The URL can be used to link to this page

072808 EDA AgPCITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD ECONOMIC DEVELOPMENT AUTHORITY MEETING COUNCIL CHAMBERS MONDAY, JULY 28, 2008 7:00 P.M. AGENDA 1. CONVENE ECONOMIC DEVELOPMENT AUTHORITY MEETING A. Roll Call President Lizee Woodruff Turgeon Bailey Wellens B. Review Agenda 2. APPROVAL OF MINUTES A. EDA Minutes of June 23, 2008 (Att.- Minutes) 3. CONSENT A. Treasurer's Report (Att.- Treasurer's report) B. Approval of the Verified Claims List (Att. -Claims List) C. Investment Policy (Att. -Assistant Treasurer's memorandum, resolution, policy) 4. NEW BUSINESS A. Selection of Officers (Att.- Executive Director's memorandum) B. Approval of Lease Documents between the Shorewood Economic Development Authority and the City of Shorewood (Att. -Assistant Treasurer's memorandum; Ground Lease dated August 1, 2008; Lease Purchase Agreement dated August 1, 2008) C. Award the Sale of Public Project Lease Revenue Bonds, Series 2008A (Att. -Assistant Treasurer's memorandum; Resolution) 5. ADJOURN CITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD ECONOMIC DEVELOPMENT AUTHORITY MEETING COUNCIL CHAMBERS MONDAY, JUNE 23, 2008 7:00 P.M. MINUTES 1. CONVENE ECONOMIC DEVELOPMENT AUTHORITY MEETING President Lizee called the meeting to order at 7:05 P.M. A. Roll Call Present: President Lizee; Boardmembers Bailey, Turgeon, Wellens, and Woodruff; Executive Director Brown; Assistant Executive Director Nielsen; Assistant Treasurer Burton; and. Attorney Keane Absent: None B. Review Agenda Woodruff moved, Wellens seconded, Approving the agenda as prese[~ted. Motion passed 5/0. 2. APPROVAL OF MINUTES A. EDA Minutes of July 23, 2007 Turgeon moved, Wellens seconded, Approving the EDA Meeting Minutes of July 23, 2007, as presented. Motion passed 4/0/1 with Bailey abstaining due to his absence at the meeting. 3. CONSENT President Lizee reviewed the items on the consent agenda. Woodruff moved, Wellens seconded, Approving the Motions Contained on the Consent Agenda. A. Approval of the Verified Claims List Motion passed 5/0. 4. NEW BUSINESS A. Selection of Officers Wellens moved, Woodruff seconded, approving the Economic Development Authority Officer appointments of Christine Lizee as President, Laura Turgeon as Vice-President, Richard Woodruff as Treasurer, Bonnie Burton as Assistant Treasurer, Lawrence Brown as Secretary and Executive Director, Brad Nielsen as Assistant Executive Director, and leaving the position of President Pro Tem vacant. Motion passed 5/0. #2A CITE' OF SHOREWOOI~ EC®NOMIC DEVEi,®PMENT AUTHORITY MEETING June 23, 2008 Page 2 of 3 B. Report on Offering of Financing for City Hall Facilities Director Burton stated at the May 12, 2008, City Council work session the City's bond consultant Paul Donna, Senior Vice President for Northland Securities, Inc., discussed the debt financing options available for the City Hall Building Remodeling Project. At that time Council directed Mr. Donna to prepare documents to authorize the City and the Shorewood Economic Development Authority (EDA) to move forward with the sale of lease revenue bonds by the EDA for the project for anot-to-exceed amount of $1,400,000. She stated Mr. Donna was present this evening to review the finance plan summary (prepared by Northland Securities) and the EDA bond resolution authorizing the issuance of the bonds (prepared by the City's bond attorney). Mr. Donna explained under the proposed financing structure the EDA would. own the facility (i.e.; the City Hall building) and it would lease the facility back to the City for its use. The structure is very similar to the structure in place for the Public Safety Facilities. The EDA will issue the bonds; using the EDA as the conduit will exempt the debt service payment from the City's levy limit. The amount of the debt will count against the City's debt limit; the City is well within the range of its debt limit considerations. The process to issue the bonds includes adopting a resolution this evening authoring the EDA to move forward with the sale of the bonds; the City will have to adopt a similar resolution. The EDA and City will have to adopt another resolution specifying the terms of the bonds before the bonds will be issued. Mr. Donna stated between now and when the actual issuance"of the bonds is approved, the City will be able to decrease the not-to-exceed amount of $1,400,000 to more accurately reflect the bid amount accepted to do the renovation. He explained if the City issued bonds for $1,400,000, there would be approximately $1,337,950 of the funds available for the renovation. Mr. Donna stated the 20-year debt service schedule included in the finance plan summary was prepared a few weeks ago. The rates would be a little a~gressiv~ if the bonds were sold today based on the market rates. Mr. Donna explained the terms of the bond will include an early prepayment (call) feature which will allow the City and EDA to prepay the bonds. It is safe to say the call feature would be seven to ten years out. A credit rating will be applied for on the bonds because it is cost effective to do so. The City's general obligation (GO) debt is currently rated Aa3 by Moody's Investors Service. Lease obligation bonds are generally rated one notch lower than the GO rating if the facility being leased is considered an essential purpose. He expected the lease obligation bonds would be rate at an A1. Mr. Donna stated the pricing of the bonds will be done to coincide with the last City Council regular meeting date of July 28, 2008, during which the finalizing resolution will be adopted. A closing date of mid-August is anticipated. Mayor Lizee thanked Mr. Donna, Northland Securities and Director Burton for their efforts. She stated Northland Securities had served the community well when it assisted with the debt financing for the Public Safety Facilities and the City. In response to a question from Councilmember Wellens, Mr. Donna clarified the prepayment option allowed the City and EDA to prepay the bonds starting December 1, 2015 without a prepayment penalty. CITY OF SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY 1VIEETING June 23, 2008 Page 3 of 3 C. Resolution Providing for the Issuance and Sale of Public Project Lease Revenue Bonds, Series 2008A Woodruff moved, Turgeon seconded, Adopting RESOLUTION NO. 08-001, "A Resolution Providing for the Issuance and Sale of Public Project Lease Revenue Sonds, Series 2008A (City of Shorewood, Minnesota Lease Obligation)" as amended in 1. (c), change "in the approximate amount of to "a maximum principal amount of '. Motion passed 5/0. 5. OTHER BUSINESS Councilmember Woodruff stated Director Burton informed him that a Treasurer's report will be given at the EDA Organizational meeting scheduled for July 28, 2008. He recommended an investment policy be adopted for the EDA; the EDA could adopt the City's investment policy by reference. 6. ADJOURN Wellens moved, Woodruff seconded, Adjourning the Shorewood Economic Development Authority Meeting of June 23, 2008, at 7:22 P.M. Motion passed 5/0. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder ATTEST: Christine Lizee, President Lawrence A. Brown, Executive Director I~t~T~.E~t)~ ~~}NC~MI~ ~~'~~ A.Ufi~I~Ifi~i'' ~75~ ~t~urttr~~ ~liila Rat~cl ~htsrewt~t~ti, Minnt'sr~t~ ~i5331-~~C~ 1~~~ ~ ~ ~~ late: July 2~, ?0€lR ~'~ _ ~{~' To: ~Cyr`~ Presitl;rzt atzd Ct}in~~~issitncrs , / ~:.~ ,/~: 1+'rorrm: I~ieliard 1~r-~t~tlrt~l"t; `l'r~:as~zrer L3onnie 13vrton ~ssist~t'["re~nrer ..~~ ~ Re; r~n~~ual E13.~ Treasurer's Re~rt and Finamcial ~tatetnent `1`he IU A By~Li~ws reyuirc t1~t~t th%° 'T`rc.~sixret' sltztll Iilc. Iltt~ Ai~tht-rity~s financial statement with the set~rt;tary :rt least t~nce per year. This zne~norandum and the C'ity's annual tjudrt report provide t~~pliance with that retluireznent. Tl~c ~`ity's ~',c~rtrprehensivc ,A.s~rtraal l°iz~ancial Rel~scrrt f'or the year ended l~e~:t;znht~r :l 1, ?(t{l7 relx~rteti; `'Tht:' F`ct~t~ertrtae l~e:treltiptn~~~t a~t~dht}rity (l~t~.~~ of the ~::ity was created pursuant tta Ivlittne~ota str~tut~'s ~C~~~.t}~J(1 throvt;h 4t~y.lCll to carry out economic and industrial tievtrlc~ptttcnt anti rede~felc~prnent consistent with. policies estal~lislzcti ~}'' the C'tzuzzcl, It is ct~inprised ofthe ~neml~ers of the t:i~,, C'cauntil anti. has ~~ L~eccrnl~er a 1 year end. The EL}r~ activities are hlencleti and repUrted in the dtrbt sG~rvict:. at~d capital project fiends- Separ~r#e fintu~cial statelnent~ are not issued for this ccamponent unit." .A inajcsr activity of`the ELIA in ?tJt17 ~~•as the issu~utce oi`+Lrt}ssoti~~`r I~ctilintt#itt~; 13raiiti*;, ~erie4'~.i}I.}"~A, `~Uti71~t and 2(1f17C. "1 he cumulative economic fain antit;ipattxl as a rt;sull af'il~e rctu~tdin issues is estimated at $~~~>b1,[31fi. Itz atltlition, [~leasc note Ilaat tl~o ~;1~7,~#(v~1 dcticiency ofrevenues oe~er txpttttlltn'a:s, slrtrran in file ~ti~tenaent of K+~venues and )/xpenditures was the result t~font~-titxtu trattsfcrs anti ncc~c~unting requirelnents relatirtl tt~ the ~ti{i7 Rctun{iiu~ issue. Tltat is to ~y~, the lease pay~n~ents received fiYnn Pulic;% zind Fire ;tre sufficient to fund the detat service ~u~d related fiscal fees the l=:U~ is responsible tcx pay, l;~ccrpts frotx~ #htr t'ity of ~'h+~re~~rcztfd l~iztanal ~t~tt~tnctzts are attaelieti fir yc~czt- revie~<<; Nate :~ ttr the Financial ~tatenzents provides additional detail re~,ardin~ the ~UU7" £;rt~ssovv'r Etefuttditz~ of'tlic EI~~ Police and Fire facility Lease Revenue E3tinds, fierier ~~CJ? anti ~{1t}3, In atlditirn, the notes also 1~rovide detailt~d inforzt~atityn ,~~iottt the Public Safety l'atrility E3t~ntls t~utstantiin~ at year enti, alUn~ with t~nnual debt ser~~ice requirements, "!'tie attached tinaufcal stdten~enXs are e~tcerE~ts from the 1Z!31r'`~I}[l7 C~omprchuK~sivc, r'~t~tzu~! [?in~rcial E~epc~rt azttl itr~: provided fr~r th4 C.t>n~'•e:zticztc:c t~f the Ct~ztzttiissic~n, ~~R CITY OF SHOREWOOD, MINNESOTA Economic Development Authority BALANCE SHEET December 31, 2007 EDA Debt Service Fund ASSETS Cash & Investments $ - Cash with Fiscal Agent $ 10,028,996 Lease Receivable 11,090,000 Due from other funds - TOTAL ASSETS $ 21,118,996 LIABILITIES Accounts & Contracts Payable $ - Due to other funds - Deferred Revenue 11,090,000 TOTAL LIABILITIES $ 11,090,000 Fund Balance Reserved for Debt Service 10,028,996 TOTAL LIABILITIES AND FUND BALANCE $ 21,118,996 STATEMENT OF REVENUE & EXPENDITURES December 31, 2007 REVENUES Lease Payments $ 1,034,751 Interest 244,007 TOTAL REVENUE $ 1,278,758 EXPENDITURES Debt Service Principal 465,000 Interest and service charges 941,222 TOTAL EXPENDITURES $ 1,406,222 EXCESS (DEFICIENCY) OF REVENUE OVER EXPENDITURES $ (127,464) OTHER FINANCING SOURCES (USES) Transfer In $ 45,091 Long-Term Debt Issued $ 10,000,000 Discount on long-term debt issued (24,233) Transfer Out $ - TOTAL OTHER SOURCES (USES) $ 10,020,858 NET CHANGE IN FUND BALANCE $ 9,893,394 FUND BALANCE, JANUARY 1 $ 135,602 FUND BALANCE, DECEMBER 31 $ 10,028,996 Source: City of Shorewood Comprehensive Annual Report 12/31/2007, Exhibit C-2 CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2007 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The City of Shorewood, Minnesota (the City), operates under the "Optional Plan A" form of government as defined in the State of Minnesota statutes. Under this plan, the government of the City is directed by a Council composed of an elected Mayor and four elected Council members. The Council exercises legislative authority and determines all matters of policy. The Council appoints personnel responsible for the proper administration of all affairs relating to the City. The City has considered all potential units for which it is financially accountable, and other organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the City's fmancial statements to be misleading or incomplete. The Governmental Accounting Standards Board (GASB) has set forth criteria to be considered in determining fmancial accountability. These criteria include appointing a voting majority of an organization's governing body, and (1) the ability of the City to impose its will on that organization or (2) the potential for the organization to provide specific benefits to, or impose specific fmancial burdens on the City. Blended component units, although legally separate entities are, in substance, part of the City's operations and so data from these units are combined with data of the City. The City has the following component unit: Blended Component Unit The Economic Development Authority (EDA) of the City was created pursuant to Minnesota statutes 469.090 through 469.108 to carry out economic and industrial development and redevelopment consistent with policies established by the Council. It is comprised of the members of the Council and has a December 31 year end. The EDA activities are blended and reported in the Debt Service and capital projects funds. Separate fmancial statements are not issued for this component unit. B. Government-wide and Fund Financial Statements The government-wide fmancial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all. of the nonfiduciary activities of the City and its component unit. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2} grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate fmancial statements are provided for governmental funds, proprietary funds and fiduciary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund fmancial statements. -29- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2007 Note 3: DETAILED NOTES ON ALL FUNDS -CONTINUED _ ;: :-~>~ Lease Revenue Bonds The City also issues bonds where the City pledges income derived from the acquired or constructed assets to pay debt service. Revenue bonds outstanding at year end are as follows: Balance Authorized Interest Issue Maturity at tion Descri and Issued Rate Date Date Year End p Public Safety Fire Facility, Series 2002A $ 3,865,000 3.00-5.50 % 09/01/02 02/01/23 $ 3,450,000 Public Safety Police Facility, Series 2002B 4,025,000 3.00-5.50 09/01/02 02/01!23 3,590,000 Public Safety Fire Facility, ~ Series 2002C 2,060,000 3.00-5.50 09/01/02 02/01/23 1,840,000 Public Safety Fire Facility, Series 2003A 1,195,000 2.35-5.10 04/15/03 02/01/23 1,095,000 Public Safety Police Facility, Series 2003B 1,220,000 2.35-5.10 04/15/03 02/01/23 1,115,000 Public Safety Fire Facility, Refiznding Series 2007A 4,130,000 3.75-5.00 01/01/07 02/01/23 4,130,000 Public Safety Police Facility, Refunding Series 2007B 4,285,000 3.75-5.00 O1/01!07 02/01/23 4,285,000 Public Safety Fire Facility, Refunding Series 2007C 1,585,000 3.75-4.00 01/01/07 02/01/22 1,585,000 Total Lease Revenue Bonds $ 21,090,000 Annual debt service requirements to maturity for revenue bonds are as follows: Lease Revenue Bonds Year Ending Governmental Activities December 31, Principal Interest Total 2008 $ 485,000 $ 953,815 $ 1,438,815 2009 495,000 933,865 1,428,865 2010 970,000 903,839 1,873,839 2011 1,120,000 861,329 1,981,329 2012 1,170,000 812,893 1,982,893 2013 -2017 6,690,000 3,190,185 9,880,185 2018 - 2022 8,390,000 1,454,684 9,844,684 2023 1,770,000 42,985 1,812,985 Total $ 21,090,000 $ 9,153,595 $ 30,243,595 -44- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2007 Note 3: DETAILED NOTES ON ALL FUNDS -CONTINUED Changes in Long-term Liabilities Long-term liability activity for the year ended December 31, 2007, was as follows: Begiruung Ending Due Within Balance Increases Decreases Balance One Year €: Governmental activities Lease revenue bonds $ 11,555,000 $ 20,000,000 $ (465,000) $ 21,090,000 $ 485,000 `" Capital lease 69,594 - (69,594) - - Compensated absences 170,598 157,161 135,348 192,411 192,411 Total $ 11 795,192 _ $ 10,157,161 $ (669,942) $ 21,282,411 $ 677.411 Business-type activities General obligation revenue bonds $ 3,920,000 $ - $ (255,000) $ 3,665,000 $ 250,000 Compensated absences 31,867 - 31,867 - _ - Total $ 3,951,867. $ - $ (286,867) $ 3 665,000 $ 250,000 Crossover Refunding On January 1, 2007 the Economic Development Authority (the EDA) of the City issued $4,130,000 of Public Safety Fire Facility Lease Revenue Crossover Refunding Bonds, 2007A. The bonds issued will crossover refund the 2002A and 2003A Public Safety Fire Facility Lease Revenue Bonds. The proceeds of the bonds were deposited in an escrow account and will be used to pay issuance costs and to purchase government obligations. The government obligations will bear interest rates that will provide sufficient funds to refund the old bonds. The 2002A series bonds will be refunded on August 1, 2009 and the 2003A series bonds will be refunded on August 1, 2010. The escrow account will also provide debt service payments on the new bond until the crossover dates. The old bonds are not considered defeased until the crossover dates, and therefore will not be removed as liabilities. As a result of the crossover refunding issue, the EDA will save $288,277 in debt service payments and achieve an economic gain (the present value of the difference between the old and the new debt service) of $195,442. ~;,_ ~; . ;; ~ Crossover Refunding On January 1, 2007 the Economic Development Authority (the EDA) of the City issued $4,285,000 of Public Safety Police Facility Lease Revenue Crossover Refunding Bonds, 2007B. The bonds issued will crossover refund the 2002B and 2003B Public Safety Police Facility Lease Revenue Bonds. The proceeds of the bonds were deposited in an escrow account and will be used to pay issuance costs and to purchase government obligations. The government obligations will bear interest rates that will provide sufficient funds to refund the old bonds. The 2002B series bonds will be refunded on August 1, 2009 and the 2003B series bonds will be refunded on August 1, 2010. The escrow account will also provide debt service payments on the new bond until the crossover dates. The old bonds are not considered defeased until the crossover dates, and therefore will not be removed as liabilities. As a result of the crossover refunding issue, the EDA will save $304,293 in debt service payments and achieve an economic gain (the present value of the difference between the old and the new debt service) of $204,501. -45- CITY OF SHOREWOOD, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2007 Note 3: DETAILED NOTES ON ALL FUNDS -CONTINUED Crossover Refunding On January 1, 2007 the Economic Development Authority (the EDA) of the City issued $1,585,000 of Public Safety Fire Facility Lease Revenue Crossover Refunding Bonds, 2007C. The bonds issued will crossover refund the 2002C Public Safety Fire Facility Lease Revenue Bond. The proceeds of the bonds were deposited in an escrow account and will be used to pay issuance costs and to purchase government obligations. The government obligations will bear interest rates that will provide sufficient funds to refund the old bond on August 1, 2009. The escrow account will also provide debt service payments on the new bond until the crossover date. The old bonds are not considered defeased until the crossover date, and therefore will not be removed as a liability. As a result of the crossover refunding issue, the EDA will save $227,700 in debt service payments and achieve an economic gain (the present value of the difference between the old and the new debt service) of $94,873. ~'1a ~~~vr~a ~~~~ ~~~ e~~l ~~~r~t Azc ~~i I~ec A~~a~~vc=~1 ~is~~~~a 0712~1~~4 Check # Ver~dOr ~'~=an~e .Z~esc~•iption Check ~atc~ IrzvUice # Arnaz~~~t 1199 US BANK-CORPORATE T EDA-2002A FIRE BONDS INTER 07/15/2008 33446200- $84,423.75 1199 US BANK-CORPORATE T EDA-20028 POLICE BONDS INT 07/15/2008 33448800- $87,885.00 1199 US BANK-CORPORATE T EDA-2002C FIRE BONDS INTER 07/15/2008 33448900- $45,033.75 1199 US BANK-CORPORATE T EDA-2003A FIRE BONDS INTER 07/15/2008 33513700- $23,988.75 1199 US BANK-CORPORATE T EDA-20038 POLICE BOND INTE 07/15/2008 33513800- $24,496.25 T(JTfILFY)R t,'SBfi,~'h"-CORf'tJR,-iTETRt;ST,SERt'IC ES $265,827.50 7'f17~4L CI-I~CKS $265,827.50 We~l~res~lrr~~, Jerly 23, 20(18 Page f of i SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY 5755 Country Club Road Shorewood, Minnesota 55331-8926 952.474.3236 FAX: 952.474.0128 MEMORANDUM Date: July 23, 2008 To: Honorable Mayor and City Council Members Lawrence A. Brown, Acting City Administrator ~~ .,~,,, From: Bonnie Burton, Finance Director/Treasurers d } Re: Resolution Adopting an Investment Policy The Shorewood City Council recently adopted an updated and revised City Investment Policy at their July 14th, 2008 meeting. A suggestion was made that the Shorewood EDA also adopt the new investment policy by reference, given the likelihood of having project funds available for investment in conjunction with a bond sale for the City Hall Project. Accordingly, EDA Resolution # 08-002 is attached for the Commissioner's review and approval. Recommendation Staff recommends approval of EDA Resolution #08-002, adopting the Shorewood Investment Policy. n ~~ SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY Hennepin County, Minnesota RESOLUTION N0.08-002 A RESOLUTION ADOPTING AN INVESTMENT POLICY FOR THE SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY (EDA) WHEREAS, the Shorewood EDA desires to establish the EDA's investment objectives and establish specific guidelines that the EDA will use in the investment of funds; and, WHEREAS, the Authority expects to receive funds for certain projects, such as the proceeds from the sale of a bond issue; and that said funds may be available to be invested temporarily; NOW THEREFORE, BE IT RESOLVED BY THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF SHOREWOOD (THE "AUTHORITY") AS FOLLOWS: The Authority hereby adopts, by reference, the City of Shorewood Investment Policy (current copy attached). APPROVED BY THE BOARD OF COMMISSIONERS OF THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF SHOREWOOD this 28th day of July 2008. ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF SHOREWOOD, MINNESOTA Christine Lizee, President ATTEST: Lawrence A. Brown, Acting Executive Director CITY OF S~IOREWOOD, MINNESOTA INVESTMENT POLICY INTRODUCTION This policy covers all monies and cash balances of the City of Shorewood and includes deposits and investments of funds deposited in interest bearing accounts. The policy is intended to be broad enough to allow the Investment Officer to function properly within the parameters of responsibility and authority, yet specific enough to adequately safeguard the investment assets. PURPOSE The purpose of this policy is to establish specific guidelines the City of Shorewood will use in the investment of City funds. It will be the responsibility of the City Finance Director/Treasurer to invest City funds in order to attain a market rate of return while preserving and protecting the capital of the overall portfolio. Investments will be made, based on statutory constraints, in safe, low risk instniments. SCOPE The City Finance Director/Treasurer is responsible for the investing of all funds in the custody of the City, including, but not necessarily limited to, the General Fund, Special Revenue Funds, Debt Service Funds, Capital Project Funds, Enterprise Funds, and Agency Funds. PRUDENCE The standard of prudence to be used by investment officials shall be the "prudent investor", and shall be applied in the context of managing the overall portfolio. Investment officers acting in accordance with this policy and with MN Statute 118A, and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided that reasonable action is taken to control adverse developments and unexpected deviations are reported in a timely manner. Page 1 OBJECTIVE There are three main objectives of all investment activities that are prioritized as follows; A. Safe - Safety of principal is the foremost objective of the City. Each investment transaction shall seek to first insure that capital losses are avoided. The objective will be mitigate credit risk and interest rate risk. Credit Risk is the risk of loss due to failure of the security issuer or backer. Intef-est Rate Risk is the risk that the market value of securities in the portfolio will fail due to changes in general interest rates. B. Li uidi - The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonable anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands. C. Yield - The investment portfolio of the City of Shorewood shall be designed to attain amarket-average rate of return through budgetary and economic cycles, taking into consideration the city's investment risk constraints, cash flow characteristics of the portfolio and prudent investment principles. Subject to requirements of the above objectives, it is the policy of the City of Shorewood to offer financial institutions and companies within the City of Shorewood the opportunity to bid on investments; however the City of Shorewood will seek the best investment yields. DELEGATION OF AUTHORITY Management responsibility for the investment program is hereby delegated from the City Council to the City Finance Director/Treasurer, and, in the absence of the Finance Director/Treasurer, the City Administrator (the investment officers). The investment officers shall establish procedures for the operation of the investment program, consistent with this investment policy. Such procedures shall include delegation of authority to persons responsible for investment transactions. The City Finance Director/Treasurer shall be responsible for all transactions undertaken and shall establish a system of internal controls designed to prevent losses from fraud and employee error. CONFLICT OF INTEREST Any City Official (elected or appointed) involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program or which could impair his/her ability to make impartial investment decisions. Page 2 AUTHORIZED FINANCIAL INSTITUTE AND DEALER In accordance with Minnesota Statute 118A.005, the responsibility for conducting investment transactions resides with the City Council of the City of Shorewood. Also, the Council shall authorize the City Finance Director/Treasurer to exercise the powers of the Council in designating a depository of the Funds. In selecting depositories, the credit worthiness of the institutions under consideration shall be examined by the City Finance Director/Treasurer. Only approved security broker/dealers selected by creditworthiness shall be utilized (minimum capital requirement of $10 million dollars and at least five years of operation). These may include "primary" dealers or regional dealers that qualify under Securities and Exchange Commission Rule 15c3-1 (uniform net capital rule). BROKER REPRESENTATIONS Municipalities must obtain from their brokers certain representations regarding future investments. Minnesota Statutes, Section 118A, Subdivision 6, requires municipalities to provide each broker with information regarding the municipalities investment restrictions. Before engaging in investment transactions with the City of Shorewood, the supervising officer at the securities broker/dealer shall submit a certification annually according to MN Statutes 118A.05. The document will state that the officer has reviewed the investment policies and objectives, as well as applicable state law, and agrees to disclose potential conflicts of interest or risk to public funds that might arise out of business transactions between the firm and the City of Shorewood. All financial instihitions shall agree to undertake reasonable efforts to preclude imprudent transactions involving the City's funds. AUTHORIZED AND SUITABLE INVESTMENTS Minnesota Statutes, Section 118A, Subdivision 3, lists all permissible investments for municipalities. This list establishes the maximum investment risk permitted for a Minnesota municipality. Even though MN Statutes 118A provides for more instruments to be used for investing purposes; the following is a listing of investments the City will be authorized to invest in: 1. Government Securities: Instniments such as bonds, notes, bills, mortgages and other securities which are direct obligations of the federal government or its agencies, with the principal fully guaranteed by the U.S. Government or its agencies. 2. Certificates of Deposit: A negotiable or nonnegotiable instalment issued by commercial banks and insured up to $100,000 by the Federal Deposit Insurance Corporation (FDIC). 3. Repurchase Agreement: An investment which consists of two simultaneous transactions, where an investor purchases securities from a bank or dealer. At the same time, the selling bank or dealer agrees to repurchase the securities at the same price plus interest at some agreed-upon future date. The security purchased is the collateral protecting the investment. Page 3 4. Any security which is a General obliGation of any state with taxing powers which is rated "A" or better by a national bond rating service. Statewide investment pools, including Minnesota Joint Powers Investment Trust (4M Fund), which invest in authorized instniments according to MN Statutes 118A. 6. Commercial paper: Short-term unsecured promissory notes with a rating of A-1 (Standard and Poor's), P-1 (Moody's) or F-1 (Fitch). These must be rated in the highest quality category by at least two nationally recognized rating agencies and must mature in 270 days or less. 7. Money market mutual fiords which invest in authorized instruments according to MN Statutes 118A. 8. Interest-bearing deposits in authorized depositories must be fully insured or collateralized. COLLATERALIZATION Collateralization will be required on two types of investments: Certificates of Deposit (above the FDIC insurance amount) and Repurchase Agreements. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be 110 percent of the market value of principal and accrued interest. When the pledged collateral consists of notes secured by first mortgages, the collateral level will be 140% of the market value of the principal and accrued interest. Collateral shall be deposited in the name of the City of Shorewood, subject to release by the City Finance Director. SAFEKEEPING At~iD CUSTODY All invested assets of the City of Shorewood involving the use of public funds custodial agreement shall comply with all rules adopted pursuant to Minnesota Statute 118A. All custodial agreements shall be in writing and shall contain a provision that all custodial services are provided in accordance with the laws of the State of Minnesota. DIVERSIFICATION The City will attempt to diversify its investments according to type and maturity. The portfolio, as much as possible, will contain both short-term and long-term investments. The City will attempt to match its investments with anticipated cash flow requirements. Extended maturities maybe utilized to take advantage of higher yields; however, no more than 30% of the total investments should extend beyond five (5) years and in no circumstance should any extend beyond fifteen (15) years. No more than 3% of unencumbered funds shall be kept in commercial paper. At least 30% of funds shall be kept in liquid savings accounts (such as the 4M Fund). Page 4 CERTIFICATE OF AUTHORITY The Shorewood City Council hereby authorizes the following city staff to sell, assign and endorse for transfer, certificates of deposit, certificates representing stocks, bonds or other securities that are registered in the name of the City of Shorewood: City Finance Director/Treasurer and City Administrator. INVESTMENT REPORTING The City Finance Director/Treasurer shall prepare an investment report at least quarterly, including a management summary that provides a clear picture of the status of the current investment portfolio. The investment report shall include the cost, date and place of each investment, the maturity date and rate of interest earning on each as of that date; and any additional information as may be requested from time to time by the City Council. CONCLUSION The intent of this policy is to ensure the safety of all City funds. The main goal of the City will be to achieve a market rate of return while providing liquidity and maintaining the safety of its principal. Adopted by the City Council of the City of Shorewood this 14th day. of July, 200. Approved: ~~ ~ ~~ Chris Lizee, Mayor Attest: _~- awrence A. Brown, Acting City Administrator Page 5 SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY 5755 Country Club Road Shorewood, MN 55331-8926 952-474-3236 FAX:952-474-0128 MEMORANDUM DATE: July 24, 2008 TO: EDA Board of Commissioners FROM. Lawrence Brown, Executive Director RE: Selection of Officers The Selection of Officers is made at the EDA's annual meeting in July. Due to the resignation of Councilmember Paula Callies and City Administrator Craig Dawson, the Board met on June 23, 2008, to fill the offices of President Pro-Tem, Secretary, and Executive Director. At that time, the Board determined not to fill the President Pro-Tem position. The EDA By-Laws state the positions of Vice President and Treasurer shall be members of the Board and shall be elected at the annual meeting. The By-Laws further state that no commissioner may serve as President and Vice President at the same time. The current appointed Officers include: President -Christine Lizee (The President shall be the Mayor of the City of Shorewood) Vice-President -Laura Turgeon (Presides in the absence of the President). The Board may determine who shall serve as Vice-President. President Pro-Tem -Appointed to serve in the absence of both the President and Vice-President. If the Board wishes to continue this position it will need to select someone for it. Treasurer -Richard Woodruff (The Treasurer shall receive and be responsible for Authority money, etc. The Board may determine who shall serve as Treasurer. Assistant Treasurer -Bonnie Burton (The Assistant Treasurer shall be the Director of Finance) Secretary -Lawrence Brown (The Secretary shall be the City Administrator). Executive Director -Lawrence Brown (The Executive Director shall be the City Administrator). Assistant Executive Director -Brad Nielsen (The Assistant Executive Director shall serve as the Director of Planning. Action Needed: The Board may determine who to appoint to the positions of Vice-President, Treasurer, and President Pro-Tem (if the Board wishes to continue the position of President Pro-Tem). m~ ~ ~ SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY 5755 Country Club Road Shorewood, Minnesota 55331-8926 952.474.3236 FAX: 952.474.0128 MEMORANDUM Date: July 23, 2008 To: EDA President and Commissioners Lawrence A. Brown, Acting Executive Director From: Bonnie Burton, Assistant Treasurer , ~ ~~'~' d Re: Resolution Authorizing the Sale of Bonds to Finance the 2008 City Hall Project The City Council, acting in their capacity as EDA Commissioners, at their June 23, 2008 meeting, adopted Resolutions to Pre-Authorize the Sale of Bonds to finance the renovation and construction of the City Ha11 (Resolution #08-001). The resolution provided for Lease Revenue Bonds to be issued in anot-to-exceed maximum amount of $1.4 million. Staff and consultants have been preparing for the bond issue with many behind-the scene tasks, including preparation and review of all bond documents; a conference call with Moody's Investor Services to obtain a bond rating for the issue; and obtaining estimates for telecommunications and furnishings from vendors. Staff s recommendation is that the bond issue be sized at $1.25 million plus issuance costs, for a grand total of $1,310,000. The bond issue was sized based on the following known cost considerations and estimates: Construction (bid received) $950,000 Telecommunications (estimate) 50,000 Furnishings (estimate) 75,000 Owners Representative (estimate) 60,000 Contingency (10%) 115,000 Costs of Issuance (estimate) 60,000 Total: 1 310 000 The attached finance documents are representative of what the Council can expect to see at Monday's meeting, after the issue has been priced and finalized. The financing plan calls fora 20-year debt service schedule, with annual debt service (principal and interest) payments of approximately $100,000. (The debt service payments, or lease payments, are paid to the EDA from the City's General Fund, either as a special levy, or possibly from an annual dedicated transfer to the General Fund from the Liquor Fund.) The Lease Agreement documents are also attached for Council review and will be finalized for the closing. In terms of process and procedure, the Shorewood EDA Board will be asked to approve EDA documents, including the Lease Purchase Agreement, and a Ground Lease Agreement, and a Resolution Awarding the Sale of Bonds. After the EDA transacts its business and the EDA meeting is adjourned, the Shorewood City Council, at their regular meeting, will be asked to approve similar resolutions for the same documents. Mr. Paul Donna will be present at the July 28, 2008 meeting to present the final terms of the bonds, answer questions, and guide the City Council through this process. ,~~ ~~ minary Preli (~ ((~~ g City of Shorewood, iVlinnesoi~~1 Public Project Lease Revem~e Bonds, Series 2008 Pricing Resize Sources & Uses Dated 08/01!2008 ( Delivered 08/21/2008 Sources Of Funds Par Amount of Bonds $1,310,000.00 Accrued Interest from 08!01/2008 to 08/21/2008 3,130.00 Total Sources $1,313,130.00 Uses Of Funds ' 845 00 59 s Discount Total Costs of Issuance including Underwriter . , Deposit to Debt Service Fund 3,130.00 Deposit to Project Construction Fund 1,250,000.00 Rounding Amount 155.00 Total Uses $1,313,130.00 Lease Revenue Bonds Serie ~ SINGLE PURPOSE i 7!24!2008 i 11:18 AM Northland Securities Inc. Public Finance Page 1 Preliminary City of Shorewood, .Minnesota Public Project Lease Revenue Bonds, Series 2008 Pricing Resize Debt Service Schedule Part 1 of 2 Date Principal Coupon Interest Total P+I Fiscal Total 08/21/2008 - - - - 950.00 46 46,950.00 - 06/01/2009 12l01/2009 - 25,000.00 2.850% , 28,170.00 53,170.00 100,120.00 06/01/2010 - - 27,813.75 27,813.75 - 12/01/2010 45,000.00 3.150% 27,813.75 72,813.75 100,627.50 06!01/2011 - - 27,105.00 27,105.00 - 12/01/2011 50,000.00 3.500% 27,105.00 77,105.00 104,210.00 06/01!2012 - 26,230.00 26,230.00 - 12/01/2012 50,000.00 3.500% 26,230.00 76,230.00 102,460.00 06/01/2013 - - 25,355.00 25,355.00 - 12/01/2013 50,000.00 3.750% 25,355.00 75,355.00 100,710.00 06/01 /2014 - - 24,417.50 24,417.50 - 12l01/2014 55,000.00 3.750% 24,417.50 79,417.50 103,835.00 06/01/2015 015 - 00 000 55 - 4.000% 23,386.25 23,386.25 23,386.25 78,386.25 - 101,772.50 12/01/2 . , - 286.25 22 22,286.25 - 06/01/2016 12/01/2016 - 60,000.00 4.000% , 22,286.25 82,286.25 104,572.50 06/01/2017 - - 21,086.25 21,086.25 - 12/01/2017 60,000.00 4.200% 21,086.25 81,086.25 102,172.50 06!01!2018 - - 19,826.25 19,826.25 - 12l01/2018 60,000.00 4.200% 19,826.25 79,826.25 99,652.50 06/01!2019 - - 18,566.25 18,566.25 - 12/01/2019 65,000.00 4.350% 18,566.25 83,566.25 102,132.50 06!01 /2020 - - 17,152.50 17,152.50 - 12/01/2020 70,000.00 4.350% 17,152.50 87,152.50 104,305.00 06/01/2021 - - 15,630.00 15,630.00 - 12/01/2021 70,000.00 4.500% 15,630.00 85,630.00 101,260.00 06/01/2022 - - 14,055.00 14,055.00 - 12/0112022 75,000.00 4.500% 14,055.00 89,055.00 103,110.00 06/01/2023 23 - 000 00 75 - 650% 4 12,367.50 12,367.50 12,367.50 87,367.50 - 99,735.00 12/01/20 . , . - 623.75 10 10,623.75 - 06/01!2024 12/01/2024 - 80,000.00 4.650% , 10,623.75 90,623.75 101,247.50 06/01/2025 - - 8,763.75 8,763.75 - 12/01/2025 85,000.00 4.750% 8,763.75 93,763.75 102,527.50 06/01/2026 - - 6,745.00 6,745.00 - 12/01(2026 90,000.00 4.750% 6,745.00 96,745.00 103,490.00 06/01/2027 - - 4,607.50 4,607.50 - 12/01/2027 95,000.00 4.850% 4,607.50 99,607.50 104,215.00 06/01/2028 - - 2,303.75 2,303.75 - 12/01/2028 95,000.00 4.850% 2,303.75 97,303.75 99,607.50 Total $1,310,000.00 - $731,762.50 $2,041,762.50 - Lease Revenue Bonds serie ~ SINGLE PURPOSE ~ 7/24/2008 ~ 11:18 AM Northland Securities Inc. Public Finance Page 2 Preliminary ~ 1,310,000.00 City of Sl~ore~~ ood, Minnesota Public Project Lease Revenue Bonds, Series 2008 Pricing Resize Debt Service Schedule Part 2 of 2 Date And Term Structure Dated 8/01 /2008 Delivery Date 8!21/2008 First Coupon Date 6/01/2009 First available call date 12/0112016 Call Price 100.0000000% Accrued Interest from 08/01!2008 to 08/21!2008 3,130.00 Yield Statistics Bond Year Dollars $16,103.89 Average Life 12.293 Years Average Coupon 4.5440111% Net Interest Cost (NIC) 4.7880515% True Interest Cost (TIC) 4.8275079% All Inclusive Cost (AIC) 5.0110909% IRS Form 8438 Net Interest Cost 4.5245748% Weighted Average Maturity 12.293 Years Bond Yield for Arbitrage Purposes 4.4879648% Lease Revenue Bonds Serie l SINGLE PURPOSE 1 7/24/2008 1 11:18 AM Northland Securities Inc. Public Finance Page 3 THE LE~tiE :1GRt:E1IE~Tti Fvllotvhtg is a st.uumaty of certain provisions of the Grouucl Lease and Lease-Purchase ~ereemeut bem~een the Authority and the City: Tlie Crrviuul Leasg; The C;round Lease terminates ulxal the occurrence of any vue of the follolx-ini~ event:: • Payment ley the C`in' of all Lease Pa}aueuts • Etercise b.' the City of its option to 1?repay the Lease and all other suers flue • The termination of the Lease Tenn by the City for uvuappmpriariou • The tenuinativn of the Lease Tenn upon the accun-ence of an Event of Dettult by the f.'it}~ The Lexse_Futclixs? ~1Qreenrent. The Authorin is willing to acquue a leasehold interest iu the site. pursuant to a C~rotutd L,e~se. front the Cin~ to the Authorit~~ and to acquire title to the Facilities and to lease and sell the site and facilities to the Ci[}~, pursuant to rt Lease Purchase Agreement. The City has detennuted that it is uecessan~ for it to actluire, pursuant to the Lease_ the Authvrihr's interest iu real property with buildint7s, stnrcnues curl iutl?ro~~emenrs eoustrxtcted thereon and equipnteut tv be coutainecl therein. Pavuteuts under the Lease A,reeutent The City- will make Lease Pavuxents tinder the Lease-Purchase Agreement sentiaunuall}- ut amounts sufficient to pay the principal of and interest ou the Bends wlreu due. The City is also oblisated to make other paynxeuts sufficient tv pay: • all fees. char;des and etipenses of the Bond Register and Payin, :Agent • all costs in connection t~'ith the call. redemption and payment of Bonds • expenses reasonably utcurred by the _luthvrit}~ iu connection xvith the perforutance of the Authority': obligations under the Lease yr Boncl Resolution • all espouses incurred in connection with the enforcement of any right, ender the Lease by the .~uthvrih~ yr the U~eners of the Bonds + all payment. required h}° rebate coeeuauts • all other payureuts which the City has a~ree<I to pay yr assume • all cysts; chat.ges, espenses and other amounts and obligations chxe under the Grvtutd Lease Lease Paynxents shall be paid in :cute-day fiuttis directly to the Bvud Registrar. It is ac}:notx~lzd~?ed that the Lease Pay°ntent to be made vn each :flay 1> or Nvventber 1>, respectivel}'. shall be applied tv pa}went of the principal oT' and interest on tln Brnttts ro be paid vn each June 1 mtil December 1, respectively. C~~erativn \~lauttenauee ~utd ~4odificativn of Site and Facilities The City shall. at its own espouse. maintain, preser~•~e and keep the Site and the Facilities in good repair, working order and condition and shall from time to Bute ruake all repairs; replacenteuts and irnl?rovements necessary to kezp the Site aucl the Facilities in sucli condition. The City shell base the right to remodel the Facilities. yr snake altcratiox>s. modifications, turd improeentents thereto. Dtuiu~~ the tenxr of the Lease, the C'it}- shall pay as the sauce became due, all utilities. rises and t;vvenunental charees of any kind whatsoever. Insurance The Cin~ shall procure and maintain coutinuvtr lv insurance relatutg to the nrtiurenance, use or operation of the Cit1-. the Facilities or any par[ thereof, nx amounts not less than the City's tort liability limits uucler \Iirmesvta Statxrtes. _ '' a Asi,~tuueut: Subleasing, The ri!=,hts ,tud obligations of the ~ulhority_ tinder Qtis Lease, utcludiue fhe right ro receive and enforce pa}'tnent of Che Lease Pavtueuts Anil the .-~clditioual Leave Pa}-tueur to b~ made b}- the Cit<. ma}= not be asiguecl. pled_'eil or tnort~as`ed or transferred in ,whole or in part. The riehts and obligations of the Authority may be hansferred and assieued to anv le«al successor to the functions of the Audx~rity. The rights atul obligations of the City utay not be assi~_ued by the City without the written consent of the Authori tv. Event: of Default and Reutedies Following= are Event, of Default under the Lease-Ftu~chase A~ eeutent: 1. Failure by the Cit}~ to pay auy Lease Paynteut or other pa}~ment requireit to be paid hereunder. '?. Faihue by the City to obset~=e and perfarnt any covenant, condition or agreeuteut muter the I:ease titr a period of CO clays after ~rritteu notice specifying sudt failure anil regttesfiug that it be remedied has been given to the City be the Authority, tmless tlteAuthoritt- shall aeree in ~~'i~itingto an elteusion of such tune prior to its expiration. ~. The City shall apply for or convent to the appointment of. or taking of possession b}•, a receiver. custodian. tntstee. liquidator or the like of the Cit}= or of alt or a subsrtntial part of its pn,pert}~, or conmteuce a ei,luntaty case touter the Federal Banktuptc}' Code, or file a petition seeking to take aclvautage of any other law relatin~_**, to bankruptc}'. insolvency, reor,?attization.,viucling-up or composition or acljusttnent of clebts- =1- ,-~ proceeding or case shall be couunenced withr.