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6.3. SR 05-07-2007 REQUEST FOR ACTION To Ci Council Agenda Section W orksession Item Description Consider Resolution Approving Lease Agreement Between the Economic Development Authority of the City of Elk River and the Young Men's Christian Association of Metropolitan Minneapolis and the Ground Lease Between the City of Elk River and the Economic Development Authority of the City of Elk River Meeting Date Ma 7, 2007 Item Number 6.3. Prepared by Lori ohnson, Ci Administrator Reviewed by Reviewed by Action Requested The City Council is asked to review and consider the Resolution approving the Lease Agreement (Lease) between the Economic Development Authority (EDA) and the Young Men's Christian Association of Metropolitan Minneapolis (YMCA) and the Ground Lease between the City of Elk River and the Economic Development Authority for the City of Elk River. Background/Discussion This project has been progressing very well with work going on simultaneously in several areas including the architectural design and preparation for bidding and city planning approvals. Two of the other items we have been working on are the Lease and the construction manager contract. Legal Counsel and staff from both the YMCA and city have been working to draft a lease for consideration by the City Council, EDA, and YMCA for the construction of a facility by the EDA to be used by the ThlCA for providing YMCA programs and services. The Lease is based on the Memorandum of Understanding (MOU) approved in December 2006, Council action and discussion since that document was approved, and current information regarding the project. The Lease is formally between the EDA and the YMCA because the EDA is the body issuing the bonds; however, since this is a project undertaken and lead by the City Council, the Lease requites the consent of the city. The Lease is scheduled to be on the EDA's May 14 meeting agenda. YMCA executives have reviewed the Lease as presented; formal approval from the YMCA will happen following Council action. A copy of the Lease is attached for your review. I will not go through each section of the Lease in detail in this memo; however, there are several items of importance that are outlined below including items that the Council has discussed before and items on which Council gave staff direction at earlier meetings. . The term of the lease is 31 years, automatically renewing after that point with a ten-year termination clause. The initial term was increased by one year because the lease starts one year before the building is open for operation. . The lease requites the construction of a full-size gymnasium of approximately 8,000 square feet including an office for city recreation staff. The city has guaranteed use of the gym for a S:\Council\Lori\2007\ YMCA Lease Approval.doc minimum of 23 hours per week plus all times when the building is open and the gymnasium is not scheduled by the YMCA. Park and Recreation Director Bill Maertz is very pleased with the design of the gym and arrangement for city use of the gym. . Each resident of the city will receive a one-time waiver of the joiner's fee and each household will receive a guest pass four times per year allowing all residents to have access to all basic services at the YMCA for one day. . The city (EDA) will issue up to $12 million of bonds with debt service of the bonds to be paid one-third by the YMCA through rent payments and two-thirds by the city through a tax levy. The bonds will have a term of 25 years unless a shorter maturity is mutually agreed upon by all parties and is approved by bond counsel. . The city will provide the building site for the facility at no cost to the YMCA. . The YMCA is responsible for payment of all operating costs including grounds maintenance, taxes, insurance, and costs for operating all programs. . 'Ibe Lease spells out in detail how all future capital improvements will be funded. This item was discussed by the Council at a work session on the MOU and the Lease is consistent with the Council's comments made at that time. . The Lease as written states that the city has applied for a Sherburne County Landfill Legacy Grant for the YMCA. The Lease further states that grant proceeds will be applied to payment of the debt on prorated basis with one-third of the grant proceeds reducing the YMCA's rent and two-thirds reducing the city's tax levy. This compromise was reached after considerable discussion so that we could prepare a document to present to the Council for consideration knowing that the Council will make the final decision on how the grant proceeds are used. Our estimate at this time is that the grant amount for this project will be around $1,200,000 because the grant is based on material costs only instead of total project cost as we originally understood. Under the grant program, the city is eligible to receive up to $2,000,000 of qualifying costs for one project. If the Council approves the Lease as presented, one-third, approximately $400,000, of the grant would go to reduce the YMCA's rent payments. The remaining two-thirds would be used to reduce the property tax levy to fund the city's share of the debt. The annual debt service after YMCA payments is around $625,000. To put this in better perspective for the Council as you make a decision on this issue, below are samples of how the grant proceeds could be allocated and the resulting impact on the property tax paid by Elk River property owners. This analysis assumes a grant award of $1,200,000 paid over three years. The estimated reduction in the annual property tax to property owners would be for three years. The market value increase of the city over those three years would help to ease the tax burden in the forth year when the levy would be increased to the full amount. S:\Council\J.ori\2007\ "Yi\1CA Lease Approval.doc Use of Grant Fund project costs over $12M Prorated to pay city debt and YMCA rent Reduce city debt Allocation of Grant Proceeds Ci1;y YMCA 0% 100% 66.67% 33.33% 100% 0% Estimated Reduction in Annual Property Tax 800,000 1,200,000 $250,000 home $ $ 36.82 $ 55.22 $1,000,000 CII Reduction in Tax Levy $ $ 147.25 $ 220.86 Estimated Annual Net Tax used fOr &ftrendum $ 86.28 $ 345.10 Assumes grant proceeds of $1,200,000 paid over three years with $400,000 of grant proceeds received per year. Annual city debt levy is approximately $625,000 C / I is commercial and industrial property Financial Impact Entering into this lease requires the city (EDA) to issue up to $12 million of bonds to finance the facility for the YMCA. The financial impact of that bond issue is carried one-third by the YMCA through rent payments and two-thirds by the property owners in Elk River through a property tax. However, the city is liable for the entire debt if the YMCA does not make the rent payments as scheduled. The estimated tax impacts of this project were provided as part of the information presented prior to the September referendum election. A copy of that information is attached. For example, the tax impact on a $250,000 home is estimated to be approximately $129. After being reduced by the YMCA rent payment, the net tax increase is $86. The estimated increase on a commercial or industrial property valued at $1,000,000 is $515 or a net of $345 after a reduction for the one-third rent payment due from the YMCA. Grant proceeds received by the city would further reduce the property tax levy in the first few years depending upon when the grant proceeds are received. The extent of the reduction depends on the amount of the grant and the allocation of grant proceeds approved by the Council as part of the Lease. The total financial assistance from the city to the YMCA is the $8,000,000 (two-thirds of the $12,000,000) as approved by the voters last September and donation of an approximately seven acre parcel of prime property adjoining Orono Park with highway 10 visibility. This is a very generous offer that staff feels the YMCA will not turn down. In fact, staff is not aware of any other city providing this much assistance to the YMCA. Any grant proceeds the Council provides to the YMCA are over and above the assistance listed above. Steve Bubul, Kennedy and Graven, Peter Beck, and I will be at Monday's meeting to go over the Lease in more detail and answer questions you may have regarding the Lease. Representatives from the YMCA will also be present at the meeting. Following approval of the Lease by the City Council and the YMCA, a proposed construction manager contract will be presented at the following meeting. It was originally our intent that both of these be presented at the same meeting; however, due to the length of time it took S:\Council\I..ori\2007\ YMCA Lease Approval.doc to negotiate the lease and the complexities of the construction management contract because of the assignment of contracts, that document will not be ready rmtil May 14. Attachments . Resolution approving Lease agreement by and between the Economic Development Authority for the City of Elk River, Minnesota as Lessor and the Y ormg Men's Christian Association of Metropolitan Minneapolis as Lessee and Ground Lease between the City of Elk River and the Economic Development Authority . Lease agreement by and between the Economic Development Authority for the City of Elk River, Minnesota as Lessor and the Young Men's Christian Association of Metropolitan Minneapolis as Lessee. . Ground Lease between the City of Elk River and the Economic Development Authority . Estimated tax impact summary from September 2006 Current . Sherburne County Legacy Grant information . Proposed plat of Civic Center Campus addition identifying Lot 1 Block 1 for lease ro YJ\lCA Action Motion by_ Second by _ Vote Follow Up S:\Council\Lori\2007\ YMCA J,ease Approval.doc CITY OF ELK RIVER RESOLUTION NO. RESOLUTION APPROVING LEASE AGREEMENT BETWEEN THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER AND THE YOUNG MEN'S CHRISTIAN ASSOCIATION OF METROPOLITAN MINNEAPOLIS AND THE GROUND LEASE BETWEEN THE CITY OF ELK RIVER AND THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER BE IT RESOLVED By the City Council ("Council") of the City of Elk River, Minnesota ("City") as follows: Section 1. Recitals. 1.01. The City and the Economic Development Authority of the City of Elk River ("Authority") have determined that it is in the best interests of the health, welfare, and safety of the City and its residents that the Authority acquire and construct a facility (the "Project") to be owned by the Authority and leased to The Young Men's Christian Association of Metropolitan Minneapolis ("YMCA"). 1.02. The Authority is authorized by the provisions of Minnesota Statutes, Section 469.102 to issue its obligations to finance the Project in whole or in part and to pledge the City's full faith, credit and taxing powers together with revenues of the Project to the payment of such obligations. 1.03. At a special election held on September 12, 2007, the voters of the City approved a pledge of the City's full faith and credit to bonds in the maximum principal amount of $12,000,000 issued by the Authority to finance the acquisition and betterment of the Project. 1.04. To implement the Project, the Authority has caused to be prepared a Lease Agreement between the Authority and the YMCA (the "Lease"), under which the YMCA will lease the Project from the Authority. 1.05. The Authority has also caused to be prepared a Ground Lease between the City and the Authority (the "Ground Lease"), under which the City will lease to the Authority the land on which the Project will be constructed. 1.06. The Council has reviewed the Lease and the Ground Lease, and has determined that it is in the best interest of the City to approve such agreements. Section 2. City Approval; Further Proceedings. 2.01. The Lease and the Ground Lease as presented to the Council are hereby in all respects approved, subject to modifications that do not alter the substance of the transaction and that are approved by the Mayor and City Administrator, provided that execution of the documents by such officials shall be conclusive evidence of approval. 2.02. The Mayor and City Administrator are hereby authorized to execute on behalf ofthe City the Ground Lease and the consent to the Lease, and any documents referenced therein 988240v2 requiring execution by the City, and to carry out on behalf of the City its obligations thereunder. Approved by the City Council of the City of Elk River, Minnesota this 7th day of May, 2007. Mayor ATTEST: City Administrator 988240v2 2 SJB revised version 5/3/07 LEASE AGREEMENT By and Between ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF ELK RIVER, MINNESOTA, as Lessor and THE YOUNG MEN'S CHRISTIAN ASSOCIATION OF METROPOLITAN MINNEAPOLIS, as Lessee Dated as of ,2007 This document drafted by: Kennedy & Graven, Chartered (SJB) 470 U.S. Bank Plaza 200 South Sixth Street Minneapolis, MN 55402 TABLE OF CONTENTS PARTIES. ...... .... ... ....... ...... ...... ....... ............ ...... ...... ...... ...... ...... ...... ...... ........ ....... ....... ..... ... .... ........ ...... .... ...1 REClT ALS ..... ...... ....... ....... ...... ...... ....... ..... ...... ...... ...... ...... ...... ....... ... ......... ........ ....... ..... ... ...... ...... ...... .......1 Section 1.01 Section 1.02 Section 1.03 Section 2.01 Section 2.02 Section 2.03 Section 2.04 Section 3.01 Section 3.02 Section 3.03 Section 3.04 Section 3.05 Section 3.06 Section 3.07 Section 3.08 Section 3.09 Section 4.01 Section 4.02 Section 4.03 Section 4.04 Section 4.05 Section 4.06 Section 4.07 Section 4.08 Section 4.09 ARTICLE I DEFINITIONS AND INTERPRET A TION Definitions. .... ......... ...... ...... ...... .... ....... ...... ....... ...... ...... ....... ........ ....... ........ ...... ...... ..... .... ..2 Characteristics of Certificate or Opinion.. ........ ...... ....... ....... ....... ............... ...... ...... ...... .....5 Additional Provisions as to Interpretation.........................................................................5 ARTICLE II LESSOR'S AGREEMENT TO CONSTRUCT BUILDING ON LAND AND REPRESENTATIONS AND WARRANTIES OF LESSEE AND LESSOR Construction of the Building ...... ........... ...... ....... .... ...... ....... ... ....... ........ ....... ...... ...... ......... 6 Coordination of Construction..... ...... .................. ...... ....... ........ ...... ........ ....... ...... ...... ......... 7 Representations and Warranties of Lessee... ....... ...... ....... ....... .... ... ....... ........ ..... ..... .......... 7 Representations and Warranties of Lessor.... ...... ...... .............. ....... ........ ....... ...... ........... ... 7 ARTICLE III RENT AL PAYMENTS AND TERM Basic Rent ...... ...... ....... ..... ............ ...... ...... ...... ...... ...... ....... ..... ... ....... ........ ............ ...... .... ...9 Additional Rent..... ...... ........... ..... ............. ...... ..... ........ ....... ............... ....... .... .................. ...9 Interest on Unpaid Rent..... .... ...... ...... ....... .... ... ............ ....... ....... ........ ....... ........... ....... .......9 Lessee's Obligations and Remedies.. ........ ...... .... ........ ....... ........ ....... .............. ...... ............9 Possession and Enjoyment .... ........ ............ .... ......... ...... ....... ....... ........ ....... .... ........ ...... ....1 0 Authority Access to Land and Facilities .........................................................................10 Term.... ..... ........ ....... ......... ........ ...... ...... ...... ...... .......... ... .... ... ..... .......... .... ... ...... ...... ...... ...1 0 Extended Term ........ ...... ................ ........... ......... .... ...... .......... ..... ......... ....... ...... ............ ...1 0 Utilities, Water and Other Charges .................................................................................11 ARTICLE IV USE OF BUILDING Operation of the Project ........... ........ ...... ...... ....... ..... ....... ..... ... ....... ........ .......... ....... ........12 Prohibited Uses of the Project.........................................................................................12 Access to the Building ....................................................................................................13 Signage ............................................................................................................................ 13 Waste, Nuisance, Deficiencies Prohibited ......................................................................13 Maintenance and Modification of the Project .................................................................13 Damage to and Destruction of Building......................................................... .................15 Termination of Rent Obligation.......... ...... ...... ..... ..... ....... ... ....... ........ .... ......... ...... ...... ....16 Assignment and Subletting....... ...... ..... .... ......... ...... ...... ....... ............... ........ .... ....... ...... ....16 Section 5.01 Section 5.02 Section 5.03 Section 5.04 Section 6.01 Section 6.02 Section 7.01 Section 7.02 Section 7.03 Section 7.04 Section 7.05 Section 8.0 I Section 8.02 Section 8.03 Section 8.04 Section 9.01 Section 9.02 Section 10.01 Section 10.02 Section 10.03 Section 10.04 Section 10.05 Section 10.06 Section 10.07 ARTICLE V OPERATION AND PROGRAMMING General Operation and Programming ............................................................................. 17 Hours of Operation......................................... .................... ............... ....... ........... ............ 17 Covenants Regarding City ..............................................................................................17 Reports ........................ ..... ..... ................... ................... ....... ............... ........ ...................... 18 ARTICLE VI TAXES Lessee to Pay Taxes ........................................................................................................19 Indemnification With Respect to Taxes..........................................................................19 ARTICLE VII INSURANCE Lessor Insurance.............................................................................................................. 20 Lessee Insurance ...... ............................ .................... ...................... ....... ......................... .20 Right to Pay Premiums.. .................. .................... ..... ..."" ........ ....... ................................ .20 Builder's Risk Insurance ..... ................... ......................................... ....... ....................... ..20 Waiver of Subrogation .................................. ............ ....... ............... ....... ....................... ..21 ARTICLE VIII LIENS; EMINENT DOMAIN Liens.......................................................................................................................... ..... .22 Effect of Total Condemnation. ...... .................. .... ........ ..... .......... ........ ....... .... ...... ........ ....22 Effect of Partial Condemnation....................................................................................... 22 Substantially All............................................................................................................. .22 ARTICLE IX EQUIPMENT Installation of Equipment................................................................................................ 23 Removal of Equipment. ....... .... ........ ...... ...... ...... ...... ....... ........ ....... ....... ....... ...... ..... ....... ..23 ARTICLE X SPECIAL COVENANTS No Warranty of Condition or Suitability; Indemnification.............................................24 Lessee to Maintain its Existence; Conditions Under Which Exceptions Permitted........24 Records and Inspection ...................................................................................................25 Further Assurances, Financing Statements, Perfection of Interest..................................25 Observance of Bond Resolution Covenants and Terms..................................................25 Nondiscrimination ........ ..... .......... ........ ...... ....... ...... ...... ....... ..... ....... ... ..... ... ...... ...... .... .....25 Audit Expenses................................................................................................................ 25 11 ARTICLE XI TERMINATIONS; EVENTS OF DEFAULT; REMEDIES UPON DEFAULT Section 11.01 Termination. ....... ........... ...................... ........................... ........ ....... ....... ........ ...... ........... ..26 Section 11.02 Breach or Default ............................................................................................................26 Section 11.03 Effect of Breach ..............................................................................................................26 Section 11.04 Attorney's Fees ...............................................................................................................27 ARTICLE XII MISCELLANEOUS Section 12.01 Notices.... ................... ......................... ............ ............ ....... ............... ....... ................. ..... ..28 Section 12.02 Binding Effect .................................................................................................................28 Section 12.03 Amendments, Changes, and Modifications.....................................................................28 Section 12.04 Counterparts...................................... ....... ................... ....... ........................... ............ ..... .28 Section 12.05 Severability .......... ...... ....... __.............. ................................. ............... ............................. .28 Section 12.06 Applicable Law ...............................................................................................................29 Section 12.07 Recording..................................................................................................................... ...29 Section 12.08 Subordination................................................................................................................. . 29 Section 12.09 Platting of Land................................................ ............ ........ ....... ................................. ...29 EXHIBITS EXHIBIT A EXHIBIT B EXHIBIT C LEGAL DESCRIPTION OF THE LAND PLANS AND SPECIFICATIONS COMPLETION CER TIFICA TE (The remainder of this page is intentionally left blank.) 111 LEASE AGREEMENT This Lease Agreement (this "Lease") is made as of ,2007, by and between the Economic Development Authority for the City of Elk River, Minnesota, a public body corporate and politic and political subdivision of the State of Minnesota (the "Authority" or "Lessor"), and The Young Men's Christian Association of Metropolitan Minneapolis, a Minnesota corporation with its principal office located in Minneapolis, Minnesota ("YMCA" or "Lessee"). RECITALS WHEREAS, Lessor is leasing certain land located in the City legally described on attached EXHIBIT A (the "Land") from the City of Elk River, Minnesota, a Minnesota municipal corporation (the "City"), pursuant to the terms of a Ground Lease Agreement dated as of , 2007 (the "Ground Lease"); and WHEREAS, the Lessor intends to issue its General Obligation Recreational Facility Bonds, (the "Bonds") as further described herein to (i) finance the design, construction and equipping of YMCA facilities to be constructed by the Authority on the Land and operated by the Lessee; (ii) fund capitalized interest on the Bonds; and (iii) finance a portion of the costs of issuance of the Bonds; WHEREAS, Lessee and Lessor will cooperatively design the Facilities; and WHEREAS, Lessor desires to sublease the Land and lease the Facilities, as further described on EXHIBIT B attached hereto and made a part hereof, to Lessee. NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto recite and agree as follows: I ARTICLE I DEFINITIONS AND INTERPRETATION Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Article I and in the recitals and succeeding Articles of this Lease shall, for all purposes of this Lease and of any amendment hereto, have the meanings herein specified, such definitions to be equally applicable to both the singular and plural forms of any of the terms defined: "Additional Rent" means the payments made by Lessee to Lessor pursuant to Section 3.02 hereof. "Architect" means BWBR Architects, Inc., a Minnesota corporation, its successors and assigns. "Authority" or "Lessor" means the Economic Development Authority for Elk River, Minnesota, a public body corporate and politic and political subdivision of the State of Minnesota, and its successors and assigns. "Authorized City Representative" means the City Administrator of the City or such other person at any time designated to act on behalf of the City by written certificate furnished to Lessor and Lessee containing the specimen signature of such person and signed on behalf of the City by the City Administrator. Such certificate may designate an alternate or alternates. "Authorized Lessee Representative" means the Chief Executive Officer or Chief Financial Officer of Lessee or such other person at any time designated to act on behalf of Lessee by written certificate furnished to Lessor and the City, containing the specimen signature of such person and signed on behalf of Lessee by the Chief Executive Officer or the Chief Financial Officer of Lessee. Such certificate may designate an alternate or alternates. "Authorized Lessor Representative" means the President or Executive Director of Lessor or such other person at any time designated to act on behalf of Lessor by written certificate furnished to Lessee and the City, containing the specimen signature of such person and signed on behalf of Lessor by the President or Executive Director of Lessor. Such certificate may designate an alternate or alternates. "Basic Rent" means the payments made by Lessee to Lessor pursuant to Section 3.01 hereof. "Board" means the board of commissioners of the Authority and any successor as governing body ofthe Authority. "Bond Counsel" means any firm of nationally recognized bond counsel experienced in tax exempt private activity bond financing acceptable to the Authority. "Bond Documents" means the Authority's resolution awarding sale of the Bonds, the Tax Exemption Agreement and the other documents required as a condition for the issuance of the Bonds by the Authority. "Bond Resolution" means the resolution to be approved by Lessor authorizing sale of the Bonds. "Bonds" means the Authority's General Obligation Recreational Facility Bonds, in the aggregate principal amount not to exceed the Maximum Bond Amount, and any bonds issued to refund such bonds. 2 "Building" means the approximately 51,000 to 59,000 square-foot facility to be constructed on the Land, including a full-sized gymnasium containing approximately 8,000 square feet, an aquatic center, and other features described in Exhibit B hereto. "Certificate of Occupancy" means a certificate provided by the building inspector for the City and relating to the Building, stating that the Building has been completed and, subject to installation of the Equipment, is ready for occupancy. "City" means the City of Elk River, a statutory city and political subdivision of the State of Minnesota, and any successor to its functions. "City Council" means the City Council of the City and any successor as governing body of the City. "Code" means the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder. "Completion Certificate" means a certificate of the Authorized City Representative, substantially in the form and substance of the attached EXHIBIT C, furnished to the Authority and Lessee, stating that the Building has been completed and the Equipment has been installed in the Building. "Completion Date" means the date of completion of construction and equipping of the Facilities, as established in accordance with Section 2.01(h) hereof. "Contractor" means the general contractor selected by the Authority to construct the Building. "Costs ofIssuance" means with reference to any series of Bonds means, without duplication, any and all out-of-pocket costs incurred by the City and the Authority in the authorization, sale and issuance of that series of Bonds, including, but not limited to, all legal, financial advising and accounting fees and expenses; underwriters' fees or commissions (including any such amounts in the form of underwriter's discount); printing and engraving costs; the initial or acceptance fee and expenses of the bond registrar and paying agent; all fees and taxes required in connection with recording or filing this Lease and the Ground Lease; and all other out -of-pocket expenses incurred in connection with the preparation of the Bond Resolution, this Lease, the Ground Lease, and any other documents related to the Bonds. "County" means Sherburne County, Minnesota. "Equipment" means the equipment acquired with proceeds of the Bonds by Lessor in accordance with Section 2.01(f) hereof and placed in the Building or on the Land, including any and all parts, fittings, accessories, replacements, substitutions, betterments or repairs thereto, as fully described in the Completion Certificate. "501(c)(3) Organization" means an organization described in Section 501(c)(3) of the Code. "Facilities" means, collectively, the Building and the Equipment. "Force Majeure" means anyone or more of the following: acts of God; strikes, lockouts or other economic disturbances; acts of public enemies; orders or restraints of any kind of the government of the United States or of the State of Minnesota or any of their respective departments, agencies or officials, or any civil or military authority; insurrections; riots; landslides; earthquakes; fires; storms; droughts, floods or other adverse weather conditions; explosions; breakages or accident to machinery, transmission pipes 3 or canals; temporary inability to obtain supplies, materials or governmental permits or licenses; or any other cause or event not reasonably within the control of Lessor. "Ground Lease" means the Ground Lease, dated as of , 2007, by which the City leases the Land to the Authority, as amended or supplemented from time to time. "Independent," when used with reference to an attorney, engineer, architect, certified public accountant, consultant or other professional person, means a person who (i) is in fact independent, (ii) does not have any material financial interest in the Authority or City or the transaction to which such person's Certificate or opinion relates (other than payment to be received for professional services rendered), and (iii) is not connected with the Authority or the City as an officer, director or employee. "Independent Counsel" means an Independent attorney duly admitted to practice law before the highest court of any state. "Land" means the real property described in EXHIBIT A hereto, including any property added to or substituted for any portion of the Land as permitted by this Lease. "Landfill Grant" means any grant received by the City from the County under the County's Landfill Abatement Legacy Grant Program pursuant to the grant application filed by the City on or before April 16, 2007. "Lease" means this Lease Agreement between the Authority, as Lessor, and the YMCA, as Lessee, as it may be supplemented or amended from time to time. "Lease Term" has the meaning provided in Section 3.07 hereof. "Lessee" means The Young Men's Christian Association of Metropolitan Minneapolis, a Minnesota corporation with its principal office located in Minneapolis, Minnesota, its successors and assigns. "Lessee Equipment" means equipment that is purchased or leased by Lessee with funds other than proceeds of the Bonds and installed in the Building, including any all parts, fittings, accessories, replacements, substitutions, betterments or repairs thereto, excluding any such equipment purchased or leased by Lessee after it becomes and so long as it remains a part of the Equipment. "Maturity Date" means the date all of the Bonds have been paid in full, redeemed or defeased in accordance with their terms. "Maximum Bond Amount" means $12,000,000 in original principal amount plus an additional two percent of that amount as permitted under Minnesota Statues, Section 475.56. "Net Proceeds," when used with respect to proceeds of insurance or a condemnation award, means money received or receivable by Lessor, as owner or as lessee under the Ground Lease ofthe Land or the Facilities, less the cost of recovery (including reasonable attorneys' fees) of such money from the insuring company or the condemning authority. "Opinion of Counsel" means a written opinion of counsel (who need not be Independent Counsel unless so specified) appointed by Lessor or Lessee. If and to the extent required by the provisions of Section 1.02 hereof, each Opinion of Counsel shall include the statements provided for in said Section 1.02. 4 "Plans" means the plans and specifications prepared by the Architect for the construction of the Building, as amended or supplemented from time to time. "Project" means the Building, the Equipment and the Land. "Project Costs" or "Project Cost" means all costs of acquisition, betterment, design and construction of the Building and related improvements to the Land, including all architect, engineering and similar costs, Costs of Issuance, and capitalized interest on the Bonds. The term Project Costs includes Equipment but excludes Lessee Equipment. "Project Fund" means the project fund to be established under the Bond Resolution. "State" means the State of Minnesota. "Tax Exemption Agreement" has the meaning provided in Section 2.01(c) hereof. "YMCA" means Lessee, except that if the context so requires, "YMCA" refers generically to facilities similar to the Facilities and/or the entity that operates such facilities. Any term defined in the Ground Lease but not defined herein shall have the same meaning herein unless the context hereof clearly requires otherwise. Section 1.02. Characteristics of Certificate or Opinion. Any Certificate made or given by an officer of the Authority or of the City or by an Independent engineer, architect, consultant or other person may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, unless such person knows or, in the exercise of reasonable care should know, that the opinion with respect to the matters upon which the Certificate may be based as aforesaid is erroneous. Any such Certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon information which is in the possession of the Authority or the City, or upon a supporting Certificate of an officer or officers of the Authority or the City, unless the signer knows or, in the exercise of reasonable care should know, that the supporting Certificate with respect to the matters upon which the Certificate or Opinion of Counsel may be based as aforesaid is erroneous. Section 1.03. Additional Provisions as to Interpretation. All references herein to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Lease; and the words "herein," "hereof," "hereunder" and other words of similar import refer to this Lease as a whole and not to any particular Article, Section or subdivision hereof. 