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8.1. SR 04-18-2016 Eclty1� ,.,�� Request for Action River To Item Number Mayor and City Council 8.1 Agenda Section Meeting Date Prepared by General Business Aril 18, 2016 Cal Portner, City Administrator Item Description Reviewed by Boys & Girls Club of Elk River Commercial Real Estate Loan Support Request Reviewed by Action Requested Adopt,by motion, a resolution approving a Commercial Real Estate Loan by the Boys & Girls Club of Elk River. Background/Discussion The Boys & Girls Club of Elk River (B&GCER) has requested the City of Elk River provide a resolution of support for a new$60,000 Commercial Real Estate Loan secured by all business assets of the B&GCER and a 2nd Real estate mortgage and Assignment of Ground Lease for the property located at 905 6th Street NW. The loan requires written consent of the lessor (The City of Elk River) per the terms of the ground lease agreement dated March 16, 1999. B&GCER President/CEO Ricky Solomon will be in attendance to answer any questions. The loan is for working capital with a maturity date of 6/11/2019. Loan terms including interest rate, maturity and amortization will match the existing loan, currently 5% fixed interest with a maturity date (balloon date) of 6/11/19 with approximately 13 years left on the amortization. Under the original loan of$400,000+ in 1999, the city entered into a Mortgagee Agreement that would require the city to take over the payments of the loan under certain circumstances (the lease would terminate as part of the agreement). This agreement would apply to the modification of the original 2014 loan which had a remaining principal amount at the time of approximately$130,000. The terms do not include a bank request for a similar Mortgagee Agreement for this second loan. According to the city attorney,if that is the case, the only concern is that the club is financially able to take on the additional debt and make its payments under the original loan so that the city isn't at risk under the first Mortgagee Agreement. If the bank is proposing a second Mortgagee Agreement, then the city is at risk for $60,000 in addition to the amounts under the original loan and will need to consider a variety of issues that aren't yet identified (e.g. under what terms would the city subject itself to retaking the property and taking on the additional$60,000 debt). Financial Impact No risk to the city, assuming that the BGCER is in a financial position to repay the loans so that the first loan doesn't go into default. POWERED 6T AR Attachments ■ Ground Lease ■ May 19, 2014, Loan Request Staff Report ■ Resolution N:APublic Bodies\Agenda Packets\04-18-2016\Final\x8.1 sr Bops n Girls Club.docx GROUND LEASE AGREEMENT THIS LEASE AGREENIENT is made on or as of the L day of 0.6, 199 7, 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) Definitions- In this Lease Agreement, unless a different meaning clearly appears from the context: (01) "Additional Rent" means all sums payable by Lessee in connection with its occupancy of the Leasehold Property and the Easement Parcel 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 7.3 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) "Easement Agreement" means the Easement Agreement between Lessor and Lessee of even date herewith. (06) "Easement Parcel" means the real property adjacent to the Leasehold Property as to which Lessor has granted an easement to Lessee pursuant to the Easement Agreement. (07) "Event of Default" means an action by the Lessee listed in Section 13.1 of this Lease Agreement. BURNIS 566679.5 (08) "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 a claim or cause of action under the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Sec. 6901 et 5tq., 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 gt or the Clean Air Act, 42 U.S.C. Sec. 7401 et ems., 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. I I 5 ("MERLA")or the Minnesota Petroleum Tank Release Cleanup Act, Minn. Stat. I I5C; 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. (09) "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. (10) "Leasehold Property" means the real property described in Exhibit A of this Lease Agreement. (11) "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 Six Hundred Thirty Thousand Dollars ($630,000.00). 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 BURNIS 566679.5 2 of 23 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 Lease Agreement shall be subject to the terms, covenants, agreements and conditions of this Lease Agreement. 2.3) Rental Payments 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" to 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 BURNS 566679.5 3 of 23 `t 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. 