+ut the application or consent of the City seeking. (aj liquidation. reorgatuzation, dissolution. winding-up or composition or actiusnnent of debts of the City or (b) the appoiutinent of a hustee, receiver. custodian,lirluiclator or the like of the Cite or (c) sutrilar relief in respect of the C'it}° under any la~i= relating to bankruptcy. insolvency, reot.,*auization, t~iudiut~-up or composition ar adjustttteut of debts; and such I>roceectiug has not been dismissed ceith sith (GCt) days of the filiua thereof. Purchase of Facilitieo by the Girt :Termination of Lease At anv time when the Ptuchase Price_ together with mt}= unpaid or delinilueut interest, has been filly paid or provided for shall be deeuted to have been completed. The Autltonty shill iltereupou deliver to the Ctty such iustreunents of eonvevance or release as. in the opinion of the Cif}, nray be necessary to relea-se the interest of the :luthorihr ut the Site uul the Facilities. GROUND LEASE Between CITY OF SHOREWOOD, MINNESOTA As Lessor and SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY As Lessee Dated as of August 1, 2008 This instniment was drafted by: KENNEDY & GRAVEN, CHARTERED (AJP) 470 U.S. Bank Plaza Minneapolis, Minnesota 55402 (612) 337-9300 335029v2 AJP SH230-41 THIS GROUND LEASE (the "Ground Lease"), made as of this 1st day of August, 2008, is by and between the CITY OF SHOREWOOD, MINNESOTA, a statutory city and political subdivision of the State of Minnesota (the "City"), as Lessor, and the SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY, 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 muhial 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 Hennepin County, Minnesota (hereinafter called the "Site"). Section 1.02. Warranties. The City covenants and warrants to the Authority: (1) 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-Purchase Agreement, between the City and the Authority of even date herewith (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 (5) That the City has authority to enter into, execute and deliver the Lease, has duly authorized its execution and delivery, and has duly executed and delivered the Lease. Section 1.03. Environmental Covenants. 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, 335029v2 AJP SFI230-~1 `Environmental Regulations"), and also including ureaformaldehyde, 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 Enviromnental 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 manufachiring 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. The City shall not store, locate, generate, produce, process, treat, transport, incorporate, discharge, emit, release, deposit or dispose of any Hazardous Substance in, upon, under, over or from the Site or the Facilities in violation of any Environmental Regulation, shall not permit any Hazardous Substance to be stored, located, generated, produced, processed, treated, transported, incorporated, discharged, emitted, released, deposited, disposed of or to escape therein, thereupon, thereunder, thereover or therefrom in violation of any Environmental Regulation, shall cause all Hazardous Substances to be properly removed therefrom and properly disposed of in accordance with all applicable Environmental Regulations, shall not install or permit to be installed any underground storage tank therein or thereunder in violation of any Environmental Regulations which are applicable to the Site and the Facilities. 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 335029v2 AJP SH230-41 2 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 interest 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, any foreclosure of a mortgage lien tinder any instrument, and/or any acquisition of title to the Site or the Facilities or any part thereof by the Authority, by deed in lieu of foreclosure of otherwise. 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. (The remainder of this page is intentionally left blank.) 335029v2 AJP SH230-41 3 ARTICLE II Term and Rent Section 2.01. Tenn. The term of this Ground Lease shall commence as of the day and year first above written, and shall end on the date the term of this Ground Lease is terminated in accordance with Section 3.01 hereof. Section 2.02. Rent. The rent for the entire term of this Ground Lease shall be One Dollar ($1.00), payable in one installment in advance on the Closing Date, as defined in the Lease. (The remainder of this page is intentionally left blank.) 335029v2 AJP SH230-41 4 ARTICLE III Termination Section 3.01. Termination. Subject to the other provisions of this Ground Lease, this Ground Lease shall terminate upon the occurrence of any one of the following events: (1) The payment by the City of all Lease Payments owing by the City as lessee under the Lease. (2) The exercise by the City of its option to prepay the Lease Payments and all other sums due in accordance with the terms and conditions of the Lease. (3) The termination of the Lease Term by the City for nonappropriation pursuant to Section 5.6 of the Lease and the receipt by the Authority of amounts from the sublease or other disposition of the Authority's interest in the Site and the Facilities sufficient to: (a) Reimburse the Authority for all administrative costs and expenses, including reasonable attorneys' fees, incurred by the Authority as a result of the termination of the Lease Term and the sublease or sale of the Authority's interest in the Site and the Facilities; and (b) Reimburse the Authority for all capital costs and expenses in any manner incurred by the Authority with respect to preparing the Site and the Facilities for sublease for commercial or other lawful purposes (as used in this Ground Lease, the right to sublease the Site includes the right to sell all leasehold interests in the Site); and (c) Pay the unpaid principal of and interest on the Bonds described in the Lease. (4) The termination of the Lease Ternl upon the occurrence of an Event of Default by the City under Article X of the Lease and the receipt by the Authority of amounts from the sublease or sale of the Authority's interest in the Site and the Facilities sufficient to: (a) Reimburse the Authority for all administrative costs and expenses, including reasonable attorneys' fees, incurred by the Authority as a result of the Event of Default and the termination of the Lease and the sublease or sale of the Authority's interest in the Site and the Facilities; and (b) Reimburse the Authority for all capital costs and expenses in any manner incurred by the Authority with respect to preparing the Site and the Facilities for sublease for commercial or other lawful purposes; and (c) Pay the unpaid principal of and interest on the Bonds described in the Lease. 335029v2 A.TP SH230-41 5 The amotults referred to in paragraphs (a), (b) and (c) of Subsection 3.01(3) or 3.01(4), as applicable, are hereinafter referred to as the "Reimbursement Amount." Section 3.02. Use of Revenues. After termination of the Term of the Lease by the City because of nonappropriation pursuant to Section 5.6 of the Lease or termination of the Term of the Lease upon the occurrence of an Event of Default under Article X of the Lease, revenues received by the Authority from the Site and the Facilities as contemplated in Subsection 3.01(3) or 3.01(4) shall be applied as follows: FIRST -- An amount thereof equal to ongoing administrative costs and costs of operation of the Site and the Facilities may be retained by the Authority; SECOND -- An amount thereof equal to interest on the outstanding Reimbursement Amount at the rates per annum specified in Exhibit B to the Lease maybe retained by the Authority; and THIRD -- Any remaining amount thereof shall be retained by the Authority and credited to the payment of the Reimbursement Amount. Use of the Site and the Facilities by the Authority or any affiliate of the Authority, other than for the purpose of assuming control, making any necessary changes in the Site or the Facilities, and the initial subleasing thereof, shall be treated as the sublease thereof on a monthly basis at the then current monthly value. Section 3.03. Reports. In the event that the Term of the Lease is terminated by the City because of nonappropriation pursuant to Section 5.6 of the Lease or terminated by the Authority as a result of the occurrence of an Event of Default by the City thereunder, the Authority shall keep complete and accurate records regarding any sublease of the Site and the Facilities and shall, within sixty days after the end of each Fiscal Year of the City, deliver a written report to the City showing: (a) all amotmts received by the Authority from any sublease of the Site and the Facilities; (b) an analysis as to whether the Authority has received the Reimbursement Amount, with all supporting calculations; and (c) the date, if any, during the next Fiscal Year of the City on which the Authority expects to receive the Reimbursement Amount. Such written report shall be verified by a certified public accountant or firm of certified public accountants not in the regular employ of the Authority. The City shall have the right, at its own expense, to examine all of the Authority's records insofar as they relate to the Site and the Facilities. Such examination shall be made at the Authority's offices during normal business hours. Section 3.04. Cit..~O~tion to Pay Reimbursement Amount. In the event that the Lease Term is terminated by the City because of nonappropriation pursuant to Section 5.6 of the Lease or terminated by the Authority as a result of the occurrence of an Event of Default by the City thereunder, the unpaid balance of the Reimbursement Amount and any other payment required under Section 3.02 hereof maybe paid by the City at any time. Upon such payment, this Ground 335029v2 A.IP SH230-41 Lease and the Authority's interest in the Site and the Facilities shall terminate; provided, that if the Authority's interest in the Site or the Facilities has been subleased to any sublessee pursuant to any sublease that is still in effect, this Ground Lease shall not terminate, but the Authority shall assign and set over to the City all of the Authority's interest in the Site and the Facilities granted under this Ground Lease, subject to all existing rights created in the Site and the Facilities by all such subleases, and the City shall be entitled to all rent payments with respect to any subleases of the Site and the Facilities. Section 3.05. Effect of Termination of Lease. In the event that the Lease Term is terminated by the City because of nonappropriation pursuant to Section 5.6 of the Lease or terminated by the Authority as a result of the occurrence of an Event of Default by the City thereunder, the City shall have no continuing obligation under this Ground Lease after such termination, other than to continue to allow the Authority to continue to use and enjoy the Site and the Facilities as provided herein. (The remainder of this page is intentionally left blank.) 335029v2 AJP SIF230-41 7 ARTICLE IV Use Of Site; Additional Covenants Section 4.01. Use. The Authority shall not use or permit the use of the Site for any unlawful purpose. Section 4.02. Quiet Enjoyment. 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 4.03. A§si~nment and Subletting. The Authority shall have the right to assign its interest in this Ground Lease, and to sublet the Site in accordance with the Lease. Section 4.04. Additional Covenants. 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). (The remainder of this page is intentionally left blank.) 335029v2 AJP SH230-41 g ARTICLE V Miscellaneous Section 5.01. Binding Effect. This Ground Lease shall be binding upon, and inure to the benefit of, the parties hereto, and their successors and assigns. Section 5.02. 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. (The remainder of this page is intentionally left blank.) 335029v2 AJP SH230-41 9 IN WITNESS WHEREOF, the parties hereto have executed this Ground Lease as of the date first above written. STATE OF MINNESOTA ) ss. COUNTY OF HENNEPIN ) CITY OF SHOREWOOD, MINNESOTA By Its Mayor By Its Acting City Administrator On this day of , 2008, before me, a Notary Public within and for said County, personally appeared Christine Lizee and to me personally known, who being by me duly sworn, did say that they are the Mayor and the Acting City Administrator of the City of Shorewood, a statutory city and political subdivision of the State of Mimlesota, the subdivision referred to in the foregoing instrument and that they acknowledged this Ground Lease to be the free act and deed of said political subdivision. 335029v2 A.IP SH230-41 Notary Public -5-1- SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY STATE OF MINNESOTA ) ss. COUNTY OF HENNEPIN ) By Its President By Its Assistant Executive Director On this day of , 2008, before me, a Notary Public within and for said County, personally appeared Christine Lizee and to me personally known, who, being each by me duly sworn, did say that they are the President and Assistant Executive Director, respectively, of the Shorewood Economic Development Authority, the Authority referred to in the foregoing instrument and that they acknowledged this Ground Lease to be the free act and deed of said Authority. Notary Public 335029v2 AJP SH230-41 -5-2- ExxIBIT a Legal Description of Site Lot 12, Block 2, Echo Hills 2nd Addition, except that part of the East 28 feet thereof lying South of the Westerly extension of the Northerly line of Lot 2, Block 1, Echo Hills, and except that part thereof described as follows: Commencing at a point in the centerline of Sanithtown Road distant 645.00 feet Easterly from an intersection of the Northerly extension of the West line of Lot 27, Auditors' Subdivision 133 with said centerline; thence Southerly parallel with the West line of said Lot 27, a distance of 34.19 feet to the point of beginning of the land to be described; thence South 00 degrees 29 minutes 57 seconds East, assumed bearing, along a line parallel with the West line of said Lot 27 and the West line of said Lot 12 a distance of 104.00 feet; thence South 76 degrees 20 minutes 42 seconds East 45.00 feet; thence South 15 degrees 30 minutes 36 seconds East 45.00 feet; thence South 76 degrees 20 mimites 42 seconds East 57.05 feet; thence North 66 degrees 48 minutes 24 seconds East 34.92 feet; thence North 34 degrees 25 minutes 43 seconds East 30.00 feet; thence North 00 degrees 29 minutes 57 seconds West, parallel with the West line of said Lots 12 and 27, a distance of 160.00 feet to a point in the North line of said Lot 12; thence South 84 degrees 37 minutes 48 seconds West 94.66 feet; thence South 74 degrees 29 minutes 24 seconds West 68.00 feet to the point of beginning. 335029v2 AJP SH230-41 A-1 LEASE-PURCHASE AGREEMENT between SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY as Lessor and CITY OF SHOREWOOD, MINNESOTA as Lessee Dated as of August 1, 2008 This instrument drafted by: KENNEDY & GRAVEN, Chartered (AJP) 200 South Sixth Street 470 U.S. Bank Plaza Minneapolis, Minnesota 55402 (612) 337-9300 335028v3 AJP SH230-41 TABLE OF CONTENTS PARTIES AND RECITALS ............................................................................ ARTICLE I Definitions And Exhibits Section 1.1 Definitions ................................................................................ Section 1.2 Exhibits .................................................................................... ARTICLE II Representations, Covenants And Warranties Section 2.1 Representations, Covenants and Warranties of the City........, Section 2.2 Representations, Covenants and Warranties of the Authority ARTICLE III Construction of Facilities; Payment of Costs Pale ......1 ............. 2 .............4 ................6 ................ 7 Section 3.1 Costs ..............................................................................................................................9 Section 3.2 Construction of Facilities; Payment of Costs ...............................................................9 Section 3.3 City to Provide Title Insurance ...................................................................................10 ARTICLE IV Sale and Lease of Facilities Section 4.1 Lease and Sale of Facilities ........................................................................................ 11 Section 4.2 Lease Payments .......................................................................................................... 11 Section 4.3 Additional Lease Payments ........................................................................................ 11 Section 4.4 Source of Lease Payments .......................................................................................... 12 Section 4.5 City's Obligations and Remedies ............................................................................... 12 Section 4.6 Possession and Enjoyment ......................................................................................... 13 Section 4.7 Authority Access to Site and Facilities ....................................................................... 13 ARTICLE V Term of Lease; Transfer or Surrender of Site and Facilities Section 5.1 Lease Term ................................................................................................................. 14 Section 5.2 Termination of Lease Term ........................................................................................ 14 Section 5.3 Authority's Interest in the Site and Facilities ............................................................. 14 Section 5.4 Surrender of Site and Facilities ...............................:................................................... 14 Section 5.5 Purchase; Conveyance of Title ................................................................................... 15 Section 5.6 Non-Appropriation ..................................................................................................... 15 Section 5.7 Intent to Continue Term; Appropriations ................................................................... 15 Section 5.8 Effect of Termination ................................................................................................. 15 ARTICLE VI General Matters Section 6.1 Use, Permits ................................................................................................................ 16 Section 6.2 Maintenance and Modification of Facilities by the City ............................................ 16 Section 6.3 Taxes, Other Governmental Charges and Utility Charges ......................................... 17 Section 6.4 Liens ............................................................................................................................ 17 Section 6.5 Easements ................................................................................................................... 18 Section 6.6 Addition and Substitution of Land ............................................................................. 18 Section 6.7 Compliance with Bond Resolution ............................................................................. 18 Section 6.8 Tax Covenants ............................................................................................................ 19 ARTICLE VII Insurance and Indemnification; Damage, Destniction and Condemnation Section 7.1 Liability Insurance ...................................................................................................... 20 Section 7.2 Property Insurance ...................................................................................................... 20 Section 7.3 Administration of Claims ........................................................................................... 20 Section 7.4 Other Insurance and Requirements for All Insurance ................................................ 20 Section 7.5 Indemnification ........................................................................................................... 21 Section 7.6 Hazardous Substance Indemnification ....................................................................... 21 Section 7.7 Damage, Destniction and Condemnation ................................................................... 22 Section 7.8 Insufficiency of Net Proceeds ..................................................................................... 22 Section 7.9 Cooperation of Authority ............................................................................................ 22 ARTICLE VIII Option to Purchase; Option to Prepay Section 8.1 Option to Purchase or Prepay .....................................................................................23 Section 8.2 Exercise of Option ......................................................................................................23 Section 8.3 Provision for Payment of Purchase Price; Discharge of City's Obligation ...............23 Section 8.4 Prerequisite; No Default .............................................................................................23 ARTICLE IX Assignment, Subleasing, Indemnification, Mortgaging and Selling Section 9.1 Assignment by Authority ............................................................................................24 Section 9.2 Assignment and Subleasing by the City .....................................................................24 Section 9.3 Restriction on Mortgage or Sale by the City ..............................................................24 ARTICLE X Events of Default and Remedies Section 10.1 Events of Default Defined ..........................................................................................25 Section 10.2 Remedies of Default ...................................................................................................26 Section 10.3 Delay; Notice ..................................................... Section 10.4 No Remedy Exclusive ....................................... Section 10.5 No Additional Waiver Implied by One Waiver ARTICLE XI Admiiustrative Provisions Section 11.1 Notices Section 11.2 Binding Effect ............................................................ Section 11.3 Severability ................................................................ Section 11.4 Amendments, Changes and Modifications ............... Section 11.5 Further Assurances and Corrective Instniments ....... Section 11.6 Execution in Counterparts ......................................... Section 11.7 Applicable Law .......................................................... Section 11.8 Authorized Officers ................................................... Section 11.9 Captions ..................................................................... 