5 ARTICLE II LESSOR'S AGREEMENT TO CONSTRUCT BUILDING ON LAND AND REPRESENTATIONS AND WARRANTIES OF LESSEE AND LESSOR Section 2,01. Construction of the Building, (a) Lessor shall cause the preparation of the Plans in accordance with the general standards set forth in Exhibit B and in consultation with Lessee, The final Plans shall be approved in writing by both Lessor and Lessee, each of whose approval may not be unreasonably withheld or delayed, Lessor and Lessee each shall have the right, by notice to the other, to terminate this Lease if the Plans have not been approved in writing by both Lessor and Lessee on or before December 31, 2007, In the event of such termination, neither Lessor nor Lessee shall have any further rights or obligations under this Lease, except that Lessee shall reimburse Lessor for one-third of the out-of-pocket costs in connection with this Lease and the Project incurred by Lessor and the City through the date of Lessor's receipt of the notice of termination, Lessee shall pay such costs to Lessor within 30 days after receipt of written demand therefor and reasonable evidence of the costs incurred, (b) Within 30 days after receipt by Lessor (or by the City on behalf of Lessor) of the final construction bids for the Building, Lessor shall provide notice to Lessee ofthe aggregate construction cost for the Building and an estimate of total Project Costs, including a summary of bids received (the "Cost Notice"), If Lessee determines that construction of the Building is not financially feasible based on the Cost Notice, Lessee may terminate this Lease by delivering to Lessor notice of termination no later than 15 days after Lessee's receipt ofthe Cost Notice, After Lessor's receipt of a timely notice of termination, neither party shall have any further rights or obligations under this Lease, except that Lessee shall reimburse Lessor for one-third of the out-of-pocket costs in connection with this Lease and the Project incurred by Lessor and the City through the date of Lessor's receipt of the notice of termination, Lessee shall pay such costs to Lessor within 30 days after receipt of demand therefor and reasonable evidence of the costs incurred, (c) Lessor will finance Project Costs from proceeds of the Bonds, except to the extent provided otherwise in paragraph (g) of this Section, Lessor will issue the Bonds at a time determined in its discretion, but in any event in such a fashion as to make proceeds available to payor reimburse Project Costs in accordance with the timeframe described in this Article, The Bonds will have a final maturity of at least twenty-five (25) years after the date of issue, unless a shorter maturity is mutually agreed upon by Lessor and Lessee and approved by Bond Counsel. Lessor's obligation to issue the Bonds is subject to (i) compliance with all terms and conditions of Minnesota Statutes, Section 469.102, including without limitation consent by the City Council and adoption of an ordinance pledging the City's full faith and credit to the Bonds; (ii) receipt by Lessor of an Opinion of Counsel, in a form satisfactory to Bond Counsel, given by counsel to Lessee with experience in the law of 50l(c)(3) Organizations, regarding Lessee's status as a 50l(c)(3) Organization, Lessee's representations and warranties under Section 2,03 hereof, and other matters related to issuance of the Bonds as qualified 50l(c)(3) bonds as defined in Section 145 of the Code; and (iii) execution by Lessor of a tax-exemption agreement between Lessor and Lessee in a form acceptable to Bond Counsel (the "Tax Exemption Agreement"), under which Lessor agrees to covenants reasonably required in order for Bond Counsel to conclude that the Bonds are qualified 50l(c)(3) Bonds as defined in Section 145 of the Code, including without limitation rebate of any arbitrage earned with respect to the Bonds if the Bonds are not exempt form rebate under the Code or regulations related thereto (subject to the terms of Section 3,02(c) hereof), (d) Lessor shall establish a Project Fund under the Bond Resolution. Proceeds of the issuance and sale of the Bonds, less amounts allocated to capitalized interest and Costs of Issuance, shall 6 be deposited into the Project Fund, in accordance with the provisions of this Lease and the Bond Resolution. (e) Lessor shall, within a reasonable time after execution of this Lease, secure a building permit and begin construction of the Facilities, in conformity with the mutually-approved Plans. Lessor shall cause the Facilities to be substantially completed with all reasonable dispatch in a workmanlike manner and in conformity with the Plans, and shall use its best efforts to substantially complete the same within fifteen months after approval of the Plans by both parties in accordance with Section 2.01(a) hereof. For the purposes of this paragraph the Facilities will be deemed substantially completed upon issuance by the City of at least a temporary certificate of occupancy for the Building in accordance with City ordinances and procedures. Lessor hereby appoints the City as its agent for the purpose of construction of the Facilities and the City may perform the same itself or through its agents, and may make or issue such contracts, orders, receipts and instructions, and in general do or cause to be done all such other things as it may consider requisite or advisable for the completion of the Facilities and for fulfilling Lessor's obligations under this Article. Lessor and Lessee agree that the City shall have full authority and the sole right under this Lease to supervise and control, directly or indirectly, all aspects of the construction of the Facilities. (f) Disbursements from the Project Fund are to be made to the City or to its order in accordance with this Article and the Bond Resolution; provided that: (1) Disbursements will be made to acquire Equipment only if (i) Lessee requests such disbursement in writing; (ii) Lessor acquires the Equipment in compliance with Minnesota Statutes, Section 471.345, or Lessee undertakes such acquisition on behalf of Lessor in compliance that statute; and (iii) Bond Counsel determines that acquisition of the requested Equipment from proceeds of the Bonds will not cause interest on the Bonds to be includable in gross income of the holders thereof for federal income tax purposes; and (2) The Authority shall be entitled to withdraw money from the Project Fund in payment of any item constituting a Cost of Issuance on or after the date of issuance of the Bonds. The Authority agrees that it will pay promptly all expenses constituting Costs of Issuance, whether or not reimbursed therefor from the Project Fund, but subject to the terms of paragraphs (g) and (h) of this Section. (g) If proceeds of the Bonds, including interest earnings thereon, are not sufficient to pay the Project Costs in full, then Lessee shall pay all costs in excess of the moneys available therefor. Lessee shall make any such payments to Lessor or third party contractors designated by Lessor promptly upon receipt of written demand given by Lessor from time to time accompanied by reasonable evidence of the costs then due. If Lessee makes any payments pursuant to this paragraph (g), it shall not be entitled to any reimbursement therefor from the Authority or the City, nor shall it be entitled to any diminution in or postponement of the payment of Basic Rent, Additional Rent, or the payment of any other amounts payable under this Lease, except to the extent otherwise provided in paragraph (h) of this Section and Section 3.0 I hereof. (h) If the City receives a Landfill Grant, Lessor shall cause the City to apply proceeds of the Landfill Grant promptly upon receipt from the County from time to time to pay principal of and interest on the Bonds on the next succeeding payment dates after receipt of such grant proceeds. (i) The Completion Date shall be the date on which the Facilities are completed in their entirety and ready to be placed in service and all other property which constitutes the Facilities has been acquired and installed, all as reasonably determined by Lessor. Promptly after the Completion Date, 7 Lessor shall submit to Lessee a Completion Certificate signed by an officer of Lessor, substantially in the form of Exhibit C hereto, which shall specify the Completion Date and shall state that construction and acquisition of the Facilities has been completed and the Project Costs have been paid, except for any portion thereof which has been incurred but is not then due and payable, or the liability for the payment of which is being contested or disputed by Lessor (or by the City on behalf of Lessor), and for the payment of which Lessor has retained specified amounts of moneys within the Project Fund. Notwithstanding the foregoing, the Completion Certificate may state that it is given without prejudice to any rights against third parties which exist at the date thereof or which may subsequently come into being. The Completion Certificate shall include a list of the equipment, if any, financed with proceeds of the Bonds and included as part of the Facilities. Section 2.02. Coordination of Construction. After Lessor has obtained the necessary permits and governmental approvals, Lessor shall provide notice to Lessee of the date construction of the Building is to commence. Commencement of construction, the progress of construction, use of staging and storage areas, ingress and egress rights and construction progress meetings shall all be coordinated between Lessor and Lessee. Lessor and Lessee shall have the right to attend all construction progress meetings and to receive copies of all construction progress reports from the Architect and the Contractor. Section 2.03. Representations and Warranties of Lessee. Lessee represents and warrants to Lessor that: (a) Lessee is a Minnesota corporation, exempt from federal income taxation under Section 501(a) of the Code, as an organization described in Section 501(c)(3) of the Code; is possessed of full power to own and hold real and personal property, and to sell the same; and has duly authorized the execution and delivery of this Lease. (b) Neither the execution and delivery of this Lease, nor the fulfillment of or compliance with the terms and conditions thereof, nor the consummation of the transactions contemplated thereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which Lessee is now a party or by which Lessee is bound. Section 2.04. Representations and Warranties of Lessor. (a) Lessor is a public body corporate and politic and a political subdivision ofthe State of Minnesota. (b) Neither the execution and delivery of this Lease, nor the fulfillment of or compliance with the terms and conditions thereof, nor the consummation of the transactions contemplated thereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which Lessor is now a party or by which Lessor is bound. (c) Lessor has provided to Lessee a true, correct and complete copy of the Ground Lease. (The remainder ofthis page is intentionally left blank.) 8 ARTICLE III RENTAL PAYMENTS AND TERM Section 3.01. Basic Rent. On or before January 15, 2008, and semiannually thereafter on or before each January 15 and July 15 through the Maturity Date (each a "Lease Payment Date"), Lessee shall pay in immediately available funds: (i) one-third of the amount payable as interest on the Bonds on the following February 1 or August 1 semiannual interest payment date (less any amount allocated as capitalized interest pursuant to the Bond Resolution), after application of any Landfill Grant proceeds made on such interest payment date in accordance with Section 2.01(h) hereof; plus (ii) one-third of the amount, if any, payable as principal of the Bonds due on such semiannual interest payment date (whether at maturity or by call for redemption) plus any premium due on the Bonds on such date, after application of any Landfill Grant proceeds made on such interest payment date in accordance with Section 2.01(h) hereof Collectively, such payments are referred to as "Basic Rent". From and after the Maturity Date, the Basic Rent shall be $1.00 per year, payable on or before January 1 first following the Maturity Date and each January 1 thereafter through the Lease Term. Section 3.02. Additional Rent. During the Lease Term, Lessee shall also payor cause to be paid the following amounts (the "Additional Rent"): (a) Until the Maturity Date, one third of all fees, charges and expenses, including agent and counsel fees, of any paying agent incurred under the Bond Resolution, as and when the same become due. (b) Until the Maturity Date, one third of all costs incident to the payment of the principal of, premium, if any, and interest on the Bonds as the same become due and payable, including redemption premiums, if any, and all other costs and expenses in connection with the call, redemption and payment of the Bonds. (c) Until the Maturity Date, one third of all payments required by the rebate covenants under the Tax Exemption Agreement, including without limitation any fees payable to consultants retained to analyze rebate requirements. (d) An amount sufficient to reimburse Lessor for all expenses reasonably incurred by Lessor hereunder and in connection with the performance of Lessor's obligations under this Lease or the Bond Resolution. (e) All expenses incurred in connection with the enforcement of any rights under this Lease by the Authority or the City. (t) All costs of insurance payable by Lessee under Section 7.01 hereof. (g) All other payments of whatever nature which Lessee has agreed to payor assume under the provisions of this Lease. Section 3.03. Interest on Unoaid Rent. In the event Lessee shall fail to make any payment of Basic Rent or Additional Rent under Section 3.01 or 3.02, the item or installinent so in default shall continue as an obligation of Lessee until the amount in default shall have been fully paid, and Lessee agrees to pay interest on any delinquent Basic Rent or Additional Rent at a rate of interest equal to the yield on the Bonds. 9 Section 3.04. Lessee's Obligations and Remedies. (a) Lessee's obligation to pay Basic Rent and Additional Rent, and to perform and observe all other covenants and agreements of Lessee contained herein, shall be absolute and unconditional; and the Basic Rent and Additional Rent due and payable hereunder shall be made without notice or demand and without set-off, counterclaim, abatement, deduction or defense including, without limitation: (i) receipt by Lessor or the City of funds from any source, including without limitation any Landfill Grant, to pay any portion of the cost of the Facilities or pay any portion of principal of or interest on the Bonds, except to the extent provided otherwise in Section 2.01(h) hereof; (ii) any failure or delay by Lessor in the performance of any of its obligations hereunder; and (iii) irrespective of whether the Facilities shall have been started or completed, or whether the City's or Lessor's title thereto or to any part thereof is defective or nonexistent; and (iv) notwithstanding any damage to, loss, theft or destruction of the Facilities or any part thereof; and (v) any failure of consideration, the taking by eminent domain of title to or of the right of temporary use of all or any part of the Facilities, legal curtailment of Lessee's use thereof, the eviction or constructive eviction of Lessee, any change in the tax or other laws of the United States of America, the State of Minnesota or any political subdivision thereof, any change in the Authority's legal organization or status, or any default by the Authority hereunder, and regardless of the invalidity of any action of the Authority, and regardless of the invalidity of any portion of this Lease. (b) Nothing in this Lease shall be construed to release Lessor from the performance of any agreement on its part herein contained or as a waiver by Lessee of any rights or claims which Lessee may have against Lessor under this Lease or otherwise, but any recovery upon such rights and claims shall be had from Lessor separately, it being the intent of this Lease that Lessee shall be unconditionally and absolutely obligated to perform fully all of its obligations, agreements and covenants under this Lease during the Lease Term (including the obligation to pay Basic Rent and Additional Rent) for the benefit of Lessor. Lessee may, however, at its own cost and expense and in its own name or in the name of Lessor, prosecute or defend any action or proceeding or take any other action involving third persons which Lessee deems reasonably necessary in order to secure or protect its right of possession, occupancy and use hereunder, and in such event Lessor hereby agrees to cooperate fully with Lessee and to take all action necessary to effect the substitution of Lessor for Lessee in any such action or proceeding if Lessee shall so request. Section 3.05. Possession and Eniovment. Lessor hereby covenants to provide Lessee during the Lease Term with quiet use and enjoyment of the Land and Facilities, and Lessee shall during the Lease Term peaceably and quietly have and hold and enjoy the Land and Facilities, without suit, trouble or hindrance from Lessor, except as expressly set forth in this Lease. At the request of Lessee and at Lessee's cost, Lessor will join in any legal action in which Lessee asserts its right to such possession and enjoyment to the extent Lessor may lawfully do so. Section 3.06. AuthOrity Access to Land and FaCIlities. Lessor shall have the right at all reasonable times to examine and inspect the Land and Facilities, and shall have such rights of access to the Land and Facilities as may be reasonably necessary to cause the proper maintenance thereof in the event of failure by Lessee to perform its obligations hereunder. Section 3.07. Term of Lease. The term of this Lease (the "Lease Term") initially shall be a period commencing on the date hereof and ending thirty-one (31) years thereafter (the "Initial Lease Term"), but shall be subject to extension as described in Section 3.08, and earlier termination as provided herein. Section 3.08. Extended Term. After expiration of the Initial Lease Term, this Lease shall remain in effect unless and until Lessee or Lessor has exercised its respective right to terminate this Lease as set forth in Article XI hereof (any such period after expiration of the Initial Lease Term being referred to as 10 the "Extended Term"). During the Extended Term, Lessee shall pay Basic Rent and Additional Rent in the amounts described in Sections 3.01 and 3.02; provided, however, that until the Maturity Date, under no circumstances shall Basic Rent payable by Lessee during the Extended Term be less than the amount necessary to pay when due one-third of the amount of principal of, premium, if any, and interest, plus any overdue amounts, on the Bonds. Section 3.09. Utilities. Water and Other Charges. Lessee shall pay all of the expenses assessed or imposed for the operation and service of all telephone, gas, electricity, water and sewer, and all other utilities and service charges of those utility services to the Building during the Lease Term. All utilities shall be in the name of Lessee and billed directly to Lessee. The parties agree and understand that the costs of initial connection to utilities (e.g., sewer and water access charges) are Project Costs financed in accordance with Article II hereof. (The remainder of this page is intentionally left blank.) II ARTICLE IV USE OF BUILDING Section 4.01. Operation of the Proiect. (a) Lessee shall use and operate the Project during the Lease Term only in furtherance of its lawful purposes and in a manner that will not adversely affect the tax-exempt status of interest on the Bonds. Lessee shall use the Project as a full-service YMCA in accordance with all terms and conditions of this Lease. Lessee agrees that at all times during the Lease Term, Lessee will maintain and operate the Project for the purposes described in this Lease, and will maintain and keep or cause to be kept the Project in good repair and good operating condition (ordinary wear, tear, and obsolescence and acts of God excepted) at its own cost, making such repairs and replacements as are necessary to that end. (b) Other than the Building and the Equipment, Lessee shall obtain all Lessee Equipment, furnishings, supplies and other personal property required or convenient for the proper operation, repair and maintenance of the Project in an economical and efficient manner, consistent with the then current standards of operation and administration generally acceptable for YMCA facilities located in the Minneapolis-St. Paul metropolitan area. (c) Lessee shall provide, at its own expense, janitorial and other cleaning services, lawn and other exterior maintenance of the Land, snow removal, and removal of debris and garbage. Section 4.02. Prohibited Uses of the Proiect. (a) Lessee shall not use the Project for any purpose other than the purposes permitted under this Lease. Lessee shall not permit the Project to be used for any unlawful purpose or in any manner which may adversely or negatively affect the reputation of Lessor or the Land. Lessee shall comply with all legal ~equirements governing or affecting Lessee's specific use and occupancy of the Building and Land and use and operation of the Equipment including, but not limited to, all federal, state and local health statutes, environmental statutes, regulations, codes and rules relating to Lessee's business and Lessee's use and occupancy of the Building and Land and use and operation of the Equipment. Lessor shall be responsible for compliance with all legal requirements of general application relating to ownership of the Building. Lessee shall not make any use or provide any service which is deemed ultra hazardous by an insurance company or cause an exposure to a risk which is not covered by insurance. (b) Lessee shall: (i) use the Project only in a manner that is consistent with Lessee's status as a not- for-profit corporation and a 501(c)(3) Organization; and (ii) not impair the exclusion from gross income of interest on the Bonds nor use or allow the use of any portion of the Project in any uruelated trade or business with respect to Lessee (or any other 501(c)(3) Organization) under Section 513(a) of the Code, except as set forth in the Tax Exemption Agreement, or if Lessee receives an opinion of Bond Counsel that such use will not affect the tax-exempt status of interest on the Bonds; and (iii) not use the Project or any part thereof financed with proceeds of the Bonds for sectarian instruction nor use the Project primarily as a place of religious worship or as a facility used primarily as part of a program of a school or department of divinity for any religious denomination or the religious training of ministers, priests, rabbis or other similar persons in the field of religion. 