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 Assessments - 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 BURNIS 566679.5 4 of 23 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 shall hold Lessor harmless against 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, furnish 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 1313RNIS 566679.5 5 of 23 insurance required by this subdivision (0 1) 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 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 I3URNIS 566679.5 6 of 23 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 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 BURNIS 566679.5 7 of 23 t Proceeds, together with any other moneys legally available for such purposes, will be sufficient to complete such repair, construction and restoration; and (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 December 31, 1999. Lessee shall construct the Improvements in a safe and secure manner that minimizes 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 BURNIS 566679.5 8 of 23 permit the storage or deposit of any debris, equipment or materials on the adjoining city park property. (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 Property(other than the Improvements constructed in accordance with approved Construction Plans)without the express prior written consent of Lessor. nURN[S 566679.5 9 of 23 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 and the surrounding area. 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 566679.5 10 of 23 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 constitute 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, wafer 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 566679.5 11 of 23 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 Alterations-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. Lessee shall also make all payments required for reimbursement of Grantor's costs of maintenance and repair of the Easement Parcel and shall repair or rebuild the Easement Parcel as required under the Easement Agreement. All payments for the costs of such maintenance and repair or rebuilding that become payable by Lessee to Lessor under the Easement Agreement shall be collectible as Additional Rent, at Lessor's option, and shall be payable 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 right of eminent domain or by agreement between Lessor, Lessee, and those authorized to exercise such right (any such matters being hereinafter BURNIS 566679.5 12 of 23 referred to as a taking), Lessor, Lessee and any person or entity having an interest in the award or awards shall have the right 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. 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 right 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. BURNIS 566679.5 13 of 23 (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. (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 11.1) 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 by Lessee, except as set forth in Section 11.2 below. 11.2) Right of First Refusal - For the additional consideration of the sum of one Dollars($1.00) and other good and valuable consideration, receipt of which is acknowledged, Lessor hereby grants to Lessee a contingent right of first refusal to purchase the Leasehold Property. Lessee's contingent right of first refusal shall not arise unless and until (a) Lessor has entered into a 13URNIS 566679.5 14 of 23 binding agreement to sell all of its right, title and interest in and to the Leasehold Property to a private, for-profit entity or organization or to an individual or individuals, which agreement provides that the sale of the Leasehold Property will be consummated during the term of this Lease Agreement (a"Sale Agreement"), and(b)the Improvements are Substantially Complete. The terms of Lessee's contingent right of first refusal and the procedures that Lessee must follow to exercise such right of first refusal are provided below: (01) Lessor shall notify Lessee in writing within ten (10) business days of the date on which Lessor executes a Sale Agreement, and shall notify Lessee of all of the pertinent provisions of the Sale Agreement. Lessee shall have ten (10) business days from the date of delivery of Lessor's notice, which shall be in the manner provided at Section 14.11 hereof, in which to exercise its contingent right of first refusal (the"Refusal Period"). (02) Lessee may exercise its right of first refusal only by delivering to Lessor a non- contingent written offer, signed by Lessee, to purchase the Leasehold Property on the same terms as provided in the Sale Agreement ("Lessee's Offer"). If Lessee does not deliver Lessee's Offer within the Refusal Period for any Sale Agreement, Lessee's right of first refusal with respect to that Sale Agreement shall expire automatically at midnight of the last day of the Refusal Period, and Lessor shall thereafter have the unrestricted right to sell the Leasehold Property pursuant to the Sale Agreement. (03) Lessor and Lessee agree that Lessee shall have no right of first refusal in connection with any offer or agreement regarding (a) any transfer, pledge, assignment, conveyance or sale of a part, but not all, of Lessor's right, title or interest in and to the Leasehold Property; or(b)any transfer, pledge, assignment, conveyance or sale of any part or all of Lessor's right, title or interest in and to the Leasehold Property to a public body or state or federal political subdivision or agency, or any public or private nonprofit organization or entity; or (c) any such transfer, pledge, assignment, conveyance or sale of any kind pursuant to an agreement providing that the consummation of the transaction will occur after the expiration of the term of this Lease Agreement. (04) Lessee's contingent right of first refusal hereunder shall expire and terminate automatically upon the first to occur of (a) the expiration of the term of this Lease Agreement, whether pursuant to its terms or as a result of Lessor's exercise of its rights pursuant to Article 12 hereof; or(b)consummation of Lessor's sale of the Leasehold Property pursuant to a Sale Agreement or pursuant to an agreement that is other than a Sale Agreement, or(c)the occurrence of an Event of Default. Upon such expiration of Lessee's right of first refusal, Lessee shall have no further rights whatever to purchase the Leasehold Property. 