Item 5.1 Fire and Emergency Services Station Project
Request for
City Council Action
DEPARTMENT INFORMATION
ORIGINATING DEPARTMENT REQUESTOR: MEETING DATE:
Administration City Administrator/Finance Director Flaherty December 9, 2024
PRESENTER(s) REVIEWED BY: ITEM #:
Administration Northland Securities & Taft Law
City Attorney Kendall
5.1 – EDA Lease Agreements
STRATEGIC VISION
MEETS: THE CITY OF OTSEGO:
X Is a strong organization that is committed to leading the community through innovative communication.
X Has proactively expanded infrastructure to responsibly provide core services.
X Is committed to delivery of quality emergency service responsive to community needs and expectations in a
cost-effective manner.
Is a social community with diverse housing, service options, and employment opportunities.
Is a distinctive, connected community known for its beauty and natural surroundings.
AGENDA ITEM DETAILS
RECOMMENDATION:
City staff is recommending that the City Council consider adoption of a resolution authorizing agreements with the EDA.
ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED?
Yes No
BACKGROUND/JUSTIFICATION:
Fire & Emergency Services Station Project
The City Council is progressing with the Fire & Emergency Services Station project, which will provide a facility for the Fire
& Emergency Services Department to operate from and serve as a hub for all public safety operations within the City.
At the November 12, 2024, meeting, the City Council adopted Resolution 2024 -83 Accepting Bids and Awarding Contracts
for construction of the project. After the competitive bidding process, the total project costs, are $18,707,868.
Lease Revenue Bonds, Series 2024A
The Otsego Economic Development Authority (the EDA) is proposing to issue lease revenue bonds pursuant to Minnesota
Statutes 469.090 through 469.1082 to finance the project.
At the November 12, 2024, meeting, the Board of Commissioners (the Board) reviewed a Finance Plan. The Finance Plan
was presented with a project contribution of $2,000,000 from the City and the balance of project costs to be financed
with the issuance of bonds. At this meeting, the Board adopted Resolution 2024-04 that provided for the competitive
sale of the bonds, approved a Municipal Advisory Service Agreement with Northland, and scheduled a meeting for
December 9, 2024, to consider the issuance and sale of the bonds.
Bond Sale
The proposals for the bond issue are scheduled to be received at 10:00AM on December 9, 2024, and will be presented
to the Board for consideration at their meeting on December 9, 2024, for consideration of issuance and sale.
Resolution
Taft Law, Bond Counsel, has prepared a Resolution authorizing the execution of lease agreements between the City and
the EDA, and for the undertaking of continuing disclosure requirements.
Lease Agreements
Taft Law, Bond Counsel, has prepared two lease agreements, a Ground Lease Agreement, and a Lease Agreement, both
of which are between the City and the EDA. These agreements document the lease agreements for the property and the
facility to be constructed. A representative from Taft Law will be present at the meeting to review the documents with
the City Council and answer any questions.
Continuing Disclosure Undertaking
Taft Law, Bond Counsel, has prepared a Continuing Disclosure Undertaking Agreement for the City that outlines the
continuing disclosure requirements in connection with the Lease Revenue Bond, Series 2024A. These requirements are
set forth by the Securities and Exchange Commission. A representative from Taft Law will be present at the meeting to
review the document with the City Council and answer any questions.
SUPPORTING DOCUMENTS ATTACHED:
• Resolution 2024-86
• Ground Lease Agreement
• Lease Agreement
• Continuing Disclosure Undertaking
POSSIBLE MOTION
PLEASE WORD MOTION AS YOU WOULD LIKE IT TO APPEAR IN THE MINUTES:
Motion to adopt Resolution 2024-86 Authorizing the Execution and Delivery of a Ground Lease Agreement, a Lease
Agreement, and Continuing Disclosure Undertaking.
BUDGET INFORMATION
FUNDING: BUDGETED:
Pending approval, the Lease Agreement would
initiate payments from the City to the EDA in 2026.
N/A
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EXTRACT OF MINUTES OF A MEETING OF THE
CITY COUNCIL OF THE CITY OF OTSEGO, MINNESOTA
HELD: December 9, 2024
Pursuant to due call and notice thereof, a regular meeting of the City Council of the City
of Otsego, Minnesota was duly called and held at the Otsego Prairie Center on December 9, 2024
at 7:00 p.m.
The following members were present:
and the following were absent:
Member ________________ introduced the following resolution and moved its adoption:
RESOLUTION AUTHORIZING THE EXECUTION AND DELIVERY OF A
GROUND LEASE AGREEMENT, LEASE AGREEMENT AND
CONTINUING DISCLOSURE UNDERTAKING
WHEREAS, the City of Otsego, Minnesota (the "City"), is authorized, pursuant to
Minnesota Statutes, Section 465.71, to enter into lease purchase agreements; and
WHEREAS, the Otsego Economic Development Authority, a body corporate and politic
(the "Authority") has agreed to enter into a Lease Agreement dated as of December 30, 2024 (the
"Lease") with the City pursuant to which the Authority will provide for the acquisition and
construction of a fire and emergency services facility (the "Project") to be used by the City; and
WHEREAS, in order to carry out the transaction, (1) the City will ground lease the land
(the “Land”), upon which the Project is to be constructed, to the Authority pursuant to a Ground
Lease Agreement between the City and the Authority, dated as of December 30, 2024 (the
"Ground Lease"), and (2) the Authority will lease the Land and the Project back to the City
pursuant to the Lease; and
WHEREAS, the Authority will issue its $________ Lease Revenue Bonds, Series 2024A
(City of Otsego, Minnesota Lease with Option to Purchase Project) (the "Bonds") to provide
funds to finance the Project pursuant to an Indenture of Trust dated as of December 30, 2024 (the
"Indenture") between the Authority and U.S. Bank National Association, as Trustee, setting forth
the form and details of the Bonds and their issuance and pledging the rental payments derived
from the Lease to the payment of the Bonds; and
WHEREAS, the City is an obligated person under the provisions of Rule 15c2-12 (the
"Rule") promulgated by the Securities and Exchange Commission pursuant to the Securities and
Exchange Act of 1934, as amended, and is therefore subject to continuing disclosure
requirements under the Rule and accordingly, the City will enter into a Continuing Disclosure
Undertaking (the "Continuing Disclosure Undertaking") relating to the Bonds; and
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NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Otsego,
Minnesota, as follows:
1. Authorization of Bonds; Documents Presented. The Authority proposes to issue
its Bonds payable from rental payments to be made by the City under the Lease. The Bonds
shall bear interest at the rates as are prescribed by the Indenture. Forms of the following
documents (collectively, the "Bond Documents") relating to the Bonds and the Project have been
submitted to the City Council and are now on file in the office of the City Administrator:
(a) the Ground Lease;
(b) the Lease; and
(c) the Continuing Disclosure Undertaking.
2. Approval and Execution of Bond Documents. The Mayor and the City
Administrator are hereby authorized and directed to execute, and deliver, on behalf of the City
the Bond Documents in substantially the forms on file with the City Administrator. All of the
provisions of the Bond Documents when executed and delivered as authorized herein shall be
deemed to be a part of this resolution as fully and to the same extent as if incorporated herein and
shall be in full force and effect from the date of execution and delivery thereof.
3. Approval of Indenture. The City hereby approves the Indenture and the Bonds
described therein (collectively, the "Related Documents") in substantially the forms submitted to
the City.
4. Authorized City Representative. The City Administrator is hereby designated and
authorized to act on behalf of the City as the City Representative, as defined in the Indenture.
5. Furnishing of Certificates and Proceedings. The Mayor and City Administrator
and other officers of the City are authorized and directed to prepare and furnish to the purchaser
of the Bonds and Bond Counsel, certified copies of all proceedings and records of the City
relating to the Bonds, and such other affidavits and certificates as may be required to show the
facts relating to the legality of the Bonds as such facts appear from the books and records in the
officers' custody and control or as otherwise known to them; and all such certified copies,
certificates and affidavits, including any heretofore furnished, shall constitute representations of
the City as to the truth of all statements contained therein.
6. Continuing Disclosure. The City is the sole obligated person with respect to the
Bonds. The City hereby agrees, in accordance with the provisions of Rule 15c2-12 (the "Rule"),
promulgated by the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended, and a Continuing Disclosure Undertaking (the
"Undertaking") hereinafter described to:
(a) Provide or cause to be provided to the Municipal Securities Rulemaking Board
(the "MSRB") by filing at www.emma.msrb.org in accordance with the Rule, certain annual
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financial information and operating data in accordance with the Undertaking. The City reserves
the right to modify from time to time the terms of the Undertaking as provided therein.
(b) Provide or cause to be provided to the MSRB notice of the occurrence of certain
events with respect to the Bonds in not more than ten (10) business days after the occurrence of
the event, in accordance with the Undertaking.
(c) Provide or cause to be provided to the MSRB notice of a failure by the City to
provide the annual financial information with respect to the City described in the Undertaking, in
not more than ten (10) business days following such occurrence.
(d) The City agrees that its covenants pursuant to the Rule set forth in this paragraph
and in the Undertaking is intended to be for the benefit of the Holders of the Bonds and shall be
enforceable on behalf of such Holders; provided that the right to enforce the provisions of these
covenants shall be limited to a right to obtain specific enforcement of the City's obligations under
the covenants.
The Mayor and City Administrator of the City, or any other officer of the City authorized
to act in their place (the "Officers") are hereby authorized and directed to execute on behalf of
the City the Undertaking in substantially the form presented to the City Council subject to such
modifications thereof or additions thereto as are (i) consistent with the requirements under the
Rule, (ii) required by the Purchaser of the Bonds, and (iii) acceptable to the Officers.
7. Modifications to Documents. The approval hereby given to the various Bond
Documents and Related Documents referred to above includes approval of such additional
details therein as may be necessary and appropriate and such modifications thereof, deletions
therefrom and additions thereto as may be necessary and appropriate and approved by the City
Attorney and the City officials authorized herein to execute said documents. Said City officials
are hereby authorized to approve said changes on behalf of the City. The execution of any
instrument by the appropriate officer or officers of the City herein authorized shall be conclusive
evidence of the approval of such documents in accordance with the terms hereof. In the absence
of the Mayor or City Administrator, any of the documents authorized by this resolution to be
executed on behalf of the City may be executed by the Acting Mayor or the Acting City
Administrator, respectively.
8. Severability. If any section, paragraph or provision of this resolution shall be held
to be invalid or unenforceable for any reason, the invalidity or unenforceability of such section,
paragraph or provision shall not affect any of the remaining provisions of this resolution.
9. Headings. Headings in this resolution are included for convenience of reference
only and are not a part hereof, and shall not limit or define the meaning of any provision hereof.
The motion for the adoption of the foregoing resolution was duly seconded by member
________________, and upon vote being taken thereon the following voted in favor thereof:
and the following voted against the same:
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whereupon the resolution was declared duly passed and adopted.
Adopted by the City Council of the City of Otsego, Wright County, Minnesota, on
December 9, 2024.
_______________________________________
Mayor
Attest:___________________
City Administrator
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STATE OF MINNESOTA )
COUNTY OF WRIGHT ) SS
CITY OF OTSEGO )
I, the undersigned, being the duly qualified and acting Administrator of the City of
Otsego, Minnesota, hereby certify that I have carefully compared and attached the foregoing
extract of minutes of a regular meeting of the City Council held in December 9, 2024, with the
original thereof on file and of record in my office and the same is a full, true and complete
transcript therefrom insofar as the same relates to the execution of a Ground Lease Agreement, a
Lease Agreement, and a Continuing Disclosure Undertaking.
WITNESS my hand on December 9, 2024.
_______________________________________
City Administrator
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This Ground Lease was recorded with the Wright County Recorder's Office on ________, 2024,
as document number _________.
GROUND LEASE AGREEMENT
Between
CITY OF OTSEGO, MINNESOTA
As Lessor
and
OTSEGO ECONOMIC DEVELOPMENT AUTHORITY
As Lessee
Dated as of December 30, 2024
This Instrument Drafted By:
Taft Stettinius & Hollister LLP (MLI)
2200 IDS Center
80 South 8th Street
Minneapolis, Minnesota 55402
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TABLE OF CONTENTS
Page
-i-
ARTICLE I DEMISE OF LAND AND WARRANTIES........................................ 1
Section 1.01 Demise ..................................................................................... 2
Section 1.02 Warranties ................................................................................ 2
Section 1.03 Lessee's Warranties .................................................................. 3
ARTICLE II TERM AND RENT ............................................................................. 3
Section 2.01 Term ......................................................................................... 3
Section 2.02 Rent .......................................................................................... 3
Section 2.03 Lease ........................................................................................ 3
Section 2.04 Termination Events .................................................................. 3
Section 2.05 Use of Sublease and/or Lease Rentals ..................................... 5
Section 2.06 Reports .................................................................................... 5
Section 2.07 Surrender of Project ................................................................. 5
Section 2.08 Return of Project Subject to Sublease or Lease ....................... 6
ARTICLE III USE OF PREMISES; ADDITIONAL COVENANTS ....................... 6
Section 3.01 Use ........................................................................................... 6
Section 3.02 Quiet Enjoyment ...................................................................... 6
Section 3.03 Assignment and Subletting ...................................................... 6
Section 3.04 Additional Covenants............................................................... 6
Section 3.05 Covenants Regarding Hazardous Substances .......................... 7
Section 3.06 Environmental Matters............................................................. 7
Section 3.07 Release of Land........................................................................ 7
ARTICLE IV LESSEE'S DEFAULT; REMEDIES ................................................... 7
Section 4.01 Lessee's Default ....................................................................... 7
Section 4.02 Lessor's Remedies .................................................................... 7
ARTICLE V BINDING EFFECT; SUCCESSORS AND ASSIGNS ....................... 7
Section 5.01 Binding Effect .......................................................................... 7
Section 5.02 Applicable Law ........................................................................ 7
EXHIBIT A - LEGAL DESCRIPTION OF LAND ...................................................... A-1
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THIS GROUND LEASE AGREEMENT, made and entered into as of December 30,
2024 (the "Ground Lease"), by and between CITY OF OTSEGO, MINNESOTA, a municipal
corporation and political subdivision of the State of Minnesota, as Lessor (the “Lessor” or the
“City”) and the OTSEGO ECONOMIC DEVELOPMENT AUTHORITY, a public body
corporate and politic duly organized and existing under the laws of the State of Minnesota, as
Lessee (the “Lessee” or the “EDA”).
W I T N E S S E T H:
WHEREAS, the Lessor owns the real property legally described in Exhibit A, located in
City (the “Land”);
WHEREAS, the Lessor proposes to lease the Land to the Lessee pursuant to this Ground
Lease;
WHEREAS, pursuant to a Lease Agreement dated as of the date hereof, between Lessor
and the Lessee (the “Lease”), the Lessor will sublease the Land from the Lessee and lease certain
improvements constructed thereon (as further described in the Lease, the “Improvements,” and
together with the Land, the “Project”) from the Lessee, with an option to purchase; and
WHEREAS, pursuant to a Indenture of Trust dated as of the date hereof (the
“Indenture”), between the Lessee and U.S. Bank Trust Company, National Association (the
“Trustee”), the Trustee has agreed to hold in trust for the benefit of the bondholders of the
$20,325,000 Lease Revenue Bonds, Series 2024A (City of Otsego, Minnesota Lease with Option
to Purchase Project), dated December 30, 2024 (the "Series 2024A Bonds", or the "Bonds"),
therein authorized to be issued, among other things, all of its right, title and interest in and to the
Rental Payments (as defined in the Lease) and other amounts due under the Lease, this Ground
Lease, and the Project.
WHEREAS, pursuant to the Indenture, the Lessee has assigned all of the rights, title and
interests and privileges of the Lessee in, to and under (i) the Lease except for the rights of the
Lessee under Sections 5.3(c), 6.5, 12.5 and 12.6 of the Lease and (ii) this Ground Lease, to the
Trustee;
NOW, THEREFORE, in the joint and mutual exercise of their powers, and in
consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEMISE OF LAND AND WARRANTIES
Section 1.01 Demise. Subject to and upon the terms, conditions, covenants and
undertakings hereinafter set forth, Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, Lessor's interest in the Land for a term commencing on the date on which this Ground
Lease is executed and ending on February 1, 2061 (the “Expected Termination Date”), unless the
term of this Ground Lease is terminated earlier in accordance with provisions of Section 4.1.
