Article 12 thereof.
The decision whether to cure a default and assume the Lessee's obligations or pay the
Leasehold Mortgage in full shall be at Lessor's sole discretion, and the mortgagee and Lessee
shall agree to accept a decision by Lessor to cure and assume the Leasehold Mortgage.
Lessor may, at its sole reasonable discretion, elect to sublet the Leasehold Property to a
sublessee of its choice, provided that such sublessee meets the mortgagee's reasonable credit
requirements and agrees to assume the obligations of the Lessee pursuant to the Leasehold
Mortgage.
The Lessee shall execute the Mortgagee Agreement, consenting to its terms and agreeing to
waive and hold harmless Lessor as to any claims, actions or rights Lessee may have in
connection with the Mortgagee Agreement, the Leasehold Mortgage, or Lessor's potential
cure and assumption or repayment of the Leasehold Mortgage pursuant to the terms of the
Mortgagee Agreement. The Mortgagee Agreement shall state that Lessee has obtained the
advice of legal counsel regarding the impact of the Mortgagee Agreement on its rights and
obligations pursuant to the Leasehold Mortgage and the Lease Agreement.
The Mortgagee Agreement shall expire upon the earlier of the following occurrences: (i)
Lessee's repayment in full of the Leasehold Mortgage; (ii) modification or amendment of the
terms of the Leasehold Mortgage without Lessor's prior written consent; (iii) the sum of all
amounts necessary to pay in full (including without limitations principal, accrued interest,
taxes, and insurance) the Leasehold Mortgage shall exceed Four Hundred Forty-One
Thousand Dollars ($441,000.00); (iv) the Leasehold Property or any part thereof shall have
been taken in condemnation proceedings or by exercise of any right of eminent domain or by
agreement, (v) the mortgagee or Lessee shall have assigned all or any part of its interests in
the Leasehold Mortgage or the Leasehold Property without Lessor's prior written consent,
(vi) the maturity date stated on the note evidencing the debt secured by the Leasehold
Mortgage, or (vii) the expiration of the term of the Lease Agreement.
BURNIS 566679.3 D-1
The mortgagee of the Leasehold Mortgage shall agree to waive and hold Lessor harmless
from any and all other rights, claims or actions that said mortgagee, or parties claiming by or
under it, may have against Lessee in connection with the Leasehold Mortgage or otherwise.
The following conditions to Lessor's obligations thereunder:
The Improvements shall be Substantially Complete, all sums for costs of construction of the
Improvements shall have been disbursed by the mortgagee, there shall be no other unpaid
claims or liens, including claims or liens for materials or labor against the Leasehold Property,
and there shall be no claims or liens for unpaid Impositions affecting the Leasehold Property.
The Improvements and the Leasehold Property shall be in good condition, satisfactory to
Lessor in its sole reasonable discretion, based upon soils condition tests, environmental
analyses, engineering reports, surveys and other analyses and documentation obtained by
Lessor at its sole discretion.
No event of default shall have occurred pursuant to the Leasehold Mortgage that is not a
monetary default due to the failure of Lessee to pay principal and interest, and taxes and
insurance escrow due thereunder as and when due;
Lessor shall have successfully terminated Lessee's rights pursuant to this Lease Agreement,
prior to the expiration of Lessee's statutory right of redemption pursuant to the Leasehold
Mortgage, and there shall be no unresolved claims, actions or demands by Lessee against
Lessor with respect to such termination;
Lessee and the mortgagee of the Leasehold Mortgage shall provide to Lessor a written
construction cost certification certified by Lessee, the mortgagee and Lessee's contractor,
setting forth the total amount of all Leasehold Mortgage loan proceeds expended for
construction of the Improvements.
The loan-to-value ratio of the Leasehold Mortgage shall be no more than seventy percent
(70%) based on an as built appraisal certified to Lessor of the value of the Improvements
(excluding the value of the Leasehold Property) prepared by an appraiser chosen by Lessor.
The City Council for the City of Elk River shall have approved the terms of the Mortgagee
Agreement, based on an opinion of its legal counsel that the Mortgagee Agreement its within
the scope of its statutory authority and does not conflict with or constitute a default pursuant
to any other law, statute or ordinance or agreement to which it is subject or to which it is a
party.
BURNIS 566679.3 D-2