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HomeMy WebLinkAbout10-25-01 6. DEVELOPMENT AGREEMENT /n- ZS - 0/ 6. Draft: 10/22/01 DEVELOPMENT AGREEMENT Relating to ORONO WOODS APARTMENTS (Including Tax Increment Financing District No. 1-1) Between CITY OF ORONO ORONO HOUSING AND REDEVELOPMENT AUTHORITY and ORONO SENIOR HOUSING, LLC This Instrument Drafted by: Faegre & Benson LLP 2200 Wells Fargo Center 90 South Seventh Street Minneapolis, Minnesota 55402-3901 Telephone: (612) 336-3000 DEVELOPMENT AGREEMENT THIS AGREEMENT, made and entered into as of this day of October November, 2001, by and among the CITY OF ORONO, a Minnesota municipal corporation having its principal office at 2750 Kelley Parkway, Orono, Minnesota(the "City"), the ORONO HOUSING AND REDEVELOPMENT AUTHORITY, a body corporate and politic having its principal office at 2750 Kelley Parkway, Orono, Minnesota(the "HRA") and ORONO SENIOR HOUSING, LLC, a Minnesota limited liability company "Developer"). com an (the Develo erP ) WITNESSETH: WHEREAS, the Developer, the City and the HRA contemplate that the Developer and Dunbar will develop the property described in Exhibit A hereto (the "Development Property") as a 62-unit apartment building for seniors (the "Project"); and WHEREAS, the Developer will cause the Development Property to be acquired and conveyed to the HRA under the terms and conditions of Section 3.3 hereof; and WHEREAS, the HRA will lease the Development Property to the Developer for use as senior housing pursuant to the Ground Lease attached hereto as Exhibit B (the "Ground Lease"); and WHEREAS, the HRA will issue its Tax Increment Revenue Note in the form of Exhibit C hereto (the "TIF Note") in payment of a portion of the costs of acquiring the Development Property; and WHEREAS, the balance of the costs of the Project will be financed by the issuance by the City of its Multifamily Senior Housing Revenue Bonds (Orono Woods Project), Series 2001A land its Taxable Senior Housing Revenue Bonds (Orono Woods Apartment Project), Series 2001B (together the "Housing Bonds") and its Subordinate Multifamily Senior Housing Revenue Note (Orono Woods Project), Series 200fB 2001C (the "Subordinate Housing Note") to be issued as described in Section 3.1 hereof; and WHEREAS, the HRA has created and established Tax Increment Financing District No. 1-1 as a housing tax increment financing district (the "TIF District") and a coterminus Housing Project Area No. 1 pursuant to a development program and a tax increment financing plan(the "TIF Plan") adopted pursuant to Minnesota Statutes, Sections 469.001 through 469.047 and Sections 469.174 through 469.179 (collectively, the "Acts"); and WHEREAS, the Project and the TIF Note are contemplated and authorized by the TIF Plan; and 1 WHEREAS, the Project, the Housing Bonds and Subordinated Housing Note are contemplated and authorized by a Senior Housing Program (the "Housing Program") adopted by the City Council pursuant to Minnesota Statutes, Chapter 462C; and WHEREAS, the Project is to be developed as a planned unit development pursuant to the terms of a Agreement dated as of October November_, 2001 between the City and the Developer (the "PUD Agreement"). WHEREAS, the proposed Project qualifies as a "housing development project" within the meaning of Minnesota Statutes, Sections 469.002, Subd. 15 and 469.017, and will promote and carry out the objectives of the Housing Program and the TIF Plan, will be in the vital best interests of the City and will promote the health, safety, morals and welfare of its residents, and are in accord with the public purposes and provisions of the applicable state and local laws. NOW, THEREFORE, in consideration of the mutual covenants and obligations of the HRA, the City and the Developer, the parties hereby represent, covenant and agree as follows: [The balance of this page intentionally left blank.] 2 ARTICLE I. DEFINITIONS, EXHIBITS, RULES OF INTERPRETATION Section 1.1 Definitions. In this Agreement, the following terms have the following respective meanings unless the context hereof clearly requires otherwise: (a) Acts. Minnesota Statutes, Sections 469.001 through 469.047 and 469.174 through 469.179. (b) Certificate of Completion. The certificate of completion set forth in Exhibit D hereto. (c) City. The City of Orono, Hennepin County, Minnesota. (d) Completion Year. The earlier of(1) the year 2002 and(2) the year(if any) in which the Certificate of Completion for the Improvements is issued. (e) Developer. Orono Senior Housing, LLC, a Minnesota limited liability company, its successors and assigns. (f) Development. The Development Property and the Improvements to be constructed thereon by the Developer in accordance with the terms of this Agreement, as they may at any time exist. (g) Development Property. The real property which is the site of the Improvements, as legally described in Exhibit A hereto. (h) Event of Default. An Event of Default, as defined in Section 7.1. (i) Financing Documents. The following documents to be executed and delivered in connection with the issuance and sale of the Housing Bonds and the Subordinate Housing Note: . Indenture of Trust dated as of November 1, 2001 between the City and U.S. Bank Trust National Association, Loan Agreement dated as of November 1, 2001 between the Developer and the City and (j) Ground Lease. The Ground Lease attached as Exhibit B hereto, as the same may be amended from time to time. (k) Housing Bonds. The Multifamily Senior Housing Revenue Bonds (Orono Woods Project), Series 2001A and the Taxable Multifamily Senior Housing Revenue Bonds, Series 2001B to be issued pursuant to Section 3.1 hereof and the Financing Documents. 3 (1) Housing Plan. The development program for the HRA's Housing Project Area No. 1, which contains the TIF District. (m) HRA. The Orono Housing and Redevelopment Authority, and any successor to its functions. (n) Improvements. The 62-unit apartment building and appurtenant facilities described in the PUD Agreement. (o) Mortgage and Holder. The term "Mortgage" shall include the mortgages referenced in Article V of this Agreement and any other instrument creating an encumbrance or lien upon the Development or any part thereof as security for a loan. The term "Holder" in reference to a Mortgage includes any insurer or guarantor (other than the Developer) of any obligation or condition secured by such Mortgage or deed of trust. (p) Permitted Encumbrances. The encumbrances on the Development Property which are permitted to exist and the time the Development Property is conveyed to the HRA, which encumbrances shall consist only of and such other encumbrances as the City and HRA may approve in writing. (q) Project. The Development Property and the Improvements to be constructed thereon pursuant to this Agreement. (r) Project Costs. Project Costs means: (a) Costs incurred directly or indirectly for or in connection with the acquisition, construction, installation or equipping of the Project, including other costs incurred in respect of the Project for preliminary planning and studies; architectural, legal, engineering, accounting, consulting, development, supervisory and other services; land, labor, services and materials and recording of documents and title work. (b) Premiums attributable to any surety bonds and insurance required to be taken out and maintained during the construction period with respect to the Development Property and the Improvements. (c) Taxes, assessments and other governmental charges in respect of the Project that may become due and payable during the construction period. (d) Costs incurred directly or indirectly in seeking to enforce any remedy against any contractor or subcontractor in respect of any actual or claimed default under any contract relating to the Improvements. 4 (e) Financial, legal, accounting, printing and engraving fees, charges and expenses and all other such fees, charges and expenses incurred in connection with the authorization, sale, issuance and delivery of the Housing Bonds and Subordinate Housing Note including, without limitation, the fees and expenses of the City and HRA and the fees and expenses of the trustee, the paying agent, the registrar and the authenticating agent properly incurred under the Financing Documents that may become due and payable during the construction period. (0 Any other costs, expenses, fees and charges properly chargeable to the cost of acquisition, construction, installation and equipping of the Project. (s) PUD Agreement. The Agreement dated 2001 between the Developer and the City relating to development of the Development Property and an adjacent parcel as a planned unit development. (t) Subordinate Housing Note. The Subordinate Multifamily Senior Housing Note (Orono Woods Project), Series 2001C to be issued pursuant to Section 3.1 hereof and the financing Documents. (u) Tax Increment Financing District (TIF District). Tax Increment Financing District No. 1-1 consisting of the Development Parcel, created by the HRA pursuant to the TIF Act and described in the TIF Plan adopted therefor. (v) Tax Increment Financing Plan(TIF Plan). The plan for development of the TIF District adopted by the HRA pursuant to the TIF Act. (w) Tax Increment Note or TIF Note. The Note to be issued by the HRA pursuant to Section 6.1 hereof and which is substantially in the form of Exhibit C hereto. (x) Term. The period beginning on the date of this Agreement and ending on February 1, 2022; provided, however, that the Term shall not extend beyond the termination date of the TIF District under the TIF Act or the date, if any, of cancellation or recission of this Agreement under Section 7.2(a) hereof. (y) TIF Act. Minnesota Statutes, Sections 469.174 through 469.179. (z) Unavoidable Delays. Delays which are the direct result of strikes, fire, war, material shortage, causes beyond the party's control or other casualty, or acts of any federal, state or local government unit, except those acts anticipated or contemplated under this Agreement. 5 Section 1.2 Exhibits. The following Exhibits are attached to and by reference made a part of this Agreement: A. Development Property B. Ground Lease C. Tax Increment Note D. Certificate of Completion E. Form of Income Certification F. Investor Letter Section 1.3 Rules of Interpretation. (a) This Agreement shall be interpreted in accordance with and governed by the laws of the state of Minnesota. (b) The words "herein" and "hereof' and words of similar import, without reference to any particular section or subdivision refer to this Agreement as a whole rather than any particular section or subdivision hereof. (c) References herein to any particular article, section or subdivision hereof are to the article, section or subdivision of this Agreement as originally executed. (d) Any titles of the several parts, articles and sections of this Agreement are inserted for convenience and reference only and shall be disregarded in construing or interpreting any of its provisions. [The balance of this page intentionally left blank.] 