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Section 1.02 Warranties. Lessor covenants and warrants to Lessee:
(a) That Lessor has authority to enter into, execute and deliver this Ground Lease,
and has duly authorized the execution and delivery of this Ground Lease;
(b) The Lessor is authorized under the Constitution and laws of the State to acquire,
construct, operate and maintain the Improvements and lease the Land to the
Lessee;
(c) The execution and delivery of this Ground Lease, the consummation of the
transactions contemplated hereby, and the performance of or compliance with the
terms and conditions of this Ground Lease by the Lessor will not conflict with or
result in a breach of any of the terms, conditions or provisions of, or constitute a
default under, any mortgage, deed of trust, lease or any other restriction or any
agreement or instrument to which the Lessor is a party or by which it or any of its
property is bound, or any order, rule or regulation applicable to the Lessor or any
of its property, of any court or governmental body, or result in the creation or
imposition of any prohibited lien, charge or encumbrance of any nature
whatsoever upon any of the property or assets of the Lessor under the terms of
any instrument or agreement to which the Lessor is a party;
(d) The Lessor has good and marketable title to the Land, subject only to Permitted
Encumbrances (as defined in the Lease);
(e) That Lessor has determined that the Land can best be made suitable and
convenient for public purposes through Lessor's entering into this Ground Lease
and the Lease, and the completion of the transactions contemplated thereby;
(f) That the Land 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 the Improvements on the
Land, as contemplated by the Lease.
(g) That all taxes, assessments or impositions of any kind with respect to the Land,
except current taxes, have been paid in full;
(h) That the Land is properly zoned for the purpose of the Improvements and
complies with all presently applicable health, environmental and safety
ordinances and laws and all other applicable laws, rules and regulations;
(i) Except as disclosed in the Official Statement (as defined in the Indenture), to the
best of the knowledge of the Lessor, (i) no Hazardous Materials (as defined in the
Lease) have been generated, treated, stored, transferred from, released or disposed
of, or otherwise placed, deposited in or located on the Land, (ii) the Land is not
now, and never has been, used as a landfill, dump or other disposal, storage,
transfer or handling area for Hazardous Materials for industrial, military or
manufacturing purposes, or as a gasoline service station or a facility for selling,
dispensing, storing, transferring or handling petroleum and/or petroleum products,
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(iii) no above ground or underground tanks have been located under, in or about
the Land and subsequently removed or filled, and (iv) to the extent storage tanks
currently exist on or under the Land, such storage tanks have been duly registered
with all appropriate regulatory and governmental bodies and otherwise are in
compliance with applicable federal, state and local statutes, regulations,
ordinances, and other regulatory requirements;
(j) Except as disclosed in the Official Statement, to the best of the knowledge of the
Lessor, the Land is not located in a flood hazard area and has never been subject
to material damage from flooding;
(k) The Lessor has not made, done, executed or suffered, and will not make, do,
execute or suffer, any act or thing whereby the Lessor’s interest in any property
now or hereafter included in the Project will be or may be impaired, changed or
encumbered in any manner whatsoever except as permitted by this Ground Lease
and the Lease; and
(l) That Lessor has authority to enter into, execute and deliver the Lease, and has
duly authorized its execution and delivery.
Section 1.03 Lessee's Warranties. Lessee covenants and warrants to Lessor that Lessee
has authority to enter into, execute and deliver this Ground Lease and the Lease, and has duly
authorized the execution and delivery of this Ground Lease and the Lease and the assignment of
all of its rights, title and interest in and under this Ground Lease and the Lease to the Trustee.
ARTICLE II
TERM AND RENT
Section 2.01 Term. The term of this Ground Lease shall commence as of the day and
year first above written, and shall end on the Expected Termination Date, subject to earlier
termination as provided in this Ground Lease and the Lease.
Section 2.02 Rent. The rent shall be One Dollar ($1.00) payable in advance on the date
hereof.
Section 2.03 Lease. In further consideration of the authorization, execution and
delivery of this Ground Lease by each of the parties, the parties have entered into the Lease and
have agreed to carry out and perform their obligations thereunder.
Section 2.04 Termination Events. Subject to the other provisions of this Ground Lease,
this Ground Lease will terminate prior to the Expected Termination Date, upon the occurrence of
any one of the following events:
(a) payment or prepayment by the City of all Rental Payments (as defined in the
Lease) or discharge of the obligation to make Rental Payments and other amounts
owing to the EDA under the Lease; or
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(b) termination of the Lease by the City by Non-appropriation (as defined in the
Lease), and the receipt by the Trustee of amounts from the sublease and/or lease
of the Trustee’s leasehold interest in the Land and its interest in the Improvements
sufficient to:
i. reimburse the Trustee for all administrative costs, fees, and expenses,
including reasonable attorneys’ fees, incurred by the Trustee as a result
of the termination of the Lease and the exercise of the Trustee’s
remedies thereunder;
ii. reimburse the Trustee for all capital costs and expenses in any manner
incurred by the Trustee with respect to the Project reasonably necessary
in order to render the Project suitable for sublease and/or lease for
commercial or other lawful purpose; and
iii. pay to the Trustee an amount which will equal the outstanding principal
amount unpaid under the Lease as of the last day of the fiscal year of the
City for which the Lease last remains in effect; or
(c) termination of the Lease by the Trustee upon the occurrence of an event of default
by the EDA thereunder, and the receipt by the Trustee of amounts from the
sublease and/or lease of the Trustee’s leasehold interest in the Land and interest in
the Improvements sufficient to:
i. reimburse the Trustee for all administrative costs, fees, and expenses,
including reasonable attorneys’ fees, incurred by the Trustee as a result of
the event of default and termination of the Lease and the exercise of the
Trustee’s remedies thereunder;
ii. reimburse the Trustee for all capital costs and expenses in any manner
incurred by the Trustee with respect to the Project reasonably necessary
in order to render the Project suitable for sublease and/or lease for
commercial or other lawful purposes;
iii. pay to the Trustee an amount which will equal the outstanding principal
amount under the Lease applicable on the last day of the fiscal year of the
Lessee in effect when the event of default occurs; and
pay to the Trustee an amount which will equal all Rental Payments due under the Lease
through the end of the fiscal year of the Lessee in effect when the event of default
occurred and which remain unpaid by the Lessee, as well as any other amounts owing
under the Lease and unpaid by the Lessee as of the end of such fiscal year.
Section 2.05 Use of Sublease and/or Lease Rentals. The amounts referred to in Section
2.04, paragraph (b) and (c), respectively, shall be known as the “Reimbursement Amount.” The
Reimbursement Amount will be recovered by allowing the Trustee first to retain from any
sublease and/or lease rentals an amount equal to 5% thereof to allow for ongoing administrative
costs and thereafter, the Trustee will be entitled to interest on the outstanding Reimbursement
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Amount at the rates per annum then applicable to the Lease. Any amounts of sublease rentals
distributed to Trustee after payment of administrative costs and interest shall be credited to the
payment of the Reimbursement Amount.
Use of the Improvements by Trustee or any subsidiary or affiliate of Trustee, other than
for the purpose of assuming control, making necessary changes in the Project, and the initial
sublease and/or lease thereof, will be treated as the sublease and/or lease thereof on a monthly
basis at the then-prevailing fair market value. In the event the Lease is terminated by the City by
Non-appropriation, or by the Trustee upon the occurrence of an event of default by the City
thereunder, the City may subsequently pay the Reimbursement Amount.
Section 2.06 Reports. In the event the Lease is terminated by City by Non-
appropriation or the Trustee upon the occurrence of an event of default by the City thereunder,
the Trustee shall keep complete and accurate records regarding any sublease and/or lease of the
Project and shall, within 60 days of the end of the fiscal year of the City (currently [December
31]), deliver a written report to the City showing:
(a) all amounts received by Trustee from any sublease and/or lease of the Project;
(b) an accounting statement as to whether Trustee has received the Reimbursement
Amount, with all supporting calculations; and
(c) the date, if any, in the next fiscal year of the City on which Trustee expects to
receive the Reimbursement Amount.
Such written report must be verified, at the expense of the City in the event the Lease is
terminated by the Trustee, by a certified public accountant or firm of certified public accountants
not within the regular employ of the Trustee. In the event that on the last day of any fiscal year
of the City the Trustee has received the Reimbursement Amount, then all rentals with respect to
any sublease and/or lease of the Project payable after the close of such fiscal year, as well as any
rentals payable during such fiscal year in excess of the amounts Trustee is entitled to receive
pursuant to Section 4.2, shall be the property of the City. The City may, at its own expense,
upon reasonable notice and at Trustee’s offices during normal business hours, examine Trustee’s
records in so far as they relate to the Project.
Section 2.07 Surrender of Project. The Trustee agrees that upon the termination of this
Ground Lease it will surrender the Project to the City free and clear of all liens and
encumbrances created by or arising under Trustee or any assignee of Trustee, except Permitted
Encumbrances; provided, however, that in the event that the Project is subject to the rights of any
sublessee and/or lessee of the Trustee granted under any sublease and/or lease entered into in
accordance with the terms of this Ground Lease after the termination of the Lease by the City
Non-Appropriation or by the Trustee upon the occurrence of an event of default by the City
thereunder, the Trustee agrees to assign and set over to the City the Trustee’s entire interest in
the Project granted under this Ground Lease, subject only to Permitted Encumbrances and the
rights of such sublessees and/or lessees under any such subleases or leases. The Trustee’s costs
of such assigning and setting over will be included in the Reimbursement Amount.
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Section 2.08 Return of Project Subject to Sublease or Lease. In the event the
Reimbursement Amount is received by Trustee in full, and Trustee’s interest in the Project has
been subleased and/or leased to any sublessee and/or lessee, as the case may be, pursuant to any
subleases and/or leases that are still in effect, this Ground Lease shall not terminate but the
Trustee shall assign and set over to the City all of Trustee’s interests in the Project granted under
the Ground Lease, subject to all existing rights created in such sublessees and/or lessees of the
Project by any such subleases and/or leases.
ARTICLE III
USE OF PREMISES; ADDITIONAL COVENANTS
Section 3.01 Use. Except in the event the Lease is terminated by the City by Non-
appropriation or by the EDA upon the occurrence of an event of default by the City thereunder,
in which case the Trustee may possess and use the Project in accordance with the provisions of
the Lease and the Indenture, the Trustee shall use the Land solely for the purpose of subleasing it
to the City pursuant to the Lease and for the acquisition, construction and operation of the
Project, and the leasing of the Improvements to the City. The Lessee shall not use or permit the
use of the Land for any unlawful purpose.
Section 3.02 Quiet Enjoyment. Lessor covenants that upon Lessee's paying the rent
reserved herein, and performing all conditions and covenants set forth in this Ground Lease and
the Lease, Lessee shall and may peaceably have, hold and enjoy the Land for the term of this
Ground Lease. Lessee covenants that upon expiration of this Ground Lease, either on the date
specified in Section 2.01 or earlier pursuant to the terms of the Lease, it shall give Lessor
peaceable possession of the Land, together with the Improvements constructed thereon pursuant
to the Lease.
Section 3.03 Assignment and Subletting. Lessee shall have the right to assign or
mortgage its interest in this Ground Lease and Land, and to sublet the Land in accordance with
the Lease. If the Lease is terminated by the City by Non-appropriation or by the EDA upon the
occurrence of an event of default by the City thereunder, the Trustee may assign its interests in
this Ground Lease and may use, sublease and/or lease the Project without the consent of the City.
Section 3.04 Additional Covenants. In the event that any person or entity, however
organized (other than Lessee or any assignee of Lessee), shall be determined to hold any interest
that in any manner affects Lessor's good and merchantable title to the Land, Lessor shall use its
best efforts to acquire the interest in the Land so held, such acquisition to be made at Lessor's
sole cost and expense. Lessor hereby agrees to save and keep harmless Lessee, or any assignee
of Lessee, from and against any and all liabilities, obligations, losses, damages, penalties, claims,
actions, costs and expenses (including reasonable attorneys' fees) of whatever kind and nature,
imposed on, incurred by or asserted against Lessee, or any assignee of Lessee, that in any way
relate to or arise out of the assertion of any interest affecting Lessor's good and merchantable title
to the Land by any person or entity, however organized (other than Lessee or any assignee of
Lessee).
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7
Section 3.05 Covenants Regarding Hazardous Substances. The Lessor shall comply
with its covenants regarding Hazardous Substances in the Lease and the provisions of the Lease
containing such covenants are hereby incorporated into this Ground Lease by reference as if the
same were fully set forth herein. The Lessor’s obligations and liabilities under this Section shall
survive the termination of this Ground Lease and any resignation or removal of the Trustee under
the Indenture.
Section 3.06 Environmental Matters. Lessor will hold Lessee, Trustee and their
officers, employees, agents, directors, successors and assigns harmless from and indemnify and
defend Lessee, Trustee and their officers, employees, agents, directors, successors and assigns
against any claims brought by any party involving any environmental condition of the Land. The
term "claim" shall include remediation costs, damage costs, fines, penalties, forfeitures,
administrative costs, consent agreements and orders, attorneys' fees, consultant fees and
laboratory fees.
Section 3.07 Release of Land. Lessee shall have the right to release Land from this
Ground Lease as provided in Section 8.7 of the Lease.
ARTICLE IV
LESSEE'S DEFAULT; REMEDIES
Section 4.01 Lessee's Default. The following shall be an "event of default" or a
"default" hereunder: if Lessee shall fail to (i) pay the rent provided herein, or (ii) observe or
perform any of the obligations of Lessee otherwise provided herein.
Section 4.02 Lessor's Remedies. Upon the occurrence of an event of default by Lessee
hereunder, which shall remain uncured for thirty days after receipt by Lessor of written notice of
such event of default, Lessor may thereafter or any time subsequently during the existence of
such breach or default; (i) enter into and upon the Land and repossess the same, expelling and
removing therefrom all persons and property, and (ii) terminate this Ground Lease.
ARTICLE V
BINDING EFFECT; SUCCESSORS AND ASSIGNS
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 Applicable Law. This Ground Lease shall be interpreted and enforced in
accordance with the laws of the State of Minnesota.
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8
IN WITNESS WHEREOF, the parties hereto have executed this Ground Lease
Agreement as of the date first above written.
CITY OF OTSEGO, MINNESOTA, Lessor
By ____________________________________
Its Mayor
By ____________________________________
Its City Administrator
STATE OF MINNESOTA )
) ss.
COUNTY OF WRIGHT )
The foregoing instrument was acknowledged before me on ______________, 2024, by
_____________________ and _________________________, the Mayor and City
Administrator respectively, of the City of Otsego, Minnesota, a municipal corporation and
political subdivision of the State of Minnesota, on behalf of said City.
__________________________
Notary Public
Signature and notary page to Ground Lease Agreement.
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9
OTSEGO ECONOMIC DEVELOPMENT
AUTHORITY
Lessee
By ____________________________________
Its President
By ____________________________________
Its Executive Director
STATE OF MINNESOTA )
) ss.
COUNTY OF WRIGHT )
The foregoing instrument was acknowledged before me on ____________, 2024, by
______________________and ________________, the President and the Executive Director,
respectively, of the Otsego Economic Development Authority, a public body corporate and
politic of the State of Minnesota, on behalf of said Authority.
_______________________________________
Notary Public
Signature and notary page to Ground Lease Agreement.
135220500v1
A-1
EXHIBIT A
Legal Description of Land
The real property located in the City of Otsego, Wright County, Minnesota with the following
legal description:
Outlot D, Ashwood, Wright County, Minnesota, according to the recorded plat thereof.