26 26 27 28 28 28 28 28 28 28 29 29 THIS LEASE-PURCHASE AGREEMENT, dated as of August 1, 2008 (the "Lease"), is by and between the SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY, a public body corporate and politic and political subdivision of the State of Minnesota, as lessor (the "Authority"), and the CITY OF SHOREWOOD, a statutory city and political subdivision of the State of Minnesota (the "City"), as lessee; WITNESSETH: WHEREAS, the City is authorized by law to acquire such items of real and personal property as are needed to carry out its governmental and proprietary functions, and to acquire such real and personal property by entering into lease-purchase contracts; and WHEREAS, the City has determined that it is necessary for it to acquire pursuant to this Lease the Authority's interest in certain real property described on Exhibit A hereto (the "Site"), together with certain public buildings, structures and improvements to be constricted thereon, and certain equipment to be contained therein (collectively, the "Facilities"); and WHEREAS, the development of the Site and the Facilities is consistent with and furthers the economic development functions of the Authority; and WHEREAS, the Authority is willing to acquire a leasehold interest in the Site pursuant to a Ground Lease of even date herewith (the "Ground Lease"), from the City to the Authority, and to acquire title to the Facilities and to lease and sell the Site and the Facilities to the City, pursuant to this Lease; and WHEREAS, to provide funds for the construction of the Facilities, the Authority will issue its $ Shorewood Economic Development Authority Public Project Lease Revenue Bonds, Series 2008A (City of Shorewood, Minnesota Lease Obligation), pursuant to a Resolution (the "Bond Resolution") adopted by the Authority on July 28, 2008; and NOW, THEREFORE, in the joint and mutual exercise of their powers, and in consideration of the muhlal covenants herein contained, the parties hereto recite and agree as follows: 335028v3 AJP SH230-41 I ARTICLE I Definitions And Exhibits Section 1.1. Definitions. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Lease and Exhibits attached hereto, have the meanings herein specified: "Additional Lease Payments" means payments due from the City pursuant to Section 4.3 hereof. "Authority" means the Shorewood Economic Development Authority, a public body corporate and politic and political subdivision of the State of Minnesota, and its successors and assigns as lessor hereunder. "Authorized Officer," when used with respect to the City, means its Mayor, its City Clerk or any other person who is designated in writing by the City as an Authorized Officer for purposes of this Lease, and when used with respect to the Authority means its Executive Director or any other person who is designated in writing by the Authority as an Authorized Officer for purposes of this Lease. "Bond Counsel" means any attorney or law firm having a national reputation as bond counsel in connection with the issuance of state and local governmental obligations and appointed by the Authority as bond counsel. "Bond Registrar" means Northland Tnzst Services, Inc., Minneapolis, Minnesota, or any successor Bond Registrar appointed by the Authority pursuant to the Bond Resolution. "Bond Resolution" means the resolution authorizing the issuance and sale of the Bonds, adopted by the Authority on July 28, 2008. "Bonds" means the $ Shorewood Economic Development Authority Public Project Lease Revenue Bonds, Series 2008A (City of Shorewood, Minnesota Lease Obligation), issued pursuant to the Bond Resolution. "City" means the City of Shorewood, 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. "Closing Date" means the date upon which the Bonds are delivered to the original purchaser thereof against payment therefor. 335028v3 A.iP SH230-41 2 "Completion Date" means the date of completion of constriction of the Facilities, as evidenced by the certificate of the City described in Section 3.2(d). "Costs of Issuance" means all fees and expenses incurred by the City and the Authority in connection with the execution and delivery of the Lease and the issuance of the Bonds, including, but not limited to, costs of preparing and printing the Bonds, this Lease, the Ground Lease, the Official Statement relating to the Bonds, and related documents; legal fees (including, without limitation, those of Bond Counsel and counsel to the Authority and the City); recording fees and title insurance premiums; Rating Agency fees; financial advisor's fees; and the Bond Registrar's initial fees. "Facilities" means any buildings, structures and improvements to be constructed on the Site, and all furniture, fixtures and equipment to be acquired with the proceeds of sale of the Bonds and located thereon. "Fiscal Year" means the twelve-month fiscal period of the City, which commences on January 1 and ends on December 31 of each year. "Ground Lease" means the Ground Lease, dated as of August 1, 2008, by which the City leases the Site 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 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. "Interest Payment Date" means June 1, 2009, and each June 1 and December 1 thereafter until the Bonds are paid in full. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended. "Lease" means this Lease-Purchase Agreement, between the Authority, as lessor, and the City, as lessee, as amended or supplemented from time to time. "Lease Payment" means each of the payments due from the City to the Authority on each Lease Payment Date during the Term of this Lease, as shown on Exhibit B. "Lease Payment Date" means the date upon which any Lease Payment is due and payable as provided in Exhibit B. "Net Proceeds," when used with respect to proceeds of insurance or a condemnation award, means moneys received or receivable by the City, as owner or as lessee hereunder, or the Authority, 335028v3 AJP SH230-41 3 as lessee under the Ground Lease or as secured party, of the Site or the Facilities, less the cost of recovery (including attorneys' fees) of such moneys from the insuring company or the condemning authority. "Owner" means the registered owner of any outstanding Bond. "Permitted Encumbrances" means, as of any particular time: (i) liens for taxes and assessments not then delinquent, or which the City may, pursuant to provisions of Section 6.3 hereof, permit to remain unpaid, (ii) the Ground Lease, this Lease and amendments hereto or thereto, (iii) the Authority's interest in the Facilities, (iv) any mechanic's, laborer's, materialmen's, supplier's or vendor's lien or right not filed or perfected in the manner prescribed by law, (v) such minor defects, irregularities, encumbrances, easements, rights-of--way and clouds on title as normally exist with respect to properties similar in character to the Site and which do not, in the opinion of Independent Counsel, materially impair the property affected thereby for the purpose for which it was intended, and (vi) easements, restrictions or encumbrances, if any, shown on Exhibit A hereto. "Purchase Price" means, with respect to any date, cash or obligations of or guaranteed by the United States of America maturing at such times and in such amounts as to provide for the full and timely payment of all interest and premium, if any, on and principal of the outstanding Bonds to maturity or an earlier redemption date, if applicable. The City shall be entitled to credit against the Purchase Price the amount of any moneys theretofore paid to and held by the Authority or the Bond Registrar and available for the payment of the outstanding Bonds. "Site" means the real property described in Exhibit A hereto, including any property added to or substituted for any portion of the Site, and less any real property released from this Lease pursuant to Article VI hereof. "State" means the State of Minnesota. "State and Federal Laws" means the Constitution and any law of the State and any ordinance, Wile or regulation of any agency or political subdivision of the State; and any law of the United States, and any rule or regulation of any executive department or federal agency. "Term" means the period during which this Lease may remain in effect as specified in Section S.l. Section 1.2. Exhibits. The following Exhibits are attached to and by reference made a part of this Lease: Exhibit A: A legal description of the Site and Facilities being leased and purchased by the City pursuant to this Lease, and a listing of Permitted Encumbrances. Exhibit B: The date and amount of each Lease Payment coming due during the Tenn of this Lease. 335028v3 AJP SH230-41 Q. Exhibit C: The form of Completion Certificate to be delivered by the City to the Authority pursuant to Section 3.2(d) hereof. (The remainder of this page is intentionally left blank.) 335028v3 A.~P SH230-41 ARTICLE II Representations, Covenants And Warranties Section 2.1. Representations Covenants and Warranties of the City. The City represents, covenants and warrants as follows: (a) The City is authorized under the Constitution and laws of the State to enter into this Lease and the transactions contemplated hereby, and to perform all of its obligations hereunder. (b) Neither the execution and delivery of this Lease, nor the fiilfillment 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 the City is now a party or by which the City is bound, constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the City, or upon the Site and the Facilities except Permitted Encumbrances. (c) This Lease is entered into under authority of and pursuant to Minnesota Statutes, Section 465.71. (d) The officers of the City executing this Lease have been duly authorized to do so. (e) The City will not pledge, mortgage or assign this Lease, or its rights, duties and obligations hereunder to any other person, firm or corporation except as provided under the terms of this Lease. (f) Subject to the City's rights under Section 5.6 hereof, the Facilities will be used until the Bonds have all been paid primarily to carry out the essential governmental or proprietary purposes of the City. (g) Subject to the provisions of Section 5.6 hereof, the City administration will include in the anmzal budget of the City submitted to the City Council, for each Fiscal Year during the Lease Term, moneys sufficient to pay and for the purpose of paying all Lease Payments and Additional Lease Payments and other obligations of the City under this Lease, and for this purpose the City will make a reasonable estimate of Additional Lease Payments to become due in the next Fiscal Year, and will take all other actions necessary to provide moneys for the payment of the obligations of the City under this Lease from sources of the City lawfully available for this purpose. (h) Except to the extent specifically provided herein, the City is not obligated to appropriate or otherwise provide moneys for the payment of the Lease Payments or any 335028v3 AJP SH230-h1 6 other amounts coming due hereunder; and in the event ofnon-appropriation or non-renewal by the City, the City shall not be liable for general, special, incidental, consequential or other damages resulting therefrom. This Lease does not constitute a general obligation of the City, and the fiill faith and credit and taxing powers of the City are not pledged for the payment of the Lease Payments or other amounts coming due, or other actions required to be performed, hereunder. (i) The City hereby declares its current need for the Facilities. The City has determined that the Purchase Price to be paid for the Facilities under this Lease represents the fair market value of the Facilities; that Lease Payments and Additional Lease Payments hereunder during the Lease Term represent the fair value of the use of the Facilities, and that the Purchase Price represents the fair purchase price of the Facilities. The City hereby determines that the Lease Payments and Additional Lease Payments do not exceed a reasonable amount so as to place the City under an economic compulsion to renew this Lease or to exercise its option to purchase the Facilities hereunder. In making such determinations the City has given consideration to the costs of the Facilities, the uses and purposes for which the Facilities will be employed by the City, the benefit to the City by reason of the acquisition of the Facilities pursuant to the terms and provisions of this Lease and the City's option to purchase the Facilities. The City hereby determines and declares that the acquisition of the Facilities and the leasing of the Facilities puursuant to this Lease will result in facilities of comparable quality and meeting the same requirements and standards as would be necessary if the acquisition of the Facilities were performed by the City other than pursuant to this Lease. The City hereby determines and declares that the period during which the City has an option to purchase the Facilities (i.e., the Term of this Lease) does not exceed the useful life of the Facilities. Section 2.2. Representations Covenants and Warranties of the Authority. The Authority represents, covenants and warrants as follows: (a) The Authority is a public body corporate and politic and political subdivision of the State; has power to enter into this Lease; is possessed of frill 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 the Authority is now a party or by which the Authority is bound, constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Authority, or upon the Site and the Facilities except Permitted Encumbrances. (c) This Lease is entered into under authority of and pursuant to Minnesota Statutes, Sections 469.090 to 469.1081, as amended. 335028v3 AJP SH230-41 7 (d) The Authority declares and finds that the Facilities are necessary to operate the Authority, and also promote economic development generally by ensuring a modern and efficient City administrative facility. (e) The officers of the Authority executing this Lease have been duly authorized to do so. (The remainder of this page is intentionally left blank.) 335028v3 AJP SH230-41 ARTICLE III Construction of Facilities; Payment of Costs Section 3.1. Costs. The City has caused estimates of the costs of construction of the Facilities to be prepared, which estimates have been reviewed and approved by the Authority. Based on such estimates, the total costs of constriction of the Facilities, when added to the Costs of Issuance, are estimated to be not less than $ In order to provide the moneys needed to pay such costs when due, and in consideration of the actions agreed to be performed by the City under this Lease, the Authority has adopted the Bond Resolution, pursuant to which the proceeds of sale of the Bonds in the amount of $ (plus accnied interest received on the Closing Date, and less any discount in the purchase price paid by the Original Purchaser) will be deposited with the City. Section 3.2. Construction of Facilities; Payment of Costs. (a) The Authority shall deposit the proceeds of the issuance and sale of the Bonds with the City, as provided in the Bond Resolution. (b) The Authority shall cause the Facilities to be constructed with all reasonable dispatch. The Authority hereby appoints the City as its agent for the purpose of constnzction 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 cease to be done all such other things as it may consider requisite or advisable for the completion of the construction of the Facilities and for fulfilling its obligations under this Article. The City shall have frill authority and the sole right under this Lease to supervise and control, directly or indirectly, all aspects of the construction of the Facilities. (c) If the proceeds of the Bonds, together with any other moneys available to pay the costs of constriction of the Facilities, shall not be sufficient to pay such costs in full, then the City shall pay all that portion of the costs in excess of the moneys available therefor. If the City shall make any payments pursuant to this paragraph (c), it shall not be entitled to any reimbursement therefor from the Authority or the Owners of the Bonds, nor shall it be entitled to any diminution in or postponement of the payment of the Lease Payments, the Additional Lease Payments or the payment of any other amounts payable under this Lease. (d) The Completion Date shall be the date on which the constriction of the Facilities are completed in their entirety and the Facilities are ready to be placed in service and all other property which constitutes the Facilities has been acquired and installed, all as determined by the City. Promptly after the Completion Date, the City shall submit to the Authority a certificate signed by an officer of the City, substantially in the form of Exhibit C hereto, which shall specify the Completion Date and shall state that constriction of the Facilities has been completed and the costs thereof 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 the City. Notwithstanding 335028v3 A.IP SH230-41 9 the foregoing, such 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 certificate as to the Completion Date shall include a list of the equipment financed with proceeds of the Bonds and included as part of the Facilities. Section 3.3. City to Provide Title Insurance. The City shall provide ALTA Form B (revised 10-17-92) title insurance policies insuring that the City has good and marketable title to the Site and that the Authority has a valid leasehold interest in and to the Site, subject only to Permitted Encumbrances, containing such affirmative insurance as the Authority may reasonably request (including, but not limited to, mechanics' liens, contiguity of parcels, zoning, and easements and party wall agreements), and deleting all standard exceptions to coverage. Title insurance premiums, abstract continuation charges and other title fees and expenses incurred pursuant to this Section shall be paid by the City on or before the Closing Date. (The remainder of this page is intentionally left blank.) 335028v3 A.lP SH230-41 I ARTICLE IV Sale and Lease of Facilities Section 4.1. Lease and Sale of Facilities. The Authority hereby leases and sells its leasehold interest in the Site and the Facilities to the City, and the City hereby leases and purchases the Authority's interest in the Site and the Facilities from the Authority, upon the terms and conditions set forth in this Lease. The sale shall be completed in accordance with the ternls of Section 5.5 hereof. The Site and the Facilities are leased and sold in their present condition without representation or warranty of any kind by the Authority, and subject to the rights of parties in possession, to the existing state of title, to all applicable legal requirements now or hereafter in effect, and to Permitted Encumbrances. The City has examined the Site and title thereto and has found all of the same to be satisfactory for the purposes of this Lease. Section 4.2. Lease Pa~tnents. Subject to the provisions of Section 4.4 hereof, the City shall pay to the Authority Lease Payments at the times and in the manner specified in the attached Exhibit B. The Lease Payments shall be paid in lawful money of the United States of America, in same-day fiords, directly to the Bond Registrar. It is acknowledged that the Lease Payment to be made on each May 15 or November 15, respectively, shall be applied by the Bond Registrar to payment of the principal of and interest on the Bonds to be paid on each June 1 and December 1, respectively. Section 4.3. Additional Lease Payments. During the Term of this Lease, the City shall pay or cause to be paid as Additional Lease Payments the following amounts: (a) All fees, charges and expenses, including agent and counsel fees, of the Bond Registrar and any Paying Agent, as and when the same become due. (b) All costs incident to the payment of the principal of and interest on the Bonds as the same become due and payable, and all other costs and expenses in connection with the call, redemption and payment of the Bonds. (c) An amount sufficient to reimburse the Authority for all expenses reasonably incurred by the Authority hereunder and in connection with the performance of the Authority's obligations under this Lease or the Bond Resolution. (d) All expenses incurred in connection with the enforcement of any rights under this Lease by the Authority or the Owners of the Bonds. (e) All payments required by the rebate covenants of Section 6.9(b) hereof. (f) All other payments of whatever nature which the City has agreed to pay or assume under the provisions of this Lease (including, without limitation, any amounts advanced under Section 6.2(b) hereof and interest thereon). 