11.3) 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, including without limitation its Right of First Refusal described in Section 11,2 hereof, 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 BURNIS 566679.5 15 of 23 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 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. 11.4) Mortgagine- 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. BURNIs 566679.5 16 of 23 1 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: (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 transfer, conveyance, assignment, mortgage, contract or sublease by Lessee in contravention of Article I 1 of this Lease Agreement; (10) Default by Lessee under any mortgage approved by Lessor pursuant to the terms of the Lease Agreement or under the Easement Agreement between Lessor and Lessee of even date herewith; 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) BURNIS 566679.5 17 of 23 r 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; (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. BURNIS 566679,5 18 of 23 (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 sublease, 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. (02) Any personal property of Lessee or any subtenant which shall remain in the Improvements or on the Leasehold Property after 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, notwithstatlding 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. 13URNIS 566679.5 19 of 23 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 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 of Lessor'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, including without limitation Lessee's Right of First Refusal pursuant to Section 11.2 hereof, shall 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 of 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. BURNIS 566679.5 20 of 23 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 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) Quiet Enjoyment - 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, MN 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, MN 55402 To Lessee: Boys and Girls Club of Elk River, Inc. 905 Sixth Street Elk River, MN 55330 Attn: John Fitzgerald BURNIS 566679.5 21 of 23 14.12) Memorandum of Lease. The Lessor and Lessee shall, at the time of execution of this Lease Agreement, execute a Memorandum of Lease setting forth all of the pertinent terms and provisions of this Lease Agreement, which shall be in recordable form and recorded in the real property records of the County of Sherburne, State of Minnesota. 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 i By: Its: Administrator THE BOYS AND GIRLS CLUB OF ELK RIVER, INC. By: ,&t4� Its: 7t"L-� 13UIZNIs 566679.5 22 of 23 STATE OF MINNESOTA ) ) ss. COUNTY OF ) The fore in ' s rument was acknowledged before me this z6 day of 199_, by , the Administrator of The City of Elk River, a public body corporate under the 1 ws of the State of Minnesota, on behalf of said public body corporate. ISDEBORAH KAY KLECKNER NOTARY PUBLIC-MINNESOTA NlY COMMISSION EXPIRES 1-31-00 Notary Public STATE OF MINNESOTA ) ) ss. COUNTY OF ) The foregoing instrument was acknowledged before me this l6`qday of �2c:rz �- 199_T by T 3,^'j3( r,t *4-4-._ , the 'Tr c ez r v.- e �- of the Boys and Girls Club of Elk River, Inc., a Minnesota nonprofit corporation, on behalf of the corporation. D. FiTKERALD,JR. LOJOHN NOTARY PUBLIC-MINNESOTA Not Public SHERBURNE COUNTYy Co;�r:i;x:�n xoirEs Jan.31,2000 BURNIS 566679.5 23 of 23 EXHIBIT A Legal That part of the North 95.00 feet of the South 420.00 feet, lying west of a line 495.00 feet west of, and parallel with, the centerline of Jackson Avenue (formerly known as "old Highway No. 169" and State Trunk Highway No. 201), and lying east of a line 713.00 feet west of, and parallel with, said centerline of Jackson Avenue; all as measured at right angles, and all being part of the Southwest Quarter of the Northwest Quarter of Section 34, Township 33, Range 26, Sherburne County, Minnesota. BURN1S 566679.5 A-1 EXHIBIT B Permitted Uses Construction of the Improvements Construction of a parking area on the Easement 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 566679.5 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 rights 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. 13URNIS 566679.5 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 choice of whether: (i) to cure a default and assume the Lessee's obligations; or (ii) to pay the Leasehold Mortgage in full as described in Section 11.4(02) of the Ground Lease Agreement 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 566679.5 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. • 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 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; • The City Council for the City of Elk River shall have approved the terms of the Mortgagee Agreement. nURNIS 566679.5 D-2 . 