135220496v4
LEASE AGREEMENT
BETWEEN
OTSEGO ECONOMIC DEVELOPMENT AUTHORITY
as Landlord
and
CITY OF OTSEGO, MINNESOTA
as Tenant
Dated as of December 30, 2024
This Instrument Drafted By:
Taft Stettinius & Hollister LLP (MLI)
2200 IDS Center
80 South 8th Street
Minneapolis, Minnesota 55402
135220496v4
Table of Contents
i
ARTICLE I DEFINITIONS AND EXHIBITS .................................................................... 2
Section 1.1. Definitions............................................................................................ 2
Section 1.2. Exhibits ................................................................................................ 6
ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES ..................... 7
Section 2.1. Representations, Covenants and Warranties of Tenant ....................... 7
Section 2.2. Representations, Covenants and Warranties of Landlord .................... 8
ARTICLE III ACQUISITION AND CONSTRUCTION OF PROJECT ............................ 10
Section 3.1. Agreement to Construct the Project ................................................... 10
Section 3.2. Agreement to Issue Bonds; Application of Bond Proceeds;
Tenant Contribution ........................................................................... 10
Section 3.3. Disbursements from the Construction Fund ...................................... 10
Section 3.4. Obligation of the Parties to Cooperate in Furnishing
Documents to Trustee ........................................................................ 12
Section 3.5. Establishment of Completion Date .................................................... 12
Section 3.6. Tenant Required to Pay Project Costs in Event Construction
Fund Insufficient ................................................................................ 12
Section 3.7. Remedies to be Pursued Against Contractors and
Subcontractors and Their Sureties ..................................................... 13
Section 3.8. Investment of Construction Fund Permitted ...................................... 13
Section 3.9. Liens and Encumbrances ................................................................... 13
Section 3.10. Tenant’s Liability ............................................................................... 13
ARTICLE IV TERM OF LEASE ......................................................................................... 15
Section 4.1. Lease Term......................................................................................... 15
Section 4.2. Possession and Enjoyment ................................................................. 15
Section 4.3. Termination by Tenant; Effect of Non-Appropriation....................... 15
Section 4.4. Intent to Continue Lease Term; Appropriations and Property
Taxes .................................................................................................. 15
Section 4.5. Effect of Termination ......................................................................... 15
Section 4.6. Termination of Lease Term ............................................................... 16
ARTICLE V RENTAL PAYMENTS ................................................................................. 17
Section 5.1. Rental Payments................................................................................. 17
Section 5.2. Place of Payment of Rental Payments ............................................... 17
Section 5.3. Additional Rental Payments .............................................................. 17
Section 5.4. Rental Payments to be Unconditional ................................................ 18
Section 5.5. Current Expense ................................................................................. 18
ARTICLE VI INSURANCE AND INDEMNIFICATION .................................................. 20
Section 6.1. Liability Insurance ............................................................................. 20
Section 6.2. Property Insurance ............................................................................. 20
Section 6.3. Worker's Compensation Insurance .................................................... 20
Section 6.4. Requirements For All Insurance ........................................................ 20
Section 6.5. Indemnification; Hazardous Substance .............................................. 21
Section 6.6. Damage to or Destruction or Condemnation of Project ..................... 22
ARTICLE VII OTHER OBLIGATIONS OF TENANT ....................................................... 23
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ii
Section 7.1. Use; Permits ....................................................................................... 23
Section 7.2. Maintenance of Project by Tenant ..................................................... 23
Section 7.3. Taxes, Other Governmental Charges and Utility Charges................. 23
Section 7.4. Advances ............................................................................................ 23
Section 7.5. Landlord Access to Project ................................................................ 24
Section 7.6. Transfer of Functions ......................................................................... 24
ARTICLE VIII TITLE ............................................................................................................ 25
Section 8.1. Title .................................................................................................... 25
Section 8.2. Security Interest ................................................................................. 25
Section 8.3. Liens ................................................................................................... 25
Section 8.4. Installation of Tenant's Equipment .................................................... 25
Section 8.5. Modification of Project ...................................................................... 26
Section 8.6. Easements and Utility Access ............................................................ 26
Section 8.7. Release of Unimproved Land ............................................................ 27
Section 8.8. Covenant For the Benefit of the Bondholders ................................... 27
ARTICLE IX PROJECT WARRANTIES ........................................................................... 28
Section 9.1. Selection of Project ............................................................................ 28
Section 9.2. Construction and Maintenance of Project .......................................... 28
Section 9.3. Contractors' Warranties ...................................................................... 28
Section 9.4. Disclaimer of Warranties ................................................................... 28
ARTICLE X PREPAYMENT ............................................................................................. 29
Section 10.1. Option to Prepay in Whole or in Part ................................................. 29
Section 10.2. Prepayment Upon Event of Damage or Destruction of Project ......... 29
Section 10.3. Exercise of Purchase Option .............................................................. 29
Section 10.4. Release of Landlord's Interest ............................................................ 29
Section 10.5. Defeasance ......................................................................................... 29
Section 10.6. Partial Prepayment or Defeasance ..................................................... 30
Section 10.7. Exercise of Partial Prepayment or Defeasance Option ...................... 30
Section 10.8. Credit for Partial Prepayment or Defeasance ..................................... 30
ARTICLE XI ASSIGNMENT, SUBLEASING, MORTGAGING AND SELLING .......... 31
Section 11.1. Assignment by Landlord .................................................................... 31
Section 11.2. Assignment and Subleasing by Tenant .............................................. 31
Section 11.3. Restriction on Mortgage or Sale of Project by Tenant ...................... 31
ARTICLE XII EVENTS OF DEFAULT AND REMEDIES ................................................ 32
Section 12.1. Events of Default Defined ................................................................. 32
Section 12.2. Remedies on Default .......................................................................... 33
Section 12.3. Return of Project ................................................................................ 34
Section 12.4. No Remedy Exclusive........................................................................ 34
Section 12.5. Agreement to Pay Attorneys' Fees and Expenses .............................. 34
Section 12.6. Late Charge ........................................................................................ 34
Section 12.7. Effect of Waiver ................................................................................. 34
ARTICLE XIII ADMINISTRATIVE PROVISIONS ............................................................. 35
Section 13.1. Notices ............................................................................................... 35
Section 13.2. Financial Information......................................................................... 35
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iii
Section 13.3. Binding Effect .................................................................................... 35
Section 13.4. Severability ........................................................................................ 35
Section 13.5. Amendments, Changes and Modifications ........................................ 35
Section 13.6. Captions ............................................................................................. 35
Section 13.7. Further Assurances and Corrective Instruments ................................ 35
Section 13.8. Execution In Counterparts ................................................................. 35
Section 13.9. Applicable Law .................................................................................. 35
EXHIBIT A DESCRIPTION OF LAND, PROJECT IMPROVEMENTS AND
PROJECT EQUIPMENT............................................................................. A-1
EXHIBIT B SCHEDULE OF RENTAL PAYMENTS ................................................... B-1
EXHIBIT C DRAW REQUEST CERTIFICATE ............................................................ C-1
135220496v4
THIS LEASE AGREEMENT (the "Lease") is dated as of December 30, 2024, and is
between the Otsego Economic Development Authority, a public body corporate and politic, as
Landlord (the "Landlord") and City of Otsego, Minnesota, a municipal corporation and political
subdivision of the State of Minnesota, as Tenant (the "Tenant").
WITNESSETH:
WHEREAS, the Tenant is authorized by law to lease real and personal property as are
needed to carry out its governmental functions; and
WHEREAS, Tenant has determined that it is necessary for it to lease from Landlord under
this Lease certain real and personal property (the "Project") for purposes of financing the Project;
and
WHEREAS, the Landlord is willing to finance the acquisition and betterment of the Project
and to lease, or (in the case of the Land) sublease, the Project to Tenant, and the Tenant is willing
to rent the same from Landlord, all pursuant to this Lease.
NOW, THEREFORE, in the joint and mutual exercise of their powers, and in consideration
of the mutual covenants herein contained, the parties hereto recite and agree as follows:
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2
ARTICLE I
DEFINITIONS AND EXHIBITS
Section 1.1. Definitions. Each term defined in the Indenture which is used but not
otherwise defined herein shall have the same meaning in this Lease as is prescribed for that term
in the Indenture. Unless the context otherwise clearly requires, the terms defined in this Section
shall, for all purposes of this Lease, have the meanings herein specified.
Act: Collectively, the Landlord Powers Act and the Tenant Powers Act, as amended from
time to time.
Additional Rental Payments: The same as defined in Section 5.3 hereof.
Bond Closing: The date the Bonds are issued and delivered to the original purchaser.
Bond Counsel: The firm of Taft Stettinius & Hollister LLP, in Minneapolis, Minnesota,
or any other attorney or firm of attorneys nationally recognized as experienced in matters relating
to the tax-exempt financing of projects within the City and acceptable to the Landlord and the
Tenant.
Bond Fund: The Bond Fund created pursuant to Section 5.02 of the Indenture.
Bond Resolution: The resolution adopted by the Landlord's Board of Commissioners, its
governing body, on December 9, 2024, authorizing issuance and sale of the Series 2024A Bonds,
as the same may be amended, modified or supplemented by any amendments or modifications
thereof.
Bonds: The Series 2024A Bonds.
Business Day: Any day other than a Saturday, Sunday, legal holiday or a day on which
banking institutions in the city in which the principal corporate office of the Trustee is located are
authorized by law or executive order to be closed.
City: The City of Otsego, Minnesota.
Code: The Internal Revenue Code of 1986, as amended and the regulations promulgated
thereunder.
Completion Date: The date described in Section 3.5, evidencing completion of the Project.
Construction Fund: The Construction Fund created pursuant to Section 4.02 of the
Indenture for the purpose of accounting for proceeds of the Bonds used to pay Project Costs.
Contractor: Any contractor from which Tenant has ordered or will order or with which
Tenant has contracted or will contract for the acquisition, construction and installation of any
portion of the Project.
135220496v4
3
County: County of Wright, Minnesota.
Date of Original Issuance: December 30, 2024.
Environmental Law: The Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. §9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
§6901 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. App. §1804 et seq., the
Federal Water Pollution Control Act, 33 U.S.C. §1251 et seq., the Clean Water Act, 33 U.S.C.
§1321 et seq. the Clean Air Act, 42 U.S.C. §7401 et seq., the Minnesota Environmental Response
and Liability Act, Minnesota Statutes, Chapter 115B, the Minnesota Petroleum Tank Release
Cleanup Act, Minnesota Statutes, Chapter 115C, and any other federal, state, county, municipal,
local or other statute, law, ordinance or regulation which may relate to or deal with human health
or the environment, all as may be from time to time amended.
Fiscal Year: The fiscal year of the Tenant, commencing January 1 of a given year and
extending through December 31 of the same year.
Governmental Unit: A "governmental unit" within the meaning of Section 141 of the Code.
Ground Lease: The Ground Lease Agreement, dated as of December 30, 2024, between
Tenant, as lessor and Landlord, as lessee, whereby Tenant leases the Land to Landlord.
Hazardous Substances: Asbestos, urea-formaldehyde, polychlorinated biphenyls
("PCBs"), nuclear fuel or material, chemical waste, radioactive material, explosives, known
carcinogens, petroleum products and by-products and other dangerous, toxic or hazardous
pollutants, contaminants, chemicals, materials or substances listed or identified in, or regulated by,
any Environmental Law.
Holder(s): The registered owner(s) of Bonds on the bond register maintained by the
Trustee pursuant to the Indenture.
Independent Counsel: An attorney duly admitted to the practice of law before the highest
court of the State who is not a full-time employee of Landlord or Tenant.
Independent Engineer: An engineer or engineering firm or an architect or architectural
firm qualified to practice the profession of engineering or architecture under the laws of the State
and who is not a full-time employee of Tenant or Landlord.
Indenture: The Indenture of Trust, dated as of December 30, 2024, between the Landlord
and U.S. Bank Trust Company, National Association, St. Paul, Minnesota, as initial Trustee
thereunder, pursuant to which the Series 2024A Bonds are issued.
Interest Payment Date: For the Series 2024A Bonds, each February 1 and August 1,
commencing August 1, 2025.
Land: The real property subleased to the Tenant under the Ground Lease and described in
Exhibit A hereto.
135220496v4
4
Landlord: Otsego Economic Development Authority, a public body corporate and politic
of the State, its successors and assigns.
Landlord Powers Act: Minnesota Statutes, Sections 469.090 through 469.1082, as
amended, and all powers granted to the Landlord therein.
Lease: This Lease Agreement and all amendments thereto.
Net Proceeds: Any property insurance proceeds or condemnation award paid with respect
to the Project, net of the expenses incurred in the collection thereof.
Non-appropriation: The failure of the governing body of Tenant to appropriate money for
any Fiscal Year of Tenant sufficient for the continued performance and discharge by the Tenant
of its obligations under this Lease (including Tenant's obligations to make Rental Payments
hereunder); provided, that such Non-appropriation shall only be deemed to exist and be effective
hereunder if declared in and evidenced by the passage of a resolution of the City Council of the
Tenant specifically stating Tenant will no longer appropriate any moneys to pay the Rental
Payments due under this Lease for a designated upcoming Fiscal Year and all subsequent Fiscal
Years.
Payment Date: Any date on which a Rental Payment is required to be paid as provided in
Section 5.1 and as shown on the attached Exhibit B.
Permitted Encumbrances: As of any particular time: (i) liens for taxes and assessments
not then delinquent, or which Tenant may, pursuant to provisions of Section 7.3, permit to remain
unpaid, (ii) this Lease, the Ground Lease, the Indenture and amendments hereto or thereto, (iii)
Landlord's interest in the Project, (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, and any such lien
which Tenant may, pursuant to Article VIII, permit to remain unpaid, (v) utility, access, and other
easements and rights-of-way, restrictions, and exceptions affecting the Land existing as of the date
hereof, (vi) such minor defects, irregularities, encumbrances, easements, rights-of-way, and clouds
on title as normally exist with respect to property similar in character to the Land and as do not in
the aggregate materially impair the property affected thereby for the purposes for which it was
acquired, and (vii) building, zoning, and subdivision laws.
Plans and Specifications: The plans and specifications for the Project as in existence on
the date of issuance of the Bonds and approved by the Tenant, together with any additions thereto
or modifications thereof approved by all such parties.
Principal Payment Date: For the Series 2024A Bonds, each February 1, commencing
February 1, 2027.
Project: The Project Improvements, the Project Equipment and the Land which are being
leased or, as to the Land, subleased to the Tenant pursuant to this Lease and which are more fully
described in the attached Exhibit A.
Project Costs or Cost of the Project or Cost: All costs of purchase, construction and
installation of the Project including the following:
135220496v4
5
(a) fees and expenses of surveyors and engineers for estimates, surveys, soil borings,
environmental reports, and soil tests and other preliminary investigations and items necessary for
the commencement of construction, preparation of plans, drawings and specifications and
supervision of construction, as well as for the performance of all other duties of surveyors and
engineers in relation to the acquisition, construction, furnishing or equipping of the Project or the
making of this Lease;
(b) all costs and expenses of every nature incurred in constructing and furnishing the
Project Improvements and purchasing and installing the Project Equipment, including the actual
cost of labor, materials, machinery, furnishings and equipment as may be payable to contractors,
builders and materialmen in connection with the construction, furnishing and equipping the
Project;
(c) the cost of any insurance and performance and payment bonds maintained during
the construction of the Project;
(d) expenses of administration, supervision and inspection properly chargeable to the
Project; underwriting expenses, legal fees and expenses, fees and expenses of accountants and
other consultants, publication and printing expenses and other fees and expenses which are
necessary or incidental and to the making of this Lease and the issuance of the Bonds or to the
acquisition, purchase, construction, installation, furnishing and equipping of the Project;
(e) all other items of expenses not elsewhere specified in this definition as may be
necessary or incident to: (i) the making of the Ground Lease and this Lease; (ii) the construction,
installation, equipping and furnishing of the Project; and (iii) the financing thereof;
(f) reimbursement to Tenant or Landlord or those acting for it for any of the above-
enumerated costs and expenses incurred and paid by them before or after the execution of this
Lease (subject to the compliance, if applicable, with the "reimbursement regulations," being
Treasury Regulations, Section 1.150-2); and
(g) any other costs of the Project described in Section 3.3.
Project Equipment: All items of machinery, equipment, or other personal property
installed or acquired or to be acquired for installation in the Project Improvements or elsewhere
on the Land in accordance with the Plans and Specifications and paid for in whole or in part from
the proceeds of the Bonds, and all replacements thereof and substitutions therefor made pursuant
to Sections 6.6 or 8.5.
Project Improvements: The buildings, structures, improvements and fixtures located on or
to be purchased, constructed, renovated, bettered, enlarged and otherwise improved on the Land
in accordance with the Plans and Specifications, and all additions, alterations, modificati ons and
improvements thereof made pursuant to Sections 6.6 or 8.5, to be used by the Tenant as a fire and
emergency services facility.
Purchase Option Price: The price at which the Tenant may purchase the Project as set forth
in Article X.
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6
Rental Payment: The payment due from Tenant to Landlord on each Payment Date during
the Term of this Lease, as provided, for the Series 2024A Bonds, in Section 5.1 and shown on the
attached Exhibit B (assuming no prepayment or acceleration of the Series 2024A Bonds).
Series 2024A Bonds: The $18,420,000 Lease Revenue Bonds, Series 2024A (City of
Otsego, Minnesota Lease with Option to Purchase Project), dated the Date of Original Issuance.
State: The State of Minnesota.
State and Federal Law or Laws: The Constitution and any law of the State and any rule 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 federal agency.
Tenant: City of Otsego, a municipal corporation and political subdivision of the State of
Minnesota.
Tenant Powers Act: Minnesota Statutes, Section 465.71 and 469.041, as from time to time
amended.
