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02. Scandia Heritage Alliance Lease Agreement and Project Update Staff Report Date of Meeting: November 5, 2025 For: Honorable Mayor and Council From: Kyle Morell, City Administrator Subject: Scandia Heritage Alliance Project Update Susan Rodjso and John Herman of the Scandia Heritage Alliance will be at the meeting to provide the Council with an update on their progress of the Water Tower Barn project. The Alliance recently hosted a Community Meeting at which a slideshow was presented; the slideshow is attached. Also attached are drafts of the Heritage Alliance lease Agreement with the City for use of the City-owned ballfield land, as well as two resolutions required by DEED. The first is a resolution accepting the Grant funding from DEED. The second is a resolution authorizing City Staff to undertake activities to complete the project. All documents presented at the meeting are for review only. Given the Council’s desire to avoid taking action on significant items at Work Sessions, all documents will be presented at the Council’s Regular Meeting on November 16 for approval. Attachments: Community Update Slide Show SHA Lease Agreement with City of Scandia Resolution Authorizing Acceptance of Grant from DEED Resolution Authorizing Staff to Undertake Activities to Complete Water Tower Barn Project RAISE OUR HISTORIC WATER TOWER BARN! Presentation Template Design Gammelgarden History: Swedish immigration, mid to late 1800s Water Tower Barn: Development of Commercial Ctr, 1895 –1900s Presentation Template Design Presentation Template Design Presentation Template Design An architect by training, a builder by passion, and a teacher at heart, Peter has served the University of Minnesota Construction Management Program since 1997. He is a recipient of the CCAPS Distinguished Educator Award and the Morse-Alumni Distinguished Teaching Award. A practicing architect and construction manager since 1983, and a business owner since 1991, Peter believes in “constructive creativity.” He also does consulting on development planning, zoning approvals, and expert testimony in his firm, Rylaur, LLC. He is a member of the American Institute of Architects. Peter Hilger, AIA Lead Architect Faculty Director and Senior Lecturer, U of M Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Main Level Floor Plan Presentation Template Design Seating Plan Presentation Template Design Main Level Lift and Tankhouse Display Presentation Template Design Mezzanine Level –Barn Loft Presentation Template Design Basement with Lift Added for Restrooms, Office, Storage Presentation Template Design Presentation Template Design Landscape Architects Dan Sandager, Abrahamson Nurseries, Scandia Carmen Simonet, Simonet Design, LLC St. Paul –with Scandia ancestry Charlie Turnblad –Carmen’s Great Uncle -- delivering goods to the Mercantile$25,000 Landscape Donation –America in Bloom and Canadian Nat’l Railway Presentation Template Design Engineering CIVIL: Adam Thiele and Drew Messmer, Anderson Engineering STRUCTURAL: Jason Hanlon, Braun Intertec Presentation Template Design Presentation Template Design Grading Plan Presentation Template Design Outdoor Lighting Presentation Template Design PHASE 2 BUILD: Outdoor Proscenium Stage Surrounded by the ambiance of forest, every event becomes a memorable encounter with nature, community, and artistry. Designed in coordination with and Acoustical Consultant to block sound from neighbors. Schematic Design Planned in Consult with Theaters, Actors, Musicians, Sound and Acoustics Engineers: •David and Monette Macdonald, Actors (Scandia residents) •Festival Theatre –St. Croix Falls •Lakeshore Players Theatre – White Bear Lake •Frosted Glass Productions – Marine on St. Croix •Zephyr Theatre -Stillwater •Masquers Theatre –Forest Lake •McNeely Music Center, White Bear Lake •Chris Frymire, Sound Engineer, Cedar Cultural Ctr -Mpls (Scandia Resident) •Kyle Tennis, Riverside Entertainment (Marine resident) •Jon Ferguson, Director, Producer, Educator •Steve Wiese, Sound Engineer, Creation Studio -Mpls •Bryan Knisley, Central Acoustics -Mpls Presentation Template Design Renderings by: Vicki Heschke DesignRight Drafting Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Tamarack