12 (c) Lessee represents that it has no present intention to sell, lease or otherwise dispose of any interest in the Project. Furthermore, Lessee shall not transfer or dispose of all or any portion of the Project except as permitted in Section 4.09 below. Section 4.03. Access to the Building. Lessee shall have the right throughout the Lease Term of ingress to and egress from the Land by way of the existing access on Orono Road. Section 4.04. Signage. Lessee shall install and maintain at Lessee's sole expense, one or more name identification signs for the Building as may be reasonably necessary or appropriate to identify services provided, ingress and egress points and service areas on the Building. All signs installed and maintained by Lessee shall be in compliance with all legal requirements and shall be subject to Lessor's prior approval, which approval shall not be unreasonably withheld or delayed. The cost of installation of signs installed as of the Completion Date shall be a Project Cost within the meaning of this Lease. Section 4.05. Waste. Nuisance, Deficiencies Prohibited. Lessee shall not commit any waste on the Building, or any nuisance or illegal act affecting the interest of Lessor. Lessor shall not commit any waste, or any nuisance or illegal act affecting the use and enjoyment of the Building by Lessee. Section 4.06. Maintenance and Modification of the Pro;ect. (a) Generally. Throughout the Lease Term, Lessee shall keep and maintain the Project in good condition and repair, including replacements and capital improvements as may be reasonably necessary (i) to ensure the structural integrity of the Facilities, including without limitation foundation, walls, roof and heating and ventilation systems ("Structural Improvements"); and (ii) to support any changes in programming necessary to maintain standards of programming at similar YMCA facilities in the Minneapolis-St. Paul metropolitan area ("Programming Improvements"). The term Structural Improvements excludes all Lessee Equipment, except and to the extent the Lessee Equipment substitutes for or replaces Equipment in accordance with Section 9.02(a) hereof. The term Programming Improvements excludes all Lessee Equipment. (b) Structural Improvements. Prior to commencing any Structural Improvements, Lessee shall submit to Lessor plans and specifications for the proposed Structural hnprovements together with Lessee's estimate of the cost and the useful life of the proposed improvement. Ifthe useful life of the proposed Structural hnprovements (as mutually determined by Lessor and Lessee in accordance with federal tax principles) extends beyond the Initial Lease Term, Lessee shall not undertake such Structural Improvements without written approval by Lessor. Lessor's approval shall be limited to the quality, structural integrity, and cost of the Structural Improvement and will not be unreasonably withheld or delayed. Lessee shall make no material changes to plans for any Structural hnprovements after approval by Lessor. The following additional provisions govern Structural Improvements: (i) If Lessor terminates this Lease under Section 11.01 hereof prior to expiration of the useful life of any Structural Improvements constructed under this paragraph, Lessor shall reimburse Lessee for the value of the useful life of the Structural Improvement remaining after termination of this Lease. The value of the remaining useful life will be calculated based on the approved cost of the Structural Improvement divided by the total number of months of useful life of that improvement, multiplied by the number of months of useful life remaining after the effective date of termination of this Lease. The number of months shall be rounded off to the nearest whole month. Lessor shall pay any amount due under this clause upon delivery by Lessor of the notice of termination of this Lease. (ii) If Lessee terminates this Lease under Section 11.01 hereof prior to expiration of the approved useful life of any Structural Improvements constructed under this paragraph, Lessor 13 shall reimburse Lessee for the value of the useful life of that Structural Improvement remaining after termination of this Lease. The remaining value of the useful life will be calculated as provided in paragraph (b)(i) of this Section. Lessor shall pay any amount due under this clause by 120 days before the effective date of termination of this Lease. (iii) If Lessee proposes to make any Structural Improvements after either party has delivered to the other a notice of termination under Section 11.01 hereof, the Structural Improvements and cost thereof shall be subject to approval by Lessor as described in this paragraph (b), provided that the cost of the Structural Improvements will be shared by Lessor and Lessee, with Lessee's share being the number of months remaining in the Lease Term after substantial completion of the Structural Improvements, divided by the number of months of useful life of the Structural Improvements, multiplied by the cost of the Structural Improvements (rounding off to the nearest whole month). Lessor shall reimburse Lessee for Lessor's share of the cost of the relevant Structural Improvements within 30 days after receipt of an invoice therefor. (iv) If Lessee constructs any Structural Improvements without approval by Lessor, Lessee shall pay the entire cost of that Structural Improvement and shall not be entitled to reimbursement of any value of that Structural Improvement upon termination of this Lease. (c) Programming Improvements. Prior to commencing any Programming Improvements, Lessee shall submit to Lessor plans and specifications for the proposed Programming Improvements together with Lessor's estimate of the cost and the useful life of the proposed improvement. If the useful life of the proposed Programming Improvements (as mutually determined by Lessor and Lessee in accordance with federal tax principles) extends beyond the Initial Lease Term, Lessee shall not undertake such Programming Improvements without written approval by Lessor. Lessor's approval shall be limited to an analysis of (i) whether the Programming Improvement is reasonably necessary to accommodate a programming change then occurring in similar facilities operated by Lessee in its service area, or to keep the Facilities competitive; and (ii) the cost of the Programming Improvement. Lessor's approval will not be unreasonably withheld or delayed. The following additional provisions govern Programming Improvements: (i) If Lessor terminates this Lease pursuant to Section 11.0 I hereof prior to expiration of the useful life of any Programming Improvements constructed under this paragraph, Lessor shall reimburse Lessee under the same terms as provided for Structural Improvements under clause (b)(i) of this Section. (ii) If Lessee terminates this Lease pursuant to Section 11.01 hereof, Lessee IS entitled to no reimbursement of the cost or value related to any Programming Improvements. (iii) If Lessee proposes to make any Programming Improvements after either party has delivered to the other a notice of termination under Section 11.01 hereof, the cost of such Programming Improvements shall be shared under the same basis described for Structural Improvements under clause (b )(iii) of this Section 4.06. (iv) If Lessee constructs any Programming Improvement without approval by Lessor, Lessee shall pay the entire cost of that Programming Improvement and shall not be entitled to reimbursement of any value of that Programming Improvement upon termination of this Lease. (d) Construction Covenants. The following provisions govern construction of all Structural and Programming Improvements: 14 (i) All alterations to the Building shall be located within the boundary lines of the Land; (ii) Alterations to the Building shall not substantially impair the structural strength or utility of the Building or significantly alter the character or purpose or detract from the value or operating efficiency ofthe Project, and Lessee shall have delivered to the Authority and the City a Certificate of the Authorized Lessee Representative to such effect; (iii) The alterations shall not significantly impair the revenue-producing capacity of the Project, and Lessee shall have delivered to Lessor a Certificate of the Authorized Lessee Representative to such effect; (iv) Lessee shall construct any Structural Improvements or Programming Improvements with a cost exceeding the minimums specified in Minnesota Statutes, Section 471.345 in accordance with the bidding procedures set forth in that statute. Lessor shall provide guidance and consultation to Lessee regarding such procedures. Lessee shall provide to Lessor timely copies of all notices, specifications, bids and contracts to evidence compliance with this clause; (v) All work in connection with any alterations of the Building shall be done promptly and in good workmanlike manner and in compliance with the building and zoning laws of the City, and with all laws, ordinances, orders, rules, regulations and requirements of all other applicable federal, state and municipal governments and the appropriate departments, commissions, boards and officers thereof, and shall not violate the provisions of any policy of insurance covering the Project; and the work shall be prosecuted with reasonable dispatch, unavoidable delays excepted. Any work involving more than $100,000 of cost shall be insured by a policy of builders risk insurance in conformance with the requirements of Article VII or similar insurance. During the construction or installation of such alterations, Lessee shall maintain the Project free of all mechanics liens or other encumbrances, and no disbursement of funds held by Lessor shall be made for the payment of costs that may be the subject of a mechanic's lien unless prior to the payment of such costs mechanic lien waivers applicable to the costs shall be delivered to Lessor; and (vi) The alterations shall not affect the tax-exempt status of interest on the Bonds. Section 4.07. Damage to and Destruction of Building. (a) If the Facilities are damaged by fire or other insured casualty, Lessor shall, to the extent of available insurance proceeds, cause such damage or destruction to be repaired. If insurance proceeds are not sufficient to restore the Facilities to substantially the condition they were in prior to the damage, Lessee shall pay all costs in excess of insurance proceeds available. If such damage occurs at a time that is during the last year of the Lease Term and after the Maturity Date, and renders more than square feet of the Building unusable by Lessee for a YMCA facility, Lessor and Lessee each shall have the right to terminate this Lease as of the date of such damage by delivery of notice of termination to the other party within sixty (60) days after the date such damage occurred. Such termination shall be effective sixty (60) days after receipt of the termination notice. (b) In the event the Building becomes damaged to any extent by any casualty, act, or occurrence not covered by Lessor's insurance, Lessor may elect not to repair the damage and to terminate this Lease, in which event Lessor shall upon electing to terminate, notify Lessee within sixty (60) days following the date such damage occurred, of Lessor's election to terminate; provided, however, that 15 Lessee shall have the right to nullify Lessor's election to terminate by agreeing to pay the uninsured portion of the casualty damage. In the event Lessee elects to exercise such right, Lessee shall deliver such notice to Lessor within thirty (30) days after receipt of Lessor's election to terminate. Upon receipt of such notice from Lessee, Lessor shall proceed to repair the damage as described herein. (c) Lessee waives any statutory rights of termination that may arise by reason of any partial or total destruction of the Building repaired by Lessor as provided in this Lease. (d) Lessor shall have no obligation to repair any additions, alterations, or improvements installed by or for Lessee after the commencement of this Lease, except to the extent insurance proceeds are available for that purpose because of additional coverage obtained for such additions, alterations or improvements. Lessee agrees at Lessee's expense, except to such extent insurance proceeds are so available, to restore, repair, or replace all such additions, alterations or improvements installed by or for Lessee after the commencement of this Lease. (e) Lessee agrees that during any period of reconstruction or repair of the Building, Lessee shall continue, to the extent practicable, the operation of Lessee's business within the Building. Section 4.08. Termination of Rent Obligation. Upon any termination of this Lease under the provisions of this Article, all Basic Rent and Additional Rent shall be adjusted as of the date of such termination, and each party shall be released thereby without further obligation to the other party coincident with the surrender of possession of the Project to Lessor, except for items which have accrued prior to such termination and are then unpaid. SectIon 4.09. Assilffiment and Subletting. Lessee may not assign or transfer its interest in this Lease in any form without the prior written consent of Lessor. (The remainder of this page is intentionally left blank.) 16 ARTICLE V OPERATION AND PROGRAMMING Section 5.01. General Ooeration and Programming. Throughout the Lease Term, Lessee shall have sole responsibility for the operating and programming of all activities in the Project, including all staffing. Lessee shall operate the Facilities using standard YMCA-designed curriculum, practices and guidelines designed for youth, adults and seniors associated with a facility that includes an aquatic center, fitness center, kids adventure zone and gymnasium. Lessee shall offer a package of services and programs similar to those offered by Lessee at other YMCAs in suburban locations in the Minneapolis-St. Paul metropolitan area. Lessee shall offer memberships that entitle members to basic services as part of the membership fee, and access to additional programs on a fee basis. Section 5.02. Hours of Ooeration. Lessee may operate the Facilities from 5:00 am through 11 pm Monday through Sunday, but shall be open during at least the hours customary for YMCAs in suburban locations in the Minneapolis-St. Paul metropolitan area. The parties agree and understand that the Facilities will be closed on Christmas and Easter, but otherwise will be open on all other customary holidays. Section 5.03. Covenants Regarding City. (a) Lessee will provide the following benefits to all residents of the City at all times during the Lease Term: (i) Offer a one-time waiver of any joiner's fee for the Facilities for any resident of the City (one waiver for each membership). (ii) Offer four household guest passes per calendar year, each of which entitles all persons living at the same address within the City to have access to all basic services of the Facilities for one day. (iii) Offer periodic community events for a nominal charge per person or household. Examples include without limitation: Breakfast with Santa; Fall Festival; and Fourth of July Picnic. (iv) Use reasonable efforts to enter into partnerships with the County, City police department, Independent School District No. 728, Boys and Girls Club, United Way, and other similar agencies, to offer programs for youth. Examples include without limitation: Kids and Cops; National Youth Program Using MiniBikes; after school programming; Leaders Club; and teen nights. (v) Offer programs for senior citizens with a nominal fee. Examples include without limitation: luncheons; day trips; and fitness assessments. (vi) Offer local bus stops at one or more location in the City, designated by Lessee, for picking up and dropping off participants in Lessee's day camp. (vii) Offer Lessee's overnight camp programs on the same terms and conditions as apply to residents of other cities. (viii) Cooperate with the City in identifying and addressing other programming needs to benefit City residents. 