880742 "11,EIIE E CEPUTY '90 MR 24 P11 1 48 12 MEMORANDUM OF GROUND LEASE AGREEMENT THIS MEMORANDUM OF GROUND LEASE AGREEMENT is made on the day of NC-CCL, , 1999, 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 have, on �:,-�.1, t> ,/S 5 S' , entered into a Ground Lease Agreement pursuant to which Lessor has leased to Lessee the real property described below located in the City of Elk River, County of Sherburne, State of Minnesota: That part of the North 95.00 feet of the South 420.00 feet, lying west of a line 495.00 feet west of, and parallel with, the centerline of Jackson Avenue (formerly known as "old Highway No. 169" and State Trunk Highway No. 201), and lying east of a line 713.00 feet west of, and parallel with, said centerline of Jackson Avenue; all as measured at right angles, and all being part of the Southwest Quarter of the Northwest Quarter of Section 34, Township 33, Range 26, Sherburne County, Minnesota (the"Leasehold Property"). The terms of said Ground Lease Agreement include, without limitation, the following: 1. Term of the Lease. The term of the Lease expires thirty (30) calendar years from the date of the Ground Lease Agreement; provided, however, that so long as no Event of Default has occurred and remains uncured pursuant to the Ground Lease Agreement the Lessee shall have the right to extend the term thereof for two (2) consecutive periods of ten (10) years each by providing to Lessor written notice of Lessee's intent to extend ninety (90) days prior to the expiration of the original term of the Ground Lease Agreement, and thereafter upon providing Lessor such written notice within ninety (90) days prior to the expiration of the first extension of said term. BURNIS 586141.2 -1- 386072 2. Improvements. Lessee agrees to construct a building and other improvements for operation and use as a Boys and Girls Club for the purpose of providing recreational and educational opportunities to the youth of the City of Elk River and the surrounding area. Lessee agrees to commence construction of such improvements within thirty (30) days from the date of Lessor's approval of the Construction Plans therefor (as defined in the Ground Lease Agreement), and to achieve Substantial Completion of such improvements (as defined in the Ground Lease Agreement) no later than December 31, 1999, 3. Rentals. The Ground Lease Agreement is a net lease. The base rent for the entire term thereof is One Dollar($1.00). Lessee is responsible for payment, as additional rent, of all costs and expenses of whatever character or kind, general and special, ordinary and extraordinary, foreseeable and unforeseeable, and of every kind and nature whatsoever that may be necessary in or about the operation of the Leasehold Property and improvements. 4. Permitted Uses. The permitted uses of the Leasehold Property are restricted to: a. Construction of the improvements; b. Construction of a parking area on an Easement Area described in that certain Parking and Access Easement dated as of the date of the Ground Lease Agreement between the parties hereto containing sufficient parking spaces and handicap parking facilities, in Lessor's discretion, to provide public access to the improvements; and C. 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. 5. Covenants Running with the Leasehold Property. The agreements and covenants set forth in the Ground Lease Agreement are binding upon and inure to the benefit of and are enforceable by the 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 the Ground Lease Agreement, 6. Assignment and Subletting. The Lessor may convey its interest in the Leasehold Property without notice to or approval by Lessee, except as set forth pursuant to a contingent right of first refusal in Lessee to purchase the Leasehold Property which is in effect only in the event that Lessor has entered into a binding agreement to sell all of its right, title and interest in and to the Leasehold Property to a private, for-profit entity or organization or to an individual or individuals, which agreement provides that the sale of the Leasehold Property will be consummated during the term of this Lease Agreement, and the improvements are Substantially Complete. Lessee has no right of first refusal in connection with any offer or agreement regarding a transfer of part, but not all, of Lessor's right, title or interest in and to the Leasehold Property, or any transfer of any part or all of Lessor's right, title or interest in and to the Leasehold Property to a public body or state or federal political subdivision or agency, or any public or private nonprofit organization or entity, or any such BURNIS 586141.2 -2- 38607 transfer of any kind pursuant to an agreement providing that the consummation of the transaction will occur after the expiration of the term of the Ground Lease Agreement. Lessee's contingent right of first refusal expires automatically upon the first to occur of(a) the expiration of the term of the Ground Lease Agreement, whether pursuant to its terms or as a result of Lessor's exercise of its rights thereunder; or (b) consummation of Lessor's sale of the Leasehold Property pursuant to an agreement as to which Lessee has no right of first refusal thereunder; or (c) the occurrence of an Event of Default as defined in the Ground Lease Agreement. Upon expiration of Lessee's contingent right of first refusal, Lessee shall have no further rights whatever to purchase the Leasehold Property. Lessee shall not sell, assign, sublease, mortgage, pledge or hypothecate or otherwise transfer all or any part of its interest in the Ground Lease Agreement or the improvements thereon, including without limitation its contingent .right of first refiasal, without the express written consent of Lessor. 