6 ARTICLE II. REPRESENTATIONS AND COVENANTS Section 2.1 By the Developer. The Developer makes the following representations and covenants: (a) The Developer has the legal authority and power to enter into this Agreement. (b) The Developer reasonably expects to obtain financial resources which, when combined with the assistance hereunder, will be sufficient to enable the completion of the Improvements. (c) The Developer will, subject to the provisions of Article IV hereof, construct, operate and maintain the Improvements in accordance with the terms of this Agreement, the PUD Agreement, the Housing Plan, the TIF Plan and all local, state and federal laws and regulations, and will construct or pay the costs of construction of any site improvements, utilities, parking facilities, or landscaping improvements which are necessary in connection with the construction and operation of the Improvements. (d) At such time or times as may be required by law, the Developer will have complied with all local, state and federal environmental laws and regulations, will have obtained any and all necessary environmental reviews, licenses or clearances under, and will be in compliance with the requirements of the National Environmental Policy Act of 1969, the Minnesota Environmental Policy Act, and the Critical Area Act of 1973. (e) The Developer will obtain, in a timely manner, all required permits, licenses and approvals, and will meet, in a timely manner, all requirements of all local, state and federal laws and regulations which must be obtained or met before the Improvements may be constructed. (f) The Developer acknowledges that the TIF District is a "housing district," as defined in Section 469.174, Subdivision 11, of the TIF Act and, as such, is subject to the limitations provided in Minnesota Statutes, Section 469.174, Subdivision 11 and Section 469.1761, Subdivision 3 (together, the "Restrictions"). The Developer covenants that it will with respect to the Improvements observe and comply, and that it will cause and require any of its permitted successors and assigns to observe and comply, with such Restrictions. In particular, and without limitation, the Developer covenants that at no time prior to the expiration of the Term shall the fair market value (determined using cost of construction, capitalized income, or other appropriate method of estimating market value) of any portion of the Improvements which are, within the meaning of Section 469.174, Subdivision 11, of the TIF Act, constructed for commercial uses or for uses other than low and moderate income housing constitute more than 20% of the total fair market value of the 7 Improvements. The Developer represents and covenants that throughout the Term the TIF District shall continue to qualify as a "housing district" under the TIF Act; specifically, that not less than 20% of the rental housing units of the Improvements shall be rented to persons/families that at occupancy have annual income less than 50% of area median gross income. The Developer further represents and covenants that throughout the Term the housing units shall be rented only to persons 62 years of age or older. At least annually, the Developer agrees to provide evidence reasonably satisfactory to the HRA of compliance with the applicable income and age limitations, including without limitation the total number of rental units during any reporting period and income and age verifications substantially in the form of the attached Exhibit E respecting units rented to tenants meeting those limits. (g) It is intended and agreed that the covenants provided in this Section 2.1 shall remain in effect throughout the Term and shall be covenants running with the land. Except as expressly set forth in Section 5.5 hereof, the obligations under such provisions shall not be subordinated to the rights of any party having an interest in the Development Property. Section 2.2 By the City. The City makes the following representations as the basis for the undertaking on its part herein contained: (a) The City is authorized by law to enter into this Agreement and to carry out its obligations hereunder. (b) The City will, in a timely manner, subject to all notification requirements, review and act upon all submittals and applications of the Developer and will cooperate with the efforts of the Developer to secure the granting of any permit, license, or other approval required to construct and operate the Improvements; provided, however, that nothing contained in this subparagraph 2.2(b) shall be construed to limit in any way the reasonable and legitimate exercise of the City's discretion in considering any submittal or application. (c) The Development Property is zoned for purposes which include the Development as proposed. The City has issued all necessary planned unit development, conditional use permits and plat approval for the Development Property. Section 2.3 By the HRA. The HRA makes the following representations as the basis of the undertakings on its part: (a) The HRA is authorized by law to enter into this Agreement and to carry out its obligations hereunder; (b) The HRA shall cooperate with the City and the Developer with regard to the issuance of any additional permits required by the Developer to construct the Improvements. (c) The I-IRA will issue the TIF Note in consideration of Dunbar's the conveyance of the Development Property in accordance with Section 3.03. 8 ARTICLE III. CITY OBLIGATIONS FOR HOUSING BONDS AND SUBORDINATED HOUSING NOTE; DEFERMENT OF FEES: ACQUISITION OF DEVELOPMENT PROPERTY; CONSTRUCTION OF PUBLIC IMPROVEMENTS Section 3.1 Housing Bonds and Subordinated Housing Note. The City agrees to issue the Housing Bonds and Subordinated Housing Note pursuant to the Housing Act in an aggregate amount, not to exceed$8,96009$9,000,000, which is estimated by the Developer to be sufficient to pay the estimated Project Costs; provided, however, that the aggregate principal amount of the Housing Bonds shall not exceed $7,810,000 $8,500,000 and the principal amount of the Subordinated Housing Note shall not exceed$250,000$500,000. The obligation of the City to issue the Housing Bonds and Subordinated Housing Note is subject to the following conditions: (a) The Financing Documents, in form and substance satisfactory to the City and the City Attorney, have been duly executed and delivered by the Developer and the other parties thereto. (b) The Developer shall have executed and delivered the Ground Lease and the PUD Agreement. (c) Faegre & Benson LLP, as bond counsel, shall have delivered its opinion that the Housing Bonds and Subordinated Housing Note were validly issued and that the interest thereon is exempt from federal income taxation. (d) The City shall have received opinions of counsel to the Developer and the other parties to the Financing Documents, in form and substance satisfactory to it, to the effect that the Ground Lease and Financing Documents are valid and binding obligations of such parties, enforceable in accordance with their terms. (e) The Developer shall have entered into a contract for construction of the Improvements with Frana& Sons Inc., in form and substance satisfactory to the City, and providing for a guaranteed maximum price of not more than (f) All conditions precedent to the execution and deliveryof the Financing g Documents shall have been satisfied without regard to any waivers which the City has not approved. 10 Neither the City nor the HRA shall be responsible for the failure of the Developer, Dunbar or any other person to satisfy the foregoing conditions and the City and HRA make no representations or warranties that such conditions can or will be met. The City and HRA have no obligation to issue any additional obligations to refund the Housing Bonds or Subordinated Housing Note or to provide any additional funds for completion of the Development or otherwise. Section 3.2. Park Dedication and Utility Connection Charges. The City agrees that fees aggregating $200,000, consisting of park dedication fees in the amount of$ and utility connection fees in the amount of$ , otherwise payable with respect to the Development are deferred and shall be payable only in the event that the Developer permits the Development to be occupied by tenants who are not 62 years of age or older. In that event such fees shall be immediately due and payable together with interest on the deferred amounts computed at the rate of 7.00% per annum from the date hereof. If there is no incurred default under this Section 3.2 on , August 1, 2024 the fees are forgiven and the City shall look solely to tax increment from the TIF District for the reimbursement of such fees. The HRA hereby agrees to apply tax increment from the TIF District to such reimbursement, subject to its obligations under the TIF Note. Section 3.3. Conveyance of Development Property; Execution of Ground Lease. On or prior to November_, 2001 the Developer shall convcy cause to be conveyed fee simple title to the Development Property to the HRA by warranty deed, subject only to Permitted Encumbrances. In consideration of such conveyance the HRA shall execute and deliver the TIF Note to the Developer. Upon execution and delivery of the Financing Documents, the HRA shall execute and deliver the Ground Lease. [The balance of this page intentionally left blank.] 11 ARTICLE IV. CONSTRUCTION OF IMPROVEMENTS Section 4.1 Construction of Improvements. The Developer agrees to construct the Improvements and complete the Project in accordance with the PUD Agreement on or prior to December 1, 2002. This covenant to construct the Improvements shall run with the land. When the Project is completed, as evidenced by a Certificate of Completion, the Development Property shall be released from the requirements of this Article IV and shall no longer be encumbered by the obligations imposed under this Article IV. Section 4.2 Building Plans. When the Developer completes the design for the Improvements, it may submit the plans and specifications to the City as part of its application for a building permit. If the proposed Improvements for that phase are substantially consistent with the definition of the Improvements set forth herein and the Developer has complied with all other applicable requirements for the issuance of a building permit, the permit shall be issued in accordance with standard City practices. The City shall not be required to provide a building permit or otherwise permit construction of any improvements on the Development Property if, in its reasonable judgment, such improvements would interfere with the ability of the Developer to complete the Improvements described herein within applicable land-use regulations. Any change in the approved plans for a phase which substantially alters the construction of the Improvements shall be subject to approval by the City. Section 4.3 Completion of Construction. All construction shall be in conformity with the plans. Periodically during construction, but at intervals of not less than 30 days, the Developer shall make reports in such detail as may reasonably be requested by the City concerning the actual progress of construction. Section 4.4 Certificate of Completion. Promptly after notification by the Developer of completion of the Improvements, the City shall inspect the construction to determine whether it has been completed in accordance with the terms of this Agreement. In the event that the City determines that the construction has been completed in accordance with the plans and applicable regulations, the City shall furnish the Developer with a Certificate of Completion in the form provided in Exhibit D. Such certification by the City shall be a conclusive determination of satisfaction and termination of the agreements and covenants in this Article IV with respect to the obligation of the Developer to construct the Improvements. The Certification of Completion provided for in this Section 4.4 shall be in recordable form. If the City shall refuse or fail to provide certification in accordance with the provisions 12 of this Section 4.4, the City shall within 15 days of such notification provide the Developer with a written statement, indicating in adequate detail in what respects the Developer has failed to complete the Improvements in accordance with the applicable plans and applicable regulations, or is otherwise in default, and what measures or acts will be necessary, in the opinion of the City, for the Developer to take or perform in order to obtain such certification. The City shall issue the Completion Certificate that the Improvements conform to the applicable plans and applicable regulations. [The balance of this page intentionally left blank.] 