17 (b) Lessee may use the City park adjacent to the Land (the "Park") throughout the Lease Term in accordance with this subsection. Lessee may use the Park on a non-exclusive basis for supervised play of up to approximately fifty (50) children at a time, between 6:00 a.m. and 6:00 p.m. on all weekdays while children are not in school (summer vacation, release days, teachers' conventions, etc.). Lessee may also use the Park for programming in accordance with City park policies in effect from time to time, upon submission by Lessee of a facility use form and payment of any applicable fee. Lessee's use of Park facilities that are open to the public shall not interfere with general public use of those facilities, and such Park facilities will remain open to the public during any Lessee activity. Under park policies in effect as of the date of this Lease, Lessee will be considered a Priority One User (as defmed in City park policies) for programs not otherwise offered in the City, and a Priority Two User for programs then being offered in the City elsewhere or by another program provider, and in each case Lessee will be granted access to the Park facilities based on availability; provided that nothing in this sentence prohibits the City from modifYing park policies regarding priority users so long as Lessee's rights described in the second sentence of this paragraph are not impaired. (c) Lessor and the City acknowledge that the Park provides public pedestrian access from the Building to Lake Orono. If at any time during the Lease Term the City vacates the Park or otherwise obstructs access through the Park such that pedestrian access from the Building to Lake Orono is materially impaired, Lessor and the City shall provide to Lessee an alternative right of pedestrian access to Lake Orono in a legal form and location that is reasonably acceptable to Lessee. (d) Lessee shall make the gymnasium within the Building available to the City for the City's recreational programs for the following minimum periods and times, in addition to all times when the Building is open and the gymnasium is not scheduled by Lessee: (i) Monday through Friday: at least 8 hours each week between the hours of 9:00 a.m. and 3:00 p.m.; and at least 8 hours each week between the hours of3:00 p.m. and 9:00 p.m.; provided that Lessee may require the City to use no more than 2 of the 16 hours on Fridays. (ii) Saturday and Sunday: at least 3 hours each week between the hours of 6:00 a.m. and 12:00 p.m. and at least 4 hours each week between the hours of 12:00 p.rn. and 8:00 p.m. Section 5.04. ReDortS. Upon request by Lessor from time to time, but not more often than twice annually, Lessee shall provide written reports to Lessor evidencing compliance with all terms of this Article V. (The remainder of this page is intentionally left blank.) 18 ARTICLE VI TAXES Section 6.01. Lessee to Pav Taxes. Lessee shall pay and discharge all of the Taxes (as defined below), installments of assessments (payable, at Lessee's option, over the longest permissible period), penalties, charges, rates or liens of any nature whatsoever that become, during the Lease Term, due and payable against the Building and the Land. The term "Taxes" as used in this Lease shall include all real property taxes on the Building and Land and all personal property taxes levied on the property used in the operation of the Building, operation of Lessee Equipment in the Building, and taxes of every kind and nature levied and assessed in lieu of, in substitution for or in addition to, existing or additional real or personal property taxes on the Building, the Land, or personal property, whether or not now customary or within the contemplation of the parties to this Lease. Section 6.02. Indemnification With Respect to Taxes. Lessee, upon prior notice to Lessor, shall be entitled in good faith, in the name of Lessor or Lessee, to contest the validity or applicability of any such taxes. Lessee agrees to indemnify Lessor from any and all loss, cost, damage, expenses, penalty or liability whatsoever resulting from or in any manner arising out of the delay or failure to pay when due any such tax, assessment or other governmental charge which Lessee shall so contest. Any such contest which Lessee shall elect to undertake, shall be at Lessee's sole expense. (The remainder of this page is intentionally left blank.) 19 ARTICLE VII INSURANCE Section 7.01. Lessor Insurance. Throughout the Lease Term, Lessor shall procure and maintain continuously in effect with respect to the Project, insurance against liability for injuries to or death of any person or damage to or loss of property arising out of or in any way relating to the maintenance, use or operation of the Project or any part thereof, in amounts not less than Lessor's tort liability limits under Minnesota Statutes, Chapter 466. Other than as allowed pursuant to Section 4.07 of this Lease, the Net Proceeds of all such insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds may be paid. It is understood that with respect to persons or entities other than Lessor, this insurance covers any and all liability of Lessor and its officers, employees and agents. As an alternative to the purchase of liability insurance, Lessor may self-insure against such liabilities in accordance with the provisions of applicable law. Policies of such insurance may include deductibles of no more than ten percent (10%) of policy amounts. Lessor shall, throughout the Lease Term, keep the Building and fixtures which are now or hereafter become a part of the Building insured against loss or damage by casualty or fire with extended coverage for not less than the full replacement value of the Project or the outstanding principal amount of the Bonds, whichever is greater. Such insurance shall name Lessee as an additional insured. Upon request, Lessor will deposit armually with Lessee policies evidencing such insurance, or a certificate or binder from the insurer(s), on which Lessee legally may rely, stating that such insurance is in force and effect. In order to avoid urmecessary expense to Lessee, Lessee may from time to time, but no more than once armually, present to Lessor alternative casualty insurance providing substantially similar coverage at lower cost. Lessor shall negotiate in good faith regarding substitution of such alternative insurance coverage. Lessee shall reimburse Lessor for the costs of obtaining one hundred percent (100%) of the insurance required under this Section 7.01. Section 7.02. Lessee Insurance. Lessee shall maintain in effect throughout the Lease Term personal injury liability insurance in the minimum amount of Five Million Dollars ($5,000,000) for injury to or death of anyone person, a minimum of Five Million Dollars ($5,000,000) for injury to or death of persons in anyone occurrence, and property damage liability insurance in the minimum amount of Five Million Dollars ($5,000,000). Such insurance shall name the City and Lessor as additional insureds. All insurance required in this Section shall be taken out and maintained in responsible insurance companies selected by Lessee that are authorized under the laws of the State of Mirmesota to assume the risks covered thereby. Upon request, Lessee will deposit armually with Lessor policies evidencing all such insurance, or a certificate or certificates or binders of the respective insurers statiog that such insurance is in force and effect. Section 7.03. Right to Pav Premiums. In the event of a party's failure to pay the premiums required of such party hereunder, Lessor, Lessee or the City shall be entitled, but shall have no obligation, to effect such insurance and pay the premiums therefor, which amounts shall be repayable to such party upon demand. Each insurer shall agree, by endorsement on the policies issued by it, that it will give to the other party at least thirty (30) days' written notice before the policy or policies in question shall be reduced in amount or canceled. Section 7.04. Builder's Risk Insurance. Any agreement for any portion of the construction of the Building shall require the contractor to maintain at all times during the construction process builder's risk 20 insurance, comprehensive general liability insurance and workers compensation insurance, all in amounts reasonably acceptable to Lessor. Section 7.05. Waiver of Subrogation. Notwithstanding any proviSIOn of this Lease to the contrary, if either party hereto suffers a loss or damage, and such loss or damage would typically be covered under any policy of insurance that such party actually maintains or is required to maintain pursuant to this Lease, then such party hereby releases the other party from any and all liability for each such loss or damage, notwithstanding that such loss, damage or liability may arise out of the negligent or intentionally tortious act or omission of the other party, its agents, officers or employees and/or notwithstanding that such party has failed to maintain the insurance policy required to be maintained by it under this Lease. All insurance policies maintained by Lessor and Lessee as provided in this Section shall contain an agreement by the insurer waiving the insurer's right of subrogation against the other party to this Lease or agreeing not to acquire any rights of recovery which the insured has expressly waived prior to loss. Each of the parties hereto agrees that if the provision waiving subrogation in any of such policies of insurance requires that notice of such waiver be served upon the insurer, such notice shall be promptly served by the party obtaining such insurance. (The remainder of this page is intentionally left blank.) 21 ARTICLE VIII LIENS; EMINENT DOMAIN Section 8.01. Liens. The parties shall keep the Building and Land free and clear of any and all mechanics' and materialmen's liens for construction on or about the Building and the Land. The party responsible for the lien shall promptly and fully pay and discharge any and all claims on which any such lien mayor could be based unless the party, in good faith, disputes the appropriateness of such obligation or claim. In that event the party responsible, in good faith, may defend against such obligation or claim; however, that party shall inderrmifY the other against all such obligations, claims, liens, suits or other proceedings pertaining thereto and, upon request, shall provide the other party with a bond or other reasonable security for its protection covering such potential liability. Section 8.02. Effect of Total Conderrmation. (a) In the event that all or substantially all of the Project (as defined in Section 8.04 hereof) is appropriated or taken under the power of eminent domain by any public or quasi-public authority, this Lease shall terminate and expire as of the date of such taking. Rents shall be paid up to said date with a proportionate refund by Lessor of any rent paid in advance and Lessee and Lessor shall thereupon be released from any liability thereafter accruing under this Lease. (b) In the event of a termination of this Lease as a result of a taking of any or all of the Project by eminent domain, Lessor shall use its best efforts to obtain an allocation of the award between the value of the Land and the Facilities. Lessor shall be entitled to (i) the amount of the award for the Land taken; (ii) the amount of the award for the Facilities taken that is required to redeem or defease the outstanding principal amount of the Bonds plus accrued interest on the Bonds; and (iii) two-thirds of any amount of the award for Facilities taken remaining after the payments required by clause (ii). Lessee shall be entitled to one-third of any amount of the award for the Facilities taken remaining after the payments required by clause (ii). Lessor and Lessee shall each have a right to contest the taking of the Project under the power of eminent domain. Notwithstanding the immediately previous sentence, Lessor shall have the exclusive right to negotiate the amount of the award for the taking, except that (I) Lessee shall have the exclusive right to negotiate the amount of the award for any Lessee Equipment and any relocation expenses, and (2) if the taking occurs after the Maturity Date, Lessee shall also have the exclusive right to negotiate the amount of the award allocated to the value of Lessee's leasehold interest in the Land and the Building pursuant to this Lease. (c) Notwithstanding anything to the contrary herein, if Lessee pays any portion of Project Costs in excess of the Maximum Bond Amount that are not reimbursed from Landfill Grant proceeds in accordance with Section 2.01(g) and (h) hereof (such payment being referred to as "Lessee's Cost Overage"), Lessor and Lessee's respective shares of interest in any conderrmation award described in paragraph (b) of this Section shall be adjusted as follows. Lessee's share shall be one-third plus the Lessee's Cost Overage as a percentage of total Project Costs. Lessor's share shall be reduced commensurately. Example: if Total Project Costs are $13,000,000, and there are no Landfill Grant proceeds, Lessee's Cost Overage is $1,000,000, and such amount represents 7.7% of Total Project Cost. Lessee's adjusted share is 41.03% (33.33% plus 7.7%,), and Lessor's adjusted share is 58.97%. Section 8.03. Effect of Partial Conderrmation. lfless than substantially all of the Project is taken (i.e., Lessee determines that it is financially and operationally feasible to continue providing its services in the Building), then (i) Lessor shall be entitled to any award for any portion of the Land taken and two- thirds of the award for the portion ofthe Facilities taken; and (ii) Lessee shall be entitled to one-third of 22 the award for the portion of the Facilities taken. To the extent permissible under the Bond Resolution and with an Opinion of Counsel by Bond Counsel that such action would not impair the tax-exempt status of the Bonds, Lessor shall apply its share of any award for partial taking of the Facilities to partially redeem or defease the Bonds, Prior to the Maturity Date, there shall be no credit or adjustment in Basic Rent or Additional Rent because of any partial condemnation, except to the extent that debt service on the Bonds is reduced by partial redemption or defeasance, From and after the Maturity Date, Basic Rent and Additional Rent shall be reduced in proportion to the reduction in the estimated market value of the Project. Section 8.04. Substantiallv All. Substantially all of the Building shall be deemed to have been taken if Lessee, in its sole discretion, determines that following the taking, it is not financially or operationally feasible to continue providing its programs and services in the Building, ARTICLE IX EQUIPMENT Section 9.01. Installation of Equipment. Lessee may, from time to time in its discretion and at its own cost and expense, install or place Lessee Equipment and other tangible personal property in the Building and (with prior written consent of Lessor) outside the Building on the Land, Lessor, at the direction of Lessee, will install the Equipment in the Building, Only the Equipment in the Building is subject to Lessor's rights under this Lease, and Lessee Equipment, unless it replaces Equipment, is not subject to Lessor's rights under this Lease, In the event that a lessor, vendor or purchase money lender (other than Lessor) installs any Lessee Equipment in the Building, Lessee shall cause any damage resulting to the Project therefrom to be repaired and the Project to be restored to its previous condition. Section 9.02, Removal of Equipment. If no default by Lessee exists under this Lease, Lessee shall have the right to remove Equipment from the Project and have the Equipment released from the terms of this Lease as follows: (a) Subject to the terms and conditions of Section 4.06(b) hereof, Lessee shall have the privilege from time to time, and at its own cost, in the ordinary courSe of business of substituting equipment and related property for any Equipment constituting a part of the Project, provided that such substitution shall not impair the value, character, utility or revenue producing significance of the Project or change the nature of the equipment substituted, Any such substituted or replacement property, including Lessee Equipment, shall become Equipment subject to the terms of this Lease in place of the replaced equipment until the Maturity Date, at which time the same shall become or again be Lessee Equipment. (b) Lessee shall also have the privilege in the ordinary course of business of removing any Equipment from the Building prior to the Maturity Date without substitution therefor if the same is obsolete and no longer used or useful in the operation of the Project; provided that Lessee pays a sum equal to the then value of said Equipment as determined by an Independent Engineer selected by Lessee. Lessee shall pay such amounts to Lessor for deposit in the Bond Fund established pursuant to the Bond 23 Resolution (in addition to the amounts required to be maintained therein) and shall deliver to Lessor a Certificate signed by said Independent Engineer setting forth the value of said Equipment and a Certificate signed by the Authorized Lessee Representative stating that the removal of such Equipment will not impair the character or revenue producing significance of the Project; provided that if the original cost of any item of Equipment so removed was less than $50,000, such removal without substitution and such deposit to the Bond Fund may be effected without such determination of value and submission of the Certificate by an Independent Engineer upon such showing by Lessee as may be satisfactory to Lessor; provided no transfer of ownership or use of Equipment with any remaining useful life shall be made prior to the Maturity Date unless an opinion of Bond Counsel is first obtained stating that such transfer or use will not cause interest on the Bonds to be included in gross income for federal income tax purposes. In the event any removal of Equipment or Lessee Equipment causes damage to the Project, Lessee shall restore or repair such damage at its expense. Lessor shall execute and deliver such releases or other documents (if any) as Lessee may properly request in connection with any action taken by Lessee in conformity with this Article IX. The removal from the Project of any portion of Equipment pursuant to the provisions of this Article shall not entitle Lessee to any abatement or diminution of Basic Rent subsequently due. 24 ARTICLE X SPECIAL COVENANTS Section 10.01. No Warranty of Condition or Suitability: Indemnification. Neither the City nor Lessor makes any warranty, either express or implied, as to the design or capacity of the Project, as to the suitability for operation of the Project, or