Room Featuring Tankhouse / Windmill Display Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Presentation Template Design Greg Amundson Inventor and Owner, InstaTrim Products (Scandia-based) and former Timber Frame Home Builder Scandia Heritage Alliance Board Board of Directors Chair, Water Tower Barn Construction Committee Steps CompletedPresentation Template Design •Hired Owner’s Rep --Michelle McGuire •Value engineering to reduce construction costs •Timber frame material organized and assessed – Missing components documented •Final civil and structural engineering plans •Final landscaping and exterior lighting plans •Construction documents completed •Initial bidding and subcontractor reviews •State-required Pre-Design Documentation completed and approved. Prepared by board member John Herman, JD •Grading plan review, Watershed permit review, building permit review Steps RemainingPresentation Template Design Targeting Spring 2026 start: •Finalize plans for Electric, Data, Sound, Interior Lighting, and HVAC •Additional value engineering •Final edits to construction documents •Launch local fundraising campaign •Finalize lease agreement with City of Scandia •Contractor bidding –January / February •Select general contractor and finalize GMP contract •Finalize Guaranteed Maximum Price and grant agreement with State of MN Architect and owner’s rep strongly urged us to wait until January for final bidding. They are hearing from contractors that the bidding environment is becoming more favorable for owners. What Is Value Engineering? Presentation Template Design Architects, builders, and owners review the construction plans and suggest ways to reduce construction costs. For example, our architect suggested insulating with Rockwool instead of spray foam. It is fire retardant and eliminates the need for a fire barrier layer of gypsum around the walls to meet code. Presentation Template Design Major items postponed to bring costs in line with funds raised ▲Wetland overlook deck ►Tiered seating in amphitheater ► ▼Fewer pavers –more grass Presentation Template Design Sample Items Moved to Alternate List Donations will help add important items back to the construction plan ▲Glass walls to view barn doors and let light into Stable Room ►Simulated cedar shake roof – historic accuracy ► Paver Plaza Area Presentation Template Design Community Volunteer Events After Construction ▲Community Landscaping event Community bench-building event ► Presentation Template Design Susan Rodsjo Marketing Communications Consultant Board Chair, Scandia Heritage Alliance Presentation Template Design WIDESPREAD COMMUNITY SUPPORT: Volunteers –IT TAKES A VILLAGE! SHA Board of Directors •Susan Rodsjo, Chair •Sarah Porubcansky, Vice Chair •Tammy Peterson, Treasurer •Suzanne Lindgren, Secretary •Greg Amundson •Loralee DiLorenzo •John Herman •Christine Maefsky •Peter Nora •Pamela Plowman Smith •Dan Willius •CITY REP –Steve Kronmiller (non-voting) Historic Homes Tour Fundraiser –Home Participants •Heather and Mike Benson •Merritt Clapp-Smith •John and Diane Herman •Dave and Amy Hume •Jim & Kris Lindberg •Travis Loeffler and Dominic Mitchell •Mary Jo Milbrandt •Debra Mitts-Smith and Marschall Smith •Christina Morrison •Lynn and Rick Sandager •John Westphal Senior Advisory Council for Capital Campaign •Nancy Speer, Capital Campaign Advisor •Peter Gove •Mary Gove •Mackenzie Johnson •Bridget Levin •Heather Logelin •Jim Lindberg •Lynne Moratzka •Patti Ray •Terry Saario •Greg Sandager •Marschall Smith, JD •Bill Strusinski •Tom Triplett, JD Committees •Allen Barkve •Pat Borchert •Gwen McCurdy •Susan Miles •Julie Miller •Lynne Moratzka •Mary Pries-Morrison •Barb Sackmann •Margaret Wieners •Dan Lindgren •Max Ocel •Mike Smith •Christine Olson •Dawn Pivek •Sarah Yost •RETIRED –Brad Borg, Kathy Ferrin, Nancy LynchWater Tower Barn Project •Peter Hilger, AIA –Lead Architect •Vicki Heschke, Drafting •Steve Philippi, AIA, consulting architect •Dan Sandager, Landscape Architect •Bridget Levin, Branding •Erik Anderson, Wood Crest Builders •Greg Olson, Construction Consultant •Curt Richter, Barn Restoration Consultant •Scott Kaiser, Water Tank Restoration •Alan Bakke, Timber Post hand-hewing •Charlene