7. Ground Lease Agreement to Control. The parties intend this Memorandum of Ground Lease to operate solely as a recorded summary of certain provisions of the Ground Lease Agreement. In the event that the provisions as stated herein contradict or are different from the terms and provisions of the Ground Lease Agreement, the terms and provisions of the Ground Lease Agreement shall control. IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of Ground Lease Agreement as of the date first above written. BOYS AND GIRLS CLUB OF ELK RIVER, INC. By: � °, ,— Its: '— -�.,.�— CITY OF ELK RIVER By: Its: Administrator BURNIS 586141.2 -3- 3860- 72 STATE OF MINNESOTA ) ) ss. COUNTY OF ) The foregoing instrument was acknowledged before me this `day ofv -�. , 1999 by j3(-v c--- , the -7—r z .,4.r �_, of the Boys and Girls Club of Elk River, Inc., a Minnesota nonprofit corporation, on behalf of the corporation. f 4 ' � JOHN D.FITZGERALD,JR. NOTARY PUBLIC-MINNESOTA N ary Public SHERBURNE COUNTY �r My Commission Expires Jan.31,2000 STATE OF MINNESOTA ) ss. COUNTY OF ) The oregoing instrument was acknowledged before me day of 1999 by , the �� Y'�'f the City of Elk River, a public body corporate and politic under the law of the State of Minnesota, on behalf of the City of Elk River. 1)ekwl� DEBORAH KAY KLECKNER Notary Public NOTARY PUBLIC-MINNESOTA MY COMMISSION EXPIRES 1.3"0 Drafted by: DOHERTY, RUMBLE& BUTLER PROFESSIONAL ASSOCIATION 3500 Fifth Street Towers 150 South Fifth Street Minneapolis, MN 55402-4235 Tel: 612-677-4500 131IRNIS 586141.2 —4— lk of Request for Action River To Item Number Mayor and City Council 4.14 Agenda Section Meeting Date Prepared by Consent May 19, 2014 Cal Portner, City Administrator Item Description Reviewed by Elk River Boys & Girls Club Refinancing Reviewed by Action Requested Adopt,by motion, a resolution consenting to the Elk River Boys & Girls Club refinance of their building. Background/Discussion The Elk River Boys & Girls Club Branch CEO Ricky Solomon has contacted the city seeking support for the refinancing of their building loan. The city has a ground lease with the club that requires the city to consent to any mortgage or other security interest in the building. The refinancing will not result in the addition of new debt rather it will enable the club to pay off their remaining debt (approximately$133,000) at a faster pace. Mr. Solomon indicated the organization, under the leadership of their Board of Directors,has eliminated all of their past outstanding debt over the last several years and is now financially very stable. Central Bank is working the refinance. They would like a resolution from the city indicating we are aware of the change in terms and consenting to the new mortgage. Financial Impact N/A Attachments ■ Resolution P, 01WfIHE0 HT NAT" UREI City of Elk i-=OM River Resolution 14- A Resolution of the City of Elk River Consenting to the Bank Refinancing for the Elk River Branch of the Boys & Girls Clubs of 10,000 Lakes WHEREAS, The City of Elk River has and continues to be a strong supporter of the Elk River Boys & Girls Club; and WHEREAS, The City has a Ground Lease Agreement, dated March 16, 1999,with the Elk River Branch of the Boys & Girls Club which requires the city to consent to any mortgage or other security interest in the Boys & Girls Club building; and WHEREAS, the Elk River Branch of the Boys & Girls Club is seeking to refinance existing debt without adding new debt on the building; and NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Elk River,Minnesota, as follows: the city is aware of and supports the improved financial position which would result from said refinancing and consents to this refinancing and any mortgage or other security interest in the Boys & Girls Club building, provided such mortgage or security interest complies with the terms of the Ground Lease dated March 16, 1999. Passed and adopted this 19`h day of May 2014. John J. Dietz,Mayor ATTEST: Tina Allard, City Clerk BaiWIRE0 0r City of Elk River Resolution 16- A Resolution of the City of Elk River Consenting to a Commercial Real Estate Loan by the Boys & Girls Club of Elk River WHEREAS, the City of Elk River has and continues to be a strong supporter of the Boys & Girls Club of Elk River; and WHEREAS, the city has a Ground Lease Agreement dated March 16, 1999,with the club which requires the city to consent to any mortgage or other security interest pertaining to the Boys & Girls Club building; and WHEREAS, the club requests the city's consent to supporting the club in obtaining a Commercial Real Estate Loan; and NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Elk River,Minnesota, as follows: the city is aware of and supports the acquisition of a Commercial Real Estate Loan by the Boys & Girls Club of Elk River of$60,000 to use as working capital Passed and adopted this 181h day of April 2016. John J. Dietz,Mayor ATTEST: Tina Allard, City NATUREJ