that it will be suitable for Lessee's purposes or needs. Lessee hereby releases the City and Lessor from, agrees that the City and Lessor shall not be liable for, and agrees to hold the City, Lessor, and their respective officers and employees, harmless against any claim, cause of action, suit or liability for any loss or damage to property or any injury to or death of any person that may be occasioned by any cause whatsoever pertaining to the Building or the use thereof, except to the extent caused by the City or Lessor. In addition to any payments required under the Tax Exemption Agreement, Lessee further agrees to indemnify and hold harmless the City and Lessor, their officers and employees, against any and all losses, claims, damages or liabilities arising out of (i) the sale of the Bonds as "qualified 501(c)(3) bonds", (ii) Lessee's use and operation of the Project, or (iii) Lessee's status as a Minnesota not-for-profit corporation or Section 501(c)(3) organization. Lessee also agrees to reimburse the City, Lessor, and their respective officers and employees, for any out-of-pocket legal and other expenses (including reasonable counsel fees) incurred by the City, Lessor, or their respective officers and employees, in connection with investigating losses, claims, damages or liabilities or in connection with defending any actions relating to (i) the sale of the Bonds as "qualified 501(c)(3) bonds", (ii) Lessee's use and operation of the Project, or (iii) Lessee's status as a Minnesota not-for-profit corporation or Section 501(c)(3) organization. Lessor agrees, at the request and expense of Lessee, to cooperate in the making of any investigation in defense of any such claim and promptly to assert any and all of the rights, privileges and defenses which may be available to Lessor. The provisions of this Section 10.01 shall survive the payment and redemption of the Bonds, provided that nothing in this Section shall be construed to impose costs or liability on Lessee for acts or omissions of Lessee, Lessor or the City, or use or operation of the Project, after termination of this Lease. Section 10.02. Lessee to Maintain its Existence: Conditions Under Which Exceptions Permitted. Lessee agrees that, throughout the Lease Term: it will maintain its existence as a not-for-profit corporation under the laws of the State of Minnesota; will be a Section 501(c)(3) organization; will not dissolve or otherwise dispose of all or substantially all of its assets; and will not consolidate with or merge into another person or permit one or more other persons to consolidate with or merge into it; provided, however, that Lessee may, without violating this Article X, consolidate with or merge into another institution, or permit one or more other of such institutions to consolidate with or merge into it, or sell or otherwise transfer to another such institution all or substantially all of its assets as an entirety and thereafter dissolve (collectively, a "Transaction") upon satisfaction of the following conditions, provided that, except with the consent of Lessor, no Transaction shall occur while an Event of Default is continuing: (a) If the surviving, resulting or transferee person, as the case may be, is other than Lessee, such surviving, resulting or transferee person shall assume all of the obligations of Lessee under this Lease, with such assumption being evidenced by a writing acceptable to Lessor (with Lessee responsible to pay all reasonable costs incurred by Lessor to review such writing and the proposed assumption); and a copy of all executed documents evidencing such assumption shall be promptly delivered to Lessor: 25 (b) Unless otherwise approved by Lessor, immediately after the Transaction, the resulting party will not be engaged in any trade or business other than the operation of the Project as herein permitted; (c) The successor Lessee shall provide to Lessor a Certificate executed by an Authorized Lessee Representative that such new Lessee has a net worth and revenues available to pay Basic Rent that are equal to or greater than the net worth and revenues of the original Lessee, immediately prior to the Transaction; and (d) Lessee shall cause to be delivered to Lessor an opinion of Bond Counsel to the effect that such Transaction shall not cause interest on the Bonds to be included in gross income for federal income tax purposes. If merger or sale or other transfer is made as provided in this Article, the provisions of this Article shall continue in full force and effect and no further merger or sale or other transfer shall be made except in compliance with the provisions of this Article. Section 10.03. Records and Inspection. Lessee shall maintain (i) copies of federal, state, municipal and other licenses and permits obtained by Lessee relating to the operation of the Project, (ii) annual audited financial statements reflecting the condition of Lessee, and (iii) all other documents, instruments, reports and records required by any provision of this Lease or by law relating to the Project or the affairs of Lessee. Lessor shall have the right to inspect all such materials, except any materials made private or confidential by federal or state law or regulation, to inspect the Project at all reasonable times and to make such copies and extracts as it may desire. At the request of Lessor, Lessee shall furnish to Lessor, at Lessee's expense, a copy of any such materials which are required by Lessor in the performance of its duties under the Bond Documents. Section 10.04. Further Assurances. Financing Statements. Preservation of Interest. At the request of Lessor, Lessee shall execute any financing statement or other instrument which, according to an Opinion of Counsel, is or may be required to carry out the intent of the parties as expressed in the Bond Documents. Lessee shall, at its sole expense, file or cause to be filed any financing statements under the Uniform Commercial Code or similar instruments deemed necessary by Lessor to perfect and continue the interest of Lessor in the Project, this Lease, and the payments to be made hereunder. Section 10.05. Observance of Bond Resolution Covenants and Terms. Lessee will not do, in any manner, anything which will cause or permit to occur any default under the Bond Resolution. Section 10.06. Nondiscrimination. Lessee covenants and agrees that, in respect to renting the Project, it shall not discriminate against any person on the basis of sex, affectional preference, marital status, race, color, creed, national origin, religious belief or status with regard to public assistance or disability. Section 10.07. Audit Expenses. Lessee agrees to pay any reasonable costs incurred by the City or Lessor as a result of the City's or Lessor's compliance with an audit, random or otherwise, by the Internal Revenue Service, the Minnesota Department of Revenue or the Minnesota Office of the State Auditor with respect to (i) Lessee's use of the Project, (ii) the status of the Bonds as "qualified 501(c)(3) bonds," or (iii) the status of Lessee as a Minnesota not-for-profit corporation or Section 501(c)(3) organization. 26 ARTICLE XI TERMINATION; EVENTS OF DEFAULT; REMEDIES UPON DEFAULT Section 11.01. Termination. Lessor or Lessee may terminate this Lease by giving notice to the other no earlier than the 21" anniversary of the date of this Lease. The effective date of termination shall be the first anniversary date ofthis Lease that is at least ten (10) years after the date of the notice. Section 11.02. Breach or Default. Lessee shall have breached this Lease and shall be considered in default if: (i) Lessee files a petition in bankruptcy or insolvency or for reorganization under any bankruptcy act, or makes an assignment for the benefit of creditors; (ii) involuntary proceedings are instituted against Lessee under any bankruptcy act; (iii) Lessee fails to pay any Basic Rent or Additional Rent when due and does not make the delinquent payment within ninety (90) days after receipt of notice thereof from Lessor; or (iv) Lessee fails to perform or comply with any of the covenants or conditions of this Lease and such failure continues for a period of ninety (90) days (or such longer period as reasonably may be necessary to cure such breach) after Lessee's receipt of notice thereof from Lessor; provided that if (1) the alleged breach consists of failure to maintain the Facilities in accordance with Article IV hereof, and (2) Lessor did not approve a Structural Improvement, and (3) Lessor's denial of the proposed Structural Improvement is the direct cause of the alleged failure to maintain, then such failure to maintain is not an event of default under this Article XI. Section 11.03. Effect of Breach. In the event of default or breach by Lessee as set forth in Section 11.02, the rights of Lessor shall be as follows: (a) Right to Cancel. Lessor shall have the right to cancel and terminate this Lease, as well as all of the right, title and interest of Lessee hereunder, by giving to Lessee not less than ninety (90) days notice of the cancellation and termination. On expiration of the time fixed in the notice, this Lease and the right, title and interest of Lessee under this Lease shall terminate in the same manner and with the same force and effect, except as to Lessee's liability, as if the date fixed in the notice of cancellation and termination were the end ofthe Initial Lease Term. (b) Lessor's Election to Pav. Lessor may elect, but shall not be obligated, to make any payment required of Lessee or comply with any agreement, term, or condition required to be performed by Lessee, and Lessor shall have the right to enter the Building for the purpose of correcting or remedying any such default and to remain until the default has been corrected or remedied. Any expenditure for the correction by Lessor shall not be deemed to waive or release Lessee's default or Lessor's right to take any action as may otherwise be permissible in the caSe of any default. (c) Re-entrv. Lessor may re-enter the Building on ninety (90) days' notice to Lessee and remove the property and personnel of Lessee, and store such property in a public warehouse or at a place selected by Lessor, at the expense of Lessee. After re-entry, Lessor may terminate this Lease on giving thirty (30) days' notice of termination to Lessee. Without the notice, re-entry will not terminate this Lease. On termination, Lessor may recover from Lessee all damages proximately resulting from the 27 breach, including the cost of recovering the Project, and may take any action it deems necessary or desirable to collect any payments due under this Lease. After re-entry, Lessor may relet the Building or any part thereof for any term without terminating this Lease, at the rent and on the terms as Lessor may choose. Lessor may make alterations and repairs to the Building. The duties and liabilities of the parties if the Building is relet shall be as follows; 1. In addition to Lessee's liability to Lessor from breach of this Lease, Lessee shall be liable for all expenses of the re1etting, for the alterations and repairs made, and for the difference between the rent received by Lessor under the new lease agreement and the Basic Rent installments that are due for the same period under this Lease. 2. Lessor shall have the right to apply the rent received from reletting the Building (I) to expenses of the reletting and alterations and repairs made, (2) to rent due under this Lease, or (3) to payment of future rent under this Lease as it becomes due. Section 11.04. Attornev's Fees. In case suit shall be brought for Lessee's default under this Lease, Lessee shall be responsible for the attorney's fees of Lessor, and such attorney's fee shall be deemed to have accrued on the commencement of the action and shall be paid on the successful completion of the action. (The remainder of this page is intentionally left blank.) 28 ARTICLE XII MISCELLANEOUS Section 12.01. Notices. All notices, certificates, requests or other communications hereunder shall be in writing, and shall be deemed sufficiently given on the earliest to occur of when delivered personally, or mailed by postage prepaid first class mail, or mailed by certified or registered mail, return receipt requested, postage prepaid, in each case addressed as follows: To Lessor: City of Elk River 13065 Orono Parkway Elk River, Minnesota 55330 Attention: City Administrator with a copy to: Kennedy & Graven, Chartered 200 South Sixth Street 470 U.S. Bank Plaza Minneapolis, Minnesota 55402 Attention: Public Finance Department To the Lessee: The Young Men's Christian Association of Metropolitan Minneapolis 30 South Ninth Street Minneapolis, MN 55402 Attention: Chief Financial Officer Lessee and Lessor may, by notice given hereunder, designate any further or different addressees) to which subsequent notices, certificates, requests or other communications shall be sent to such party, by providing notice of such change. Any written notice given in a manner other than as provided in this Section shall be deemed to have been given only upon actual receipt by the addressee(s). Section 12.02. Binding Effect. This Lease shall inure to the benefit of and shall be binding upon Lessor, Lessee and their respective successors and assigns. Section 12.03. Amendments. Changes and Modifications. This Lease be amended in writing only by mutual agreement of Lessor and Lessee, with consent by the City. Section 12.04. Counterparts. This Lease may be executed in several counterparts, each of which shall be regarded as an original and all of which shall constitute but one and the same Lease. Section 12.05. Severability. In case any Article or provision of this Lease, or in case any covenant, stipulation, obligation, agreement, act or action, or part thereof, made, assumed, entered into or taken under this Lease, or any application thereof, is for any reason held to be illegal or invalid, or is at any time inoperable by reason of any law, or actions thereunder, such illegality, invalidity or inoperability shall not affect the remainder hereof or any other Article or provision of this Lease or any other covenant, stipulation, obligation, agreement, act or action, or part thereof, made, assumed, entered into or taken under this Lease, which shall at the time be construed and enforced as if such illegal or invalid or inoperable portion were not contained herein; nor shall such illegality, invalidity or inoperability or any application thereof affect any legal and valid and operable application thereof from time to time, and each such Article, provision, covenant, stipulation, obligation, agreement, act or action, or part thereof, shall be 29 deemed to be effective, operative, made, entered into or taken in the manner and to the full extent from time to time permitted by law. Section 12.06. Applicable Law. This Lease shall be governed by and construed in accordance with the laws of the State of Minnesota. Section 12.07. Recording. Lessor, promptly upon request by Lessee, will execute and deliver, in recordable form, a Memorandum of this Lease, which Lessee may cause to be duly recorded, at Lessee's expense, in the real estate records of the County, in order to provide notice to the public of Lessee's interest in the Project pursuant to this Lease. Lessor shall cause the Ground Lease, or a Memorandum thereof, to be so recorded not later than the date of recording ofthe Memorandum of this Lease. Section 12.08. SubordmatlOn. Non-Dlsturbance and Attornment Agreement. The City and Lessee shall execute and deliver, in recordable form, a Subordination, Non-Disturbance and Attornment Agreement, in form and substance acceptable to Lessee in its reasonable discretion, pursuant to which the City shall agree, inter alia, that: this Lease shall not and does not constitute a default under the Ground Lease; Lessee shall not be bound by any amendment to the Ground Lease made without Lessee's written consent; Lessee shall be entitled to notice of and an opportunity to cure any breach or default by Lessor under the Ground Lease; and Lessee's use and possession of the Project throughout the Lease Term shall not be disturbed, notwithstanding any breach or default by Lessor under the Ground Lease, provided Lessee faithfully performs its obligations under this Lease. Section 12.09. Platting of Land. The parties agree and understand that, as of the date of this Lease, the Land is part of a larger parcel owned by the City, and that the City, at its expense, is in the process of platting such larger parcel to create (among other parcels) a parcel consisting of the Land described in Exhibit A hereto. Lessee agrees to execute the plat if requested by Authority or City and to cooperate in all respects with the platting process, all at no expense to Lessee. Upon recording of the plat in the real estate records of the County, the parties shall execute an addendum to the Memorandum ofthis Lease, substituting the platted definition ofthe Land for the definition attached as Exhibit A. Lessee shall record such addendum at its expense. (The remainder of this page is intentionally left blank.) 