Roise, Architectural Historian •Chris Frymire, Sound Engineer Indigenous Partner Team •Dan Bertelsen •Dan Brtek •Cody Chamberlain •An Garagiola •Liz Kelly •Jan Lynn •Rosetta Peters •Diane Wilson Partner Organizations –Events and Research •Gammelgården Museum •Marine Community Library •Washington County Historical Society / Hay Lake School / Erickson Log House •Scandia Softball Theaters/Actors/Musicians -Amphitheater Design •David Macdonald and Monette Magrath Macdonald •Festival Theatre •Lakeshore Players Theatre •Masquers Theatre •Frosted Glass Productions •Zephyr Theatre •Kyle Tennis, Riverside Entertainment Presentation Template Design WIDESPREAD COMMUNITY SUPPORT: Letters of Support --Water Tower Barn Scandia Interpretive Plan for Museum Displays completed June 2025 History of Scandia Fastpitch Softball: Awarded $20,000 grant from Minnesota Historical Society for Softball Exhibit Plan Tankhouse Exhibits and Story of Frank Lake Applied for grant from MNHS for Tankhouse Displays and Story of Frank Lake Fundraising Update: Presentation Template Design $2.2 million State Legislature Funding $885,000 cash, pledges, and Legacy Naming $700,000 donated materials, pro-bono services, land TOTAL: $3.8 million Presentation Template Design •State of Minnesota –2023 Capital Investment Bill •Fred C. and Katherine B. Andersen Foundation •Hardenbergh Foundation •Scandia Fastpitch Softball Families & Friends •Security State Bank of Marine •Midco Foundation •Scandia-Marine Lions Club •America in Bloom / Canadian National Railway •National Trust for Historic Preservation •US LBM –Owner of Arrow Building Center •Osceola Medical Center Foundation •Compeer Financial •Minnesota Department of Health Water Division •Minnesota Historical Society •Individual Donor Families – SHA Board members and other community supporters Major Donors Presentation Template Design LEGACY NAMING Presentation Template Design Scandia Fast-pitch Softball Presentation Template Design Security State Bank of Marine Presentation Template Design Forest Lake High School Carpentry Class II is building the outdoor kiosk in 2026. Materials grant from US LBM, parent company of Arrow Building Center –St. Croix Falls. SUPPORTING TRADES EDUCATION!!! Midco Communications Scandia-Marine Lions -- $25,000 Scandia-Marine Lions Club Community Fundraising Campaign Presentation Template Design STRETCH GOAL: $300,000 $200,000 to build as we want to Heritage Trail Campaign •Family Stories •Historic Node Stories Presentation Template Design Heritage Trail Fundraising Campaign •Eight Historic Districts •Approx. 250 homes per district •HOUSE PARTIES and mail campaign From Sacred Ground to Scenic Sanctuary It was surely not what Martha Johnson had prayed for on the last day of May 1854 as she watched the coast of Sweden recede from the ship’s deck. The Atlantic Ocean crossing and journey across North America had been hard enough. Yet here she was with her husband Anders Petter and their 2-year-old son, enduring their first winter in this strange, new land, living in a cave. They arrived in the Minnesota wilderness in mid-October, too late to begin building a log cabin. So the best they could do is make a home from a damp, frigid hollow overlooking the icy St. Croix River. In truth, they were far from the first people to shelter there. Martha and her husband –later known as ‘Carpenter Peter’ –may have noted shards of pottery, clam shells, animal bones and other artifacts left by the Indigenous people who long had used the cave as a temporary campsite. But their stay, kept alive in stories passed down through generations, marked a sharp turn in the history of the majestic river bluff tucked in the northeast corner of Scandia. For Ojibwe and Dakota people, the river had been a highway for trade and a place of habitation. Tensions between them grew, however,with development of the fur trade. In 1825, a treaty created a boundary ‘at a place called the Standing Cedar,’ near the cave. A second treaty 12 years later ceded the land to the U.S. government, opening it for White settlement. Anders and Martha were among the first of those settlers, and they prospered. In three years, they bought nearby farmland that would remain in the family for more than a