Tenant Representative: The City Representative as defined in the Indenture.
Term or Lease Term: The period commencing as of December 30, 2024, and ending on
February 1, 2061, subject to earlier termination in accordance with the provisions of this Lease.
Trustee: The Trustee under the Indenture.
Section 1.2. Exhibits.
The following Exhibits are attached to and by reference made a part of this Lease:
Exhibit A: A description of the Land, Project Improvements and Project Equipment being
leased by Tenant pursuant to this Lease.
Exhibit B: A schedule indicating the date and scheduled amount of each Rental Payment
(respecting the Series 2024A Bonds) coming due during the Lease Term (assuming no optional
prepayment or acceleration).
Exhibit C: Form of Draw Request.
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7
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
Section 2.1. Representations, Covenants and Warranties of Tenant. Tenant represents,
covenants and warrants as follows:
(a) Tenant is a municipal corporation and a political subdivision duly organized and
existing under the Constitution and laws of the State.
(b) Tenant is authorized under the Constitution and laws of the State to execute and
deliver this Lease, to acquire, construct, operate and maintain the Project, and to perform all of its
obligations provided hereunder and contemplated hereby.
(c) The officers of Tenant executing this Lease have been duly authorized to execute
and deliver this Lease, under the terms and provisions of a resolution of Tenant's governing body,
or by other appropriate official action.
(d) In authorizing and executing this Lease, Tenant has complied with all open
meeting, public bidding and other State and Federal Laws applicable to this Lease and the Tenant
and any other laws relating to the indebtedness of the Tenant applicable to this Lease, the sublease
of the Land and lease of the Project and the acquisition, construction, operation and maintenance
of the Project.
(e) Tenant will not pledge, mortgage or assign this Lease, or its duties and obligations
hereunder to any other person, firm or corporation except as provided under the terms of this Lease.
(f) The Project is necessary to the Tenant in order for the Tenant to perform its
essential governmental functions and the Project will be used during the Term of this Lease only
to carry out the governmental purposes of Tenant.
(g) During the Term of this Lease, Tenant will not take any action (or suffer any action
to be taken or circumstance to exist which is within the power of Tenant to prevent) the effect of
which would be (1) to cause the interest on the Bonds to become subject to federal income taxation,
including, but not limited to, permitting any entity that is not a Governmental Unit to use, directly
or indirectly, any portion of the Project in a trade or business so as to impair the tax-exempt status
of the Bonds, all within the meaning of Section 141 of the Code, or (2) to cause the Bonds to be
"arbitrage bonds" within the meaning of Section 148 of the Code.
(h) The Project will comply with all applicable land use, environmental control,
building, subdivision, and zoning ordinances, codes and regulations, if any, and will be constructed
wholly within the boundaries of the Land. The Land is properly zoned for the purpose of the
Project. All taxes, assessments or impositions of any kind with respect to the Land (if any), except
current taxes (if any), have been paid in full.
(i) The Land 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 acquisition, construction, operation and maintenance of the Project on the Land..
135220496v4
8
(j) The Tenant has good and marketable title to the Land, subject only to Permitted
Encumbrances.
(k) The execution and delivery hereof, the compliance with the terms and conditions
hereof, and the consummation of the transactions contemplated hereby, do not and will not conflict
with or result in a breach of the terms, conditions, and provisions of any restriction or any
agreement or instrument to which the Tenant is now a party or by which the Tenant is bound, or
constitute a default under any of the foregoing.
(l) There is no litigation, action, suit or proceeding pending (or to the best of Tenant's
knowledge, threatened) before any court, administrative agency, arbitrator or governmental body
that challenges (1) the authority of Tenant or its officers or its employees to enter into this Lease
or the Ground Lease (2) the proper authorization, approval and/or execution of this Lease and other
documents contemplated hereby, (3) the ability of Tenant otherwise to perform its obligations
under this Lease or the Ground Lease and the transactions contemplated hereby, or (4) the issuance
of the Series 2024A Bonds by the Landlord.
(m) The Tenant has reviewed the Indenture respecting the Series 2024A Bonds and
hereby consents to the terms of the Indenture and agrees to be bound by and to discharge any
obligations specifically imposed upon the Tenant pursuant to the terms of the Indenture.
(n) The Tenant covenants, notwithstanding any termination of this Lease (whether
arising pursuant to an Event of Default, a Non-appropriation or otherwise), that it will use its best
efforts to assist the Landlord and/or the Trustee in re-leasing and/or selling the Project.
(o) The Project is a facility essential to the operations of the Tenant and the public
safety of the residents of the Tenant.
(p) The Tenant certifies that this Lease is a "triple net" lease that requires the Tenant to
pay all expenses, taxes, fees, insurance premiums, rebate payments, and costs associated with the
Project and this Lease without the right of offset.
(q) Except as disclosed in the Official Statement, no member of the governing body
of the Tenant or any other officer of the Tenant has any significant or conflicting interest, financial,
employment or otherwise, in the Tenant or the Project or in the transactions contemplated hereby.
(r) The Tenant does not rely on any warranty of the Landlord or the Trustee, either
express or implied, as to the title or condition of the Project or that it will be suitable to the Tenant’s
needs, and recognizes that the Landlord or the Trustee is not obligated to operate or maintain the
Project or to expend any funds thereon, and acknowledges the Landlord and the Trustee have made
no such warranty either express or implied.
(s) Except as disclosed in the Official Statement (as defined in the Trust Agreement),
to the best of the knowledge of the Tenant, (i) no Hazardous Substances have been generated,
treated, stored, transferred from, released or disposed of, or otherwise placed, deposited in or
located on the Land, (ii) the Land is not now, and never has been, used as a landfill, dump or other
disposal, storage, transfer or handling area for Hazardous Substances for industrial, military or
manufacturing purposes, or as a gasoline service station or a facility for selling, dispensing, storing,
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transferring or handling petroleum and/or petroleum products, (iii) no above ground or
underground tanks have been located under, in or about the Land and subsequently removed or
filled, and (iv) to the extent storage tanks currently exist on or under the Land, such storage tanks
have been duly registered with all appropriate regulatory and governmental bodies and otherwise
are in compliance with applicable federal, state and local statutes, regulations, ordinances, and
other regulatory requirements.
(t) Except as disclosed in the Official Statement, to the best of the knowledge of the
Tenant, the Land is not located in a flood hazard area and has never been subject to material
damage from flooding.
Section 2.2. Representations, Covenants and Warranties of Landlord. Landlord
represents, covenants and warrants as follows:
(a) Landlord is a public body corporate and politic and a political subdivision, duly
organized and existing under the laws of the State and has power to enter into this Lease and by
proper action has duly authorized the execution of this Lease.
(b) The Project constitutes an authorized economic development project under the Act.
(c) The governing body of Landlord has determined that the Project will promote the
public interest and welfare of the State of Minnesota and the City and the people thereof through
the provision of public facilities required for the purpose of providing various services to the City
residents.
(d) The acquisition and construction of the Project, the issuance and sale of the Series
2024A Bonds, the execution and delivery of this Lease and the performance of all covenants and
agreements of the Landlord contained in this Lease have been duly authorized by the Bond
Resolution.
(e) Landlord has not made, done, executed or suffered and warrants that it will not
make, do, execute or suffer any act or thing whereby its Landlord's interest in the Project shall or
may be impaired or changed or encumbered, except as provided in the Indenture.
(f) To finance the Cost of the Project, Landlord proposes to issue the Series 2024A
Bonds.
(g) There is no litigation pending or to the best of Landlord's knowledge threatened
against Landlord relating to the Indenture, the Bond Purchase Agreement, the Ground Lease, the
acquisition, equipping, installation, construction or financing of the Project or to the Series 2024A
Bonds or to this Lease or questioning the organization, powers or authority of Landlord to perform
its obligations hereunder.
(h) The execution and delivery of this Lease, the fulfillment of or compliance with the
terms and conditions hereof, and the consummation of the transactions contemplated hereby do
not conflict with or result in a breach of the terms, conditions or provisions of any restriction or
any agreement or instrument to which Landlord is now a party or by which Landlord is bound or
constitute a default under any of the foregoing, or result in the creation or imposition of any lien,
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charge or encumbrance whatsoever upon any of the property or assets of Landlord, or upon the
Project, except Permitted Encumbrances.
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ARTICLE III
ACQUISITION AND CONSTRUCTION OF PROJECT
Section 3.1. Agreement to Construct the Project. Subject to the provisions of Section
3.6, the Landlord hereby makes, constitutes and appoints the Tenant its agent for the purposes of
(1) constructing, equipping, bettering, installing and otherwise completing the Project, or causing
the same to occur, and, subject to the terms and conditions of this Lease, which terms and
conditions the Landlord determines to be necessary, desirable and proper, or (2) providing for and
making all decisions with respect to such construction, equipping, installation and completion of
the Project. The Tenant hereby agrees to act and do all things on behalf of the Landlord, to perform
all acts and agreements of the Landlord hereinabove described in this section and to bring any
actions or proceedings against any person which the Tenant might bring with respect thereto as
the Tenant shall deem proper; and the Tenant further agrees that it will, in accordance with the
requirements set forth in this article, cause the construction, equipping, installation and completion
of the Project to occur. The parties hereto agree that, as between the Landlord and the Tenant, the
Tenant shall have the sole right of possession and use of the Project for the purpose of causing the
construction, installation, completion, operation and maintenance of the Project.
Subject to the provisions in Section 12.2, this appointment of the Tenant as agent, and all
authority hereby conferred, are granted and conferred irrevocably in connection with the
construction, equipping, installation, operation and maintenance of the Pro ject which shall not be
terminated prior thereto by act of the Landlord or of the Tenant. The Tenant agrees that title to
Tenant's interest in any equipment, fixtures or other personal property financed by the Bonds which
are to be affixed to the Project to be acquired after issuance of Bonds shall pass to the Landlord at
the time such equipment, fixtures or other personal property is delivered to the Project. The
Landlord hereby assigns to the Tenant all warranties and guarantees of all contractors,
subcontractors, suppliers, architects and engineers for the furnishing of labor, materials or
equipment or supervision or design in connection with the Project Costs and any rights or causes
of action arising from or against any of the foregoing.
The Tenant agrees to cause the Project and all other facilities and equipment necessary in
connection therewith to be substantially acquired, constructed and installed on or before August 1,
2027.
Section 3.2. Agreement to Issue Bonds; Application of Bond Proceeds; City
Contribution.
(a) In order to provide funds for payment of Project Costs, the Landlord will issue
and deliver to the initial purchaser thereof the Series 2024A Bonds and the Landlord will deposit
the proceeds of the Series 2024A Bonds with the Trustee in the Bond Fund, and the Construction
Fund as provided in the Indenture.
(b) In order to provide funds for payment of Project Costs, the Tenant will $2,000,000
of funds with the Trustee in the Construction Fund, as provided in the Indenture.
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Section 3.3. Disbursements from the Construction Fund. The Landlord has, in the
Indenture, authorized and directed the Trustee to use the moneys in the Construction Fund to pay,
or to reimburse the Landlord or Tenant, as the case may be, for payments made, for the following
costs and for the following purposes:
(1) All Project Costs, including the costs of acquiring, constructing, and equipping the
Project, including costs of labor and materials and other charges from architects, engineers,
contractors, builders and material suppliers in connection with the design, planning, acquisition,
installation and construction of the Project, and including the reasonable expenses of any
employees of the Tenant performing any such functions (provided said employee costs are
properly chargeable as a capital cost of the Project);
(2) Interest accruing upon the Series 2024A Bonds prior to the Completion Date and
not covered by proceeds of the Series 2024A Bonds and earnings thereon deposited in the Bond
Fund, and any interest which has accrued for any interim financing obtained by the Tenant incident
to the acquisition, installation and construction of the Project before the Series 2024A Bonds are
delivered to the initial purchaser thereof;
(3) The cost of any indemnity and surety bonds obtained in connection with the Project,
the fees and expenses of the Trustee during construction, taxes and other municipal governmental
charges levied or assessed during construction upon the Project or any property acquired therefor,
and the premiums for insurance, if any, in connection with the Project during construction;
(4) The cost of acquisition and installation of equipment for completion or operation
of the Project;
(5) Fees and expenses of engineers and architects for surveys and estimates and other
preliminary investigations, preparation of plans and specifications, and supervising acquisition,
installation and construction, as well as for the performance of all other d uties of engineers and
architects, as are specifically required in relation to the acquisition, installation and construction
of the Project or the issuance of Bonds therefor;
(6) Expenses of administration, supervision and inspection properly chargeable to the
Project, any administrative fees of the Landlord, legal expenses and fees, fiscal consultant
expenses and fees, financing charges, cost of audits and of preparing, offering and issuing the
Bonds, and initial and transaction fees and any expenses of the Trustee, incident to the acquisition,
installation, construction and financing of the Project; and also
(7) Any other obligation or expense heretofore or hereafter incurred by the Landlord
or the Tenant in connection with the acquisition, installation, equipping and construction of the
Project.
All moneys in the Construction Fund (including moneys earned pursuant to the provisions
of Section 3.8) remaining after the Completion Date and payment in full of the items provided for
in the preceding subsections (1) to (7), inclusive, of this section, then due and payable, shall be
deposited in the Bond Fund, as provided in the Indenture, and credited against amounts of Rental
Payments due or to become due; provided that amounts approved by the Tenant Representative,
as to Project Costs, shall be retained by the Trustee in the Construction Fund, as directed in writing
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by the Tenant Representative, for payment of Project Costs not then due and payable but
reasonably foreseen.
Each of the payments referred to in this section shall be made only upon the written order
of the Tenant Representative as to the Project Costs; provided, that interest accruing on the Bonds
during construction may be paid without an order of the Tenant Representative.
Before any of the payments referred to in the preceding subsections of this section (other
than (2)) may be made, the Tenant Representative, as to the Project Costs, shall certify to the
Trustee with respect to each such payment by submitting the form of Draw Request attached hereto
as Exhibit C: (a) that none of the items for which the payment is proposed to be made has
theretofore been paid from the Construction Fund and (b) that each item for which the payment is
proposed to be made is or was necessary in connection with the Project and is or was a Project
Cost. In the case of any contract providing for the retention of a portion of the contract price, there
shall be paid from the Construction Fund only the net amount remaining after deduction of any
such portion.
Section 3.4. Obligation of the Parties to Cooperate in Furnishing Documents to Trustee.
The Landlord and the Tenant agree to cooperate in furnishing to the Trustee the documents referred
to in Section 3.3 that are required to effect payments out of the Construction Fund and to cause
such orders to be directed in writing by the Tenant Representative, and to the Trustee as may be
necessary to effect payments out of the Construction Fund in accordance with Section 3.3. Such
obligation is subject to any provision of this Lease or the Indenture requiring additional
documentation with respect to payments and shall not extend beyond the moneys in the
Construction Fund available for payment under the terms of the Indenture.
Section 3.5. Establishment of Completion Date. The Completion Date shall be
evidenced to the Trustee by a certificate signed by the Tenant Representative stating that
construction of the Project has been completed in accordance with the Plans and Specifications
and all labor, services, materials and supplies used in such construction, acquisition and installation
have been paid for.
Section 3.6. Tenant Required to Pay Project Costs in Event Construction Fund
Insufficient. In the event that, after the Series 2024A Bonds have been issued, the moneys in the
Construction Fund available for payment of the Project Costs should not be sufficient to pay all
costs required to complete the Project in accordance with the Plans and Specifications, the Tenant
agrees, for the benefit of the Landlord and the Holders of the Series 2024A Bonds, to complete the
Project and the Tenant shall pay the Costs thereof directly or by causing to be deposited in the
Construction Fund such amounts as are necessary and sufficient for payment of the balance of the
Project Costs, and to this end Tenant shall promptly perform its obligations. The Landlord does
not make any representation or warranty, either express or implied, that the moneys which will be
paid into the Construction Fund and which will be available for payment of the Project Costs will
be sufficient to pay all such Costs. The Tenant agrees that if after exhaustion of the moneys of the
Construction Fund the Tenant should pay any portion of the Project Costs pursuant to the
provisions of this Section, Tenant shall not be entitled to any reimbursement therefor from the
Landlord, the Trustee, or the Holders of any of the Series 2024A Bonds or be entitled to any
diminution in or postponement of the amounts payable under Section 5.1 or 5.3.