30 LESSOR: ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF ELK RIVER, MINNESOTA By: Its: President By: Its: Executive Director STATE OF MINNESOTA ) ) SS COUNTY OF SHERBURNE ) The foregoing instrument was acknowledged before me this _day of , the President of the Economic Development Authority for the Minnesota, as Lessor. , 2007, by City of Elk River, Notary Public STATE OF MINNESOTA ) ) SS COUNTY OF SHERBURNE ) The foregoing instrument was acknowledged before me this _day of , 2007, by , the Executive Director of the Economic Development Authority for the City of Elk River, Minnesota, as Lessor. Notary Public S-I LESSEE: THE YOUNG MEN'S CHRISTIAN ASSOCIATION OF METROPOLITAN MINNEAPOLIS By Its STATE OF MINNESOTA ) )SS COUNTY OF ) The foregoing instrument was acknowledged before me this _day of , the of The Young Men's Christian Association Minneapolis, a Minnesota corporation. , 2007, by of Metropolitan Notary Public S-2 The City of Elk River, Minnesota hereby consents to the aforementioned Lease Agreement between the Economic Development Authority for the City of Elk River, Minnesota and The Young Men's Christian Association of Metropolitan Minneapolis, dated as of ,2007, and expressly acknowledges and accepts its obligations under Sections 2.01(e), 2.01(h), 5.03(b), 5.03(c) and 12.09 thereof. CITY OF ELK RIVER, MINNESOTA By: Its: Mayor By: Its: City Clerk STATE OF MINNESOTA ) )SS COUNTY OF SHERBURNE ) The foregoing instrument was acknowledged before me this _day of , the Mayor of the City of Elk River, Minnesota. , 2007, by Notary Public STATE OF MINNESOTA ) )SS COUNTY OF SHERBURNE ) The foregoing instrument was acknowledged before me this _day of , the City Clerk of the City of Elk River, Minnesota. , 2007, by Notary Public S-3 EXHIBIT A LEGAL DESCRIPTION OF THE LAND [Insert metes and bounds description that will exclude any area needed for City parking uses] A-I EXIllBIT B STANDARDS FOR PLANS AND SPECIFICATIONS The Lessee and Lessor will cause the design and construction of the Building to incorporate reasonable architectural appeal, quality building materials and durable finishes that comply with City standards. The Lessee and Lessor intend to design and construct the Building to meet current building codes and environmental standards. The design of the aquatic area shall be reviewed by the State Health Department and shall meet all applicable requirements of the State Health Department. The gymnasium shall be designed and constructed in a manner that permits City staffing and City users controlled access to the gymnasium. The Lessee and Lessor will include alternates in the design documents that will give the Lessee and Lessor the option to elect to use building materials that qualify the Building for the Landfill Grant. The primary spaces of the Building shall consist of a fitness studio, locker rooms, full-size gymnasium, aquatics area, kid zone, and office/community room/member services area. 6 EXlllBIT C COMPLETION CERTIFICATE The undersigned officer of the City of Elk River, Minnesota (the "City"), acting as agent of the Economic Development Authority for the City of Elk River (the "Authority") under that certain Lease Agreement dated as of , 2007 (the "Lease"), between the Authority and The Young Men's Christian Association of Metropolitan Minneapolis (the "YMCA"), hereby certifies to the Authority and the YMCA that as of , 2008 (the "Completion Date"), the Facilities described in the Lease have been completed in their entirety and are ready to be placed in service and all other property which constitutes the Facilities has been acquired and installed. Construction and acquisition of the Facilities have been completed and the Project costs have been paid, except for any portion thereof which has been incurred but is not now due and payable, or the liability for the payment of which is being contested or disputed by the City, and for the payment of which the Authority has been directed to retain and has retained specified amonnts of money within the Project Fund. Notwithstanding the foregoing, this Certificate is given without prejudice to any rights against third parties which exist at the date hereof or which may subsequently come into being. Attached as EXHIBIT A to this Certificate is a list of the Equipment financed with proceeds of the Bonds and included as part of the Facilities. Capitalized terms used in this Certificate and defined in the Lease are used with the meanings given therein. CITY OF ELK RIVER, MINNESOTA By Its 6 GROUND LEASE Between CITY OF ELK RIVER, MINNESOTA As Lesso r and ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF ELK RIVER As Lessee Dated as of ,2007 This instrument was drafted by: KENNEDY & GRAVEN, CHARTERED (SJB) 470 U.S. Bank Plaza 200 South Sixth Street Minneapolis, Minnesota 55402 (612) 337-9300 THIS GROUND LEASE, made as of this _ day of , 2007, by and between the CITY OF ELK RIVER, a statutory city and political subdivision of the State of Minnesota (the "City"), as lessor and the ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF ELK RIVER, a public body corporate and politic and political subdivision of the State of Minnesota (together with its successors and assigns as lessee hereunder, the "Authority"), as lessee. WITNESSETH: In consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows: ARTICLE I Demise Of Site And Warranties Section 1.01. Demise. Subject to and upon the terms, conditions, covenants, and undertakings hereinafter set forth, the City hereby leases and permits the use to, and the Authority hereby leases from the City, the property described in Exhibit A attached hereto, located in Sherburne County, Minnesota (hereinafter called the "Site"). Section 1.02. Warranties. The City covenants and warrants to the Authority: (I) That the City has good and merchantable title to the Site, has authority to enter into, execute, and deliver this Ground Lease, has duly authorized the execution and delivery of this Ground Lease and has duly executed and delivered this Ground Lease; (2) That the Site is not subject to any dedication, easement, right-of-way, reservation in patent, covenant, condition, restriction, lien or encumbrance which would prohibit or materially interfere with the construction of certain facilities (hereinafter called the "Facilities") on the Site, as contemplated by that certain Lease Agreement, dated as of , 2007, by and between the Authority and The Young Men's Christian Association of Metropolitan Minneapolis (hereinafter called the "Lease"); (3) That all taxes, assessments or impositions of any kind with respect to the Site, except current taxes, have been paid in full; (4) That the Site is properly zoned for the purpose of the Facilities; and Section 1.03. Environmental Covenant. To the best knowledge of the City, after due inquiry, (i) no dangerous, toxic or hazardous pollutants, contaminants, chemicals, waste, materials or substances, as defined in or governed by the provisions of any federal, state or local law, statute, code, ordinance, regulation, requirement or rule relating thereto (collectively, "Environmental Regulations"), and also including urea-formaldehyde, polychlorinated biphenyls, asbestos, asbestos containing materials, nuclear fuel or waste, radioactive materials, explosives, carcinogens, and petroleum products, or any other waste, material, substance, pollutant or contaminant which would subject the owner of the Site and the Facilities to any damages, penalties or liabilities under any applicable Environmental Regulation (collectively, "Hazardous Substances") are now or have been stored, located, generated, produced, processed, treated, transported, incorporated, discharged, emitted, released, deposited or disposed of in, upon, under, over or from the Site or the Facilities in violation of any Environmental Regulation; (ii) no threat exists of a discharge, release or emission of a Hazardous Substance upon or from the Site into the environment; (iii) the Site has not been used as or for a mine, a landfill, a dump or other disposal facility, an industrial or manufacturing facility, or a gasoline service station; (iv) no underground storage tank is located at the Site or has previously been located therein but has been removed therefrom; (v) no violation of any Environmental Regulation now exists relating to the Site or the Facilities, no notice of any such violation or any alleged violation thereof has been issued or given by any governmental entity or agency, and there is not now any investigation or report involving the Site or the Facilities by any governmental entity or agency which in any way relates to Hazardous Substances; (vi) no person, party or private or governmental agency or entity has given any notice of or asserted any claim, cause of action, penalty, cost or demand for payment or compensation, whether or not involving any injury or threatened injury to human health, the environment or natural resources, resulting or allegedly resulting from any activity or event described in (i) above; (vii) there are not now any actions, suits, proceedings or damage settlements relating in any way to Hazardous Substances, in, upon, under, over or from the Site, (viii) the Site is not listed in the United States Environmental Protection Agency's National Priorities List of Hazardous Waste Sites or any other list of Hazardous Substance sites maintained by any federal, state or local governmental agency; and (ix) the Site is not subject to any lien or claim for lien or threat of a lien in favor of any governmental entity or agency as a result of any release or threatened release of any Hazardous Substance. In the event any Hazardous Substance is found upon, under, over or from the Site or the Facilities in violation of any Environmental Regulation or if any lien or claim for lien in favor of any governmental entity or agency as a result of any release of any Hazardous Substance is threatened, the City, at its sole cost and expense, shall, within ten days of such finding, deliver written notice thereof to the Authority and shall promptly remove such Hazardous Substances upon, under, over or from the Site or the Facilities and prevent the imposition of any liens against the Site or the Facilities for the cleanup of any Hazardous Materials. Such removal shall be conducted and completed in compliance with all applicable federal, state, and local laws, regulations, rules, ordinances, and policies, in accordance with the orders and directives of all federal, state, and local governmental authorities. In the event the City has not removed such Hazardous Substances within a time period deemed reasonable by the Authority, the City shall, at the written direction of the Authority, take such remedial action as the Authority shall direct. In the event the City shall not comply with the written directions of the Authority within the time frame established within its written directions, the City hereby grants to the Authority an irrevocable license to remove Hazardous Substances from, repair, clean up, and detoxify the Site and the Facilities and agrees to reimburse the Authority for all of its costs therefor. The City further agrees, to the extent permitted by Minnesota law, to reimburse the Authority for any and all claims, demands, judgments, penalties, liabilities, costs, damages, and expenses, including court costs and attorneys' fees directly or indirectly incurred by the Authority (prior to trial, at trial and on appeal) in any action against or involving the Authority resulting from any breach of the foregoing covenants, or from the discovery of any Hazardous Substance, in, upon, under or over, or emanating from the Site or the Facilities, whether or not the City is responsible therefor, it being the intent of the City and the Authority that the Authority shall have no liability or responsibility for damage or injury to human health, the environment or natural resources caused by, for abatement and/or clean up of, or otherwise with respect to, Hazardous Substances by virtue of the interests of the Authority in the Site and the Facilities pursuant to this Ground Lease, or hereafter created, or as the result of the Authority exercising any of its rights or remedies with respect thereto hereunder or under any other instrument, including but not limited to becoming the owner thereof by foreclosure or conveyance in lieu of foreclosure. The foregoing representations, warranties, and covenants of this Section shall be deemed continuing covenants, representations, and warranties for the benefit of the Authority, including but not limited to any purchaser at a foreclosure sale, any transferee of the title of the Authority or any other purchaser at a foreclosure sale, and any subsequent owner of the Site or the Facilities, and shall survive the satisfaction or release of this Ground Lease, and/or any acquisition of title to the Site or the Facilities or any part thereof by the Authority. Any amounts covered by the foregoing shall bear interest from the date incurred at the maximum rate permitted by law and shall be payable on demand. 2 ARTICLE II Term And Rent Section 2.01. Term. The term of this Ground Lease shall commence as of the day and year first above written, and shall end on the 99th anniversary of such date. Section 2.02. Rent. The rent for the entire term of this Ground Lease shall be One Dollar ($1.00), payable io one iostallment upon execution of this Ground Lease. ARTICLE III Use Of Site; Additional Covenants Section 3.01. Use. The Authority shall not use or permit the use of the Site for any unlawful purpose. Section 3.02. Ouiet Eniovment. The City covenants that upon the Authority's paying the rent reserved herein, and performing all conditions and covenants set forth in this Ground Lease and the Lease, the Authority shall and may peaceably have, hold and enjoy the Site for the term of this Ground Lease. The Authority covenants that upon expiration of this Ground Lease, it shall give the City peaceable possession of the Site, together with the Facilities and any other improvements constructed thereon pursuant to the Lease. Section 3.03. Assi!!Ilment and Sublettiog. The Authority shall have the right to sublet the Site in accordance with the Lease, but otherwise shall not assign its rights in this Ground Lease or otherwise sublet the Site without prior written consent ofthe City. Section 3.04. Additional Covenants. Other than the rights granted under the Lease, in the event that any person or entity, however organized (other than the Authority or any assignee of the Authority), shall be determined to hold any interest that in any manner affects the City's good and merchantable title to the Site, the City shall use its best efforts to acquire the interest so held, such acquisition to be made at the City's sole cost and expense. The City hereby agrees to save and keep harmless the Authority, or any assignee of the Authority, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, costs, and expenses (including reasonable attorneys' fees, but only in the event that litigation is actually commenced by the Authority) of whatever kind and nature, imposed on, incurred by or asserted against the Authority, or any assignee of the Authority, that in any way relate to or arise out of the assertion of any interest affecting the City's good and merchantable title to the Site by any person or entity, however organized (other than the Authority or any assignee of the Authority). ARTICLE IV Miscellaneous Section 4.01. Binding Effect. This Ground Lease shall be binding upon, and inure to the benefit of, the parties hereto, and their successors and permitted assigns. 3 Section 4.02. Certain Defined Terms. Unless the context hereof clearly requires otherwise, capitalized terms used in this Ground Lease and defined in the Lease are used herein with the same meanings as set forth in the Lease. Secl10n 403. Severabihtv. In the event any provision of this Ground Lease shall be held invalid or unenforceable by any court or competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. SectIOn 4.04. Amendments. Chanl!es. and ModificatIOns. This Ground Lease may be amended or any of its terms modified only by written amendment authorized and executed by the City and the Authority. Section 4.05. Further Assurances and Corrective Instruments. The Authority and the City agree that they will, if necessary, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Site and the Facilities or for carrying out the expressed intention ofthis Ground Lease. Section 4.06. Execution in Counteroarls. This Ground Lease may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 4.07. Auuhcable Law. This Lease shall be governed by and construed in accordance with the laws of the State of Minnesota Section 4.08. Authorized Officers. Whenever under the provisions of this Ground Lease the approval of the Authority or the City is required, or the Authority or the City is required to take some action at the request of the other, such approval of such request shall be given for the Authority or for the City by an Authorized Authority Representative or Authorized City Representative, as the case may be, any party hereto shall be authorized to rely upon any such approval or request. The term "Authorized Authority Representative" means the Executive Director of the Authority or such other person at any time designated to act on behalf of the Authority by written certificate furnished to the City, containing the specimen signature of such person and signed on behalf of the Authority by the Executive Director; and the term "Authorized City Representative" means the City Administrator of the City or such other person at any time designated to act on behalf of the City by written certificate furnished to the Authority, containing the specimen signature of such person and signed on behalf of the City by the City Administrator. In each case, such certificate may designate an alternate or alternates. Section 4.09. Cautions. The captions or headings in this Ground Lease are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Sections of this Ground Lease. Section 4.10. Notices. All notices, certificates, requests or other communications hereunder shall be sufficiently given and shall be deemed given when delivered personally or mailed by first class mail or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the City or Authority (as the case may be) as follows City of Elk River/Elk River EDA 13065 Orono Parkway Elk River, Minnesota 55330 4 Attention: City Administrator/Executive Director (The remainder of this page is intentionally left blank.) 