13 ARTICLE V. LIMITATION UPON ENCUMBRANCE; PROHIBITIONS AGAINST ASSIGNMENT AND TRANSFER; SUBORDINATION Section 5.1 Limitation Upon Encumbrance of Development. Prior to the issuance of the Certificate of Completion, neither the Developer nor any successor in interest to the Development Property or any part thereof shall engage in any financing or any other transaction creating any Mortgage or other encumbrance or lien upon the Development Property, whether by express agreement or operation of law, or suffer any encumbrance or lien to be made on or attached to the parcel of the Development Property other than this Agreement, the PUD Agreement and the Financing Documents. Section 5.2 Representation as to Development. The Developer represents and agrees that its undertakings pursuant to the Agreement are for the purpose of implementation of the Development and not for speculation in landholding. The Developer further recognizes that, in view of the importance of the Development to the general welfare of the City and the substantial financing and other public aids that have been made available by the HRA and the City for the purpose of making the Development possible, the qualifications and identity of the Developer are of particular concern to the HRA and the City. The Developer further recognizes that it is because of such qualifications and identity that the HRA and City are entering into this Agreement, and, in so doing, are further willing to rely on the representations and undertakings of the Developer for the faithful performance of all undertakings and covenants agreed by Developer to be performed. Section 5.3 Prohibition Against Transfer of Property and Assignment of Agreement For the reasons set out in Section 5.2 of this Agreement, the Developer represents and agrees that, prior to the issuance of the Certificate of Completion as certified by the City: (a) Except for leases and other tenancies in the rental units of the Improvements or for any other purpose authorized by this Agreement, the Developer, except as so authorized, has not made or created, and will not make or create, or suffer to be made or created, any total or partial sale, assignment, conveyance, or any trust or power, or transfer in any other mode or form of or with respect to this Agreement or the Development Property or any part thereof or any interest therein, or any contract or agreement to do any of the same, without the prior written approval of the City; and (b) The City shall be entitled to require, except as otherwise provided in this Agreement, as conditions to any such approval under this Section 5.3 that: (i) any proposed transferee shall have the qualifications and financial responsibility, as reasonably determined by the City, necessary and adequate to fulfill the obligations undertaken in this Agreement by the Developer or, in the event the transfer is of or relates to part of the Development, such obligations to the extent that they relate to such part; (ii) any proposed transferee, by 14 instrument in writing satisfactory to the City and in form recordable among the land records, shall for itself and its successors and assigns, and specifically for the benefit of the HRA and the City, have expressly assumed all (or the applicable portion) of the obligations of the Developer under this Agreement and agreed to be subject to such obligations, restrictions and conditions or, in the event the transfer is, of, or relates to part of the Development, such obligations, conditions, and restrictions to the extent that they relate to such part; provided, that the fact that any transferee of, or any other successor in interest whatsoever to, the Development or any part thereof, shall, for whatever reason, not have assumed such obligations or agreed to do so, shall not, unless and only to the extent otherwise specifically provided in this Agreement or agreed to in writing by the City, relieve or except such transferee or successor from such obligations, conditions, or restrictions, or deprive or limit the HRA and the City of or with respect to any rights or remedies or controls with respect to the Development or the construction of the Improvements; it being the intent of this Section 5.3, together with other provisions of this Agreement, that to the fullest extent permitted by law and equity and excepting only in the manner and to the extent specifically provided otherwise in the Agreement no transfer of, or change with respect to, ownership in the Development or any part thereof, or any interest therein, however consummated or occurring, whether voluntary or involuntary, shall operate, legally or practically, to deprive or limit the HRA or the City, of any rights or remedies or controls provided in or resulting from this Agreement with respect to the Development and the construction of the Improvements that the HRA and the City would have had, had there been no such transfer or change; and(iii) there shall be submitted to the City for review all instruments and other legal documents involved in effecting transfers described herein, and if approved by the City, their approval shall be indicated to the Developer in writing. In the absence of specific written agreement by the City to the contrary, no such transfer or approval by the City thereof shall be deemed to relieve the Developer from any of its obligations with respect thereto. Section 5.4 Approvals. Any approval required to be given by the City under this Article V may be denied only in the event that the City reasonably determines that the ability of the Developer to perform its obligations under this Agreement will be materially impaired by the action for which approval is sought. Section 5.5 Subordination and Modification for the Benefit of Mortgagees. (a) In order to facilitate the obtaining of temporary or permanent financing for the construction or purchase of the Development, or individual phases thereof, by the Developer, the City agrees to subordinate its rights under this Agreement to the Holder of any Mortgage entered into for the purpose of obtaining such financing, but only provided that the Mortgage or subordination agreement provides that if the Holder of the Mortgage shall foreclose on the Development Property or the Improvements thereon, or on the Developer's interest in the Ground Lease, or any portion thereof, or accept a deed to such property in lieu of foreclosure, it shall consent to be bound by the provisions of Section 2.1(f) of this Agreement. 15 (b) In order to facilitate the obtaining of financing for the acquisition and construction of the Development, the City agrees that it shall agree to any reasonable modification of this Article V or waiver of its rights hereunder to accommodate the interests of the Holder of the Mortgage, provided, however, that the City determines, in its reasonable judgment, that any such modification(s) will adequately protect the legitimate interests and security of the HRA and the City with respect to the Development. [The balance of this page intentionally left blank.] 16 ARTICLE VI. TAX INCREMENT NOTE Section 6.1 Issuance of Tax Increment Note. The Developer represents that it has incurred and will incur significant costs in acquiring the Development Property which are estimated to be at least $ $700,000. In consideration of this Agreement, the HRA agrees to reimburse up to $ approximately $700,000 of these costs, together with interest accruing thereon at 7.00%per annum, as provided in and subject to the provisions of the TIF Note substantially in the form of Exhibit C hereto. The HRA shall issue the TIF Note and deliver the same to the Developer or the Developer's designee, as registered owner of the TIF Note, contemporaneously with the execution and delivery of a warranty deed conveying the Development Property to the HRA. The Developer covenants and agrees not to sell, transfer or convey the TIF Note without the express written consent of the HRA, which consent shall not be unreasonably withheld if the transferee executes and delivers to the HRA and the City an investment letter substantially in the form of Exhibit F hereto; provided, however, that the Developer may, without such consent, pledge or grant a security interest in the TIF Note to a lender as security for a loan, including the trustee for the Housing Bonds. The Developer acknowledges that neither the City nor the HRA make any representations as to the adequacy of tax increments available to pay the TIF Note. The TIF Note shall be payable solely from tax increment from the TIF District received by the HRA to the extent provided in Section 6.2 hereof and neither the City nor the HRA shall be liable on the TIF Note, nor shall the TIF Note be payable out of any funds or properties of the City or HRA except for said tax increment. Section 6.2 Tax Increment Available for TIF Note. The Note shall be paid solely from tax increment from the TIF District as set forth in the TIF Note. Only the amounts specifically required to be paid thereon shall be due and payable, regardless of whether the TIF Note has been paid in full. 17 ARTICLE VII. EVENTS OF DEFAULT Section 7.1 Events of Default Defined. The following shall be deemed Events of Default under this Agreement and the term shall mean, whenever it is used in this Agreement, unless the context otherwise provides, the failure by the Developer to observe and substantially perform any covenant, condition, obligation or agreement on its part to be observed or performed hereunder, after written notice to the Developer as provided in this Agreement. Section 7.2 Remedies on Default. Whenever any Event of Default occurs, the HRA and the City may, in addition to any other remedies or rights given the HRA and the City under this Agreement, (1)without notice suspend their performance under this Agreement until they receive assurances from the Developer, deemed adequate by the HRA and the City, that the Developer has cured its default(or will do so within a reasonably acceptable period) and will continue its performance under this Agreement, and(2) after provision of 60 days written notice to the Developer of the Event of Default, but only if the Event of Default has not been cured within said 60 days, or if the Event of Default cannot be cured within 60 days, the Developer does not provide assurances reasonably satisfactory to the City and the HRA that the Event of Default will be cured as soon as reasonably possible, take any one or more of the following actions: (a) cancel or rescind this Agreement or the TIF Note, or both; (b) withhold the Ccrtificatc of Complction; or f e) take whatever action at law or in equity as may appear necessary or desirable to the HRA or the City to enforce performance and observance of any obligation, agreement, or covenant of Dunbar or the Developer under this Agreement. Section 7.