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Section 3.7. Remedies to be Pursued Against Contractors and Subcontractors and Their
Sureties. In the event of default of any Contractor or subcontractor under any contract made by it
in connection with the Project or in the event of breach of warranty with respect to any materials,
workmanship, or performance guaranty, the Tenant will promptly proceed, either separately or in
conjunction with others, to exhaust the remedies of the Tenant or the Landlord against the
Contractor or subcontractor so in default and against each such surety for the performance of such
contract. The Tenant agrees to advise the Landlord of the steps it intends to take in connection
with any such default. If the Tenant shall so notify the Landlord, the Tenant may, at its own
expense and in its own name or in the name of the Landlord, prosecute or defend any action or
proceedings or take any other action involving any such Contractor, subcontractor or surety which
the Tenant deems reasonably necessary, and in such event the Landlord hereby agrees to cooperate
fully with the Tenant and to take all action necessary to effect the substitution of the Tenant for
the Landlord in any such action or proceeding, but at the expense of the Tenant. Any amounts
recovered by way of damages, refunds, adjustments or otherwise in connection with the foregoing,
after deduction of expenses incurred in such recovery, prior to the Completion Date shall be paid
into the Construction Fund or, if recovered after the Completion Date and full disposition of the
Construction Fund in accordance with Section 3.3, shall be paid into the Bond Fund.
Section 3.8. Investment of Construction Fund Permitted. Any moneys held as a part of
the Construction Fund shall, at the written request of the Tenant Representative, be invested or
reinvested by the Trustee in Qualified Investments. The type, amount and maturity of such
investments shall be as specified by the Tenant Representative. The Trustee may make any and
all investments permitted under this section through or from its own bond department or any of its
affiliates. The Tenant covenants that the portion of the Construction Fund representing bond
proceeds shall be directed to be invested and deposited only for a temporary period pending the
need for expenditure to pay Project Costs, and it further covenants that said portion representing
bond proceeds shall not be directed to be invested or used in such manner that any of the Series
2024A Bonds would be "arbitrage bonds" for purposes of Section 148 of the Internal Revenue
Code and regulations thereunder. The Landlord and Tenant acknowledge that if the Tenant fail s
to provide written investment directions such amounts shall be held by the Trustee uninvested and
the Trustee is relying on any such written investment direction as to the suitability and legality of
such directed investment and its compliance with the requirements of Section 5.04 of the
Indenture.
The Landlord and Tenant acknowledge that regulations of the Comptroller of the Currency
grant the Landlord and Tenant the right to receive brokerage confirmations of the security
transactions as they occur. The Landlord and Tenant specifically waive such notification to the
extent permitted by law and will receive periodic cash transaction statements which will detail all
investment transactions.
Section 3.9. Liens and Encumbrances. The Tenant shall pay, before delinquency, all
costs for work done or caused to be done by the Tenant which could result in any lien or
encumbrance on the Project or any part thereof, shall keep the title to the Project and every part
thereof free and clear of any lien or encumbrance in respect of such work, and shall, to the extent
permitted by law, indemnify and hold harmless the Landlord against any claim, loss, costs, demand
and legal or other expense, whether in respect of any lien or otherwise, arising out of the supply
of materials, services or labor for such work. The Tenant shall immediately notify the Landlord
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of any lien, claim or lien or other action which affects the title to the Project or any part thereof,
and shall cause the same to be removed within five days (or such additional time as the Landlord
may permit in writing), failing which the Landlord may take such action as the Landlord deems
necessary to remove the same and the entire costs thereof shall be immediately due and payable
by the Tenant to the Landlord; provided, however, that the Tenant may in good faith contest any
mechanic's lien by appropriate proceedings if (i) the contest does not involve the imminent threat
of forfeiture, sale or disturbance of the Project or any part thereof and (ii) the Tenant provides such
security as the Landlord or the Trustee, or both may reasonably request. The Landlord shall not,
without Tenant's prior written consent, which consent may be withheld in the Tenant's absolute
discretion, encumber its interest in the Project or any part thereof except as provided in the
Indenture.
Section 3.10. Tenant’s Liability. As between Tenant, the Landlord and the Trustee, the
Tenant assumes liability for all risk of loss during the acquisition, construction, installation and
operation of the Improvements. The Tenant shall require that each Contractor maintain in force
during the entire acquisition, construction and installation period of the Improvements, builder’s
risk or property damage insurance in an amount at least equal to the full value of all work done
and materials and equipment provided or delivered by the Contractor, as well as comprehensive
liability insurance, worker’s compensation insurance and other insurance required by law or
customarily maintained with respect to like projects.
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ARTICLE IV
TERM OF LEASE
Section 4.1. Lease Term. Landlord hereby leases the Project to Tenant, and Tenant
hereby leases, or in the case of the Land, subleases, the Project from Landlord upon the terms and
conditions set forth in this Lease. This Lease shall be in effect for a Lease Term commencing
upon the date of execution hereof and ending on the date the last Rental Payment is due and payable
as shown in Exhibit B unless terminated by Tenant at the end of any Fiscal Year of Tenant
occurring prior thereto in accordance with Section 4.3, or unless terminated as provided in Section
4.6.
Section 4.2. Possession and Enjoyment. Landlord hereby covenants to provide Tenant
during the Term of this Lease with the quiet use and enjoyment of the Project and Tenant shall
during the Term of this Lease peaceably and quietly have and hold and enjoy the Project, without
suit, trouble or hindrance from Landlord, except as expressly set forth in this Lease and the Ground
Lease. Landlord will, at the request of Tenant and at Tenant's cost, join in any legal action in
which Tenant asserts its right to such possession and enjoyment to the extent Landlord lawfully
may do so.
Section 4.3. Termination by Tenant; Effect of Non-Appropriation. In the sole event of
Non-appropriation, Tenant shall have the right to terminate this Lease, in whole but not in part, at
the end of any Fiscal Year of Tenant, in the manner and subject to the terms specified in this section
and in Sections 4.5 and 4.6. Tenant may effect such termination by giving Landlord and the
Trustee a written notice of termination and by paying to Landlord any Rental Payments and any
other amounts due pursuant to Section 4.5 which are due and have not been paid and any other
amount due pursuant to Section 4.5 at or before the end of its then current Fiscal Year. Tenant
shall give written notice to the Trustee and the Landlord of any such termination not less than
ninety days prior to the end of such Fiscal Year. If the Landlord and the Trustee are not delivered
a written notice of an event of Non-appropriation with a certified copy of a resolution of the City
Council the Tenant stating that Tenant will no longer appropriate any moneys to pay the Rental
Payments due under this Lease, not less than ninety days prior to the end of a fiscal year then an
event of Non-appropriation is deemed not to have occurred. In the event of termination of this
Lease as provided in this section, Tenant shall convey to Landlord and release its interest under
this Lease in the Project in accordance with Section 12.3 immediately after termination of this
Lease.
Section 4.4. Intent to Continue Lease Term; Appropriations and Property Taxes. Tenant
presently intends to continue this Lease for its entire Term and to pay all Rental Payments. The
Tenant covenants that the chief financial official and/or other appropriate official of the Tenant
will include in the officer's annual budget for each Fiscal Year and thereby request an appropriation
by Tenant's City Council of an amount sufficient to meet Tenant's obligations under this Lease.
To provide sufficient funds to pay the Rental Payments due hereunder, subject to the provisions in
Section 4.3, Tenant shall include in each annual budget an appropriation sufficient, and shall levy
such taxes as may be necessary, when combined with any other appropriated and available funds,
to make the Rental Payments. Upon request of the Trustee or the Landlord, the Tenant shall provide
such annual budget.
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Section 4.5. Effect of Termination. Upon any termination of this Lease as described in
Section 4.3, Tenant shall not be responsible for the payment of any additional Rental Payments
coming due with respect to succeeding Fiscal Years. If Tenant does not deliver possession of the
Project to Landlord in accordance with Section 12.3 and convey to Landlord or release its interest
under this Lease in the Project immediately upon the termination of this Lease, the termination
shall nevertheless be effective, but Tenant shall be responsible for the payment of damages in an
amount equal to the amount of the Rental Payments coming due which are attributable to the
number of days after termination of this Lease during which Tenant fails to take such actions and
for any other loss suffered by Landlord as a result of Tenant's failure to take such actions as
required. Termination of this Lease for any reason shall not terminate Tenant's obligations under
Sections 2.1, 6.5 or 6.6 or relieve Tenant from any liability for the nonperformance of any covenant
in those sections or for any inaccuracy in the representations contained in Section 2.1.
Section 4.6. Termination of Lease Term. The Term of this Lease will terminate upon
any termination hereof by Tenant described in Section 4.3, upon a default by Tenant and Landlord's
election to terminate this Lease pursuant to Article XII, or upon the Tenant's exercise of its option
to purchase the Project pursuant to Article X and Tenant's payment of the Purchase Option Price.
Upon Tenant's purchase of the Project, this Lease and the Ground Lease shall terminate and the
Tenant thereupon shall become entitled to the Project AS IS, WITHOUT WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE OR FITNESS FOR THE USE
CONTEMPLATED BY TENANT, except that the Project shall not be subject to any lien or
encumbrance created by or arising through Landlord, other than Permitted Encumbrances. To
evidence the foregoing, the Landlord shall, at the request and expense of Tenant, execute such
documents as the Tenant reasonably determines are required to convey and release to the Tenant,
any and all of Landlord's remaining right, title and/or interest in and to the Project.
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ARTICLE V
RENTAL PAYMENTS
Section 5.1. Rental Payments. Subject to Tenant's exercise of its option to purchase the
Project or prepay in part Rental Payments pursuant to Article X, and payment of the Purchase
Option Price, Tenant shall:
(a) On or before the date identified on Exhibit B pay the Rental Payments as set forth
on Exhibit B.
(b) The Tenant shall have a credit against each Rental Payment to the extent of any
investment earnings which are available and which are in excess of amounts otherwise required to
pay principal of or interest on the Series 2024A Bonds.
(c) In the event the Tenant shall have paid Rental Payments with respect to a Rental
Payment Date, but the funds on deposit in the Bond Fund are nevertheless insufficient to pay such
principal, premium (if any) and interest on the Bonds then due or to become due on such Interest
Payment Date, the Tenant will forthwith pay as Rental Payments the amount of the deficiency.
Section 5.2. Place of Payment of Rental Payments; Assignment by Landlord. In
accordance with Section 11.1 of this Lease and the Indenture, the Landlord is assigning its rights,
title, interests and privileges, including the right to receive Rental Payments hereunder, to the
Trustee to secure payment of the principal and interest on the Bonds. The Rental Payments
provided for in Section 5.1 shall be paid directly to the Trustee at its corporate trust office for the
account of Tenant for deposit in the Bond Fund, as provided in the Indenture.
Section 5.3. Additional Rental Payments. The Tenant shall pay Additional Rental
Payments as follows:
(a) To the Trustee, for itself or remittance to the paying agents, promptly after being
billed, until the principal of and interest on the Bonds shall have been fully paid or provision for
the payment thereof shall have been made in accordance with the provisions of the Indenture, (i)
an amount equal to the annual fee of the Trustee as trustee, for the ordinary services of the Trustee
rendered and its ordinary expenses incurred under the Indenture during the preceding billing
period, (ii) the fees and charges of paying agents, authenticating agents, and registrars on the Bonds
for acting as paying agent, authenticating agent, and registrar as provided in the Indenture, as and
when the same become due, and (iii) the fees and charges of the Trustee for necessary
extraordinary services rendered by it and extraordinary expenses incurred by it under the
Indenture, as and when the same become due, other than the fees and charges which were required
by reason of the gross negligence or willful default of the Trustee under the Indenture; provided,
that the Tenant may, without creating a default hereunder, contest in good faith the necessity for
any such extraordinary services and extraordinary expenses and the reasonableness of any such
fees, charges or expenses; and
(b) To the Trustee or Landlord, as the case may be, upon demand, any amounts
advanced by the Trustee for the account of the Tenant or the Landlord under the Indenture or
advanced by the Landlord under this Lease; and
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(c) To the Treasurer of City of Otsego, or other appropriate authority or official for the
account of the Tenant and before the same become delinquent or any penalty attaches, all taxes,
special assessments, or other governmental charges imposed on or with respect to the Project or
any part thereof, subject to Section 7.3; and
(d) To the Landlord, all reasonable expenses incurred by the Landlord in connection
with the transactions contemplated hereby which are not otherwise required to be paid by the
Tenant under the terms of this Lease; and
(e) All other costs and expenses specifically required to be paid by the Tenant or
Landlord under the terms of this Lease or the Indenture.
(f) To the Landlord, upon its request, any amount of arbitrage profit required to be
rebated to the United States under Section 6.07 of the Indenture.
Section 5.4. Rental Payments to be Unconditional. Except as provided in Section 4.3,
the obligation of Tenant to make Rental Payments required hereunder, and to perform and observe
all other covenants and agreements of Tenant contained herein, shall be absolute and unconditional
in all events and the obligation to make such Rental Payments shall remain notwithstanding any
dispute between Tenant and Landlord or any other person unless the Landlord shall violate the
Tenant's right to quiet enjoyment of the Project to such a degree that Tenant no longer enjoys its
right of possession to the Project. Tenant shall make all Rental Payments and other payments
required hereunder when due and shall not withhold any Rental Payment or other payment pending
final resolution of such dispute and Tenant shall not assert any right of setoff or counterclaim
against its obligation to make such Rental Payments or other payments required under this Lease.
Tenant shall have the right pursuant to Section 7.3 to in good faith contest taxes, special
assessments, utility or other charges in accordance with the provisions of Section 7.3. However,
nothing herein shall be construed to release Landlord from the performance of its obligations
hereunder; and if Landlord should fail to perform any such obligation, Tenant may institute such
legal action against Landlord as Tenant may deem necessary to compel the performance of such
obligation or to recover damages therefor.
Section 5.5. Current Expense. The obligations of Tenant under this Lease, including its
obligation to pay the Rental Payments due with respect to the Project, in any Fiscal Year for which
this Lease is in effect, shall constitute a current expense of Tenant for such Fiscal Year. The
Tenant's obligations hereunder shall be from year to year only and shall not constitute an
indebtedness, liability or mandatory payment obligation of Tenant in any ensuing Fiscal Year
beyond the then current Fiscal Year. No provision herein shall be construed or interpreted as
creating a general obligation or other indebtedness of the Tenant within the meaning of any
constitutional or statutory debt limitation. Except for the lien herein created in the Project and the
proceeds thereof, nothing herein shall be construed to pledge or to create a lien on any taxes or on
any other class or source of money of the Tenant, nor shall any provision herein restrict the future
issuance of any bonds of the Tenant or obligations payable from any class or source of Tenant
moneys.
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ARTICLE VI
INSURANCE AND INDEMNIFICATION
Section 6.1. Liability Insurance. The Tenant shall, at its own expense, cause
comprehensive liability and property damage insurance to be carried and maintained with respect
to the activities to be undertaken by and on behalf of the Tenant in connection with the use of the
Project substantially the same as insurance carried by the Tenant with respect to other
governmental activities.
Section 6.2. Property Insurance. The Tenant shall cause casualty and property damage
insurance to be carried and maintained with respect to the Project in an amount at least equal to
the replacement value of the Project with a deductible not to exceed the deductible carried by the
Tenant with respect to other similar governmental buildings (except that during construction of the
Project, builders risk insurance, full value of completed structure - all risk coverage, may be
substituted for property insurance required for that portion of the Project). Such coverage must
apply exclusively to the Project and must be available to repair/rebuild the Project under all
circumstances after the occurrence of an insured peril. Full payment of insurance proceeds up to
the required policy dollar limit in connection with damage to the Project shall, under no
circumstances, be contingent on the degree of damage sustained at other facilities owned or leased
by the Tenant. The policy must explicitly waive any co-insurance penalty. The Net Proceeds of
insurance required by this section will be applied to the prompt repair, restoration or replacement
of the Project or to the prepayment of Rental Payments as provided herein. Any Net Proceeds not
needed for those purposes will be paid to the Tenant.
Section 6.3. Worker's Compensation Insurance. If required by State law, Tenant shall
carry Worker's Compensation Insurance covering all employees on, in, near or about the Project,
and upon request, shall furnish to Landlord certificates evidencing such coverage throughout the
Term of this Lease.