335028v3 AJP SH230-41 I I (g) All costs, charges, expenses and other amounts and obligations due and owing by the Authority under the Ground Lease, as and when the same become due. Section 4.4. Source of Lease Payments. Notwithstanding any other provision of this Lease apparently to the contrary, this Lease shall not constitute a general obligation of the City, and the full faith and credit of the City are not pledged for the payment of the Lease Payments or the performance by the City of its obligations hereunder. The Lease Payments and Additional Lease Payments shall be paid, and other obligations of the City hereunder shall be met, solely from the amounts appropriated by the City Council for such purpose in the City's annual budget and shall constitute a current expense of the City for the Fiscal Year then in effect. This Lease shall not constitute an indebtedness of the City within the meaning of the Constitution and laws of the State. The other obligations of the City hereunder shall be met solely from one or more of the following: (a) Net Proceeds of insurance or self-insurance required to be maintained by the City under Article VII hereof; (b) Net Proceeds of any condemnation award with respect to the Site and Facilities; and (c) moneys from time to time appropriated by the City Council for this purpose, provided that the City Council shall have no legal obligation to appropriate moneys for this purpose. Section 4.5. City's Obligations and Remedies. (a) Except as provided in Section 5.6 hereof, the City's obligation to pay Lease Payments due with respect to the Site and the Facilities, and to perform and observe all other covenants and agreements of the City contained herein, shall be absolute and unconditional; and the Lease Payments and Additional Lease Payments due and payable hereunder shall be made without notice or demand and without set-off, counterclaim, abatement, deduction or defense including, without limitation, any failure or delay by the Authority in the performance of any of its obligations hereunder, and irrespective of whether the Facilities shall have been started or completed, or whether the City's or the Authority's title thereto or to any part thereof is defective or nonexistent, and notwithstanding any damage to, loss, theft or destruction of the Facilities or any part thereof, 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 the City's use thereof, the eviction or constrictive eviction of the City, any change in the tax or other laws of the United States of America, the State or any political subdivision thereof, any change in the Authority's legal organization or status, or any default of 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) Notwithstanding any provision or covenant contained in this Lease or the Bonds, the City is not obligated to renew this Lease beyond any Fiscal Year from time to time in effect, nor is it obligated to budget or appropriate moneys or to pay Lease Payments or Additional Lease Payments beyond the end of the Fiscal Year in effect at a given time. (c) Nothing in this Lease shall be constrzed to release the Authority from the performance of any agreement on its part herein contained or as a waiver by the City of any rights or claims which the City may have against the Authority under this Lease or otherwise, but any recovery upon such rights and claims shall be had from the Authority separately, it being the intent 335028v3 A.1P SH230-41 12 of this Lease that the City shall be unconditionally and absolutely obligated to perform frilly all of its obligations, agreements and covenants under this Lease during the Term of this Lease unless sooner terminated in accordance with Section 5.2 hereof (including the obligation to make Lease Payments and Additional Lease Payments) for the benefit of the Owners of the Bonds. The City may, however, at its own cost and expense and in its own name or in the name of the Authority, prosecute or defend any action or proceeding or take any other action involving third persons which the City deems reasonably necessary in order to secure or protect its right of possession, occupancy and use hereunder, and in such event the Authority hereby agrees to cooperate fully with the City and to take all action necessary to effect the substitution of the City for the Authority in any such action or proceeding if the City shall so request. Section 4.6. Possession and Enjoyment. The Authority hereby covenants to provide the City during the Term of this Lease with quiet use and enjoyment of the Site and Facilities, and the City shall during such Tenn peaceably and quietly have and hold and enjoy the Site and Facilities, without suit, trouble or hindrance from the Authority, except as expressly set forth in this Lease. At the request of the City and at the City's cost, the Authority will join in any legal action in which the City asserts its right to such possession and enjo}nnent to the extent the Authority may lawfully do so. Section 4.7. Authority Access to Site and Facilities. The Authority shall have the right at all reasonable times to examine and inspect the Site and the Facilities, and shall have such rights of access to the Site and the Facilities as maybe reasonably necessary to cause the proper maintenance thereof in the event of failure by the City to perform its obligations hereunder. (The remainder of this page is intentionally left blank.) 335028v3 A.IP SH230-41 13 ARTICLE V Term of Lease; Transfer or Surrender of Site and Facilities Section 5.1. Lease Term. Subject to the provisions of Section 5.6 hereof, this Lease shall be in effect for a Term commencing upon the execution hereof and ending on December 1, 2028. Section 5.2. Termination of Lease Term. The Term of this Lease will terminate upon the occurrence of the first of the following events: (a) non-appropriation by the City pursuant to Section 5.6 hereof; (b) the payment by the City of the Purchase Price, pursuant to Section 8.1 hereof; (c) the discharge by the City of its obligation to pay the Lease Payments and Additional Lease Payments required to be paid by it hereunder pursuant to Section 8.3 hereof; or (d) a default by the City and the Authority's election to terminate this Lease pursuant to Article X hereof. Section 5.3. Authority's Interest in the Site and Facilities. Upon payment of all Lease Payments and Additional Lease Payments due hereunder, or upon prepayment of the Lease Payments and Additional Lease Payments or discharge of the City's obligation to make the Lease Payments and Additional Lease Payments in accordance with Article VIII hereof, and in either event, upon defeasance of the Bonds, frill and unencumbered legal title to the Facilities shall pass to the City, and the Authority shall have no further interest therein. In such event the Authority and its officers shall take all. actions necessary to authorize, execute and deliver to the City any and all documents necessary to vest in the City all of the Authority's right, title and interest in and to the Site and Facilities, free and clear of all liens, leasehold interests, encumbrances (other than Permitted Encumbrances), including, if necessary, a release of any and all interests or liens created under the provisions of this Lease. Section 5.4. Surrender of Site and Facilities. Upon termination of the Term of this Lease pursuant to Section 5.2, clause (a) or (d), or upon exercise by the Authority of its right to take possession of the Site and the Facilities under Section 10.2 hereof, the City shall surrender the Site and the Facilities to the Authority in the condition in which they were originally received from the Authority, except as repaired, rebuilt, restored, altered or added to as permitted or required hereby, ordinary. wear and tear excepted. The City shall have the right to remove from the Site and the Facilities at or prior to such termination or possession all personal property located therein which was not financed with proceeds of the Bonds, or which has not replaced personal property so financed, and which is not otherwise owned by the Authority, but the City shall repair any damages caused by such removal. 335028v3 AJP SH230-41 lq, Section 5.5. Purchase; Conveyance of Title. At any time when the Purchase Price, together with any unpaid or delinquent interest, has been fully paid or provided for, whether by (i) payment of all Lease Payments and Additional Lease Payments as provided in Section 5.2 hereof, or (ii) payment or provision for payment of the Purchase Price as provided in Article VIII hereof, then the purchase of the Site and the Facilities by the City shall be deemed to have been completed. The Authority shall thereupon deliver to the City such instruments of conveyance or release as, in the opinion of the City, may be necessary to release the interest of the Authority in the Site and the Facilities. Section 5.6. Non-Appropriation. If the City Council does not appropriate or budget moneys sufficient to pay the Lease Payments and reasonably estimated Additional Lease Payments coming due in the next Fiscal Year, as determined by the City's budget for the Fiscal Year in question, then the Term of this Lease shall terminate at the end of the preceding Fiscal Year. The City Council shall effect such non-appropriation by adoption of a resohrtion specifically referring to this Lease and determining (i) not to provide moneys for payments due hereunder in the next Fiscal Year and (ii) that the Lease shall terminate at the end of the then-current Fiscal Year, and the City shall give the Authority a written notice of such non-appropriation and shall pay to the Authority any Lease Payments and Additional Lease Payments which are due and have not been paid at or before the end of its then current Fiscal Year. The City shall endeavor to give as much notice of non-renewal as possible prior to the end of such Fiscal Year, but in any event the City shall not be required to give more than twelve (12) months notice, and the City shall notify the Authority of any anticipated termination. In the event of termination of this Lease as provided in this Section, the City shall surrender possession of the Site and the Facilities to the Authority in accordance with Section 5.4 hereof and convey to the Authority or release its interest in the Site and the Facilities within ten (10) days after the expiration of the then-current term. Section 5.7. Intent to Continue Term; Appropriations. The City presently intends to continue this Lease for its entire Term and to pay all Lease Payments specified in Exhibit B and Additional Lease Payments. The City reasonably believes that moneys in an amount sufficient to make all such Lease Payments and Additional Lease Payments can and will lawfully be appropriated or budgeted and made available. Section 5.8. Effect of Termination. Upon termination of this Lease as provided in Section 5.6 hereof, the City shall not be responsible for the payment of any Lease Payments or Additional Lease Payments coming due with respect to succeeding Fiscal Years, but if the City has not delivered possession of the Site and the Facilities to the Authority in accordance with Section 5.4 hereof and conveyed to the Authority or released its interest in the Site and the Facilities within ten (10) days after the termination date, the termination shall nevertheless be effective, but the City shall be responsible for the payment of damages in an amount equal to the amount of the Lease Payments thereafter coming due under Exhibit B and Additional Lease Payments which are attributable to the number of days during which the City fails to take such actions and for any other loss suffered by the Authority as a result of the City's failure to take such actions as required. The City shall be required to pay over to the Authority any moneys which it has appropriated or budgeted for the purpose of paying obligations under this Lease for any Fiscal Years preceding the Fiscal Year for which non-renewal under Section 5.6 is effective. 33~028v3 A.1P SH230-41 I S ARTICLE VI General Matters Section 6.1. Use; Permits. The City shall exercise due care in the use, operation and maintenance of the Site and the Facilities, and shall not use, operate or maintain the Site and the Facilities improperly, carelessly, in violation of any State and Federal Law or for a purpose or in a mam~er contrary to that contemplated by this Lease. The City shall obtain or cause to be obtained all permits and licenses necessary for the operation, possession and use of the Site and Facilities. The City shall comply with all State and Federal Laws applicable to the operation, possession and use of the Site and Facilities, and if compliance with any such State and Federal Law requires changes or additions to be made to the Site and Facilities, such changes or additions shall be made by the City at its expense. Section 6.2. Maintenance and Modification of Facilities by the City. (a) During the Term of this Lease the City shall, at its own expense, maintain, preserve and keep the Site and the Facilities in good repair, working order and condition, and shall from time to time make all repairs, replacements and improvements necessary to keep the Site and the Facilities in such condition. The Authority shall have no responsibility for any of these repairs, replacements or improvements. In addition, the City shall, at its own expense, have the right to remodel the Facilities or to make additions, modifications and improvements thereto. All such additions, modifications and improvements shall thereafter comprise part of the Facilities and be subject to the provisions of this Lease. Such additions, modifications and improvements shall not in any way damage the Facilities; and the Facilities, upon completion of any additions, modifications and improvements made pursuant to this Section, shall be of a value not less than the value of the Facilities immediately prior to the making of such additions, modifications and improvements. Any property for which a substihrtion or replacement is made pursuant to this Section may be disposed of by the City in such manner and on such terms as are determined by the City. The City will not permit any mechanic's or other lien to be established or remain against the Site and Facilities for labor or materials furnished in connection with any remodeling, additions, modifications, improvements, repairs, renewals or replacements made by the City pursuant to this Section; provided that if any such lien is established and the City shall first notify the Authority of the City's intention to do so, the City may in good faith contest any lien. filed or established against the Site or the Facilities, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom unless the Authority shall notify the City that, in the opinion of Independent Counsel, by nonpayment of any such item the interest of the Authority in the Site or the Facilities will be materially endangered or the Site or the Facilities or any part thereof will be subject to loss or forfeiture, in which event the City shall promptly pay and cause to be satisfied and discharged all such unpaid items or provide the Authority with full security against any such loss or forfeiture, in form satisfactory to the Authority. The Authority will cooperate hilly with the City in any such contest, upon the request and at the expense of the City. 335028v3 AJP SH230-41 I( (b) In the event the Authority becomes aware of any condition on the Site or in the Facilities which, in the reasonable opinion of the Authority, creates a risk to the health and safety of any users of the Facilities or creates a risk of significant deterioration of the Facilities if not corrected, the Authority may, but shall be under no obligation to, notify the City of such condition and request that it be cured as promptly as is reasonably possible. In the event the City does not promptly cure such condition, the Authority may, but shall be under no obligation to, take reasonable steps to correct such condition. In such event, the cost to the Authority and interest thereon at the highest rate specified in any Bond until paid will be charged to the City as an Additional Lease Payment. Section 6.3. Taxes Other Governmental Charles and Utility Charges. During the Term of this Lease the City shall also pay or cause to be paid when due all gas, water, steam, electricity, heat, power and other charges incurred in the operation, maintenance, use, occupancy and upkeep of the Site and the Facilities. The City shall also pay all property and excise taxes and governmental charges of any kind whatsoever which may at any time be lawfully assessed or levied against or with respect to the Site or the Facilities or any part thereof or the Lease Payments, and which become due during the Term of this Lease with respect thereto; and all special assessments and charges lawfully made by any governmental body for public improvements that may be secured by a lien on the Site or the Facilities; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the Term of this Lease as and when the same become due. The City shall not be required to pay any federal, state or local income, inheritance, estate, succession, transfer, gift, franchise, gross receipts, profit, excess profit, capital stock, corporate, or other similar tax payable by the Authority, its successors or assigns, unless such tax is made in lieu of or as a substitute for any real estate or other tax upon property. The City may, at the City's expense and in the City's name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Authority shall notify the City that, in the opinion of Independent Counsel, by nonpayment of any such items the interest of the Authority in the Site or the Facilities will be materially endangered or the Site, the Facilities or any part thereof will be subject to loss or forfeiture, in which event the City shall promptly pay such taxes, assessments or charges or provide the Authority with full security against any loss which may result from nonpayment, in form satisfactory to the Authority. Section 6.4. Liens. The City shall not, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to the Site or the Facilities, except the respective rights of the Authority and the City as herein provided and Permitted Encumbrances. Except as expressly provided in this Article, the City shall promptly, at its own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim if the same shall arise at any time. The City shall reimburse the Authority for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim. 335028v3 AJP SH230-41 I7 Section 6.5. Easements. The Authority will from time to time, at the request of the City and at the City's cost and expense, cooperate and join with the City: (a) in granting easements and other rights in the nature of easements, releasing existing easements or other rights in nature of easements which are for the benefit of the Site or the Facilities; (b) in executing amendments to any covenants and restrictions affecting the Site or the Facilities; (c) in executing and delivering to any person any instrument appropriate (i) to confirm or to the effect that such grant, release or execution is not detrimental to the proper conduct of the operations of the City on or in the Site or the Facilities, (ii) to show the consideration, if any, being paid for such grant, release or amendment, (iii) to show that such grant, release, dedication, transfer, petition or amendment does not materially impair the use of the Site or the Facilities or reduce the value of the Site or the Facilities, or (iv) to confirm that the City will remain obligated hereunder to the same extent as if such grant, release, or amendment had not been made, and the City will perform all obligations under such instrument. The consideration, if any, received by the Authority or the City for such grant, release, or amendment shall be applied to the payment of the Bonds. Section 6.6. Addition and Substitution of Land. The Authority and the City agree to add to the Ground Lease and this Lease certain additional interests in land, and to release from the Ground Lease and this Lease certain portions of the Site, and to substitute other interests in real property for some or all of the portions of the Site so released, but only upon the conditions hereinafter set forth: (1) The City may, from time to time, add additional real property to the Site subject to the Ground Lease and this Lease if (i) the additional real property is to be the site of a portion of the Facilities, and (ii) the City provides the Authority with an adequate legal description and survey of the Site, satisfactory to the Authority, and an endorsement to the title insurance policy described in Section 3.3 hereof covering the additional real property and showing only such further exceptions to title as are acceptable to the Authority. (2) The City may, from time to time and with the prior written consent of the Authority, obtain the release of a portion of the Site as now described, if (i) the City certifies that such portion of the Site is not reasonably necessary for the constriction of the Facilities and (ii) the unreleased portion of the site is not impaired by such release with respect to ingress and egress, access to dedicated roads and use of the unreleased portion of the site for its then current or intended purposes. (3) To accomplish the addition, release or substitution of real property as described in paragraph (1) or (2), the City shall prepare and furnish to the Authority amendments or supplements to this Lease, the Ground Lease and any UCC Financing Statements filed in connection with this Lease. The City shall pay all expenses, including attorney's fees, incurred in accomplishing any such addition, release or substitution. Section 6.7. Compliance with Bond Resolution. During the Term of this Lease, the City agrees to perform all obligations imposed upon the Authority or the City by the Bond Resolution. 335028v3 AJP SH230-41 1 g Section 6.8. Tax Covenants. (a) The City covenants and agrees with the Authority for the benefit of the Owners from time to time of the Bonds that it will take, and will cause its officers, employees or agents to take, all actions necessary to comply with the applicable provisions of the Internal Revenue Code, and that it will not take or permit to be taken by any of its officers, employees or agents any actions that would cause the interest on the Bonds to become subject to federal income taxation under the applicable provisions of the hlternal Revenue Code. (b) The City shall take such actions and make all calculations, transfers and payments that may be necessary to comply with the rebate requirements contained in Section 148(f) of the Internal Revenue Code. The City will compute the rebate requirement and make rebate payments in accordance with law. The City must make periodic computations of the amount to be paid to the United States under Section 148(f) of the Internal Revenue Code, which amount is to be paid to the Authority as Additional Lease Payments under this Lease. The City may use any funds legally available to make any rebate payment required under this subparagraph. (c) None of the proceeds of the Bonds will be used, directly or indirectly, to replace fiords which were used in any business carried on by any person other than a state or local governmental unit. (d) The payment of the Lease Payments will not be (A) directly or indirectly secured by any interest in (i) property used or to be used for a private business use by any person other than a state or local governmental unit or (ii) payments in respect of such property, or (B) directly or indirectly derived from payments (whether or not by or to the Authority or the City), in respect of property or borrowed money, used or to be used for a private business use by any person other than a state or local govermnental unit. (e) None of the proceeds of the Bonds will be used, directly or indirectly, to make or finance loans to persons other than a state or local governmental unit. (fj Except as provided below, no user of the Facilities or other property financed with proceeds of the Bonds will use the Facilities or such other property in a trade or business on any basis other than the same basis as the general public; and no person other than a state or local governmental unit will be a user of the Facilities or such other property in a trade or business as a result of (i) ownership, or (ii) actual or beneficial use pursuant to a lease or a management or incentive payment contract, or (iii) joint venture or any other similar arrangement. Notwithstanding the foregoing, the City may permit up to five percent (5%) of the useable square footage of the Facilities to be used in the trade or business of a person other than a governmental unit. 335028v3 AJP SH230-41 1 C~ ARTICLE VII Insurance and Indemnification; Damage, Destruction and Condemnation Section 7.1. Liability Insurance. During the Term of this Lease the City shall procure and maintain continuously in effect with respect to the Site and the Facilities, 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 Site, the Facilities or any part thereof, in amounts not less than the City's tort liability limits under Minnesota Statutes, Chapter 466 for death of or personal injury to any one person, in amounts not less than the City's tort liability limits under Minnesota Statutes, Chapter 466 for all personal injuries and deaths arising out of any one occurrence, and in amounts not less than the City's tort liability limits under Minnesota Statutes, Chapter 466 for property damage arising out of any one occurrence. 