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to the HRA or the City is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the HRA, the City or the Developer to exercise any remedy reserved to it, it shall not be necessary to give notice, other than such notice as may be required in this Article VII. 18 Section 7.4 No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Agreement should be breached by any party and thereafter waived by another party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other concurrent, previous or subsequent breach hereunder. 19 [Thc balancc of this page intcntionally lcft blank.] ARTICLE VIII. ADDITIONAL PROVISIONS Section 8.1 Conflicts of Interest; Representatives Not Individually Liable. No HRA or City officer who is authorized to take part in any manner in making this Agreement in his or her official capacity shall voluntarily have a personal financial interest in this Agreement or benefit financially therefrom. No member, official, or employee of the HRA or the City shall be personally liable to the Developer, or any successor in interest, in the event of any default or breach by the HRA or the City or for any amount which may become due to the Developer or successor or on any obligations under the terms of this Agreement. Section 8.2 Notice of Status and Conformance. At such time as all of the provisions of this Agreement have been fully performed by the Developer, the HRA and the City upon not less than ten days prior written notice by the Developer agree to execute, acknowledge and deliver without charge to the Developer or to any person designated by the Developer a statement in writing in recordable form certifying the extent to which this Agreement has been fully performed and the obligations hereunder fully satisfied. Section 8.3 Notices and Demands. Except as otherwise expressly provided in this Agreement, a notice, demand or other communication under this Agreement by either party to the other shall be sufficiently given or delivered if it is sent by mail, postage prepaid, return receipt requested or delivered personally: (a) As to the City: City of Orono City Administrator 2750 Kelley Parkway Orono, Minnesota 55356 (b) As to the HRA: Executive Director Orono HRA 2750 Kelley Parkway Orono, Minnesota 55356 (c) As to the Developer: 20 c/o Wedum Foundation 3191 Shorewood Drive Arden Hills, MN 55112 or at such other address with respect to any party as that party may, from time to time, designate in writingand forward to the others as provided in this Section 8.3. � Section 8.4 Counterparts. This Agreement may be simultaneously executed in any number of counterparts, all of which shall constitute one and the same instrument. [The balance of this page intentionally left blank.] 21 IN WITNESS WHEREOF, the HRA and the City have caused this Agreement to be duly executed in their names and behalf and the Developer has caused this Agreement to be duly executed as of the day and year first above written. CITY OF ORONO, MINNESOTA By Mayor By City Clerk ORONO HOUSING AND REDEVELOPMENT AUTHORITY. By , Executive Director By , Chair ORONO SENIOR HOUSING, LLC By Its 22 STATE OF MINNESOTA ) ) ss COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this day of November, 2001, by and , the Mayor and City Clerk of the City of Orono, Minnesota, a municipal corporation under the laws of the State of Minnesota, on behalf of the city. Notary Public STATE OF MINNESOTA ) ) ss COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this day of November, 2001, by and , the Executive Director and Chair of the Orono Housing and Redevelopment Authority, a public body corporate and politic, on behalf of the HRA. Notary Public STATE OF MINNESOTA ) ) ss COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this day of November, 2001, by , the of Orono Senior Housing, LLC, a Minnesota limited liability company, on behalf of the company. Notary Public Ml:79G200.03EXIHBIT 796288.04 23 EXHIBIT A LEGAL DESCRIPTION OF DEVELOPMENT PROPERTY , according to the recorded plat thereof, Hennepin County, Minnesota. A-1 EXHIBIT B GROUND LEASE between ORONO HOUSING AND REDEVELOPMENT AUTHORITY, as Landlord and ORONO SENIOR HOUSING, LLC, as Tenant Dated as of , 2001 TABLE OF CONTENTS ARTICLE 1 DEFINITIONS 1 1.1 Definitions. 1 1.2 Exhibits 2 ARTICLE 2-LEASE AND TERM 3 2.1 Grant 3 2.2 Covenants. 3 2.3 Quiet Enjoyment. 3 2.4 Term. 3 2.5 Purchase of Development Property 3 2.6 Title to Improvements 4 ARTICLE 3-RENT 4 3.1 Rent. 4 3.2 Net Lease. 4 3.3 Manner of Payment. 4 ARTICLE 4-TENANT'S COVENANTS 4 4.1 Tenant's Equipment. 4 4.2 Maintenance. 5 4.3 Repairs. 5 4.4 Nondiscrimination;Restrictions on Use. 5 ARTICLE 5-FINANCING 5 5.1 Mortgages 5 5.2 Notice. 5 5.3 Performance. 6 6.4 New Lease. 6 5.5 Further Assurances 7 5.6 Termination of Lease. 7 ARTICLE 6-ASSIGNMENT AND SUBLETTING 8 6.1 Assignments. 8 6.2 Subleases. 8 6.3 Other Agreements 8 ARTICLE 7-END OF TERM 8 7.1 Surrender. 8 7.2 Vesting. 8 7.3 Tenant's Equipment. 8 7.4 Acceptance. 8 7.5 Merger. 9 -i- ARTICLE 8-NOTICES AND ESTOPPELS 9 8.1 Notices. 9 8.2 Estoppels. 9 ARTICLE 9-DEFAULT 10 9.1 Events of Default. 10 9.2 Termination. 10 9.3 Payments. 11 9.4 Injunctive Relief 11 9.5 Forbearance. 11 9.6 Costs. 12 9.7 Waiver of Default 12 9.8 Tenant's Liability 12 ARTICLE 10-MISCELLANEOUS 12 10.1 Relationship. 12 10.2 Number and Gender. 12 10.3 Captions. 12 10.4 Time. 12 10.5 Construction. 12 11.6 Law. 13 10.7 Binding. 13 10.8 Short Form. 13 10.9 Severability. 13 10.10 Counterparts 13 10.11 Interest Rate. 13 EXHIBIT A Legal Description of the Development Property A-1 EXHIBIT B Permitted Encumbrances B-1 -ii- THIS GROUND LEASE, made on or as of the day of November, 2001, by and between ORONO HOUSING AND REDEVELOPMENT AUTHORITY, a public body corporate and politic and a governmental subdivision under Minnesota law, and ORONO SENIOR HOUSING,LLC("ORONO SENIOR HOUSING,LLC"),a Minnesota limited liability company. The Authority and Orono Senior Housing,LLC,in consideration of the covenants herein contained, hereby agree as follows: ARTICLE 1 DEFINITIONS 1.1 Definitions. In this Lease: "City" means the City of Orono, Minnesota. "Commencement Date" means that date upon which all of the parties hereto have executed this Lease. "Development" means the Development Property and the Improvements to be constructed pursuant to the Development Agreement. "Development Agreement" means the Development Agreement dated as of November_, 2001 between the City, the Landlord and the Tenant. "Development Property" means the real property that is the subject of the Development Agreement, which is legally described in Exhibit A. "Event of Default" means any one or more of the events listed under Section 10.2 of this Lease. "Financing Documents" means any of the following documents to be executed and delivered in connection with the issuance and sale of the Housing Bonds and the Subordinate Housing Note: "Holder" means the holder of any Mortgage. "Improvements" means the 62-unit senior housing apartment building to be constructed by Tenant upon and within the Development Property pursuant to the Development Agreement. "Landlord" means the Authority, its successors and assigns. -1- "Lease" means this lease agreement for the Development Property entered into pursuant to the Development Agreement. "Mortgage" means any mortgage or deed of trust on Tenant's interest in this Lease, the Development Property and the Improvements permitted under Article 5 of this Lease. "Permitted Encumbrances" means the matters described in Exhibit C. "Rent" means any amounts due from Tenant to Landlord under the terms of this Lease. "Tenant" means Orono Senior Housing, LLC and its permitted successors and assigns. "Tenant's Equipment" means all movable equipment, furniture and other trade fixtures installed or placed in the Development by or for the account of Tenant or any occupant of the Development. "Term" means the period of time set out in Section 2.4 of this Lease. "Termination Date" means , 2100. "Unrelated Third Party" means an individual or entity that is not (i) an individual ("Related Individual") who is an owner or officer of Tenant or a Related Company, (ii) any subsidiary or parent of Tenant (each of which is a "Related Company"), or (iii) a general partnership, limited partnership or limited liability partnership ("Related Partnership") in which a Related Individual or Related Company is a partner, or (iv) a corporation or limited liability corporation in which a Related Individual, Related Company or Related Partnership is an owner, shareholder, officer, member or manager. 1.2 Exhibits. The following exhibits are attached to and by this reference made a part of this Lease: (1) "Exhibit A" - Legal Description of the Development Property (2) "Exhibit B" - Permitted Encumbrances -2- ARTICLE 2 LEASE AND TERM 2.1 Grant. Upon the terms and conditions of this Lease, Landlord demises and leases the Development Property to Tenant and Tenant leases and accepts the Development Property from Landlord subject to the Permitted Encumbrances. 2.2 Covenants. Landlord covenants to observe and perform all of the covenants and conditions to be observed and performed by Landlord under this Lease. Tenant covenants to pay the Rent when due under this Lease and to observe and perform all of the terms and conditions and covenants to be observed and performed by Tenant under this Lease. 2.3 Quiet Enjoyment. Landlord covenants that Tenant, on paying the Rent, shall peacefully have, hold and enjoy the Development Property subject to the terms of this Lease, subject only to the Permitted Encumbrances. 