Section 6.4. Requirements For All Insurance. All insurance policies (or riders or
endorsements to existing policies) required by this Article shall be taken out and maintained with
responsible insurance companies organized under the laws of one of the states of the United States
and qualified to do business in the State and rated A by Best or in the two highest categories of
Standard and Poor's and Moody's and shall contain a provision that the insurer shall not cancel or
revise coverage thereunder without giving written notice to the insured parties at least thirty days
before the cancellation or revision becomes effective. All insurance policies or riders required by
Sections 6.1 and 6.2 shall name Tenant, Landlord and Trustee as insured parties and, with respect
to the property insurance, shall also name the Landlord and Trustee as loss payees. During the
period of completion of the Project, the requirement that Landlord and Trustee be named as an
insured party under the liability insurance may be satisfied by having Landlord and Trustee named
as additional insureds under the liability insurance policy carried by the general Contractor. Tenant
shall annually deposit with the Trustee a certificate of the Tenant stating that the insurance it carries
for the Project is in full force and effect and complies with Article VI of this Lease and the Trustee
shall be authorized to conclusively rely on such certificate. The Trustee has no duty or obligation
to determine the sufficiency of such insurance requirements. Before the expiration of any such
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policy (or rider), Tenant shall furnish to Landlord evidence that the policy has been renewed or
replaced by another policy conforming to the provisions of this Article.
Section 6.5. Indemnification; Hazardous Substance.
(1) Tenant assumes all risks and liabilities, whether or not covered by insurance, for
loss or damage to the Project or any portion thereof and for injury to or death of any person or
damage to any property, in any manner arising out of or incident to any possession, use, operation
or condition of the Project or any portion thereof, whether such injury or death be with respect to
agents or employees of Tenant or of third parties, and whether such property damage be to Tenant's
property or the property of others. To the maximum extent permitted by law, Tenant hereby
assumes responsibility for and agrees to indemnify, protect, save and keep harmless Landlord and
the Trustee and their officers, directors, employees, agents, successors and assigns from and
against any and all liabilities, obligations, losses, damages, penalties, claims, actions, costs and
expenses (including reasonable attorney's fees) of whatsoever kind and nature, imposed on,
incurred by or asserted against Landlord or the Trustee that in any way relate to or arise out of the
possession, use, operation or condition of the Project or the financing related thereto, unless caused
by Landlord, the Trustee or their agents.
(2) To the maximum extent permitted by law, the Tenant hereby agrees to defend,
indemnify and hold harmless Landlord, the Trustee and their officers, employees, directors, agents,
successors and assigns (hereinafter collectively referred to as the "Indemnitees") from and against,
and shall reimburse each such Indemnitees for, any and all loss, claim, liability, damage, judgment,
penalty, injunctive relief, injury to person, property or natural resources, cost, expense, action or
cause of action arising in connection with or as the result of any past, present or future existence,
use, handling, storage, transportation, manufacture, release or disposal of any Hazardous
Substance in, on or under the Land, whether foreseeable or unforeseeable, regardless of the source,
the time of occurrence or the time of discovery (hereafter collectively referred to as "Loss"). The
foregoing indemnification against Loss includes, without limitation, indemnification against all
costs in law or in equity of removal, response, investigation, or remediation of any kind, and
disposal of such Hazardous Substances, all costs of determining whether the Land is in compliance
with, and of causing the Land to be in compliance with, all applicable Environmental Laws, 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 thereof.
(3) The obligations of Tenant to indemnify the Indemnitees shall survive satisfaction
and payment in full of the Bonds, and termination of this Lease or the Landlord or Trustee
reacquiring possession of the Land under the Ground Lease. The rights of the Indemnitees
hereunder shall be in addition to any other rights and remedies which the Indemnitees may have
against the Land and the Tenant under this Lease or any other document or at law or in equity.
(4) Notwithstanding anything in this Lease to the contrary, if Landlord should, after
subleasing the Land to the Tenant as provided herein, subsequently terminate this Lease and
reacquire possession of the Land under the Ground Lease(the date on which this event occurs being
the "Termination Date"), the indemnifications described in this section shall not apply to any Loss
incurred by Landlord or the Trustee as a direct result of affirmative actions of the Landlord or the
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Trustee after Landlord or the Trustee has terminated this Lease and acquired possession of the
Land under the Ground Lease if such affirmative actions of the Landlord or the Trustee are the
sole and direct cause of the introduction and initial release of a Hazardous Substance in, on or
under the Land; provided, however, that the Tenant shall bear the burden of proof that the
introduction and initial release of such Hazardous Substance (i) occurred subsequent to the
Termination Date, (ii) did not occur as a result of any action of the Tenant, and (iii) did not occur
as a result of a continuing migration or release of any Hazardous Substance introduced prior to the
Termination Date in, on, under or near the Project.
(5) Except as expressly provided for in this section, the indemnifications provided
herein shall remain in full force and effect, including, without limitation, with respect to Hazardous
Substances which are discovered or released in, on or under the Land after the Termination Date,
and with respect to the continuing migration or release of any Hazardous Substance previously
introduced in, on, under or near the Land. The foregoing limitations shall not affect or impair any
rights, remedies or claims the Landlord or the Trustee may have outside the scope of this
indemnity, at law or in equity, with respect to the Tenant or others.
Section 6.6. Damage to or Destruction or Condemnation of Project. If after the
execution of this Lease all or any part of the Project is lost, stolen, condemned, destroyed or
damaged, or taken by condemnation, Tenant shall either (i) as soon as practicable after such event
restore and/or replace (as in the case may be required), or cause to be restored and/or replaced, the
same at Tenant's sole cost and expense such restoration or replacement to be of equal or greater
value to the Project or the applicable portion thereof immediately prior to the time of the loss
occurrence or condemnation, whereupon such restoration or replacement shall be substituted in
this Lease by appropriate endorsement, if necessary or (ii) at its option redeem the Bonds in whole
but not in part. By way of example but not limitation, restoration shall include any demolition,
clearance or other clean-up or safety measures reasonably required in connection with any
casualty, destruction or other loss of any portion of the Project. The Net Proceeds payable with
respect to the loss may be applied towards the costs of such replacement or restoration.
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ARTICLE VII
OTHER OBLIGATIONS OF TENANT
Section 7.1. Use; Permits. Tenant shall exercise due care in the construction, use,
operation and maintenance of the Project, and shall not install, use, operate or maintain the Project
improperly, carelessly, in violation of any State and Federal Law or for a purpose or in a man ner
contrary to that contemplated by this Lease. Tenant shall obtain (or cause to be obtained) all
permits and licenses necessary for the construction, operation, possession and use of the Project.
Tenant shall comply with all State and Federal Laws applicable to the construction, use, possession
and operation of the Project, and if compliance with any such State and Federal Law requires
changes or additions to be made to the Project, such changes or additions shall be made by Tenant
at its expense.
Section 7.2. Maintenance of Project by Tenant. Tenant shall, at its own expense,
maintain, preserve and keep the Project in good repair, working order and condition and shall from
time to time make all repairs and replacements necessary to keep the Project in such condition.
Neither Landlord nor Trustee shall have any responsibility for any of these repairs or replacements.
Section 7.3. Taxes, Other Governmental Charges and Utility Charges. Except as
expressly limited by this section, Tenant shall pay (or cause to be paid) all taxes and other charges
of any kind which are at any time lawfully assessed or levied against or with respect to the Project,
or which become due during the Term of this Lease, whether assessed against Tenant or Landlord.
Tenant shall also pay (or cause to be paid) when due all gas, water, steam, electricity, heat, power,
telephone, and other charges incurred in the operation, maintenance, use, occupancy and upkeep
of the Project, and all special assessments and charges lawfully made by any governmental body
for public improvements that may be secured by a lien on the Project; provided that with respect
to special assessments or other governmental charges that may lawfully be paid in installments
Tenant shall only be required to pay (or cause to be paid) such installments, during the Term of
this Lease as and when the same become due.
Tenant may, at its own expense and in its own name, in good faith contest any such taxes,
assessments, utility and other charges and shall notify the Landlord of such good faith contest and,
in the event of any such contest, may permit the taxes, assessments, utility or other charges so
contested to remain unpaid during the period of such contest and any appeal therefrom but only if
(1) nonpayment of any such items will not materially endanger the interest of Landlord in the
Project, nor subject to loss or forfeiture the Project or any part thereof, and (2) Tenant files with
the Trustee an opinion of Independent Counsel stating in effect that neither event will occur. If
both conditions are not satisfied Tenant shall promptly pay such taxes, assessments, utility or other
charges or provide Landlord with full security against any loss which may result from nonpayment,
in form satisfactory to Landlord.
The Tenant, at its expense, shall comply with all applicable laws to the extent any failure
to comply would have a material adverse effect on the Project or the Landlord’s rights hereunder,
or would result in the levying of any criminal or civil penalties on either party, whether or not such
compliance requires changes in the Project or property owned by the Tenant or interfere with the
use and enjoyment of the Project or any part thereof. The Tenant will take such actions at its
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expense, to enable the Tenant to obtain all permits and similar authorizations needed for the use
of the Project.
Section 7.4. Advances. If Tenant shall fail to perform any of its obligations under this
Article, Landlord may, but shall not be obligated to, take such action as may be necessary to cure
such failure, including the advancement of money, and Tenant shall be obligated to repay all such
advances on demand with interest from the date of the advance to the date of repayment. The
interest rate on the advance shall be one hundred basis points greater than (1) the rate of interest at
which the Landlord borrowed the money advanced or, (2) if the Landlord did not borrow the
money, the rate of four percent (4.0%) per annum.
Section 7.5. Landlord Access to Project. Tenant agrees that Landlord shall have the right
at all reasonable times upon reasonable notice to examine and inspect the Project. Tenant further
agrees that Landlord shall have such rights of access to the Project as may be reasonably necessary
to cause the proper maintenance of any portion of the Project in the event of failure by Tenant to
perform its obligations hereunder.
Section 7.6. Transfer of Functions. The Tenant covenants that it will, at all times during
the Term of this Lease, use the Project to the fullest extent possible in the governmental functions
of the Tenant. The Tenant further covenants that, to the extent it may lawfully do so under the
laws of the State of Minnesota, and to the extent it would not obviate the Tenant's right to terminate
this Lease at the end of any Fiscal Year, it will not transfer any governmental functions from the
Project to any other location during the Term of this Lease and will not otherwise eliminate or
diminish the use of the Project by the Tenant in its governmental functions unless the Tenant
promptly replaces such governmental functions with other functions or programs of the Tenant
which will be substituted at the Project for the transferred functions for the remaining Term of this
Lease.
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ARTICLE VIII
TITLE
Section 8.1. Title. During the Term of this Lease title to the Project and any and all
repairs, replacements, substitutions and modifications to it under Sections 6.6 or 8.5 shall be in the
Landlord. Upon any termination of this Lease described in Section 4.3 or upon a default by Tenant
and Landlord's election to terminate this Lease pursuant to Article XII, Tenant shall have no further
interest in the Project under this Lease. In such event Tenant shall execute and deliver to Landlord
such documents as Landlord may request to evidence the termination of this Lease; and upon
request by Landlord, Tenant shall deliver possession of the Project to Landlord, in accordance with
Section 12.3. Upon payment in full of the Rental Payments this Lease shall terminate and the
Landlord shall convey and release to the Tenant any and all of Landlord's right, title and/or interest
in and to the Project. Upon payment in full of the Rental Payments this Lease shall terminate and
the Landlord shall convey and release to the Tenant any and all of landlord’s right, title and/or
interest in and to the Project.
Section 8.2. Security Interest. The Tenant hereby pledges, assigns and grants to the
Landlord a security interest in all portions of the Project, whether now owned or existing or
hereafter acquired or arising, that are deemed personal property or fixtures pursuant to applicable
law, the proceeds thereof and all repairs, replacements, substitutions and modifications thereto or
thereof made pursuant to Section 8.5 and a security interest in the proceeds of all insurance
policies, in order to secure Tenant's payment of all Rental Payments due during the Term of this
Lease and the performance of all other obligations herein to be performed by the Tenant. The
Tenant will cause to be executed, filed and recorded all instruments, including financing statements
and continuation statements, and will perform such acts as are required to establish and maintain
a valid and perfected security interest in such portions of the Project. The Trustee shall not be
responsible for filing any financing or continuation statement or recording any documents or
instruments in any public office at any time or otherwise for perfecting or maintaining the
perfection of any lien or security interest in the Trust Estate or under this Lease. The Trustee shall
not be responsible for filing or for the sufficiency or accuracy of any financing statements initially
filed to perfect security interests granted under this Lease or the Indenture.
Section 8.3. Liens. During the Term of this Lease, Tenant 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 Project, other than the respective rights of Landlord and Tenant
as herein provided and Permitted Encumbrances. Except as expressly provided in Section 7.3 and
this Article, Tenant 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; provided that if any such lien for labor or materials is established
against the Project and Tenant shall first notify Landlord of Tenant's intention to do so, Tenant
may in good faith contest any such lien, and in such event may permit the lien so contested to
remain undischarged and unsatisfied during the period of such contest and any appeal therefrom
but only if (1) nonpayment of any such item will not materially endanger the interest of Landlord
in the Project and will not subject to loss or forfeiture the Project or any part thereof, and (2) the
Tenant files with the Landlord an opinion of Independent Counsel stating in effect that neither
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event will occur. Tenant shall reimburse Landlord for any expense incurred by Landlord in order
to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim.
Section 8.4. Installation of Tenant's Equipment. Tenant may at any time and from time
to time, in its sole discretion and at its own expense, install items of fixtures, equipment and other
personal property in or upon the Project. All such items shall remain the sole property of Tenant,
in which Landlord shall have no interest, and may be modified or removed by Tenant at any time
provided that Tenant shall repair and restore on a timely basis any and all damage to the Project
resulting from the installation, modification or removal of any such items. Nothing in this Lease
shall prevent Tenant from purchasing items to be installed pursuant to this section under a
conditional sale or lease-purchase contract, or subject to a vendor's lien or security agreement, as
security for the unpaid portion of the purchase price thereof, or from entering into any other loan
agreement secured by a lien or security interest in such property provided that no such lien or
security interest shall attach to any part of the Project. Landlord and the Trustee shall, at the
request and expense of Tenant, execute such releases and other documents as Tenant reasonably
determines is necessary to facilitate such purchase or loan and as are consistent with the rights of
the parties under this Lease; and as a condition to executing such documents, Landlord and the
Trustee may require and conclusively rely upon a written statement of Tenant that the documents
comply with the provisions of this section.
Section 8.5. Modification of Project. Subject to Tenant's rights under Section 8.4,
Tenant shall, at its own expense, have the right to make repairs to the Project, and to make repairs,
replacements, substitutions and modifications to all or any of the parts thereof. All such work and
any part or component used or installed to make a repair or as a replacement, substitution or
modification, shall thereafter comprise part of the Project and be subject to the provisions of this
Lease; provided, however, that an addition to the Project constructed on Tenant Land outside of
the then-exterior walls of the Project will not become part of the Project. Such work shall not in
any way damage the Project or cause it to be used for purposes other than those authorized under
the provisions of State and Federal Law or those contemplated by this Lease; and the Project, upon
completion of any such work shall be of value which is not less than the value of the Project prior
to the commencement of such work. Any property for which a replacement or substitution is made
pursuant to this section may be disposed of by Tenant in such manner and on such terms as are
determined by Tenant. Landlord shall also at Tenant's expense execute such other releases from
the provisions of this Lease for any replacement equipment as Tenant may reasonably request. For
purposes of executing any such amendment or document, Landlord and Trustee may require and
conclusively rely upon a written statement of Tenant that such amendment or document complies
with the provisions of this section.
Section 8.6. Easements and Utility Access. Tenant may, at Tenant's expense, at any time
and from time to time request Landlord to convey an easement affecting the Land to a corporate
utility or public body, or any other person, upon written certification by an Independent Engineer
that in its opinion the easement is necessary or desirable to provide road or other access or utility
service for the Project or other property and will not impair the usefulness of the Project for the
purposes contemplated in this Lease and will not destroy the means of ingress therefrom and egress
therefrom. No such easement shall result in any abatement of rents or other sums payable by
Tenant under this Lease. Landlord will execute the easement and will join in the execution of a
supplement to this Lease and the Ground Lease, providing for the subordination of this Lease and
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the Ground Lease to any such easement; but the subordination shall not become effective until the
following items are filed with, and/or where applicable, executed by, the Landlord:
(1) a copy of the easement (or if Section 8.7 is applicable, release) executed or to be
executed by Landlord;
(2) a plat or survey of the Land prepared and certified by a registered Minnesota land
surveyor, showing the land to be subjected to the easement as described in the easement (or if
Section 8.7 is applicable, the land to be released) and the location in relation thereto of all
buildings, structures and permanently installed equipment on the land, and all other easements,
roads, tracks and utility installations;
(3) evidence of the authority of the officers executing the lease supplement and
easement (or, if Section 8.7 is applicable, the release) on behalf of Landlord and Tenant, including
a certified copy of an authorizing resolution of the governing body of Landlord and of Tenant; and
(4) the certificate of the Independent Engineer.