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 the Authority, this insurance covers any and all liability of the City and its officers, employees and agents. As an alternative to the purchase of liability insurance, the City may self- insure against such liabilities in accordance with the provisions of applicable law. Policies of commercial insurance may include deductibles of no more than ten percent (10%) of policy amounts. Section 7.2. Property Insurance. During the Term of this Lease, the City shall procure and maintain continuously in effect, to the extent of the frill insurable value of the Facilities, other than building foundations, but in an amount at least equal to the principal amount of the outstanding Bonds from time to time, insurance against loss from or damage by vandalism and fire, with a uniform standard extended coverage endorsement limited only as may be provided in the standard form of extended coverage endorsement at the time in use in the State, in such amount as will be at least sufficient so that a claim may be made for the fiill replacement cost of any part thereof damaged or destroyed. All policies (or endorsements or riders) evidencing insurance required in this Section shall be carried in the names of the City and the Authority, as their respective interests may appear. The Net Proceeds of insurance required by this Section shall be applied as provided in this Article VII. Section 7.3. Administration of Claims. Neither the City nor the Authority shall be required to prosecute any claim against or contest any settlement proposed by any insurer, but any of them may prosecute any such claim or contest any such settlement. In the event of a contest by the City, it shall be at the City's expense, and the City may bring such claim or contest in the name of the Authority, the City or both, and the Authority will join therein at the City's written request upon the receipt by the Authority of an ilidemnity from the City against all costs, liabilities and expenses in connection with such claim or contest. Section 7.4. Other Insurance and Requirements for All Insurance. All insurance required by this Article may be carried under a separate policy or a rider or endorsement; shall be taken out and maintained with responsible insurance companies organized tinder the laws of one of the states 335028v3 AJP SH230-41 20 of the United States and qualified to do business in the State; shall contain a provision that the insurer shall not cancel or revise coverage thereunder without giving written notice to the City and the Authority at least thirty (30) days before the cancellation or revision becomes effective; and shall name the City and the Authority as insured parties. The insurance required by Sections 7.1 and 7.2 hereof maybe provided by the City pursuant to an umbrella policy which provides coverage for the amounts and the insurable incidents provided in such Sections. Annually, the City shall deposit with the Authority policies evidencing any such insurance procured by it, or a certificate or certificates of the respective insurers stating that such insurance is in force and effect. Before the expiration of any such policy, the City shall furnish to the Authority evidence that the policy has been renewed or replaced by another policy conforming to the provisions of this Article, unless such insurance is no longer obtainable. Section 7.5. Indemnification. As between the Authority and the City, to the extent permitted by the laws of the State, the City assumes all risks and liabilities, whether or not covered by insurance, for loss or damage to the Facilities and for injury to or death of any person or damage to any property, whether such injury or death be with respect to agents or employees of the City, the Authority or of third parties, and whether such property damage be to the City or the Authority's property or the property of others, which is proximately caused by the negligent conduct of the City, its officers, employees, agents and lessees, or arising out of the operation, maintenance or use of the Site and the Facilities by the City, its officers, employees, agents and lessees. The City hereby assumes responsibility for and agrees to reimburse the Authority for all liabilities, obligations, losses, damages, penalties, claims, actions, costs and expenses (including reasonable attorney's fees) of whatsoever kind and nahire, imposed on, incurred by or asserted against the Authority or its officers or employees that in any way relate to or arise out of a claim, suit or proceeding based in whole or in part on the foregoing, to the maximum extent permitted by law. Section 7.6. Hazardous Substance Indemnification. The City agrees, to the extent permitted by the laws of the State, to defend, indemnify and hold harmless the Authority, its officers, employees, agents, successors and assigns (the "Indemnitees") from and against, and shall reimburse the Indemnitees for, any and all loss, claim, liability, damage, judgment, penalty, injunctive relief, injury to personal property or natural resources, cost, expense, action or cause of action arising in connection with or as the result of any past, present or firture existence, use, handling, storage, transportation, manufacture, release or disposal of any Hazardous Substance in, on or under the land upon which the Facilities are located, whether foreseeable or unforeseeable, regardless of the source, the time of occurrence or the time of discovery (collectively referred to as "Loss"). This indemnification against Loss includes, without limitation, indemnification against all costs in law or in equity or removal, response, investigation, or remediation of any kind, and disposal of such Hazardous Substances, all costs of determining whether the land upon which the Facilities are located is in compliance with, and of causing the land upon which the Facilities are located to be in compliance with, all applicable Environmental Regulations (as defined in the Ground Lease), all costs associated with claims for damages to persons, property, or natural resources, and the Indemnitees' reasonable attorneys' and consultants' fees, court costs and expenses incurred in connection with any of the above. For this purpose "Hazardous Substance" shall be defined as any substance, the presence of which requires investigation, permitting, control or remediation under any federal, state or local statute, regulation, ordinance or order, including without limitation: (a) any substance defined as "hazardous waste" under the Resource 33~028v3 AJP SH230-41 21 Conservation and Recovery Act, as amended (42 U.S.C. §6901, et seq.); (b) any substance defined as a "hazardous substance" under the Comprehensive Environmental Response, Compensation and Liability Act, as amended (42 U.S.C. §9601, et seg•); (c) any substance defined as a "hazardous material" under the Hazardous Materials Transportation Act (49 U.S.C. §5101, et seg•); (d) any substance defined under any State statute analogous to (a), (b) or (c), to the extent that said statute defines any term more expansively; (e) asbestos: (f) urea formaldehyde; (g) polychlorinated biphenyls; (h) petroleum, or any distillate or fraction thereof; (i) any hazardous or toxic substance designated pursuant to the laws of the State; and (j) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority. Section 7.7. Dan1a~,e, Destruction and Condemnation. If the Facilities or any portion thereof is destroyed (in whole or in part) or is damaged by fire or other casualty or title to or the temporary use of the Facilities or any part thereof, or the interest of the City or the Authority in the Site or the Facilities or any part thereof is taken under the exercise of the power of eminent domain by any governmental body or by any person, firm or corporation acting under governmental authority, the City shall have the rights with respect to the Net Proceeds of any insurance or condemnation award specified in this Section, but the City shall be obligated to continue to pay the Lease Payments and Additional Lease Payments due with respect to the Facilities. All Net Proceeds shall be applied to the prompt repair, restoration, modification, improvement or replacement of the Site and the Facilities by the City, or, if the City elects not to repair or rebuild, all Net Proceeds shall be applied to prepay the Lease Payments and the Additional Lease Payments; in either event all Net Proceeds not needed for these purposes shall belong to the City. Section 7.8. Insufficiency of Net Proceeds. If the Net Proceeds are insufficient to pay in full the cost of any repair, restoration, modification, improvement or replacement of the Site and the Facilities, the City shall either: (a) complete the work and pay any cost in excess of the amount of the Net Proceeds, and the City agrees that if by reason of any such insufficiency of the Net Proceeds, the City shall make any payments pursuant to the provisions of this Section 7.8, the City shall not be entitled to any reimbursement therefor from the Authority nor shall the City be entitled to any diminution of the Lease Payments or the Additional Lease Payments due with respect to the Facilities; or (b) prepay the Lease Payments and Additional Lease Payments, in which event the Net Proceeds shall be used for this purpose. If the City elects not to repair, rebuild or restore, the City shall prepay or discharge the Lease Payments and the Additional Lease Payments to the full extent of the Net Proceeds. Section 7.9. Cooperation of Authority. The Authority shall cooperate fully with the City at the expense of the City in filing any proof of loss with respect to any insurance policy covering the casualties described in Section 7.7 hereof and in the prosecution or defense of any prospective or pending condemnation proceeding with respect to the Site or the Facilities or any part thereof and will, to the extent it may lawfully do so, permit the City to litigate in any proceeding resulting therefrom in the name of and on behalf of the Authority. In no event will the Authority voluntarily settle, or consent to the settlement of, any proceeding arising out of any insurance claim or any prospective or pending condemnation proceeding with respect to the Site or the Facilities or any part thereof without the written consent of the City. 335028v3 AJP SH230-41 22 ARTICLE VIII Option to Purchase; Option to Prepay Section 8.1. Option to Purchase or Prepay. The City shall have the option at any time to purchase the Site and the Facilities by payment to the Authority of the Purchase Price then applicable, or to prepay unpaid Lease Payments and Additional Lease Payments, in whole or in part. Section 8.2. Exercise of Option. The City shall give notice to the Authority of its intention to exercise its purchase or prepayment option not less than forty-five (45) days in advance of the date of prepayment or purchase, and shall pay to the Authority on the date of prepayment or purchase the prepayment amount or (in the event of a purchase) an amount equal to the then current Purchase Price, less any Net Proceeds to be applied to the amount to be so paid in accordance with Section 7.8 hereof. Section 8.3. Provision for Payment of Purchase Price; Discharge of City's Obligation. The City may at any time provide for the payment of the Purchase Price or discharge its obligation to pay Lease Payments due under this Lease by depositing irrevocably in escrow with a bank or mist company, cash or direct obligations of the United States, bearing interest payable at such times and at such rates and maturing on such dates, but not callable prior thereto, as shall be required to provide moneys sufficient to pay or prepay all unpaid Lease Payments on the dates when they are due or subject to prepayment as provided in Section 8.1 hereof, as determined by the City, together with (i) computations and an opinion letter of a certified public accounting firnl showing and attesting to the sufficiency of such moneys and securities for this purpose, and (ii) an opinion letter of Bond Counsel stating that the deposit of such cash or securities will not cause the Bonds to become "arbitrage bonds" under Section 148 of the Internal Revenue Code. Section 8.4. Prerequisite; No Default. The City may exercise the rights specified in Sections 8.1, 8.2, and 8.3 only if it is not in default under this Lease or if such exercise cures any default then existing. 335028v3 A.iP SH230-41 23 ARTICLE IX Assignment, Subleasing, Indemnification, Mortgaging and Selling Section 9.1. Assignment by Authority. Except as expressly provided in this Section, the Authority's rights and obligations under this Lease, including the right to receive and enforce payment of the Lease Payments and the Additional Lease Payments to be made by the City under this Lease and its interest in the Site and the Facilities, shall not be assigned, pledged, mortgaged or transferred, in whole or in part. The rights and obligations of the Authority maybe transferred and assigned to any legal successor to the fimctions of the Authority. Section 9.2. Assignment and Subleasin~by the City. The rights and obligations of the City under this Lease may not be assigned by the City without the written consent of the Authority. The City may sublease the Site and the Facilities, or any portion thereof, to any other entity, provided that the City filrnishes to the Authority an Opinion of Counsel, who is nationally recognized bond counsel, that such sublease will not adversely affect the validity of the outstanding Bonds or the exemption of the interest thereon from federal income taxation. Section 9.3. Restriction on Mort~a~e or Sale by the City. Without the prior written consent of the Authority, the City will not mortgage, sell, assign, transfer or convey the Site or the Facilities or any portion thereof during the Term of this Lease. (The remainder of this page is intentionally left blank.) 335028v3 AJP SH230-41 2~ ARTICLE X Events of Default and Remedies Section 10.1. Events of Default Defined. Any one or more of the following events shall be an "Event of Default" under this Lease: (a) Failure by the City to pay any Lease Payment, Additional Lease Payment, or other payment required to be paid hereunder at the time and from the sources specified herein. (b) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in clause (a) of this Section, for a period of sixty (60) days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Authority, unless the Authority shall agree in writing to an extension of such time prior to its expiration; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Authority shall not unreasonably withhold its consent to an extension of such time if corrective action is instituted by the City within the applicable period and diligently pursued until the default is corrected. (c) The occurrence of any of the following events: (i) The City shall (a) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or the like of the City or of all or a substantial part of its property, (b) commence a vohmtary case under the Federal Bankruptcy Code (as now or hereafter in effect), or (c) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts; or (ii) A proceeding or case shall be commenced, without the application or consent of the City, as the case may be, in any court of competent jurisdiction, seeking (a) the liquidation, reorganization, dissolution, winding-up, or the composition or adjustment of debts, of the City, (b) the appointment of a tnistee, receiver, custodian, liquidator or the like of the City, or (c) similar relief in respect of the City under any law relating to banknzptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, and such proceeding or case has not been dismissed within sixty (60) days of the filing thereof. The provisions of Section 10.1(b) are subject to the following limitation: if by reason of force majeure either party is unable in whole or in part to carry out its obligations under this Lease, it shall not be deemed in default during the continuance of such inability or during any other delays which are a direct consequence of the force majeure inability, and the time for such. performance shall be extended to cover such delays. The term "force majeure" as used herein shall mean, without limitation, the following: acts of God; strikes, lockouts or other industrial disturbances; acts 335028v3 AJP SH230-41 ~S of public enemies; orders or restraints of any kind of the government of the United States of America or any of its departments, agencies or officials, or any civil or military authority, or the State or any of its departments, agencies or officials; insurrections; riots; landslides; earthquakes; fires; storms; droughts; floods; explosions; breakage or accident to machinery, transmission pipes or canals; or any other cause or event not reasonably within the control of a party and not resulting from its negligence. Each party agrees, however, to remedy with all reasonable dispatch the cause or causes preventing it from carrying out its agreements. Section 10.2. Remedies on Default. Whenever any Event of Default shall have happened and be continuing, the Authority may take, but only upon not less than five (5) days written notice to the City, one or any combination of the following remedial steps: (a) Without terminating this Lease, re-enter and take possession of the Site and the Facilities and exclude the City from using the Site and the Facilities until the Event of Default is cured; or (b) Subject to the provisions of Section 5.6 hereof, take any action at law or in equity which may appear necessary or desirable to: (i) collect the Lease Payments and Additional Lease Payments then due for the Fiscal Year then in effect, (ii) collect any Lease Payments and Additional Lease Payments to become due and payable during the current Fiscal Year, or (iii) enforce performance and observance of any obligation, agreement or covenant of the City under this Lease; or (c) Terminate the Term of this Lease, exclude the City from possession of the Site and the Facilities, and use its best efforts to lease the Site and the Facilities to another for the account of the City, holding the City liable for the difference between the rentals received and the Lease Payments and Additional Lease Payments which would have been receivable hereunder for the Fiscal Year then in effect. This provision does not limit any other remedies which the Authority may have under any other document or provision of law. Section 10.3. Delay; Notice. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle any part to exercise any remedy reserved to it in this Lease it shall not be necessary to give any notice, other than such notice as maybe required in this Lease. Section 10.4. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Lease or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accniing upon any default shall impair any such right or power or shall be constnied to be a waiver thereof, but any such right and power maybe exercised from time to time and as often as maybe deemed expedient. 335028v3 A.1P SI I230-41 26 Section 10.5. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Lease is breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. (The remainder of this page is intentionally left blank.) 335028v3 AJP SH230-41 27 ARTICLE XI Administrative Provisions Section 11.1. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when delivered or deposited in the United States mail in certified or registered form with postage fully prepaid: If to the City: City of Shorewood 5755 Country Club Road Shorewood, Minnesota 55331-8926 Attention: Acting City Administrator/Clerk If to the Authority: Shorewood Economic Development Authority 5755 Country Club Road Shorewood, Minnesota 55331-8926 Attention: Assistant Executive Director The above-named persons, by notice given hereunder, may designate different addresses to which subsequent notices, certificates or other communications will be sent. Section 11.2. Binding Effect. This Lease shall inure to the benefit of and shall be binding upon the Authority and the City and their respective successors and assigns. Section 11.3. Severability. In the event any provision of this 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 11.4. Amendments, Changes and Modifications. This Lease may be amended or any of its terms modified only by written amendment authorized and executed by the City and the Authority. Section 11.5. 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 of this Lease. Section 11.6. Execution in Counterparts. This Lease may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instniment. Section 11.7. Applicable Law. This Lease shall be governed by and construed in accordance with the laws of the State. 335028v3 A.1P SH230-41 28 Section 11.8. Authorized Officers. Whenever under the provisions of this 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 Officer, and any party hereto shall be authorized to rely upon any such approval or request. Section 11.9. Captions. The captions or headings in this Lease are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Sections of this Lease. (The remainder of the page is intentionally left blank.) 