2.4 Term. The term of this Lease commences on the Commencement Date and expires at 11:59 p.m. on the Termination Date, unless terminated earlier as provided in this Lease. 2.5 Purchase of Development Property. On the Termination Date, if there is no uncured Event of Default by Tenant under this Lease at the time of exercise, Tenant may purchase the Landlord's entire interest in the Development Property on the following conditions: (1) Tenant shall give Landlord not less than thirty (30) days prior written notice exercising its right to purchase the Development Property, (2) the closing shall take place on a mutually convenient date at the principal office of Landlord or such other location as the parties agree, (3) the purchase price for the Landlord's entire interest in the Development Property shall be One Dollar ($1.00), (4) at closing, Landlord shall convey fee title in the Development Property to Tenant by quit claim deed, assignments and other appropriate instruments of conveyance, such conveyance to be subject only to (i) the Permitted Encumbrances, (ii) at Landlord's option, a restriction running with the land for such period as the Landlord may specify to the effect that the Development may be used only for residential housing purposes available for occupancy by persons 62 years of age and older, and (iii) any liens and encumbrances created -3- or consented to by Tenant or arising from the failure of Tenant to perform or observe by its agreements under this Lease, (5) this Lease shall automatically terminate on closing, (6) Tenant shall reimburse Landlord for all reasonable out of pocket costs and expenses incurred by Landlord in connection with the conveyance. 2.6 Title to Improvements. Title to the Improvements hereafter erected or located on the Development Property by or on behalf of the Tenant shall remain the property of Tenant, except that if(1) Tenant does not purchase the Development Property pursuant to Section 2.5 of this Lease, all Improvements located on the Development Property on the Termination Date shall become the property of Landlord, or(2) Landlord terminates this Lease pursuant to Section 9.2(1)hereof, then Landlord may repossess the Development, as provided in said Section 9.2(1). ARTICLE 3 RENT 3.1 Rent. Tenant shall pay Rent to Landlord on of each calendar year until the Termination Date in the amount of$1. 3.2 Net Lease. It is the intention and purpose of Landlord and Tenant that this Lease shall be a "Net Lease" to Landlord. All costs and expenses of whatever character or kind, general and special, ordinary and extraordinary, foreseeable or unforeseeable, and of every kind and nature whatsoever that may be necessary in or about the operation of the Improvements shall be the responsibility of Tenant. 3.3 Manner of Payment. Rent payable to Landlord shall be paid to Landlord in immediately available funds of the United States of America at the office of Landlord set out in Section 9.1 or at such place and to such party as Landlord may from time to time designate. Except as otherwise provided, Rent that has accrued prior to the expiration or earlier termination of this Lease shall be absolutely net to Landlord throughout the Term without offset or deduction. Tenant's obligation to pay Rent that has accrued prior to the expiration or earlier termination of this Lease shall survive the expiration or earlier termination of this Lease. -4- ARTICLE 4 TENANT'S COVENANTS 4.1 Tenant's Equipment. All Tenant's Equipment shall be the property of Tenant, Tenant's tenants or any lessor of such equipment. Landlord shall have no interest in Tenant's Equipment. Landlord shall not be responsible for any loss or damage to Tenant's Equipment except to the extent caused by Landlord's wrongful act or negligence. 4.2 Maintenance. Tenant shall at Tenant's expense maintain the Improvements and, to the extent imposed by law on adjacent property owners, the adjacent sidewalks and curbs in good order and condition, ordinary wear excepted, and in compliance with legal requirements. 4.3 Repairs. Tenant shall make all necessary or appropriate capital and operating repairs and replacements and renewals to the Improvements, interior and exterior, structural and non-structural, ordinary and extraordinary, and foreseen and unforeseen sufficient for proper operation thereof using materials of good quality. The need for or appropriateness of such repairs, replacements and renewals and the quality of the materials used in accomplishing the same shall be in accordance with the reasonable standards of prudent operators of similar facilities. 4.4 Nondiscrimination; Restrictions on Use. Tenant covenants that during the Term, (i) it shall permit the Development to be used only for residential rental housing and may rent units in the Development only to persons who are 62 years of age or older (the "Senior Housing Restriction"). In addition, the Developer shall to the extent permitted by law give preference in the rental of units in the following order of priority: (i)to persons who are residents or former residents of the City, (ii)persons who have a child who is a resident of the City-and, (iii) persons who have at any time been full time employees of the City or an agency or department of the City and(iv) persons who are residents or former residents of the City of Long Lake (the "Orono Preference Requirement"). The Senior Housing Restriction shall apply to all units. The Orono Preference Requirement shall apply only if there is a waiting list for available units. Except for the Senior Housing Restriction and the Orono Preference Requirement it shall not discriminate upon the basis of race, color, creed, religion, ancestry, national origin or sex, affectional preference, disability, marital status or status with regard to public assistance, in the sale, lease, or rental or in the use or occupancy of the Development Property or any improvements erected or to be erected thereon, or any part thereof. -5- ARTICLE 5 FINANCING 5.1 Mortgages. Tenant's interest in this Lease, the Development Property, the Improvements, or any combination thereof may be encumbered only as provided by the Financing Documents and the Development Agreement. 5.2 Notice. If any Holder registers with Landlord its name and address in writing by registered or certified mail, Landlord shall by registered or certified mail, return receipt requested, addressed as registered with Landlord, give such Holder a copy of any notice or other communication with respect to any claim that a default exists or is about to exist under this Lease and a copy of any notice changing Landlord's address. Any notice given to a Holder shall be deemed duly served when personally delivered to an officer of Holder or mailed in accordance with Section 8.1 of this Lease. 5.3 Performance. If Tenant fails to make any payment or perform any act required of Tenant under this Lease, then any Holder may(but shall not be obligated to), to the extent permitted under its Mortgage, make such payment or perform such act with the same effect as if made or performed by Tenant. Entry by a Holder upon the Development for such purpose or partial performance of the Mortgage shall not waive or release Tenant from any obligation or default under this Lease except for an obligation or default fully performed or cured by Holder. 5.4 New Lease. (a) If(i)this Lease is rejected or disaffirmed pursuant to bankruptcy law or other law affecting creditor's rights, (ii)Holder gives written request to Landlord not later than thirty (30) days after the effective date of such rejection or disaffirmance, (iii) Holder pays to Landlord all of Landlord's expenses (including reasonable attorneys' fees) incidental thereto, and(iv)Holder pays all Rent accrued as of the date of rejection or disaffirmance, then Landlord shall execute and deliver a new lease with Holder or its nominee, purchaser, assignee or transferee, as the case may be, for the remainder of the Term with the same terms as are contained herein except for charges and encumbrances caused or suffered by Tenant. (b) Any new lease entered into pursuant to this Section 5.4 shall be superior to all rights, liens and interest intervening between the date of this Lease and the date of such new lease. Upon the request of the new tenant, Landlord shall execute and deliver a memorandum of the new lease in recordable form so that notice of the new lease may be placed of record by the new tenant. -6- (c) The rights hereunder of Holders shall be exercisable by such Holders in the order of the priority of lien or other security interest of their respective Mortgages. (d) At Tenant's expense, upon written request of Tenant, any Holder, or any prospective Holder, Landlord shall deliver to them or any of them a separate written instrument signed and acknowledged by Landlord setting forth and confirming the provisions of this Section 5.4, and acknowledging to them or any of them in writing the receipt by Landlord of any notice or instrument given, sent or delivered to Landlord pursuant to the provisions of this Section 5.4. (e) When a new lease is entered into such Holder or(if reasonably approved by Landlord pursuant to the Development Agreement) its designee (such holder or designee the "Acquiring Holder," and the Mortgage of such Acquiring Holder the "Acquiring Holder's Leasehold Mortgage"),the liens on and estates and other interests in the Development Property or this Lease of all persons holding directly or indirectly under or through Tenant(including the Acquiring Holder's Leasehold Mortgage), other than liens, estates and interests which are subordinate to the Acquiring Holder's Leasehold Mortgage, shall immediately and without documentation continue in effect, attach to the new lease and be reinstated as to each other to the same extent, and in the same manner, order and priority, as if(i)the new lease were this Lease, (ii) this Lease had not been terminated, and(iii)the Acquiring Holder had acquired the leasehold estate under this Lease by assignment on the date the term of the new lease commences. Each lien, estate or interest which could have been extinguished by the foreclosure of the Acquiring Holder's Leasehold Mortgage shall be deemed to be subordinate to the Acquiring Holder's Leasehold Mortgage. (f) Notwithstanding any provision of this Section 5.4 apparently to the contrary, Landlord shall not be required to provide any notice to any Holder under this Section 5.4 unless such Holder has provided Landlord written notice of its existence in accordance with Section 5.2 hereof. (g) Upon request of a Holder, Landlord will enter into an agreement with such Holder confirming the provisions of this Section 5.4 for the benefit of such Holder and acknowledging the Holder's Mortgage and the assignments made therein. -7- 5.5 Further Assurances. Landlord agrees to execute such amendments to this Lease and further agreements as may reasonably be requested by any Holder, provided such amendments and further agreements do not impose any material obligations or liabilities upon Landlord, or affect the rights of Landlord hereunder in any material respect. 