Any money received by Tenant for the easement shall be remitted to the Landlord and credited to
the Bond Fund. For purposes of executing the instruments described in this section, Landlord and
Trustee may require and conclusively rely upon a written statement of Tenant that the provisions
of this section have been fully satisfied.
Section 8.7. Release of Unimproved Land. Tenant may, at Tenant's expense, at any time
and from time to time request Landlord to release from the provisions of this Lease and the Ground
Lease any part of the Land on which no building, structure or permanently installed equipment is
situated, upon written certification by an Independent Engineer stating that in their opinion the
Land proposed to be released is not needed for the operation of the Project for the purposes stated
in this Lease, and that the release will not impair the usefulness of the Project for these purposes
and will not destroy the means of ingress thereto and egress therefrom. Landlord will join in the
execution of a supplement to this Lease providing for the release thereof, subject to the following
conditions:
(1) the release shall not become effective until the filing with the Landlord of the
following items:
(A) the items described in paragraphs (1) to (4), inclusive, of Section 8.6; and
(B) an opinion of Independent Counsel stating that the above documents satisfy
the requirements of this Section and that the release is in appropriate form for execution
by the respective parties; and
(2) the Tenant shall not be entitled to any abatement, reduction, or diminution of any
rents payable under this Lease.
Section 8.8. Covenant For the Benefit of the Bondholders. Tenant recognizes the
authority of the Landlord to pledge all moneys receivable under this Lease, including any proceeds
from the sale of all or a part of the Project, as security for the payment of the principal of and
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interest and redemption premiums, if any, on the Bonds. Each of the terms and provisions of this
Lease is a covenant for the use and benefit of the Holders of the Bonds, so long as any thereof
shall remain outstanding; and the Trustee shall be deemed, on behalf of the Bondholders, a third
party beneficiary of said terms and conditions; but upon payment in full of the Bonds and of all
fees and charges of the Trustee, all references in this Lease to the Bonds shall be ineffective, and
no Holder of any of the Bonds shall thereafter have any rights hereunder, save and except those
that shall have theretofore vested.
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ARTICLE IX
PROJECT WARRANTIES
Section 9.1. Selection of Project. The Project and the Contractors have been and are to
be selected by Tenant, and Landlord shall have no responsibility in connection therewith, or with
respect to the suitability of the Project for the use intended by Tenant or any delay or failure by
the Contractors to construct the Project for use by Tenant.
Section 9.2. Construction and Maintenance of Project. Landlord shall have no
obligation to construct, inspect or maintain the Project or any portion thereof under any
circumstances, but such actions shall be the obligation of Tenant. The Tenant shall, at its expense,
keep the Project in reasonable order and condition in light of the use to which the Project will be
put and will repair, restore and rebuild all building enclosures and other structures and
improvements located therein to the extended provided for under this Lease.
Section 9.3. Contractors' Warranties. Landlord hereby assigns to Tenant for and during
the Term of this Lease, all of its interest in all Contractors' warranties and guarantees, express or
implied, issued on or applicable to the Project, and Landlord hereby authorizes Tenant to obtain
the customary services furnished in connection with such warranties and guarantees at Tenant's
expense.
Section 9.4. Disclaimer of Warranties. THE PROJECT IS LEASED TO TENANT
HEREUNDER AS IS, AND LANDLORD MAKES NO WARRANTY OR REPRESENTATION,
EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION,
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR FITNESS FOR
THE USE CONTEMPLATED BY TENANT OF THE PROJECT, OR ANY OTHER
REPRESENTATION OR WARRANTY WITH RESPECT TO THE PROJECT.
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ARTICLE X
PREPAYMENT
Section 10.1. Option to Prepay in Whole or in Part. Tenant may prepay the unpaid
Principal Portion of the Rental Payments, in whole or in part and if in part, in multiples of $5,000,
on February 1, 2033, or any day thereafter, at the Purchase Option Price equal to the principal
amount of the Bonds outstanding and accrued interest to the next day on which they may be called
for redemption, plus past due Rental Payments, and only in the manner provided in this Article.
Section 10.2. Prepayment Upon Event of Damage or Destruction of Project. Tenant may
prepay the unpaid Principal Portion of the Rental Payments, in whole but not in part, upon written
notice and direction to the Landlord, in the event of damage to or destruction of the Project or any
part thereof, at the Purchase Option Price equal to the principal amount of the Bonds outstanding
and accrued interest to the redemption date, plus past due Rental Payments, and only in the manner
provided in this Article.
Section 10.3. Exercise of Purchase Option. Tenant shall give written notice to Landlord
and Trustee of its intention to exercise its purchase option pursuant to Sections 10.1 or 10.2 not
less than forty-five days prior to the date on which the option is to be exercised and shall deposit
with the Trustee on the date of exercise an amount equal to all Rental Payments and any other
amounts then due or past due and the applicable Purchase Option Price. The purchase shall be on
the date on which the option is to be exercised at the office of Landlord.
Section 10.4. Release of Landlord's Interest. Upon exercise by Tenant of its option to
purchase Landlord's interest in the Project and payment of the Purchase Option Price, this Lease
and the Ground Lease shall terminate and Tenant thereupon shall become entitled to the Project
AS IS, WITHOUT WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR FITNESS FOR
THE USE CONTEMPLATED BY TENANT, except that the Project shall not be subject to any
lien or encumbrance created by or arising through Landlord other than Permitted Encumbrances.
To evidence the foregoing, Landlord and Trustee, as agent for and on behalf of the Bondholders,
shall, at the request and expense of Tenant, execute such documents as Tenant reasonably
determines are required to convey and release to Tenant, any and all of their remaining right, title
and/or interest in and to the Project.
Section 10.5. Defeasance. Tenant shall have the option to provide for the payment of the
Rental Payments (and, if applicable, the Purchase Option Price) by the deposit with the Trustee in
escrow on behalf of the holders of the Bonds of cash or securities for which the full faith and credit
of the United States are pledged for the payment of principal and interest or which are guaranteed
as to payment of principal and interest by the United States, in an amount sufficient (together with
interest earnings thereon) to provide for payment of said Rental Payments (and, if applicable, the
Purchase Option Price) prior to their respective Payment Dates as provided in Section 5.1 through
their final maturity date, or such earlier date upon which an option to purchase would have been
exercisable by Tenant; provided that such earlier date is designated by Tenant as the date on which
the applicable Purchase Option Price shall be paid; and provided further that Tenant files with
Landlord and Trustee an opinion of Bond Counsel stating in effect that such defeasance will not
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impair the tax exempt status of the Bonds. Upon exercise by Tenant of this option, this Lease and
the Ground Lease shall terminate and, at the request and expense of Tenant, Landlord and Trustee
shall convey and release their interest in the Project as provided in Section 10.4. For purposes of
executing such release both the Landlord and Trustee may conclusively rely upon a report of an
independent certified public accountant stating in effect that the sums held in escrow satisfy the
payment requirement set forth in this section.
Section 10.6. Partial Prepayment or Defeasance. Tenant shall have the option to prepay
on February 1, 2033, or any date thereafter a portion of any Rental Payment selected by the Tenant
and scheduled to become due under this Lease. The Tenant shall also have the option to provide
for the payment or prepayment, in increments, of a portion of Rental Payments scheduled to
become due under this Lease by depositing in escrow with the Trustee sufficient funds for that
purpose, in the manner and subject to the conditions set forth in Section 10.5 as if (a) those Rental
Payments to be paid or prepaid were the only Rental Payments then scheduled to become due
under this Lease and (b) any of the Rental Payments to be prepaid were the Purchase Option Price.
Section 10.7. Exercise of Partial Prepayment or Defeasance Option. Tenant shall give
written notice to Landlord and Trustee of its intention to exercise its option to partially prepay
Rental Payments or defease its Rental Payment obligations, in whole or part, as provided in
Sections 10.5 and 10.6. Tenant shall give such notice not less than forty-five days prior to the date
on which a portion of any Rental Payments are to be prepaid, in whole or part, or the Purchase
Option Price is to be paid, and shall deposit with Trustee on the date of exercise the sum required
to effect such prepayment or defeasance.
Section 10.8. Credit for Partial Prepayment or Defeasance. If Tenant partially prepays or
defeases any Rental Payments under Section 10.6 and thereafter elects to acquire the Project as
provided in this article, the Tenant shall be entitled to credit against the applicable Purchase Option
Price an amount equal to a portion of the Rental Payments scheduled to come due after the date as
of which the applicable Purchase Option Price is calculated and taken into account at the time such
partial prepayment or defeasance occurred.
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ARTICLE XI
ASSIGNMENT, SUBLEASING, MORTGAGING AND SELLING
Section 11.1. Assignment by Landlord. Except for Landlord's assignment of this Lease
to the Trustee pursuant to the Indenture, Landlord shall not assign this Lease, in whole or in part,
and no such purported assignment thereof shall be effective. The Landlord's sole obligation is to
provide to the Tenant quiet enjoyment of the Project. Subject to the provisions of the Indenture,
any and all of Landlord's rights, title and/or interest in and to this Lease, the Rental Payments and
other amounts due hereunder and the Project may only be assigned and reassigned in whole to the
Trustee without the consent of the Tenant.
Section 11.2. Assignment and Subleasing by Tenant. Neither this Lease nor Tenant's
interest in the Project may be assigned or subleased by Tenant without the written consent of
Landlord, and the Trustee and any such assignment or sublease shall not relieve Tenant from its
obligations hereunder, including without limitation the obligation to make the Rental Payments
hereunder; provided that Landlord's consent to any other sublease shall not be required if (1) the
sublease provides that the sublessee will not take any action in derogation of Tenant's obligations
hereunder, (2) a copy of the sublease is filed with Landlord and the Trustee, (3) the term of the
sublease coincides with the term of this Lease, and (4) either (A) the sublease is to a Governmental
Unit or (B) an opinion of Bond Counsel is first filed with the Landlord and the Trustee stating in
effect that the sublease will not impair the tax-exempt status of the Bonds.
Section 11.3. Restriction on Mortgage or Sale of Project by Tenant. Tenant will not sell,
transfer or convey its interest in the Project or any portion thereof during the Term of this Lease
without the written consent of Landlord.
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ARTICLE XII
EVENTS OF DEFAULT AND REMEDIES
Section 12.1. Events of Default Defined. The following shall be "events of default" under
this Lease and the terms "events of default" and "default" shall mean, whenever they are used in
this Lease, with respect to the Project, any one or more of the following events:
(i) Failure by Tenant to pay any Rental Payment or other payment required
to be paid under this Lease at the time specified herein and, except in the case of a failure
to pay when due any Rental Payment, the continuation of said failure for a period of seven
days.
(ii) Failure by Tenant to observe and perform any covenant, condition or
agreement on its part to be observed or performed, other than as referred to in clause (i) of
this section, for a period of thirty days after written notice specifying such failure and
requesting that it be remedied has been given to Tenant by Landlord, unless Landlord 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, Landlord
will not unreasonably withhold its consent to an extension of such time if corrective action
is instituted by Tenant within the applicable period and diligently pursued until the default
is corrected.
(iii) The filing by Tenant of a voluntary petition in bankruptcy; or failure
by Tenant promptly to lift any execution, garnishment or attachment of such consequence
as would impair the ability of Tenant to carry on its governmental or proprietary function;
or adjudication of Tenant as a bankrupt; or assignment by Tenant for the benefit of
creditors, or the entry by Tenant into an agreement of composition with creditors; or the
approval by a court of competent jurisdiction of a petition applicable to Tenant in any
proceedings instituted under the provisions of federal bankruptcy laws, or any similar acts
which may hereafter be enacted.
(iv) The vacation or abandonment by the Tenant of the Project for a period
of ninety consecutive days.
The provisions of this section and Section 12.2 are subject to the following limitation: if by reason
of force majeure Tenant is unable in whole or in part to carry out its obligations under this Lease
with respect to the Project, other than its obligation to pay Rental Payments with respect thereto,
which shall be paid when due notwithstanding the provisions of this paragraph, Tenant shall not
be deemed in default during the continuance of such inability. The term "force majeure" as used
herein shall mean, without limitation, the following: acts of nature; strikes, lockouts or other labor
disturbances; acts of public enemies; orders or restraints of any kind of the government of the
United States of America or the State or their respective departments, agencies or officials, or any
civil or military authority; 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 Tenant and not resulting from its negligence.
Tenant agrees, however, to remedy with all reasonable dispatch the cause or causes preventing
135220496v4
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Tenant from carrying out its obligations under this Lease; provided that the settlement of strikes,
lockouts and other labor disturbances shall be entirely within the discretion of Tenant and Tenant
shall not be required to make settlement of strikes, lockouts and other labor disturbances by
acceding to the demands of the opposing party or parties when such course is, in the reasonable
judgment of Tenant, unfavorable to Tenant.
Section 12.2. Remedies on Default. Whenever any event of default referred to in Section
12.1 shall have happened and be continuing with respect to the Project, the Landlord, shall have
the right, at its option and without any further demand or notice, to take one or any combination
of the following remedial steps:
(i) Landlord, with or without terminating this Lease, may declare all Rental
Payments due or to become due during the Term of the Lease to be immediately due and
payable by Tenant, whereupon such Rental Payments shall be immediately due and
payable. If Landlord has not terminated the Lease and has not declared all Rental Payments
immediately due and payable and if Tenant has cured the event of default and has paid the
late charge provided in Section 12.6, if applicable, the Tenant shall be restored to its former
position before the event of default occurred.
(ii) Landlord, with or without terminating this Lease, may repossess the
Project or any portion thereof by giving Tenant written notice to vacate the Project,
whereupon Tenant shall do so in the manner provided in Section 12.3; or in the event
Tenant fails to do so within ten days after receipt of such notice, Landlord may enter upon
the Project and take possession of the Project and charge Tenant for costs incurred in
repossessing such portion of the Project, including reasonable attorneys' fees. Tenant
hereby expressly waives any damages occasioned by such repossession.
(iii) If the Landlord terminates this Lease and takes possession of the
Project or any portion thereof, Landlord shall have the right to lease or sell the Landlord's
interests in the Project or any portion thereof, subject to Tenant’s fee simple title interest
therein, in a commercially reasonable manner at public or private sale in accordance with
applicable State laws, and the Tenant agrees to use its best efforts to assist the Landlord in
so doing. Landlord shall apply the proceeds of such sale to pay the following items in the
following order; (a) all costs incurred in securing possession of the Project and prepayment
of the Bonds; (b) all expenses incurred in completing the sale; and (c) the balance of any
accrued Rental Payments owed by Tenant.
(iv) Landlord may take any other remedy available at law or in equity to
require Tenant to perform any of its obligations hereunder.
In no event, however, shall the Tenant be liable under this Article XII for Rental Payments (or the
equivalent thereof) in excess of the moneys appropriated by it on a yearly basis (other than for any
additional Rental Payments due if the Tenant occupies the Project after termination of this Lease
pursuant to Section 4.3).
Section 12.3. Return of Project. Upon the termination of this Lease prior to the payment
of all Rental Payments in accordance with Exhibit B, Tenant, shall vacate the Project in the
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condition, repair, appearance and working order required in Section 7.2, reasonable wear and tear,
damage by the elements and insured damage excepted in the following manner as may be specified
by Landlord; (i) by executing such documents as Landlord reasonably deems necessary to transfer
all of Tenant's right, title and interest under this Lease in and to the Project to Landlord and (ii) by
paying all reasonable costs and expenses whether incurred by the Landlord or Trustee (including
attorneys fees) with respect to such transfer of the Property, provided that nothing herein shall
limit the rights of the Tenant as fee owner of the Land subject to the rights of the Landlord under
the Ground Lease. If Tenant refuses to return the Project in the manner designated, Landlord may
repossess the Project and charge to Tenant the costs of such repossession or pursue any remedy
described in Section 12.2.
Section 12.4. No Remedy Exclusive. No remedy conferred upon or reserved to Landlord
by this Article 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. 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 by Landlord or the Trustee.
Section 12.5. Agreement to Pay Attorneys' Fees and Expenses. In the event either party
to this Lease should default under any of the provisions hereof and the non-defaulting party or
Trustee should employ attorneys and/or incur other expenses for the collection of moneys or for
the enforcement of performance or observance of any obligation or agreement on the part of the
defaulting party herein contained, the defaulting party agrees that it will on demand therefor pay
to the non-defaulting party or Trustee, as the case may be, the reasonable fees and expenses of
such attorneys and/or such other reasonable expenses so incurred by the non-defaulting party or
Trustee.