5 IN WITNESS WHEREOF, the parties hereto have executed this Ground Lease as of the date first above written. CITY OF ELK RIVER, MINNESOTA By Its Mayor By Its City Clerk STATE OF MINNESOTA ) ) ss. COUNTY OF SHERBURNE ) On this day of , 2007, before me, a Notary Public within and for said County, personally appeared Stephanie Klinzing, to me personally known, who being by me duly sworn, did say that she is the Mayor of the City of Elk River, a statutory city and political subdivision of the State of Minnesota, the subdivision referred to in the foregoing instrument; that said instrument was signed in behalf of said political subdivision by authority of its City Council; and said Mayor acknowledged said instrument to be the free act and deed of said political subdivision. Notary Public STATE OF MINNESOTA ) ) ss. COUNTY OF SHERBURNE ) On this day of , 2007, before me, a Notary Public within and for said County, personally appeared Lori Johnson, to me personally known, who being by me duly sworn, did say that she is the City Administrator of the City of Elk River, a statutory city and political subdivision of the State of Minnesota, the subdivision referred to in the foregoing instrument; that said instrument was signed in behalf of said political subdivision by authority of its City Council; and said City Administrator acknowledged said instrument to be the free act and deed of said political subdivision. Notary Public S-l ECONONiUC DEVELOPMENT AUTHORITY FOR THE CITY OF ELK RIVER By Its President By Its Executive Director STATE OF MINNESOTA ) ) ss. COUNTY OF SHERBURNE ) On this _ day of , 2007, before me, a Notary Public within and for said County, personally appeared , to me personally known, who, being each by me duly sworn, did say that he is the President of the Economic Development Authority for the City of Elk River, the Authority referred to in the foregoing instrument; that said instrument was signed in behalf of said authority by authority of its Board of Commissioners; and he acknowledged said instrument to be the free act and deed of said Authority. Notary Public STATE OF MINNESOTA ) ) ss. COUNTY OF SHERBURNE ) On this _ day of , 2007, before me, a Notary Public within and for said County, personally appeared to me personally known, who, being each by me duly sworn, did say that he/she is the Executive Director of the Economic Development Authority of Elk River, the Authority referred to in the foregoing instrument; that said instrument was signed in behalf of said authority by authority of its Board of Commissioners; and he acknowledged said instrument to be the free act and deed of said Authority. Notary Public S-2 EXHIBIT A TO GROUND LEASE The Site described in the referenced instrument is located in Sherburne County, Minnesota, and is legally described as follows: A-I eferendum continued from page I The estimated tax increase on property values is listed below. The YMCA intends to pay one-third of the debt. The right hand column is the reduced tax increase based on the YMCA paying one-third. x Type of Property Taxable Annual YMCA Market Value Tax Increase Payment 100,000 51.51 17.00 150,000 77.26 25.50 200,000 103.01 33.99 225,000 115.89 38.24 250,000 128.77 42.49 275,000 141.64 46.74 300,000 154.52 50.99 350,000 180.27 59.49 100,000 51.51 17.00 200,000 103.01 33.99 300,000 154.52 50.99 400,000 206.03 67.99 500,000 257.53 84.98 750,000 386.30 127.48 1,000,000 515.07 167.97 Tax Increase with YMCA Payment Residential Homestead 34.51 51.76 69.02 77.65 86.28 94.90 103.53 120.78 34.51 69.02 103.53 138.04 172.55 258.82 345.10 Commercial Industrial Agricultural 150,000 51.51 17.00 Homestead* 250,000 51.51 17,00 350,000 51.51 17.00 500,000 51.51 17.00 *Assumes house, garage, and one acre valued at $100,000 34.51 34.51 34.51 35.51 Agricultural 800 0 Non-Homestead 1,000 0 (doUars per acre) 1,200 0 Seasonal 100,000 0 Recreational 200,000 0 Residential 350,000 0 The YMCA will charge membership fees and offer pro- grams similar to other suburban YMCA's. Residents may receive a one-time waiver of up to $79 of membership joining fee, periodic family events at a nominal cost, and four guest passes per household per year. Please vote on September 12. If you are not sure where to vote call 763.241.2861. If you need assistance to vote call 763.241.2861. Also note, there are two pages of Election information in this newsletter. 7th Annual Family Fright Night at Pinewood Golf Course Saturday, October 28, 5-9 pm Sign up at www.emr.OHr to participate To volunteer call Parks & Recreation at 763.635.1 150 4 ~ River 13065 Orono Parkway Elk River, MN 55330 ^n~7 -~B 0 '1 I..\JU \-'c. Sherburne County PLANNING & ZONING ADMINISTRA nON 13880 Highway 10 Elk River, MN 55330 (763) 241-2900. (800) 438-0578 FROM: Dave Lucas, Solid Waste Offic r TO: Sherburne County Municipalities and To DATE: February 6,2007 RE: Landfill Abatement Legacy Grant Application The Landfill Abatement Legacy Grant Program is now entering its second year, and as with any new program it is expected that some "fine tuning" may be required. This program has and continues to receive praise however the application form itself required some minor work. Attached please find a revised Landfill Abatement Legacy Grant Application. Some of the changes to this application are: · The addition of several definitions. . Replace the term "green" with "qualifying materials" (the term "green" also implies energy efficiency, which by itself, does not qualify for reimbursement under this program). . The ability to award more than just one applicant per year provided that the qualifying applicants are within the established program budget. Please replace your original application with this revised version. As always, if you have any questions regarding this program and or this application form, please do not hesitate in giving me a call. Sherburne County Landfill Abatement Legacy Grant Application BACKGROUND As a continuation of a long standing policy to support actions which reduce our county's dependence on indiscriminate landfilling, the Sherbume County Board of Commissioners adopted the Landfill Abatement Legacy Grant Program. This program is structured to: encourage the use of "qualifying materials in the construction, and lor remodeling of municipal buildings; maximize the reuse of building materials and/or existing structure; and, divert construction and demolition waste from disposal in landfills. The County will grant to cities and townships in the County an amount equal to $100 per capita as reimbursement for meeting or exceeding the above stated criteria in the construction, and/or remodeling of city or township owned buildings. DEFINITIONS: 1. Construction and Demolition Debris: means Solid Waste resulting from construction, remodeling, repair, erection and demolition of buildings, roads and other artificial structures, including: concrete, brick, bituminous concrete, untreated wood, masonry, glass, trees, rock, plastic building parts, plumbing fixtures, roofing materials, wallboard, and built-in cabinetry. Construction and Demolition Debris does not include: asbestos waste; auto glass; wood treated with chemical preservatives; furniture; lighting equipment; vermiculite; contaminated soil; firebrick; food waste; machinery; engine parts; paints; paint thinners or solvents; varnishes; street sweepings; tar; carpet/padding if not affixed to a structure; mattresses; adhesives, caulking, sealants and applicators, brushes, containers, tubes, filters contaminated with these materials; sandblasting materials; agricultural chemicals or containers (including empty pesticide, herbicide, and insecticide containers); chemical containers; animal carcasses, parts, or rendering and slaughterhouse wastes; appliances (including white goods and brown goods); ashes or hot wastes that could spontaneously combust or ignite other wastes due to high temperatures; ash from incinerators, resource recovery facilities and power plants; batteries; carbon filters; fluorescent tubes and ballasts; high-intensity discharge lamps; foundry wastes; Hazardous Waste; household Refuse or garbage; infectious waste; liquids (any type), liquid non-hazardous materials; medical waste; mercury containing wastes (thermostats, switches); PCB contaminated wastes; petroleum products and their containers or filters (including oil, grease or fuel); radioactive waste (unless natural materials at normal background levels); septic tank pumpings; sludges (including ink, lime, wood, sewage or paper); live coal tar (including applicators, containers, and tubes); Waste Tires; vehicles; Yard Waste; and packaging materials, including cardboard, paper, shrink-wrap and styrofoam. Mixtures of Construction and Demolition Debris with other Solid Waste is not Construction and Demolition Debris. 2. Disposal: means the discharge, deposit, injection, dumping, spilling, leaking, or placing of any waste into or on any land or water so that the waste or any constituent thereof may enter the environment or be emitted into the air, or discharged into any waters, including ground waters. 3. Landfill: means any tract or parcel of land, including any constructed facility, at which solid waste Pagelof6 Sherburne County's Landfill Abatement Legacy Grant Application is disposed of in or on the land. 4. Municipal Buildinq: means township and city owned buildings within Sherburne County. 5. Post-consumer material: means waste material generated by households or by commercial, industrial and institutional facilities in their role as end-users of the product, which can no longer be used for its purpose. 6. Pre-consumer material: means material diverted from the waste stream during the manufacturing process. Excluded is reutilization of materials such as rework, regrind or scrap generated in a process and capable of being reclaimed within the same process that generated it. 7. Qualifvinq Materials: means those building materials that contain post-consumer and pre- consumer recyclable content. 8. Recyclinq: means the process of Collecting and preparing Recyclable Materials and reusing the materials in their original form or using them in manufacturing processes that do not cause the destruction of Recyclable Materials in a manner that precludes further use 9. Recyclable Materials: means marketable materials that are separated from Solid Waste for the purpose of Recycling, including paper, glass, plastics, metals, automobile oil, and batteries. Refuse-derived fuel or other material that is destroyed by incineration is not a Recyclable Material. Recyclable Materials also refers to marketable materials separated from Industrial Solid Wastes and Construction and Demolition Debris for the purpose of recycling. 10. Solid Waste: means garbage, Refuse, sludge from a water supply treatment plant or air contaminant treatment Facility, and other discarded waste materials and sludges, in solid, semisolid, liquid, or contained gaseous form, resulting from industrial, mining, and agricultural operations and from Non-Residential Property, and from community activities, but does not include Hazardous Waste; animal waste used as fertilizer; earthen fill, boulders, rock; sewage sludge; solid or dissolved material in domestic sewage or other common pollutants in water resources, such as silt, dissolved or suspended solids in industrial waste water effluents or discharges which are point sources subject to permits under Section 402 of the federal Water Pollution Control Act, as amended; dissolved materials in irrigation retum flows; or source, special nuclear, or by-product material as defined by the Atomic Energy Act of 1954, as amended. MAJOR QUALIFICATIONS FOR THIS PROGRAM ARE AS FOLLOWS: 1. Population will be based upon the 2004 State Demographer Population figures. A listing of the maximum grantfor each city and township is attached (see attachment 1). Forthe purpose ofthis program, these numbers shall remain fixed. 2. Each community shall have only one grant awarded under this program. 3. The maximum award paid out in any given year shall be limited to $1,000,000. In the case of a grant recipient qualifying for more than $1,000,000, the reimbursement will be paid over two years. 4. Joint City/Township projects will be considered as qualifying projects. 5. For the purpose of this program, qualifying applicants must be able to demonstrate the minimum following standards: · Use of qualifying materials with recycled content such that the sum of post-consumer recycled content plus one-half of the pre-consumer content constitutes at least 25 percent (based on cost) of the total value of the materials in the project. · Use salvaged, refurbished or reused materials such that the sum of these materials constitutes at least 5 percent based on cost, of the total value of materials on the project. Page 2 0[6 Sherburne County's Landfill Abatement Legacy Grant Application . Maintain at least 50 percent (based on surface area) of existing building structure (including structural floor and roof decking) and envelope (exterior skin and framing, excluding window assemblies and non-structural roofing material). If the project includes an addition to an existing building, this credit is not applicable if the square footage of the addition is more than 2 times the square footage of the existing building. . Recycle and/or salvage at least 50 percent of non-hazardous construction and demolition debris. Develop and implement a construction waste management plan that, at a minimum, identifies the materials to be diverted from disposal and whether the materials will be sorted on-site or co-mingled. Excavated soil and land clearing debris do not contribute to this credit. Calculations can be done by weight or volume, but must be consistent throughout. . 6. Applicants may want to achieve LEED Certification, which distinguishes building projects that have demonstrated a commitment to sustainability by meeting the highest performance standards. For more information regarding LEED, refer to (http://www.usqbc.orq). 7. I n Minnesota, there are hundreds of companies that incorporate post-consumer recycled material in their manufacturing of assorted products. One particular list that may be used for reference is available at http://www.moea.state.mn.us/rpdir/index.cfm (please refer to attachment). 8. Upon approval of a grant award by the County Board, the grant money will be encumbered for a maximum of five years. Reimbursement for building project costs will be based on information submitted following construction as required in the grant agreement. 9. The municipal building must be located in Sherburne County. Page 3 of6 Sherburne County's Landfill Abatement Legacy Grant Application DIRECTIONS In orderto be determined eligible for a Landfill Legacy Grant through Sherburne County, applicants must complete this application form. To be considered for funding, you must not be in violation of any local, County or State rules, statutes, or requirements. Incomplete applications will not be reviewed! Funding consideration of your request will be based on whether or not the project meets the minimum eligibility requirements identified and the project criteria that Sherburne County established in 2006. Please complete the entire application and feel free to contact the Sherburne County Zoning Department if you have any questions @ 763-241-2900. Due Date: April 16, 2007 Date Received by Sherburne County: I. APPLICANT INFORM A TlON Zip Phone # fax # II. BUILDING PROJECT DESCRIPTION (Attach additional sheet if necessa/Y) 1. Please describe the building project and what the intended use is. 2. Is your municipal building a joint project? Yes_ No_ If yes, please list all partners (City, Township) 3. What area(s) of Sherbume County will your building project serve? 4. What is the schedule of your municipal building project? I Begin Date: End Date: Page 4 of6 Sherburne County's Landfill Abatement Legacy Grant Application 111 ESTIMA TED BUILDING PROJECT SUMMARY Please complete your project budllet summary below. Attach additional pages as necessary. Include a complete list of "qualifying" buildinll materials and the percent of post-consumer and pre-consumer recvcled content. ESTIMATED MUNICIPAL BUILDING PROJECT SUMMARY Building Materials: (Indicate which building materials Percent of Recycled Cost: contain post-consumer and or pre-consumer recycled Content: content and the percent of) . . TOTAL COST OF BUILDING PROJECT Page 5 of6 Sherburne County's Landfill Abatement Legacy Grant Application IV ATTACHMENTS The following need to be included with your application. Incomplete applications will not be considered. 1. Copy of the bUilding permit from applicable local unit of government if available (city or county). 2. 2 sets of plans with cross section and specifications. 3. Complete list of companies and building materials to be used in the municipal building project. Note that "qualifying" building materials intended to be used for your project must include the total percent of post-consumer and pre-consumer recycled content in orderto be considered for this grant process. V CERTlFICA TION I hereby certify that the information herein is true and correct to the best of my knowledge. I agree that all information submitted herewith shall become part of this grant application. Further, I understand that if I have knowingly provided any false information any award received may be withdrawn and/or subject to be repaid to Sherburne County. I Applloao! Sig"tu,e, Date: FOR OFFICE ,USE ONLY:. ,,\-,' .',". ", ..... . ." . . ... . APPLICATION IS: REcOMMENDED FO~: APPROVAL , ". DENIED: TABLED BY COUNTY DENIAL: , ; ~J "',..,'; "'::"1 Page 6 of6 Sherburne County's Landfill Abatement Legacy Grant Application Attachment 1 Sherburne County Landfill Abatement Legacy Grant Maximum Grant Amount Township/City Maximum Grant Amount City of Elk River * $ 2,000,000.00 City of Big Lake $ 830,000.00 City of Becker $ 374,900.00 City of Clear Lake $ 36,900.00 Citv of St. Cloud $ 666,000.00 City of Zimmerman $ 409,800.00 Citv of Princeton $ 5,100.00 TownshipofBiaLake $ 754,400.00 Township of Orrock $ 327,900.00 Township of Becker $ 425,100.00 Township of Clear Lake $ 168,000.00 Township of Haven $ 213,000.00 Township of Palmer $ 254,600.00 Township of Santiaoo $ 173,800.00 Township of Blue Hill $ 130,200.00 Township of Baldwin $ 609,400.00 Township of Livonia $ 499,200.00 TOTAL $ 7,878,300.00 . Maximum amount per year - $ 1,000,000 Note that the above amounts listed represent the maximum amount that may be granted under this program. 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'..- '::.', -", '<;." , T r 0 If r l"IIP'i!:\lI'I;ljillli~m: ~ I ,III: 'H~!!tl~!l!.Wil;.l~'li, ~ t '1;:1 t!llS I ~ t.a!:J~1l't l '0 '1,1 ~ \ ~'I!lhi!l!i,jh!!"II!lltl'~I' '(f !~\h' Pi <I'iH li'j ~ i hll'!m. !1!hIN!H~mnl:! ~ . h!{I';f'll"!lli'il''''I''~ I ~:';~~!{,!i~Nh'!I!':'IH~:! ~ , Jll,hlI1W!1l! II,'!! ~".!~ t ~!'p l -. 118 ~ ~..l .tilt ~ : II 1.'l,.IIl,bf;ll'll,lil'll~ I hfHI'I!ho "1'1 fl'll ~. ! "!''''l!' ;,;; !<.II!!':'llh II" I !ll J" '11'1"1 "I" l,ill."II<l~ 'll'I'II'!, l' ,., 'I' .~I'.l,' ,. l 11 i"l,'lllllllll':.;ll ~,;! HI; 'Ii.,'!!/!;!j' !i~ !~~~ '_t t!~ ~ \ ~\ ~ ~ ~ Pi L ~ ~ ~ ~ ~ ""I ~ '. Q S r) ~ ~ ~ ~ 8 IIoiiO, :;:t ~ " ~ ~ ~ . ~ % ~ ;:~~Q a~~q -";:'~~Q ~"ll!=::l"" ~~ d ~ .!.[i::~~ ~~..t!1 "'g~ ~ i: 1.!l May 7th 2007 DeBt Lori Johnson, Due to work obligations, I will not be able to attend tonight's City Council Meeting, I will be in contract negotiations. Loci, under Item 6.3, it is my understanding and my position that the City of Elk River should retain the whole amount of the 1.2 million dollar county grant. The reasons I have for this position are: 1) The landfill is located in the City of Elk River. The 1.2 Million dollar grant is money the County has collected on a tllX the County has on the landf11l. 2) This grant money could be used for a future city project. (Which maybe the City of Elk River should do anyway). 3) A number of cities in the county have asked for financial aid in the past, with or without the grant the YMCA will get built, so the money should stay with County Residence. Loci, if there is any issue with this, please post-pone this until next week, or you may reach me on my cell (612)865-3102. Jerry 2/2'd 06OTSf9f9H:0l :wo~ dbS:,0 L002-L-^~W