5.6 Termination of Lease. No cancellation, surrender, abandonment, acceptance of surrender or modification or amendment of this Lease shall be binding upon any Holder or affect the lien of any Mortgage if done without the prior written consent of said Holder (provided (x) that no consent shall be required to a surrender on the Termination Date or earlier termination hereof, and (y) consents to any modification or amendment to this Lease shall not be unreasonably withheld or delayed by such Holder). ARTICLE 6 ASSIGNMENT AND SUBLETTING 6.1 Assignments. Tenant and its successors and assigns shall not assign or sublet all or substantially all of Tenant's interest in this Lease or the Development without the prior written consent of Landlord, except as otherwise provided in (a) the Development Agreement, (b) Article 5 hereof, or(c) Section 6.2 hereof. 6.2 Subleases. (a) Tenant may enter into subleases of the housing in the Improvements as provided in the Development Agreement without the need for Landlord consent. (b) Units in the Development may be subleased only for purposes of residential housing and no unit may be subleased to a person under 62 years of age. 6.3 Other Agreements. Tenant may enter into the Financing Documents and such other agreements affecting the Development Property as are contemplated by the Development Agreement. ARTICLE 7 END OF TERM 7.1 Surrender. Upon termination of this Lease or of Tenant's right of possession of the Development Property, Tenant shall immediately quit and surrender possession of the Development to Landlord in its then condition. -8- 7.2 Vesting. Upon termination of this Lease, if Tenant does not exercise Tenant's option to purchase under Section 2.5 of this Lease, all right, title and interest of Tenant in the Development shall automatically vest in Landlord without the necessity of confirmation by any other document. However, upon the request of Landlord, such vesting shall be confirmed in separate recordable instruments in form and substance acceptable to Landlord. 7.3 Tenant's Equipment. Any of Tenant's Equipment remaining in the Development after termination of this Lease or of Tenant's right of possession of the Development Property shall be deemed conclusively to have been abandoned by Tenant and, after notice to Tenant and Tenant's failure to respond within twenty (20) business days after service thereof, may be appropriated, sold, destroyed, or disposed of by Landlord without further notice or obligation to compensate Tenant or account therefor. 7.4 Acceptance. No modification, termination or surrender of this Lease or surrender of the Development Property or any part thereof or any interest therein by Tenant shall be valid or effective unless agreed to and accepted in writing by Landlord and any Holders, and no act by any representative or agent of Landlord or any Holder other than such written agreement and acceptance shall constitute acceptance thereof. 7.5 Merger. There shall be no merger of the leasehold estate created by this Lease with the fee estate in the Development Property by reason of the same party owning or holding any interest in such leasehold estate and any interest in such fee estate. No merger of the leasehold estate and fee estate shall occur unless and until all parties (including any Holder) having any interest in the leasehold estate created by this Lease and the fee estate in the Development Property shall join in and duly record a written instrument effecting such merger. ARTICLE 8 NOTICES AND ESTOPPELS 8.1 Notices. All notices and other communications from Landlord to Tenant or from Tenant to Landlord under this Lease shall be in writing and shall be deemed duly served if delivered personally to an officer of the party being served or if mailed by registered or certified mail, postage prepaid, addressed if to Landlord: -9- if to Tenant: or such other address or addresses as Landlord or Tenant shall have designated in writing to the other. Notices which are mailed shall be deemed to have been given on the date received as evidenced by the customary registered or certified mail receipt. 8.2 Estoppels. Landlord or Tenant shall at any time and from time to time upon not less than thirty (30) days prior notice from the other execute, acknowledge and deliver a written statement certifying (1) that this Lease is in full force and effect, subject only to such modification(if any) as may be set out therein, (2) the dates (if any) to which Rent is paid in advance, (3) that there are not, to such party's knowledge, any uncured defaults on the part of the other party, or specifying such defaults if any are claimed, and (4) such other matters as may be reasonably required by the requesting party. Any such statement may be relied upon by any prospective transferee or encumbrancer of all or any portion of the Development or any interest therein or any assignee of any such persons. If any party fails to timely deliver such statement, such party shall be deemed to have acknowledged that this Lease is in full force and effect, without modification except as may be represented by the other, and that there are no uncured defaults in the other's performance. ARTICLE 9 DEFAULT 9.1 Events of Default. Any one or more of the following events constitutes an Event of Default: (1) If Tenant shall have failed to pay when due Rent or any other amount payable by Tenant pursuant to this Lease within ten (10) days following -10- Tenant's receipt of written notice from Landlord stating that such payment was not made; or (2) If Tenant shall have failed to perform any of the other covenants, terms, conditions or provisions of this Lease or any of its obligations under the Development Agreement within sixty (60) days after Tenant's receipt of written notice specifying such failure; provided, however, with respect to those failures which cannot with due diligence be cured within said 60-day period, Tenant shall not be deemed to be in default hereunder if Tenant commences to cure such default within such 60-day period and thereafter continues the curing of such default with all due diligence; 9.2 Termination. If an uncured Event of Default exists under this Lease, then Landlord may, subject to Section 9.5 hereof, exercise one or more of the following remedies in addition to any other rights and remedies provided at law or in equity: (1) Landlord may terminate this Lease by written notice to Tenant and may forthwith repossess the Development and recover as damages the amounts provided in Section 9.3 hereof, or (2) Landlord may terminate Tenant's right of possession and repossess the Development without demand or notice of any kind and without terminating this Lease, in which event Landlord may (but will not be obligated to) relet all or any part of the Development or any part thereof for the account of Tenant for such rent and upon such terms as Landlord deems advisable and may make any changes, additions, improvements, redecorations and repairs to the Development as Landlord deems advisable without affecting Tenant's liability under this Lease. 9.3 Payments. If pursuant to Section 9.2 this Lease is terminated or Landlord terminates Tenant's right of possession and repossesses the Development, Tenant shall pay to Landlord on demand the sum of: (1) all unpaid Rent owing at the time of termination or repossession, as the case may be, (2) all expenses (together with interest thereon at a rate of twelve percent (12%) per annum from the date paid by Landlord) incurred by Landlord in terminating, repossessing and reletting including but not limited to costs of changes, additions, improvements, redecorations and repairs, brokerage and legal fees, and the collection of Rent, and -11- (3) any deficiency between the Rent, when due in accordance with this Lease, for the remainder of the Term and the payments, if any, received by Landlord from any reletting of the Development or portions thereof. 9.4 Injunctive Relief. If an uncured Event of Default exists under this Lease, Landlord shall have the right, in addition to any remedy available to Landlord under Section 9.2 of this Lease, to institute from time to time an action or actions for injunctive and/or other equitable relief. 9.5 Forbearance. If there is a Mortgage on Tenant's interest in this Lease or the Development Property, Landlord will not terminate this Lease or Tenant's right of possession of the Development Property pursuant to Section 9.2 of this Lease, if Holder or any purchaser or transferee of Tenant's interest in this Lease or the Development by reason of foreclosure or other proceedings or by deed or assignment in lieu of such proceedings (or an assignee of Holder or such purchaser or transferee) shall, within one hundred eighty(180) days after acquiring Tenant's interest in this Lease or the Development, cure all defaults susceptible of being cured by such entity(or, if such cure would reasonably require more than one hundred eighty(180) days and thereafter promptly, effectively and continuously proceed to cure such default). Nothing in this Section shall affect Landlord's right to enforce any remedy under this Lease for an Event of Default except, so long as Holder is in the process of curing such Event of Default or foreclosing its Mortgage under this Section, the right to terminate this Lease or Tenant's right of possession of the Development. 9.6 Costs. Tenant shall indemnify Landlord against all costs and charges (including reasonable legal fees) lawfully and reasonably incurred in enforcing payment of Rent, and in obtaining possession of the Development after an Event of Default of Tenant or upon expiration or earlier termination of this Lease, or in enforcing any covenant, proviso or agreement of Tenant contained in this Lease. Landlord shall indemnify Tenant against all costs and charges (including legal fees) lawfully and reasonably incurred in enforcing any covenant, proviso or agreement of Landlord contained in this Lease. 9.7 Waiver of Default. No failure or delay by Landlord or Tenant to insist on strict performance of any term of this Lease or to exercise any right, power, or remedy upon a breach of this Lease shall constitute a waiver of such term or such breach. 9.8 Tenant's Liability. Notwithstanding anything to the contrary provided in this Lease, it is specifically understood and agreed, such agreement being a primary consideration for the execution of this Lease by Tenant, that(i)there shall be absolutely no personal liability on the part of Tenant, or its officers, directors, members, employees and agents, to Landlord with respect to any of the terms, covenants and conditions of this Lease, and (ii)Landlord shall look solely to recovering possession of the Development Property in the event of any breach by Tenant of any of the terms, covenants and conditions of this Lease to be performed by Tenant. -12- ARTICLE 10 MISCELLANEOUS 10.1 Relationship. Nothing contained in this Lease shall create any relationship between the parties hereto other than that of lessor and lessee. Landlord and Tenant disclaim any intention to create a joint venture, partnership or agency relationship. 