Section 12.6. Late Charge. Whenever any event of default referred to in Section 12.1,
clause (i), hereof shall have happened and be continuing with respect to the Project, Landlord shall
have the right, at its option and without any further demand or notice, to require a late payment
charge equal to four percent of the delinquent amount or such lesser amount as may be permitted
by Minnesota law if four percent exceeds the applicable limit under Minnesota law, and Tenant
shall be obligated to pay the same immediately upon receipt of Landlord's written invoice therefor;
provided, however, that this section shall not be applicable if or to the extent that the application
thereof would affect the validity of this Lease.
Section 12.7. Effect of Waiver. In the event any agreement contained in this Agreement
should be 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.
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ARTICLE XIII
ADMINISTRATIVE PROVISIONS
Section 13.1. Notices. All notices, certificates, legal opinions or other communications
hereunder shall be sufficiently given and shall be deemed given if personally delivered or if
telecopied or delivered by overnight express mail, with a copy to be sent by first class U.S. mail,
postage prepaid, to the addresses specified in Section 13.07 of the Indenture; provided that
Landlord and Tenant, by notice given hereunder, may designate different addresses to which
subsequent notices, certificates, legal opinions or other communications will be sent.
Section 13.2. Financial Information. Tenant shall annually provide Landlord and, upon
request, the Trustee, with current financial statements and budgets, and such other financial
information relating to the ability of Tenant to continue this Lease as may be requested by Landlord
or the Trustee. The Trustee will have no duty to review or analyze any such financial statements.
The Trustee will not be deemed to have notice of any information contained therein or event of
default which may be disclosed in any manner therein. Compliance by the Tenant with its
continuing disclosure obligation under the Authorizing Resolution and Continuing Disclosure
Agreement, as required by Rule 15c2-12 of the Securities and Exchange Commission promulgated
pursuant to the Securities Exchange Act of 1934, as amended, will be deemed sufficient to satisfy
the requirements of this Section 13.2.
Section 13.3. Binding Effect. This Lease shall inure to the benefit of and shall be binding
upon Landlord and Tenant and their respective successors and assigns.
Section 13.4. Severability. In the event any provision of this Lease shall be held invalid
or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
Section 13.5. Amendments, Changes and Modifications. This Lease may be amended or
any of its terms modified only by written document duly authorized, executed and delivered by
Landlord and Tenant.
Section 13.6. 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 provision, Article, Section or
Clause of this Lease.
Section 13.7. Further Assurances and Corrective Instruments. Landlord and Tenant agree
that they will, from time to time, 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 Project hereby
leased or intended so to be, or for otherwise carrying out the expressed intention of this Lease.
Section 13.8. 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 instrument.
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37
Section 13.9. Applicable Law. This Lease shall be governed by and construed in
accordance with the laws of the State.
135220496v4
S-1
IN WITNESS WHEREOF, Landlord and Tenant have respectively caused this Lease to
be duly executed in their names and on their behalf by their duly authorized representatives.
OTSEGO ECONOMIC DEVELOPMENT
AUTHORITY
Landlord
By______________________________
Its President
By______________________________
Its Executive Director
STATE OF MINNESOTA )
) ss.
COUNTY OF WRIGHT )
The foregoing instrument was acknowledged before me on ____________, 2024, by
______________________and ________________, the President and the Executive Director,
respectively, of the Otsego Economic Development Authority, a public body corporate and
politic of the State of Minnesota, on behalf of said Authority.
__________________________
Notary Public
Signature and Notary page to Lease Agreement.
135220496v4
S-2
CITY OF OTSEGO, MINNESOTA, Tenant
By ____________________________________
Its Mayor
By ____________________________________
Its City Administrator
STATE OF MINNESOTA )
) ss.
COUNTY OF WRIGHT )
The foregoing instrument was acknowledged before me on ______________, 2024, by
_____________________ and _________________________, the Mayor and City
Administrator respectively, of City of Otsego, Minnesota, a municipal corporation and political
subdivision of the State of Minnesota, on behalf of said City.
__________________________
Notary Public
Signature and Notary page to Lease Agreement.
135220496v4
A-1
EXHIBIT A
DESCRIPTION OF LAND, PROJECT
IMPROVEMENTS AND PROJECT EQUIPMENT
Part I
Land
The real property located in the City of Otsego, Wright County, Minnesota with the following
legal description: Outlot D, Ashwood, Wright County, Minnesota, according to the recorded plat
thereof.
Part II
Project Improvements
All buildings, structures, improvements and fixtures located on or to be purchased, constructed,
renovated, bettered, enlarged, and otherwise improved on the Land (more specifically defined in
Section 1.1 of this Lease).
Part III
Project Equipment
All items of machinery, equipment and other personal property installed or to be acquired for
installation in the Project (more specifically defined in Section 1.1 of this Lease).
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B-1
EXHIBIT B
SCHEDULE OF RENTAL PAYMENTS
Otsego Economic Development Authority
$18,420,000 Lease Revenue Bonds, Series 2024A
(City of Otsego, Minnesota Lease with Option to Purchase Project)
[To be inserted].
135220496v4
C-1
EXHIBIT C
DRAW REQUEST CERTIFICATE
I, _________________ of City of Otsego, Minnesota hereby requisition from the
Construction Fund created by a Indenture of Trust (the "Indenture"), dated as of December 30,
2024, between the Otsego Economic Development Authority (the "Authority") and U.S. Bank
Trust Company, National Association, as Trustee, relating to the issuance by the Authority of
$18,420,000 Lease Revenue Bonds, Series 2024A (City of Otsego, Minnesota, Lease with Option
to Purchase Project) and in accordance with Section 3.3 of the Lease Agreement dated December
30, 2024 between the Authority and City of Otsego, Minnesota (the "Lease"), the sums indicated
in Exhibit A to be paid to the parties listed therein in payment and/or reimbursement for payment
for the work described therein. A copy of each bill setting forth each item of Project Cost to be
paid or reimbursed (and in the case of reimbursement evidence of payment of such item of Cost)
as herein provided is attached hereto and incorporated herein by reference.
I HEREBY CERTIFY THAT:
(a) each item of Project Cost for which payment or reimbursement is herein
requested was necessary in connection with the Project and has not formed the basis for
any previous payment from the Construction Fund;
(b) with respect to all Project Cost items incurred under any construction contract
providing for the retention of a portion of the contract price, the total amount certified for
payment or reimbursement of such Project Costs does not exceed the net contract price
after deducting any portion to be withheld.
____________________________
City Representative
135220496v4
EXHIBIT A
Schedule of Amounts Due and Payable From Construction Fund Directly to Named Payees:
Name and Address
of Payee
Payment
Requested
Work Done
by Payee
Schedule of Amounts Due and Payable To City From Construction Fund as Reimbursement for
Payment by City:
Name and Address
of Payee Paid
By City
Reimbursement
Requested
Work Done
By Payee of
City
135402193v1
CONTINUING DISCLOSURE UNDERTAKING
This Continuing Disclosure Undertaking (the "Disclosure Undertaking") is executed and
delivered by the City of Otsego, Minnesota (the "City"), in connection with the issuance by the
Otsego Economic Development Authority (the "Authority") of its $_________ Lease Revenue
Bonds, Series 2024A (City of Otsego, Minnesota Lease with Option to Purchase Project) (the
"Bonds"). The Bonds are being issued pursuant to an Indenture of Trust dated as of December
30, 2024 between the Authority and U.S. Bank Trust Company, National Association, as trustee
(the "Indenture"). Pursuant to a resolution adopted by the Board of Commissioners of the
Authority on December 9, 2024 the Authority approved the form of the Indenture. Pursuant to a
Resolution adopted by the City Council of the City on December 9, 2024 the City approved this
Undertaking and therefore the City covenants and agrees as follows:
SECTION 1. Purpose of the Disclosure Undertaking. This Disclosure Undertaking is
being executed and delivered by the City for the benefit of the Owners and in order to assist the
Underwriter in complying with SEC Rule 15c2-12(b)(5). Although the Authority is the issuer of
the Bonds, it is not an "obligated person" subject to the disclosure requirements under the Rule
because (i) the Bonds are payable from lease payments to be made by the City and (ii) financial
information and operating data set forth in the Official Statement relates only to the City.
SECTION 2. Definitions. In addition to the definitions set forth in the Resolution, which
apply to any capitalized term used in this Disclosure Undertaking unless otherwise defined in
this Section, the following capitalized terms shall have the following meanings:
"Annual Report" shall mean any annual financial information provided by the City
pursuant to, and as described in, Sections 3 and 4 of this Disclosure Undertaking.
"Audited Financial Statements" shall mean the financial statements of the City audited
annually by an independent certified public accounting firm, prepared pursuant to generally
accepted accounting principles promulgated by the Financial Accounting Standards Board,
modified by governmental accounting standards promulgated by the Government Accounting
Standards Board.
"Dissemination Agent" shall mean such party from time to time designated in writing by
the City to act as information dissemination agent and which has filed with the City a written
acceptance of such designation.
"Financial Obligation" shall mean a (i) debt obligation; (ii) derivative instrument entered
into in connection with, or pledged as security or a source of payment for, an existing or planned
debt obligation; or (iii) guarantee of (i) or (ii). This term shall not include municipal securities as
to which a final official statement has been provided to the MSRB consistent with the Rule.
"Fiscal Year" shall be the fiscal year of the City.
"Governing Body" shall, with respect to the Bonds, have the meaning given that term in
Minnesota Statutes, Section 475.51, Subdivision 9.
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"MSRB" shall mean the Municipal Securities Rulemaking Board.
"Occurrence(s)" shall mean any of the events listed in Section 5 of this Disclosure
Undertaking.
"Official Statement" shall be the Official Statement dated December __, 2024, prepared
in connection with the Bonds.
"Owners" shall mean the registered holders and, if not the same, the beneficial owners of
any Bonds.
"Participating Underwriter" shall mean any of the original underwriters of the Bonds
required to comply with the Rule in connection with offering of the Bonds.
"Resolution" shall mean the resolution or resolutions adopted by the Governing Body of
the City providing for, and authorizing the issuance of, the Bonds.
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as the same may be amended from time
to time or interpreted by the Securities and Exchange Commission.
SECTION 3. Provision of Annual Reports.
A. Beginning in connection with the Fiscal Year ending on December 31, 2024, the
City shall, or shall cause the Dissemination Agent to provide to the MSRB by filing at
www.emma.msrb.org, together with such identifying information as prescribed by the MSRB, an
Annual Report which is consistent with the requirements of Section 4 of this Disclosure
Undertaking by not later than December 31, 2025, and by December 31 of each year thereafter.
B. If the City is unable to provide to the MSRB an Annual Report by the date
required in subsection A, the City shall send a notice of such delay and estimated date of delivery
to the MSRB.
SECTION 4. Content and Format of Annual Reports. The City's Annual Report shall
contain or incorporate by reference the financial information and operating data pertaining to the
City listed below as of the end of the preceding Fiscal Year. The Annual Report may be
submitted to the MSRB as a single document or as separate documents comprising a package,
and may cross-reference other information as provided in this Disclosure Undertaking.
The following financial information and operating data shall be supplied:
A. An update of the operating and financial data of the type of information contained
in the Official Statement under the captions: Economic and Financial Information –
"Valuations," "Tax Capacity Rates" and "Tax Levies and Collections;" and Summary of Debt
and Debt Statistics.
B. Audited Financial Statements of the City. The Audited Financial Statements of
the City may be submitted to the MSRB separately from the balance of the Annual Report. In
the event Audited Financial Statements of the City are not available on or before the date for
135402193v1
3
filing the Annual Report with the MSRB as set forth in Section 3.A. above, unaudited financial
statements shall be provided as part of the Annual Report. The accounting principles pursuant to
which the financial statements will be prepared will be pursuant to generally accepted accounting
principles promulgated by the Financial Accounting Standards Board, as such principles are
modified by the governmental accounting standards promulgated by the Government Accounting
Standards Board, as in effect from time to time. If Audited Financial Statements are not
provided because they are not available on or before the date for filing the Annual Report, the
City shall promptly provide them to the MSRB when available.
SECTION 5. Reporting of Significant Events. This Section 5 shall govern the giving of
notices of the occurrence of any of the following events with respect to the Bonds:
(1) Principal and interest payment delinquencies;
(2) Non-payment related defaults, if material;
(3) Unscheduled draws on debt service reserves reflecting financial difficulties;
(4) Unscheduled draws on credit enhancements reflecting financial difficulties;
(5) Substitution of credit or liquidity providers, or their failure to perform;
(6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed
or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-
TEB), or other material notices or determinations with respect to the tax status of
the Bonds, or other material events affecting the tax status of the Bonds;
(7) Modifications to rights of security holders, if material;
(8) Bond calls, if material, and tender offers;
(9) Defeasances;
(10) Release, substitution, or sale of property securing repayment of the Bonds, if
material;
(11) Rating changes;
(12) Bankruptcy, insolvency, receivership or similar event of the City;
(13) The consummation of a merger, consolidation, or acquisition involving an
obligated person or the sale of all or substantially all of the assets of the obligated
person, other than in the ordinary course of business, the entry into a definitive
agreement to undertake such an action or the termination of a definitive
agreement relating to any such actions, other than pursuant to its terms, if
material;
(14) Appointment of a successor or additional trustee or the change of name of a
trustee, if material.
(15) Incurrence of a Financial Obligation of the obligated person, if material, or
agreement to covenants, events of default, remedies, priority rights, or other
similar terms of a Financial Obligation of the obligated person, any of which
affect security holders, if material; and,
(16) Default, event of acceleration, termination event, modification of terms, or other
similar events under the terms of a Financial Obligation of the obligated person,
any of which reflect financial difficulties.
Whenever an event listed above has occurred, the City shall promptly, which may not be
in excess of the ten (10) business days after the Occurrence, file a notice of such Occurrence with
135402193v1
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the MSRB, by filing at www.emma.msrb.org, together with such identifying information as
prescribed by the MSRB.
The City agrees to provide or cause to be provided, in a timely manner, to the MSRB
notice of a failure by the City to provide the Annual Reports described in Section 4.
SECTION 6. Termination of Reporting Obligation. The City's obligations under this
Disclosure Undertaking shall terminate upon the legal defeasance, prior redemption or payment
in full of all of the Bonds.
SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage
a Dissemination Agent to assist it in carrying out its obligations under this Disclosure
Undertaking, and may discharge any such Agent, with or without appointing a successor
Dissemination Agent.
SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this
Disclosure Undertaking, the City may amend this Disclosure Undertaking, and any provision of
this Disclosure Undertaking may be waived, if (a) a change in law or change in the ordinary
business or operation of the City has occurred, (b) such amendment or waiver would not, in and
of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been
effective on the date hereof but taking into account any subsequent change in or official
interpretation of the Rule, and (c) such amendment or waiver is supported by an opinion of
counsel expert in federal securities laws to the effect that such amendment or waiver would not
materially impair the interests of Owners.
SECTION 9. Additional Information. Nothing in this Disclosure Undertaking shall be
deemed to prevent the City from disseminating any other information, using the means of
dissemination set forth in this Disclosure Undertaking or any other means of communication, or
including any other information in any Annual Report or notice of an Occurrence, in addition to
that which is required by this Disclosure Undertaking. If the City chooses to include any
information in any Annual Report or notice of an Occurrence in addition to that which is
specifically required by this Disclosure Undertaking, the City shall have no obligation under this
Disclosure Undertaking to update such information or include it in any future Annual Report or
notice of an Occurrence.
SECTION 10. Default. In the event of a failure of the City to provide information
required by this Disclosure Undertaking, any Owner may take such actions as may be necessary
and appropriate, including seeking mandamus or specific performance by court order, to cause
the City to comply with its obligations to provide information under this Disclosure Undertaking.
A default under this Disclosure Undertaking shall not be deemed an Event of Default under the
Resolution, and the sole remedy under this Disclosure Undertaking in the event of any failure of
the City to comply with this Disclosure Undertaking shall be an action to compel performance.
SECTION 11. Beneficiaries. This Disclosure Undertaking shall inure solely to the
benefit of the City, the Participating Underwriters and Owners from time to time of the Bonds,
and shall create no rights in any other person or entity.
135402193v1
5
SECTION 12. Reserved Rights. The City reserves the right to discontinue providing any
information required under the Rule if a final determination should be made by a court of
competent jurisdiction that the Rule is invalid or otherwise unlawful or, subject to the provisions
of Section 8 hereof, to modify the undertaking under this Disclosure Undertaking if the City
determines that such modification is required by the Rule or by a court of competent jurisdiction.
135402193v1
6
Dated: December 30, 2024 CITY OF OTSEGO, MINNESOTA
By: ________________________
Its Mayor
By: _________________________
Its City Administrator