335028v3 AJP SH230-41 29 IN WITNESS WHEREOF, the Authority has caused this Lease to be executed in its corporate name by its duly authorized officers; and the City has caused this Lease to be executed in its name by its duly authorized officers and sealed with its corporate seal, as of the date first above written. STATE OF MINNESOTA ) ss. COUNTY OF HENNEPIN ) SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY By Its President By Its Assistant Executive Director On this day of , 2008, before me, a Notary Public within and for said County, personally appeared Christine Lizee and , to me personally known, who, being each by me duly sworn, did say that they are the President and Assistant Executive Director, respectively, of the Shorewood Economic Development Authority, the Authority referred to in the foregoing instrument, and that they acknowledged this Lease to be the free act and deed of said Authority. Notary Public 335028v3 AJP SH230-41 30 CITY OF SHOREWOOD,IVIINNESOTA By Its STATE OF MINNESOTA ) ss. COUNTY OF HENNEPIN ) Mayor By Its Acting City Administrator On this day of , 2008, before me, a Notary Public within and for said County, personally appeared Christine Lizee and , to me personally known, who being by me duly sworn, did say that they are the Mayor and Acting City Administrator of the City of Shorewood, the city referred to in the foregoing instrument, and that they acknowledged this Lease to be the free act and deed of said city. Notary Public 335028v3 AJP SH230-41 3I EXHIBIT A Legal Description of Site and Facilities Lot 12, Block 2, Echo Hills 2nd Addition, except that part of the East 28 feet thereof lying South of the Westerly extension of the Northerly line of Lot 2, Block 1, Echo Hills, and except that part thereof described as follows: Commencing at a point in the centerline of Smithtown Road distant 645.00 feet Easterly from an intersection of the Northerly extension of the West line of Lot 27, Auditors' Subdivision 133 with said centerline; thence Southerly parallel with the West line of said Lot 27, a distance of 34.19 feet to the point of beginning of the land to be described; thence South 00 degrees 29 minutes 57 seconds East, assumed bearing, along a line parallel with the West line of said Lot 27 and the West line of said Lot 12 a distance of 104.00 feet; thence South 76 degrees 20 minutes 42 seconds East 45.00 feet; thence South 15 degrees 30 minutes 36 seconds East 45.00 feet; thence South 76 degrees 20 minutes 42 seconds East 57.05 feet; thence North 66 degrees 48 minutes 24 seconds East 34.92 feet; thence North 34 degrees 25 minutes 43 seconds East 30.00 feet; thence North 00 degrees 29 minutes 57 seconds West, parallel with the West line of said Lots 12 and 27, a distance of 160.00 feet to a point in the North line of said Lot 12; thence South 84 degrees 37 minutes 48 seconds West 94.66 feet; thence South 74 degrees 29 minutes 24 seconds West 68.00 feet to the point of beginning. 335028v3 AJP SH230-41 A-1 EXHIBIT B Schedule of Lease Payments Lease Payment Date Principal Interest Total Payment 335028v3 A,1P SH230-41 B-1 EXHIBIT C Form of Completion Certificate I, the undersigned, hereby certify that I am the duly qualified and acting of the CITY OF SHOREWOOD, MINNESOTA (the "City"); and, with respect to the Lease- Purchase Agreement, dated as of August 1, 2008 (the "Lease"), by and between the City and the Shorewood Economic Development Authority, that: 1. The Facilities described in the Lease have been constructed, delivered and installed in accordance with the City's specifications. 2. The City has appropriated and/or taken. other lawful actions necessary to provide moneys sufficient to pay all Lease Payments required to be paid under the Lease during the current fiscal year of the City, and such moneys will be applied in payment of all Lease Payments due and payable during such current fiscal year. Dated: , 20 CITY OF SHOREWOOD, MINNESOTA By Its 335028v3 A.1P SH230-41 C-1 Extract of Minutes of Meeting of the Shorewood Economic Development Authority, Hennepin Cotmty, Minnesota Pursuant to due call and notice thereof, a regular meeting of the Shorewood Economic Development Authority was duly held in the City Hall in the City of Shorewood, Minnesota on Monday, July 28, 2008, commencing at 7:00 P.M. The following members were present: and the following were absent: *~~ ~~* ~*~ The President announced that the next order of business was consideration of a proposal for the purchase of the Authority's $ Public Project Lease Revenue Bonds, Series 2008A (City of Shorewood, Minnesota Lease Obligation). The Acting Executive Director presented the proposal. After due consideration of the proposal, Commissioner following resolution, and moved its adoption: 335034v2 AJP SH230-4] then introduced the it ~!(' RESOLUTION NO. 2008- A RESOLUTION AWARDING THE SALE OF $ PUBLIC PROJECT LEASE REVENUE BONDS, SERIES 2008A (CITY OF SHOREWOOD, MINNESOTA LEASE OBLIGATION); FIXING THEIR FORM AND SPECIFICATIONS; DIRECTING THEIR EXECUTION AND DELIVERY; AND PROVIDING FOR THEIR PAYMENT BE IT RESOLVED By the Board of Commissioners of the Shorewood Economic Development Authority (the "Authority") as follows: Section 1. Sale of Bonds. 1.01. Back rg ound. The City of Shorewood, Minnesota (the "City") is authorized by Minnesota Statutes, Section 465.71, as amended to acquire such items of real. and personal property as are needed to carry out its governmental and proprietary functions, and to acquire such real and personal property by entering into lease-purchase agreements. The City has determined that it is necessary for it to acquire pursuant to aLease-Purchase Agreement, dated as of August 1, 2008 (the "Lease"), between the City and the Authority, the Authority's interest in certain real property described in the Lease (the "Site"), together with certain buildings, struchires and improvements to be constructed thereon, and certain equipment to be contained therein (the "Facilities"). 1.02. Constniction of Facilities. The development of the Site and the Facilities is consistent with and furthers the economic development functions of the Authority, and the Authority is willing to acquire a leasehold interest in the Site pursuant to a Ground Lease, dated as of August 1, 2008 (the "Ground Lease"), between the City and the Authority, and to acquire title to the Facilities and to lease and sell the Site and the Facilities to the City, pursuant to the Lease. To provide funds for the constnlction of the Facilities, the Authority will issue its $ Shorewood Economic Development Authority Public Project Lease Revenue Bonds, Series 2008A (City of Shorewood, Minnesota Lease Obligation) (the "Bonds"). 1.03. Award to the Purchaser and Interest Rates. The proposal of Northland Securities, Inc. (the "Purchaser") to purchase the Bonds is hereby found and determined to be a reasonable offer and is hereby accepted, the proposal being to purchase the Bonds at a price of $ plus accnied interest to date of delivery, for Bonds bearing interest as follows: 33~034v2 A.IP SH230-41 2 Year of Maturity 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 True interest cost: Interest Rate Year of Maturity 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Interest Rate 1.04. Purchase Contract. The President and the Acting Executive Director are directed to execute a contract with the Purchaser on behalf of the Authority. 1.05. Terms and Principal Amounts of the Bonds. The Authority will forthwith issue and sell the Bonds pursuant to Minnesota Statutes, Sections 469.091 to 469.1081, as amended (the "Act") in the total principal amount of $ , originally dated August 1, 2008, in the denomination of $5,000 each or any integral multiple thereof, numbered No. R-l, upward, bearing interest as above set forth, and maturing serially on December 1 in the years and amounts as follows: Year of Maturity 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Amount Year of Maturity Amrnmt 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 1.06. Optional Redemption. Bonds due on or after December 1, 2016 are subject to optional redemption and prepayment on December 1, 2015 and on any date thereafter. Redemption may be in whole or in part and if in part, at the option of the City, so long as the Lease is in effect, and in such manner as the City will determine. If less than all Bonds of a maturity are called for redemption, the Authority will notify DTC (as defined in Section 7 335034v2 A.fP SH230-a1 3 hereof) of the particular amount of such maturity to be prepaid. DTC will determine by lot the amount of each participant's interest in such maturity to be redeemed and each participant will then select by lot the beneficial ownership interests in such maturity to be redeemed. Prepayments will be at a price of par phis accrued interest. [1.07. Mandatory Redemption. To be inserted if Term Bonds are requested by the Purchaser.] Section 2. Registration and Payment. 2.01. Registered Form. The Bonds will be issued only in frilly registered form. The interest thereon and, upon surrender of each Bond, the principal amount thereof, is payable by check or draft issued by the Registrar described herein. 2.02. Dates; Interest Payment Dates. Each Bond will be dated as of the last interest payment date preceding the date of authentication to which interest on the Bond has been paid or made available for payment, unless (i) the date of authentication is an interest payment date to which interest has been paid or made available for payment, in which case the Bond will be dated as of the date of authentication, or (ii) the date of authentication is prior to the first interest payment date, in which case the Bond will be dated as of the date of original issue. The interest on the Bonds is payable on June 1 and December 1 of each year, commencing June 1, 2009, to the registered owners of record thereof as of the close of business on the fifteenth day of the immediately preceding month, whether or not that day is a business day. 2.03. Registration. The Authority will appoint a bond registrar, transfer agent, authenticating agent and paying agent (the "Registrar"). The effect of registration and the rights and duties of the Authority and the Registrar with respect thereto are as follows: (a) Register. The Registrar must keep at its principal corporate trust office a bond register in which the Registrar provides for the registration of ownership of Bonds and the registration of transfers and exchanges of Bonds entitled to be registered, transferred or exchanged. (b) Transfer of Bonds. Upon surrender for transfer of a Bond duly endorsed by the registered owner thereof or accompanied by a written instrument of transfer, in form satisfactory to the Registrar, duly executed by the registered owner thereof or by an attorney duly authorized by the registered owner in writing, the Registrar will authenticate and deliver, in the name of the designated transferee or transferees, one or more new Bonds of a like aggregate principal amount and maturity, as requested by the transferor. The Registrar may, however, close the books for registration of any transfer after the fifteenth day of the month preceding each interest payment date and until that interest payment date. (c) Exchange of Bonds. When Bonds are surrendered by the registered owner for exchange the Registrar will authenticate and deliver one or more new Bonds of a like 335034v2 A.IP SH230-41 4 aggregate principal amount and maturity as requested by the registered owner or the owner's attonley in writing. (d) Cancellation. Bonds surrendered upon transfer or exchange will be promptly cancelled by the Registrar and thereafter disposed of as directed by the Authority. (e) Improper or Unauthorized Transfer. When a Bond is presented to the Registrar for transfer, the Registrar may refuse to transfer the Bond until the Registrar is satisfied that the endorsement on the Bond or separate instrument of transfer is valid and genuine and that the requested transfer is legally authorized. The Registrar will incur no liability for the refusal, in good faith, to make transfers which it, in its judgment, deems improper or unauthorized. (f) Persons Deemed Owners. The Authority and the Registrar may treat the person in whose name a Bond is registered in the bond register as the absolute owner of the Bond, whether the Bond is overdue or not, for the purpose of receiving payment of, or on account of, the principal of and interest on the Bond and for all other purposes and payments so made to the registered owner or upon the owner's order will be valid and effectual to satisfy and discharge the liability upon the Bond to the extent of the sum or sums so paid. (g) Taxes, Fees and Charges. The Registrar may impose a charge upon the owner thereof for a transfer or exchange of Bonds, sufficient to reimburse the Registrar for any tax, fee or other governmental charge required to be paid with respect to the transfer or exchange. (h) Mutilated Lost, Stolen or Destroyed Bonds. If a Bond becomes mutilated or is destroyed, stolen or lost, the Registrar will deliver a new Bond of like amount, number, maturity date and tenor in exchange and substitution for and upon cancellation of the mutilated Bond or in lieu of and in substitution for a Bond destroyed, stolen or lost, upon the payment of the reasonable expenses and charges of the Registrar in connection therewith; and, in the case of a Bond destroyed, stolen or lost, upon filing with the Registrar of evidence satisfactory to it that the Bond was destroyed, stolen or lost, and of the ownership thereof, and upon furnishing to the Registrar of an appropriate bond or indemnity in form, substance and amount satisfactory to it and as provided by law, in which both the Authority and the Registrar must be named as obligees. Bonds so surrendered to the Registrar will be cancelled by the Registrar and evidence of such cancellation must be given to the Authority. If the mutilated, destroyed, stolen or lost Bond has already matured or been called for redemption in accordance with its terms it is not necessary to issue a new Bond prior to payment. (i) Redemption. In the event any of the Bonds are called for redemption, notice thereof identifying the Bonds to be redeemed will be given by the Registrar by mailing a copy of the redemption notice by first class mail (postage prepaid) to the 335034v2 A.IP SH230-41 S registered owner of each Bond to be redeemed at the address shown on the registration books kept by the Registrar and by publishing the notice if required by law. Failure to give notice by publication or by mail to any registered owner, or any defect therein, will not affect the validity of the proceedings for the redemption of Bonds. Bonds so called for redemption will cease to bear interest after the specified redemption date, provided that the funds for the redemption are on deposit with the place of payment at that tune. 2.04. Appointment of Initial Re is~ trar. The Authority appoints Northland Trust Services, Inc, Minneapolis, Minnesota, as the initial Registrar. The President and the Acting Executive Director are authorized to execute and deliver, on behalf of the Authority, a contract with the Registrar. Upon merger or consolidation of the Registrar with another corporation, if the resulting corporation is a bank or mist company authorized by law to conduct such business, the resulting corporation is authorized to act as successor Registrar. The Authority agrees to pay, from Additional Lease Payments paid by the City under the Lease, the reasonable and customary charges of the Registrar for the services performed. The Authority reserves the right to remove the Registrar upon 30 days' notice and upon the appointment of a successor Registrar, in which event the predecessor Registrar must deliver all cash and Bonds in its possession to the successor Registrar and must deliver the bond register to the successor Registrar. 2.05. Execution Authentication and Delivery. The Bonds will be prepared under the direction of the Acting Executive Director and executed on behalf of the Authority by the signatures of the President and the Acting Executive Director, provided that all signatures may be printed, engraved or lithographed facsimiles of the originals. If an officer whose signature or a facsimile of whose signature appears on the Bonds ceases to be such officer before the delivery of any Bond, that signature or facsimile will nevertheless be valid and sufficient for all purposes, the same as if the officer had remained in office until delivery. Notwithstanding such execution, a Bond will not be valid or obligatory for any purpose or entitled to any security or benefit under this Resohition unless and until a certificate of authentication on the Bond has been duly executed by the manual signature of an authorized representative of the Registrar. Certificates of authentication on different Bonds need not be signed by the same representative. The executed certificate of authentication on a Bond is conclusive evidence that it has been authenticated and delivered under this Resolution. When the Bonds have been so prepared, executed and authenticated, the Authority will deliver the same to the Purchaser upon payment of the purchase price in accordance with the contract of sale heretofore made and executed, and the Purchaser is not obligated to see to the application of the purchase price. 2.06. Temporary Bonds. The Authority may elect to deliver in lieu of printed definitive Bonds one or more typewritten temporary Bonds in substantially the form set forth in Section 3 with such changes as may be necessary to reflect more than one maturity in a single temporary bond. Upon the execution and delivery of definitive Bonds the temporary Bonds will be exchanged therefor and cancelled. 335034v2 AJP SH230-41 6 Section 3. Form of Bond. 3.01. The Bonds will be printed or typewritten in substantially the following form: UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF HENNEPIN CITY OF SHOREWOOD SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY No. R- $ Public Project Lease Revenue Bond, Series 2008A Date of Interest Rate Maturity Original Issue CUSIP December 1, August 1, 2008 Registered Owner: CEDE & CO. Principal Amount: The Shorewood Economic Development Authority, a public body corporate and politic and political subdivision of the State of Minnesota (the "Authority"), for value received, hereby promises to pay, but solely from the sources hereinafter described, to the Registered Owner specified above or registered assigns, the principal amount set forth above on the Maturity date specified above, upon the presentation and surrender hereof, and to pay to the Registered Owner hereof interest on such principal amount from such sources at the interest rate specified above from the Date of Original Issue set forth above, or the most recent interest payment date to which interest has been paid or duly provided for as specified below, on June 1 and December 1 of each year, commencing June 1, 2009, until said principal amount is paid. Principal and interest are payable in lawful money of the United States of America at the office of Northland Tnist Services, Inc., Minneapolis, Minnesota, or of its successor, as Bond Registrar. Interest shall be paid on each interest payment date by check or draft mailed to the person in whose name this Bond is registered at the close of business on the fifteenth (15th) day of the month immediately preceding such interest payment date (whether or not a business day) at the Owner's address set forth on the registration records maintained by the Bond Registrar. Upon written request to the Bond Registrar, delivered at least fifteen (1 S) days prior to an interest payment date by a registered Owner of $500,000 or more in aggregate original principal amount of the Bonds, payment of interest may be made by wire transfer to such registered Owner. Any such interest not punctually paid or provided for will cease to be payable on such regular record dates and such defaulted interest may be paid to the person in whose name this Bond is registered at the 335034v2 AJP SH230-41 7 close of business on a special record date for the payment of such defaulted interest established by the Bond Registrar. It is hereby certified and recited and the Authority has found: that all acts, conditions and things required to be done precedent to and in the issuance of this Bond and the series of which it is a part have been properly done, have happened and have been performed in regular and due time, form and manner as required by law; and that this Bond and the series of which it is a part does not constitute a debt of the Authority within the meaning of any constitutional or stahitory limitation. This Bond is issued pursuant to Minnesota Statutes, Sections 469.091 to 469.1081, as amended (the "Act"), and in conformity with the provisions, restrictions and limitations thereof. This Bond does not constitute or give rise to a charge against the general credit or properties or taxing powers of the Authority or the City of Shorewood, Minnesota (the "City") and does not grant to the Owner of this Bond any right to have the Authority or the City levy any taxes or appropriate any fiends for the payment of the principal hereof or interest hereon, nor is this Bond a general obligation or a pecuniary liability of the Authority or the City or the individual officers or agents thereof. This Bond does not constitute an indebtedness of the Authority or the City within the meaning of any state constitutional provision or statutory limitation. This Bond and interest hereon are payable solely from Lease Payments to be paid by the City pursuant to a Lease-Purchase Agreement, dated as of August 1, 2008 (the "Lease"), between the Authority and the City, or other moneys held by the Bond Registrar in a fiend or account appropriated to the payment of the Bonds of this series under the Bond Resolution adopted by the Authority on July 28, 2008 (the "Resolution"). The Authority's Board of Commissioners has designated the issue of Bonds of which this Bond forms a part as "qualified tax exempt obligations" within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code") relating to disallowance of interest expense for financial institutions and within the $10 million limit allowed by the Code for the calendar year of issue. THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS PURSUANT TO THE LEASE IS SUBJECT TO ANNUAL APPROPRIATION BY THE CITY COUNCIL OF THE CITY. IN THE EVENT THE CITY COUNCIL DETERMINES NOT TO APPROPRIATE MONEYS FOR THE PAYMENT OF LEASE PAYMENTS DUE IN A FISCAL YEAR, THE LEASE WILL TERMINATE AT THE END OF THE THEN-CURRENT FISCAL YEAR, AND THE CITY WILL HAVE NO FURTHER OBLIGATION TO MAKE LEASE PAYMENTS PURSUANT TO THE LEASE. This Bond is one of a duly authorized series of special, limited obligation Bonds in an aggregate principal amount of $ , in denominations of $5,000 or integral multiples thereof not exceeding the principal amount maturing in any