10.2 Number and Gender. The words "Landlord" and "Tenant" as used herein includes the plural as well as the singular. The use of specific gender includes any other gender as applicable. 10.3 Captions. The captions in this Lease are for convenience only and shall have no effect on the construction or interpretation of this Lease. 10.4 Time. Time is of the essence of this Lease and each of its provisions. 10.5 Construction. The provisions of this Lease shall be construed as a whole according to their common meaning, and not strictly for or against Landlord or Tenant. 10.6 Law. This Lease shall be governed by and construed under the laws of Minnesota. 10.7 Binding. This Lease is binding upon and inures to the benefit of Landlord and Tenant and their respective successors and assigns and shall not be for the benefit of any third parties other than such successors and assigns. 10.8 Short Form. Landlord and Tenant agree upon request of the other to execute a Short Form of this Lease suitable for recording. 10.9 Severability. If any term of this Lease or application of it to any person or circumstance is invalid or unenforceable, the remainder of this Lease or the application of it to other persons or circumstances shall not be affected, and each provision of this Lease shall be valid and enforceable to the extent permitted by law. 10.10 Counterparts. This Lease may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 10.11 Interest Rate. Any interest due from one party to another hereunder shall be at the interest rate specified herein or the maximum rate permitted by applicable law, if less. -13- IN WITNESS OF THIS LEASE, Landlord and Tenant have properly executed it as of the date set out at its head. LANDLORD ORONO HOUSING AND REDEVELOPMENT AUTHORITY By: Name: Its: Executive Director [SIGNATURE PAGE TO LEASE (DEVELOPMENT PROPERTY)] -14- TENANT ORONO SENIOR HOUSING, LLC, a Minnesota limited liability company By: Wedum Foundation, its Manager Member By: Name: Its: [SIGNATURE PAGE TO LEASE (DEVELOPMENT PROPERTY)] -15- EXHIBIT A LEGAL DESCRIPTION OF DEVELOPMENT PROPERTY M1:7%288.03 796288.04 A-1 Draft: 10/17/01 EXHIBIT B PERMITTED ENCUMBRANCES MI:7%288.03 796288.04 A-1 Draft: 10/17/01 EXHIBIT C FORM OF TIF NOTE No. R- 1 UNITED STATES OF AMERICA STATE OF MINNESOTA ORONO HOUSING AND REDEVELOPMENT AUTHORITY TAX INCREMENT REVENUE NOTE OF 2001 [1] The Orono Housing and Redevelopment Authority (the "HRA"), located in the City of Orono,Hennepin County,Minnesota,hereby acknowledges itself to be indebted and,for value received, hereby promises to pay to Orono Senior Housing, LLC, a Minnesota limited liability company,or its registered assigns(the "Registered Owner"),but only in the manner, at the times, from the sources of revenue, and to the extent hereinafter provided, the Principal Amount of this Note (as defined in paragraph [2] hereof) and to pay interest on the unpaid portion of the Principal Unpaid Amount of this Note at the rate of interest of 7.00%per annum. Interest shall accrue on the Principal Amount from , , and shall be computed on the basis of a 360-day year consisting of 12 30-day months. This Note is the "TIF Note" described and defined in that certain Development Agreement, dated as of , 2001 (as the same may be amended from time to time, the "Development Agreement"), among the HRA, the City of Orono, Minnesota, and Orono Senior Housing, LLC, a Minnesota limited liability company,as the initial Developer under the Development Agreement. Each capitalized term which is used but not otherwise defined in this Note shall have the meaning given to that term in the Development Agreement. [21 The Principal Amount of this Note shall be $ $ [not more than $850,000]. [3] Subject to the terms hereof,amounts due on this Note shall be payable on each February 1 and August 1, commencing FebruarrAugust 1, 2002, and continuing through February 1, 2024 (the "Payment Dates"), and on each "Additional Payment Date" described in paragraph [5] hereof. All amounts of accrued interest on this Note which are not paid in full on any Payment Date shall also accrue additional interest from the date of such non-payment(the "Compound Interest") until paid at the rate of interest of 7.00% per annum. [4] On each Payment Date(or,if not a business day of the HRA,the first business day thereafter) the HRA shall pay by check or draft mailed to the person that was the Registered Owner of this Note at the close of the last business day of the HRA preceding such Payment Date C-1 an amount equal to the lesser of(1)the Available Tax Increments (which generally consist of 90%of the tax increments from the HRA's Tax Increment Financing District No. 1-1 within its Housing Project Area No. 1) received by the HRA within the 6-month period preceding said Payment Date and(2)the sum of(i)the accrued and unpaid interest on the Principal Amount and (ii)the unpaid Principal Amount of this Note. All payments made by the HRA under this Note shall be applied first to pay the accrued and unpaid interest on the Principal Amount of this Note and second to pay the unpaid Principal Amount hereof. The HRA shall have the right on any Payment Date to prepay the principal amount of this Note in whole or in part without penalty or premium and without the prior written consent of the Registered Owner or the Developer. [5] This Note shall terminate and be of no further force and effect on any date upon which the HRA shall have terminated the Development Agreement or on the last Payment Date following payment thereon of the amounts due hereon, whichever occurs earliest. [6] The HRA makes no representation or covenant, express or implied, that the revenues described herein will be sufficient to pay, in whole or in part, the amounts which are or may otherwise become due and payable hereunder. Any amounts which have not become due and payable on this Note on or before the final Payment Date or Additional Payment Date, as the case may be, shall no longer be a debt or obligation of the HRA whatsoever. [7] The HRA's payment obligations hereunder shall be further conditioned on the Developer's compliance with the terms and conditions of the Development Agreement and on the fact that there shall not at the time have occurred and be continuing an Event of Default under the Development Agreement, and, further, if pursuant to the occurrence of an Event of Default under the Development Agreement the HRA duly elects to terminate the Development Agreement pursuant to its terms, the HRA shall have no further debt or obligation under this Note whatsoever; provided that if, pursuant to an Event of Default,the HRA elects pursuant to Section 7.2 of the Development Agreement to withhold payment otherwise due hereon, said suspended payment shall become payable hereon upon cure of the Event of Default. Reference is hereby made to the provisions of the Development Agreement for a fuller statement of the obligations of the Developer and of the rights of the HRA thereunder, and said provisions are hereby incorporated by reference into this Note to the same extent as though set out in full herein. The execution and delivery of this Note by the HRA, and the acceptance thereof by the initial Registered Owner hereof, shall conclusively establish this Note as the "TIF Note" (and shall conclusively constitute discharge of the HRA's obligation to issue and deliver the same) under the Development Agreement. [8] This Note is a special and limited revenue obligation but not a general or moral obligation of the HRA and is payable by the HRA only from the sources and subject to the qualifications and limitations stated or referenced herein. Neither the full faith and credit nor the taxing powers of the HRA are pledged to or available for the payment of this Note, and no property or other asset of the HRA, save and except the above referenced Available Tax Increments, is or shall constitute a source of payment of the HRA's obligations hereunder. [9] This Note is issued by the HRA in aid of financing a project pursuant to and in full conformity with the Constitution and laws of the State of Minnesota, including Minnesota Statutes, Sections 469.174 through 469.179, and including specifically but without limitation Section 469.178, Subdivision 4, thereof. C-2 Draft: 10/17/01 [10] This Note may be assigned but upon such assignment the assignor shall promptly notify the HRA thereof in writing, and the assignee shall surrender this Note to the HRA either in exchange for a new fully registered note or for transfer of this Note on the registration records for the Note maintained by the HRA. As a condition to any such transfer, the transferee shall have delivered to the HRA an executed Investor Letter in the form of Exhibit F to the Development Agreement. Each such assignee shall take this Note subject to the foregoing conditions and subject to all provisions stated or referenced herein. [11] IN WITNESS WHEREOF, the Orono Housing and Redevelopment Authority has caused this Note to be executed by the manual signatures of its Chair and Executive Director, has caused the official seal of the HRA to be omitted herefrom, as permitted by law, and has caused this Note to be issued and dated as of , Chair Executive Director C-3 CERTIFICATION OF REGISTRATION It is hereby certified that the foregoing Note was as of the latest date listed below registered in the name of the last Registered Owner noted below, and that, at the request of said Registered Owner of this Note, the undersigned has as of said applicable date registered this Note as to principal and interest on the Note in the name of such Registered Owner,as indicated in the registration blank below, on the books kept by the undersigned for such purposes. NAME OF REGISTERED DATE OF SIGNATURE OF OWNER REGISTRATION HRA EXECUTIVE DIRECTOR Orono Senior Housing, LLC, a Minnesota Limited Liability Company ,2001 C-4 EXHIBIT D CERTIFICATE OF COMPLETION AND PARTIAL RELEASE The undersigned hereby certifies that Orono Senior Housing, LLC, a Minnesota limited liability company, and/or permitted assigns (the "Developer"), has fully and completely complied with the Developer's obligations under Article IV of that document entitled "Development Agreement," dated November_, 2001 between the City of Orono, the Orono Housing and Redevelopment Authority and Orono Senior Housing, LLC, a Minnesota limited liability company, and filed for record , 20_, as Document No. in the office of the Hennepin County Recorder with respect to construction of that phase of the Improvements (as defined in the Development Agreement) constructed on the real property described in Exhibit A hereto. As to the real property described in Exhibit A, the obligations of Article IV of the Development Agreement are terminated and satisfied and released of record. DATED: CITY OF ORONO, MINNESOTA By: Its Mayor By: Its City Clerk STATE OF MINNESOTA ) SS COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this day of , by and , the Mayor and City Clerk of the City of Orono, Minnesota, a municipal corporation under the laws of the State of Minnesota, on behalf of the city. Notary Public MI:7%288-93x796288.04 D-1 EXHIBIT E Form of Income Certification Certification of Tenant Eligibility UNIT NUMBER: I/We, the undersigned, being first duly sworn, state that I/we have read and answered fully and truthfully each of the following questions for all persons who are to occupy the unit in the Orono Woods Apartments development for which application is made, all of whom are listed below: 1. 2. 3. 4. 5. Name of Members Relationship Social of the to Head of Security Place of Household Household Age Number Employment Head - - Spouse - - Income Computation 6. Anticipated Annual Income. The anticipated total annual income from all sources of each person listed in item 1 above for the twelve month period beginning on the date of this certificate, including income described in (a) below, but excluding all income described in(b) below, is $ (a) The amount set forth above includes all of the following income (unless such income is described in (b) below; (i) all wages and salaries, overtime pay, commissions, fees, tips and bonuses before payroll deductions; (ii) net income from the operation of a business or profession or from the rental of real or personal property (without deducting expenditures for business expansion or amortization of capital indebtedness or any allowance for depreciation of capital assets); (iii) interest and dividends (including income from assets as set forth in item 7(b) below); (iv) the full amount of periodic payments received from social security, annuities, insurance policies, retirement funds, pensions, disability or death benefits and other similar types of periodic receipts; E-1 (v) payments in lieu of earnings, such as unemployment and disability compensation, workmen's compensation and severance pay; (vi) the maximum amount of public assistance available to the above persons; (vii) periodic and determinable allowances, such as alimony and child support payments and regular contributions and gifts received from persons not residing in the dwelling; (viii) all regular pay, special pay and allowances of a member of the Armed Forces (whether or not living in the dwelling) who is the head of the household or spouse; and (ix) any earned income tax credit to the extent it exceeds income tax liability. (b) The following income is excluded from the amount set forth above: (i) casual, sporadic or irregular gifts; (ii) amounts that are specifically for or in reimbursement of medical expenses; (iii) lump sum additions to family assets, such as inheritances, insurance payments (including payments under health and accident insurance and workmen's compensation), capital gains and settlement for personal or property losses; (iv) amounts of educational scholarships paid directly to student or educational institution, and amounts paid by the government to a veteran for use in meeting the costs of tuition, fees, books and equipment, but in either case only to the extent used for such purposes; (v) hazardous duty pay to a member of the household in the armed forces who is away from home and exposed to hostile fire; (vi) relocation payments under Title H of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970; (vii) income from employment of children (including foster children) under the age of 18 years; (viii) foster child care payments; (ix) the value of coupon allotments under the Food Stamp Act of 1977; E-2 (x) payments to volunteers under the Domestic Volunteer Service Act of 1973; (xi) payments a ments received under the Alaska Native Claims Settlement Act; (xii) income derived from certain submarginal land of the United States that is held in trust for certain Indian tribes; (xiii) payments on allowances made under the Department of Health and Human Services' Low-Income Home Energy Assistance Program; (xiv) payments received from the Job Partnership Training Act; (xv) income derived from the disposition of funds of the Grand River Bank of Ottawa Indians; and (xiv) the first$2,000 of per capita shares received from judgments awarded by the Indian Claims Commission or the Court of Claims or from funds held in trust for an Indian tribe by the Secretary of Interior. 7. Net Family Assets. If any of the persons described in item 1 above (or any person whose income or contributions were included in item 6 above)has any savings, stocks, bonds, equity in real property or other form of capital investment (excluding interests in Indian trust lands), provide: (a) the total value of all such assets owned by all such persons: $ ; (b) the amount of income expected to be derived from such assets in the 12-month period commencing on the date hereof: $ ; (c) the amount of such income included in item 6: $ ; E-3 8. Students (a) Will all of the persons listed in item 1 above be or have they been full-time students during five calendar months of this calendar year at an educational institution (other than a correspondence school) with regular faculty and students? Yes No (b) (Complete only if the answer to item 8(a) is "Yes") Is any such person (other than nonresident aliens) married and eligible to file a joint federal income tax return? Yes No The above information is full, true and complete to the best of my knowledge. I have no objections to inquiries being made for the purpose of verifying the statements made herein. The undersigned acknowledge that the lease executed by the undersigned may be canceled upon notice as provided therein if the undersigned have misrepresented any of the information set forth above. Date: Signature E-4 FOR COMPLETION BY PROJECT OWNER OR MANAGER ONLY: A. Calculation of eligible income: (1) Enter amount entered for entire household in item 6 above: (2) If the amount entered in item 7(a) above is greater than $5,000, enter the greater of(i) the amount entered in 7(b) less the amount entered in 7(c) or (ii) 10% of the amount entered in 7(a): (3) TOTAL ELIGIBLE INCOME (Line A(I) plus line A(2): B. The amount entered in A(3) (Total Eligible Income) is: Less than $ , which is an amount equal to 50% of median income for the Minneapolis-St. Paul SMSA. More than the above-mentioned amount. C. Number of apartment unit assigned: D. This apartment unit was was not last occupied for a period of at least 31 consecutive days by a person or persons whose aggregate anticipated annual income, as certified in the above manner, was less than or equal to the amount at which a person would have qualified under B above. E. Applicant: Qualifies as a Lower-Income Tenant. Does not qualify as a Lower Income Tenant, Owner or Manager E-5 EXHIBIT F INVESTOR LETTER Orono Housing and Redevelopment Authority Orono, Minnesota City of Orono, Minnesota Orono, Minnesota Re: Orono Housing and Redevelopment Authority Tax Increment Revenue Note Ladies and Gentlemen: The undersigned representative of (the "Purchaser"), being the purchaser of the Orono Housing and Redevelopment Authority Tax Increment Revenue Note of 2001, dated as of November , 2001 (the "Note"), does hereby certify, represent and warrant for the benefit of the addressees that: (a) The Purchaser is either a bank, savings and loan association, registered investment company, insurance company or other "Accredited Investor" as defined in Rule 501(a) of Regulation D of the Securities Act of 1933, as amended. Purchaser(i) is duly and validly organized under the laws of its jurisdiction of incorporation or organization, (ii) is legally authorized to purchase the Note as lawful investment of the Purchaser, (iii) has such knowledge and experience in business and financial matters as to be capable of evaluating the merits and risks of an investment in the Note on the basis of the information and review of documents described in section(d)below and the investigation which the Purchaser has conducted and(iv) can bear the economic risk of the purchase of the Note. (b) The Purchaser has purchased the Note for its own account for investment purposes only or has become the registered owner thereof for security purposes and not for the account of any other person and not for distribution, assignment or resale; provided, however, the Purchaser may dispose of the Note or any portion thereof or interest therein in compliance with paragraph 10 of the Note and provided further that a sale of shares in any investment company that purchases the Note will not, in and of itself, constitute a distribution of the Note for the purposes of this section(b). F-1 (c) Neither the City of Orono, Minnesota(the "City"), the Orono Housing and Redevelopment Authority (the "HRA") nor its counsel shall be deemed to have made any representations with respect to the Note or the Development Agreement or tax increment financing district referred to therein as of any date, except as expressly provided in the Note or the Development Agreement. (d) The Purchaser has obtained and has read and reviewed such documents, instruments and information related to the issuance of the Note as the Purchaser has requested from the City and the HRA. The Purchaser has also reviewed such other information as requested and has been provided an opportunity to ask questions of, and has received answers from, representatives of the City and the HRA regarding the terms and conditions of the Note. We understand that the Note is payable solely from certain tax increment pledged to the payment thereof and understand that such tax increment may not be sufficient to pay stated principal of and interest on the Note and that there may be other risks in such an investment which are not described therein. (e) The undersigned is a duly appointed, qualified and acting officer or representative of the Purchaser and authorized to make the certifications, representations and warranties contained herein and the purchase of the Note constitutes a lawful investment of the Purchaser. (f) The Purchaser acknowledges that the City, the HRA, the members of their respective governing bodies and their officers (each individually an "Issuer Party" and collectively the "Issuer Parties") have not undertaken to furnish information to the Purchaser or to ascertain the accuracy or completeness of any information that may have been furnished to the Purchaser by or on behalf of the City, the HRA or the prior holder of the Note relating to the tax increment pledged to payment of the Note and that none of the Issuer Parties have made any representations concerning the accuracy or completeness of any information supplied to the Purchaser or relating to the security for the Note. The Purchaser hereby waives any requirements of due diligence in investigation or inquiry on the part of any Issuer Parties and all claims, actions, or causes of action which the Purchaser may have directly or indirectly from or relating to any action which the Issuer Parties took or could have taken, in connection with the issuance and sale of the Note to the Purchaser. IN WITNESS WHEREOF, I have hereunder set my hand the day of , Name: Title: F-2