year, and numbered from R-1 upwards, and of like tenor and effect except as to serial number, denomination, interest rate, maturity and right of prior redemption, all of which have been authorized by law to be issued and have been issued or are to be issued by the Authority pursuant to the Resolution, to provide 335034v2 AJP SFI230-41 8 financing for the acquisition and construction of the Site and the Facilities described in the Lease. The Bonds are equally and ratably secured by the Resolution and the Lease. Pursuant to a Ground Lease, dated as of August 1, 2008 (the "Ground Lease") between the City and the Authority, the City has leased the Site described in the Lease to the Authority. Reference is hereby made to the Ground Lease, the Lease, the Resolution, and any amendments or supplements thereto for a description and limitation of the property, revenues and funds pledged and appropriated to the payment of the Bonds, the nature and extent of the security thereby created, the rights of the Owners of the Bonds, the rights, duties and immunities of the Bond Registrar, and the rights, immunities and obligations of the Authority and the City thereunder. Certified copies of the Resolution and executed counterparts of the Ground Lease and the Lease are on file at the office of the Authority. Bonds due on or after December 1, 2016 are subject to optional redemption, at the election of the City, so long as the Lease is in effect, in whole or in part, and if in part in such manner as the City shall determine, on December 1, 2015 and any date thereafter, at a redemption price of par phis accrued interest. Notice of any such redemption shall be given to the registered Owner of each Bond to be redeemed by first class mail, addressed to the Owner's registered address, not later than thirty (30) days prior to the date fixed for redemption. Prior to the date fixed for redemption, funds shall be deposited with the Bond Registrar sufficient to pay the Bonds called and accrued interest thereon. Upon the happening of the above conditions, Bonds thus called shall not bear interest on or after the call date and, except for the purpose of payment from the funds so deposited, shall no longer be protected by the Resolution. This Bond is transferable, as provided in the Resolution, only upon the registration records maintained by the Bond Registrar by the Registered Owner hereof in person or by the Owner's duly authorized attorney, upon surrender of this Bond for transfer at the office of the Bond Registrar, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Bond Registrar duly executed by, the Registered Owner hereof or the Owner's duly authorized attorney, and, upon payment of any tax, fee or other governmental charge required to be paid with respect to such transfer, one or more Bonds of the same maturity, aggregate principal amount and interest rate will be issued to the designated transferee or transferees. The Bonds are issuable only as frilly registered bonds without coupons in denominations of $5,000 or any integral multiple thereof not exceeding the principal amount maturing in any year. As provided in the Resolution and subject to certain limitations set forth therein, the Bonds are exchangeable for a like aggregate principal amount of Bonds of the same maturity and interest rate, of different authorized denominations, as requested by the Registered Owner or the Owner's duly authorized attorney upon surrender thereof to the Bond Registrar. In case an Event of Default as defined in the Resolution or the Lease occurs, or in the event of non-appropriation under the Lease by the City Council of the City, the principal of this Bond and all other Bonds outstanding may be declared or may become due and payable prior to 335034v2 AJP SH230-41 (~ the stated maturity hereof in the manner and with the effect and subject to the conditions provided in the Resolution, but no Owner of any Bond shall have any right to enforce the provisions of the Resolution, the Lease or the Ground Lease except as provided in the Resolution. With the consent of the Authority and the Bond Registrar, and to the extent permitted by and as provided in the Resolution, the terms and provisions of the Resolution, the Lease and the Ground Lease, or of any instrument supplemental thereto, may be modified or altered by the assent or authority of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding thereunder. This Bond shall not be valid or become obligatory for any purpose until it shall have been authenticated by the execution of the certificate hereon endorsed by the Bond Registrar under the Resolution. (The remainder of this page is intentionally left blank.) 335034v2 AJP SH230-41 1 IN WITNESS WHEREOF, the Shorewood Economic Development Authority has caused this Bond to be executed in its name by the facsimile signatures of its duly authorized officers, all as of the Date of Original Issue specified above. Date: SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY (Facsimile) President (Facsimile) Acting Executive Director (Form of Bond Registrar's Certificate) This is one of the Bonds described in the within mentioned Resolution. Date: NORTHLAND TRUST SERVICES, INC. Bond Registrar By Authorized Signature 335034v2 AJP SH230-41 I I ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (Please Print or Typewrite Name and Address of Transferee) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within Bond on the books kept for registration thereof, with frill power of substitution in the premises. Dated: Please Insert Social Security Number or Other Identifying Number of Assignee Notice: The signature to this assignment must correspond with the name as it appears on the face of this Bond in every particular, without alteration or any change whatever. PROVISIONS AS TO REGISTRATION The ownership of the principal of and interest on the within Bond has been registered on the books of the Bond Registrar in the name of the person last noted below. Signature of Date of Registration Registered Owner Bond Registrar August , 2008 Cede & Co. Federal ID #13-2555119 3.02. Approving Leal Opinion. The Acting Executive Director is authorized and directed to obtain a copy of the proposed approving legal opinion of Kennedy & Graven, Chartered, Minneapolis, Minnesota, which will be complete except as to dating thereof and to cause the opinion to be printed on or accompany each Bond. 335034v2 AJP SH230-41 12 Section 4. Payment• Security; Pledges and Covenants. 4.01. Debt Service Fund. (a) The Bonds are payable from the Debt Service Fund hereby created, and the Lease Payments payable by the City under the Lease are hereby pledged to the Debt Service Fund. There is also appropriated to the Debt Service Fund the accnied interest paid by the Purchaser upon closing and delivery of the Bonds. So long as there is no Event of Default under the Lease and the City has not terminated the Lease due to nonappropriation, the Debt Service Fund shall be held and administered by the City. (b) Project Fund. The proceeds of the Bonds, less the appropriations made in paragraph (a), will be deposited with the City in a separate project fund to be used solely to defray expenses of the construction of the Facilities. When the Facilities are completed and the cost thereof paid, the project fund is to be closed, and any balance thereon credited to the Debt Service Fund. 4.02. Lease Payments. The Authority covenants to apply all Lease Payments received by the Authority from the City pursuant to the Lease to the payment of the principal of and interest on the Bonds. The Bonds shall not constitute or give rise to a charge against the general credit or properties or taxing powers of the Authority or the City and shall not grant to the Owners of the Bonds any right to have the Authority or the City levy any taxes or appropriate any funds for the payment of the principal thereof or interest thereon. The Bonds are not a general obligation or a pecuniary liability of the Authority or the City or the individual officers or agents thereof. The Bonds shall not constitute an indebtedness of the Authority or the City within the meaning of any state constitutional provision or statutory limitation. The Bonds and interest thereon are payable solely from Lease Payments to be paid by the City pursuant to the Lease, or other moneys held by the Bond Registrar in a fund or account appropriated to the payment of the Bonds. The obligation of the City to make Lease Payments pursuant to the Lease is subject to annual appropriation by the City Council of the City. In the event the City Council determines not to appropriate moneys for the payment of Lease Payments due in a fiscal year, the Lease will terminate at the end of the then-current fiscal year, and the City will have no further obligation to make Lease Payments pursuant to the Lease. In case an Event of Default as defined in the Lease occurs, or in the event of non- appropriation by the City Council of the City, the Authority may declare the principal of all Bonds outstanding to be due and payable prior to the stated maturity thereof, and upon such declaration, the principal of all Bonds outstanding shall become due and payable. After such declaration, all moneys received by the Authority and applicable to the Bonds pursuant to the Lease shall be applied to the equal and proportional payment of all Bonds outstanding and claims for interest thereon, without priority of any Bond over another Bond, or of principal over interest or interest over principal. 335034v2 AJP SH230-4] 13 Section 5. Authentication of Transcript. 5.01. Bond Transcript. The officers of the Authority are authorized and directed to prepare and furnish to the Purchaser and to the attorneys approving the Bonds, certified copies of proceedings and records of the Authority relating to the Bonds and to the financial condition and affairs of the Authority, and such other certificates, affidavits and transcripts as may be required to show the facts within their knowledge or as shown by the books and records in their custody and under their control, relating to the validity and marketability of the Bonds, and such instruments, including any heretofore furnished, maybe deemed representations of the Authority as to the facts stated therein. 5.02. Official Statement. The President and Acting Executive Director are authorized and directed to certify that they have examined the Official Statement prepared and circulated in connection with the issuance and sale of the Bonds and that to the best of their knowledge and belief the Official Statement is a complete and accurate representation of the facts and representations made therein as of the date of the Official Statement. 5.03. Approval of Documents. The Ground Lease and the Lease are hereby approved. The President and the Acting Executive Director are authorized and directed to execute and deliver the Ground Lease and the Lease on behalf of the Authority, substantially in the forms on file, but with all such changes therein as shall be approved by the officers executing the same, which approval shall be conclusively evidenced by the execution thereof. Copies of all of the transaction documents shall be delivered, filed and recorded as provided therein. The President, the Acting Executive Director and other officers of the Authority are also authorized and directed to execute such other instniments as may be required to give effect to the transactions herein contemplated. 5.04. Payment of Costs of Issuance. The Authority authorizes the Purchaser to forward the amount of Bond proceeds allocable to the payment of issuance expenses (other than amounts payable to Kennedy & Graven, Chartered as Bond Counsel) to the Registrar on the closing date for further distribution as directed by the Authority's financial adviser, Northland Securities, Inc. Section 6. Tax Covenants. 6.01. Tax-Exempt Obli ate ions. The Authority covenants and agrees with the holders from time to time of the Bonds that it will not take or permit to be taken by any of its officers, employees or agents any action which would cause the interest on the Bonds to become subject to taxation under the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations promulgated thereunder, in effect at the time of such actions, and that it will take or cause its officers, employees or agents to take, all affirmative action within its power that maybe necessary to ensure that such interest will not become subject to taxation under the Code and applicable Treasury Regulations, as presently existing or as hereafter amended and made applicable to the Bonds. 335034v2 AJP SH230-41 14, 6.02. No Rebate Required. (a) The Authority will comply with requirements necessary lender the Code to establish and maintain the exclusion from gross income of the interest on the Bonds under Section 103 of the Code, including without limitation requirements relating to temporary periods for investments, limitations on amounts invested at a yield greater than the yield on the Bonds, and the rebate of excess investment earnings to the United States, if the Bonds (together with other obligations reasonably expected to be issued in calendar year 2008) exceed the small-issuer rebate exception amount of $5,000,000. (b) For purposes of qualifying for the small issuer exception to the federal arbitrage rebate requirements, the Authority finds, determines and declares that the aggregate face amount of all tax-exempt bonds (other than private activity bonds) issued by the Authority (and all subordinate entities of the Authority) during the calendar year in which the Bonds are issued and outstanding at one time is not reasonably expected to exceed $5,000,000, all within the meaning of Section 148(f)(4)(D) of the Code. 6.03. Not Private Activity Bonds. The Authority further covenants not to use the proceeds of the Bonds or to cause or permit them or any of them to be used, in such a manner as to cause the Bonds to be "private activity bonds" within the meaning of Sections 103 and 141 through 150 of the Code. 6.04. Qualified Tax-Exempt Obli a~ bons. In order to qualify the Bonds as "qualified tax-exempt obligations" within the meaning of Section 265(b)(3) of the Code, the Authority makes the following factual statements and representations: (a) the Bonds are not "private activity bonds" as defined in Section 141 of the Code; (b) the Authority designates the Bonds as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Code; (c) the reasonably anticipated amount of tax-exempt obligations (other than private activity bonds that are not qualified 501(c)(3) bonds) which will be issued by the Authority (and all subordinate entities of the Authority) during calendar year 2008 will not exceed $10,000,000; and (d) not more than $10,000,000 of obligations issued by the Authority during calendar year 2008 have been designated for purposes of Section 265(b)(3) of the Code. 6.04. Procedural Requirements. The Authority will use its best efforts to comply with any federal procedural requirements which may apply in order to effectuate the designations made by this section. 335034v2 AJP SH230-41 15 Section 7. Book-Entry System; Limited Obligation of Authority. 7.01. DTC. The Bonds will be initially issued in the form of a separate single typewritten or printed fully registered Bond for each of the maturities set forth in Section 1.03 hereof. Upon initial issuance, the ownership of each Bond will be registered in the registration books kept by the Registrar in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York, and its successors and assigns ("DTC"). Except as provided in this Section, all of the outstanding Bonds will be registered in the registration books kept by the Registrar in the name of Cede & Co., as nominee of DTC. 7.02. Participants. With respect to Bonds registered in the registration books kept by the Registrar in the name of Cede & Co., as nominee of DTC, the Authority, the Registrar and the Paying Agent will have no responsibility or obligation to any broker dealers, banks and other financial institutions from time to time for which DTC holds Bonds as securities depository (the "Participants") or to any other person on behalf of which a Participant holds an interest in the Bonds, including but not limited to any responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Participant or any other person (other than a registered owner of Bonds, as shown by the registration books kept by the Registrar) of any notice with respect to the Bonds, including any notice of redemption, or (iii) the payment to any Participant or any other person, other than a registered owner of Bonds, of any amount with respect to principal of, premium, if any, or interest on the Bonds. The Authority, the Registrar and the Paying Agent may treat and consider the person in whose name each Bond is registered in the registration books kept by the Registrar as the holder and absolute owner of such Bond for the purpose of payment of principal and interest with respect to such Bond, for the purpose of registering transfers with respect to such Bonds, and for all other purposes. The Paying Agent will pay all principal of and interest on the Bonds only to or on the order of the respective registered owners, as shown in the registration books kept by the Registrar, and all such payments will be valid and effectual to fully satisfy and discharge the Authority's obligations with respect to payment of principal of or interest on the Bonds to the extent of the sum or sums so paid. No person other than a registered owner of Bonds, as shown in the registration books kept by the Registrar, will receive a certificated Bond evidencing the obligation of this Resolution. Upon delivery by DTC to the Authority of a written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., the words "Cede & Co.," will refer to such new nominee of DTC; and upon receipt of such a notice, the Authority will promptly deliver a copy of the same to the Registrar and the Paying Agent. 7.03. Representation Letter. The Authority has heretofore executed and delivered to DTC a Blanket Issuer Letter of Representations (the "Representation Letter") which will govern payment of principal of and interest on the Bonds and notices with respect to the Bonds. Any Paying Agent or Registrar subsequently appointed by the Authority with respect to the Bonds will agree to take all action necessary for all representations of the Authority in the Representation Letter with respect to the Registrar and Paying Agent, respectively, to be complied with at all times. 335034v2 AJP SH230-41 1 7.04. Transfers Outside Book-Entr~ystem. In the event the Authority, by resolution, determines that it is in the best interests of the persons having beneficial interests in the Bonds that they be able to obtain Bond certificates, the Authority will notify DTC, whereupon DTC will notify the Participants, of the availability through DTC of Bond certificates. In such event the Authority will issue, transfer and exchange Bond certificates as requested by DTC and any other registered owners in accordance with the provisions of this Resolution. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving notice to the Authority and discharging its responsibilities with respect thereto under applicable law. In such event, if no successor securities depository is appointed, the Authority will issue and the Registrar will authenticate Bond certificates in accordance with this Resolution and the provisions hereof will apply to the transfer, exchange and method of payment thereof. 7.05. Payments to Cede & Co. Notwithstanding any other provision of this Resolution to the contrary, so long as a Bond is registered in the name of Cede & Co., as nominee of DTC, payments with respect to principal of and interest on the Bonds and notices with respect to the Bonds will be made and given, respectively, in the manner provided in DTC's Operational Arrangements, as set forth in the Representation Letter. Section 8. Continuing Disclosure. 8.01. Continuing Disclosure Certificate. The City hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of this Resohtion, failure of the City to comply with the Continuing Disclosure Certificate is not to be considered an event of default with respect to the Bonds; however, any Bondholder may take such actions as inay be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Section. 8.02. Execution of Continuing Disclosure Certificate. "Continuing Disclosure Certificate" means that certain Continuing Disclosure Certificate, executed by the Mayor and the Acting City Administrator of the City and dated the date of issuance and delivery of the Bonds, as originally executed and as it maybe amended from time to time in accordance with the terms thereof. Section 9. Defeasance. When all Bonds and all interest thereon have been discharged as provided in this Section, all pledges, covenants and other rights granted by this Resolution to the holders of the Bonds will cease. The City may discharge all Bonds which are due on any date by depositing with the Registrar on or before that date a sum sufficient for the payment thereof in frill. If any Bond should not be paid when due, it may nevertheless be discharged by depositing with the Registrar a sum sufficient for the payment thereof in fiill with interest accrued to the date of such deposit. 335034v2 AJP SH230-41 I7 Adopted this 28th day of July, 2008 by the Board of Commissioners of the Shorewood Economic Development Authority. SHOREWOOD ECONOMIC DEVELOPMENT AUTHORITY By Its President By Its Acting Executive Director 335034v2 AJP SH230-41 18 The motion for the adoption of the foregoing resolution was duly seconded by Commissioner ,and upon vote being taken thereon, the following voted in favor thereof: and the following voted against the same: whereupon said resolution was declared duly passed and adopted. 335034v2 A.1P SH230-41 1(3 STATE OF MINNESOTA ) COUNTY OF HENNEPIN ) SS. CITY OF SHOREWOOD ) I, the undersigned, being the duly qualified and Acting Executive Director of the Shorewood Economic Development Authority, do hereby certify that I have carefully compared the attached and foregoing extract of minutes of a regular meeting of the Authority held on July 28, 2008 with the original minutes on file in my office and the extract is a full, tnie and correct copy of the minutes insofar as they relate to the issuance and sale of $ Public Project Lease Revenue Bonds, Series 2008A (City of Shorewood, Minnesota Lease Obligation) of the Authority. WITNESS My hand officially as such Acting Executive Director and the corporate seal of the Authority this day of , 2008. Acting Executive Director (SEAL) 335034v2 AJP SH230-41