century. The same toddler who lived in the cave, Andrew John, would raise 10 children there. They probably allowed themselves a small sense of satisfaction a decade after that first dreary winter, when they bought the bluff land over the cave. For 30 years, Historic Nodes that Raise $25,000 – Honored with outdoor museum sign telling story of the historic district. Once goal is reached, donations will help another district PLEDGE DONATIONS •Donations may be pledged over 5 years •Example: Donate $1,000 per year for 5 yrs = $5,000 donation Honor Your Family Legacy •$15,000 or $25,000 Capital Contribution •Story on Heritage Trail honoring family story or an individual •Professionally written story wi th family input We can do this Scandia! Presentation Template Design John Herman, JD Retired attorney and owner, Herman Real Estate Advisors Experience with cultural and historic projects across the Twin Cities and Minnesota Member of Scandia Heritage Alliance Board of Directors and Construction Committee Presentation Template Design State Grant of $2.2 Million Lease agreement with City State grant requires that the city owns the land. Nonprofit leases the land and provides programming State Grant Agreement Required to obtain GUARANTEED MAXIMUM PRICE from general contractor EQUAL to construction funds available Presentation Template Design Scandia Mayor Steve Kronmiller Presentation Template Design ENVIRONMENTAL TRUST FUND GRANT for WETLAND TRAIL: •City won $907,000 from Environment and National Resources Trust Fund (lottery funds) •SHA provided lobbying support and grant-writing assistance •SHA providing a portion of the required match (wetland trail portion on SHA lease property) •City match is the sidewalk along Olinda Trail •Connection to Gateway Trail Presentation Template Design TRAIL LOCATION Presentation Template Design TRAIL SCHEMATIC Presentation Template Design Paved trail around wetland: Boardwalk across one part Presentation Template Design Gateway Trail Update Presentation Template Design Connecting to Scandia Plaza Presentation Template Design Pedestrian Safety Measures SCANDIA HERITAGE ALLIANCE PO Box 159 | Scandia MN 55073 ScandiaHeritage.org | 651-233-0267 ScandiaHeritageAlliance@gmail.com WATER TOWER BARN SCANDIA is a project of Scandia Heritage Alliance, a 501c3 charitable organization, in coordination with the City of Scandia. Join us in our mission to preserve and celebrate Scandia’s rich history, heritage, arts and rural character. The Minnesota Legislature dedicated $2.2 million in 2023 for WATER TOWER BARN SCANDIA –a Challenge Grant that requires Scandia Heritage Alliance to raise the remaining funds needed to build the project. We invite you to partner in rebuilding the iconic Water Tower Barn and create a special space in Scandia to explore, gather, and play. Your significant contribution will leave a legacy for our children and grandchildren to enjoy for decades to come. WATER TOWER BARN SCANDIA is a project of Scandia Heritage Alliance, a 501c3 charitable organization, in coordination with the City of Scandia. Join us in our mission to preserve and celebrate Scandia’s rich history, culture, arts and rural character. Thank you for supporting this important project! L E A S E / U S E A G R E E M E N T by and between City of Scandia, as Lessor and Scandia Heritage Alliance, as Lessee and User _____________, 2026 i TABLE OF CONTENTS 1. PURPOSE. . ................................................................................................................. 1 2. DEMISE AND DESCRIPTION OF PREMISES.. ....................................................... 2 3. GRANT AGREEMENT ............................................................................................... 2 4. TERM AND OPTIONS TO RENEW. ........................................................................ 3 5. STATUTORY TERMINATION AND TIME FOR LEGISLATIVE RECONSIDERATION. ................................................................................................ 3 6. RENT.. .......................................................................................................................... 4 7. PAYMENT OF TAXES AND ASSESSMENTS. ........................................................ 4 8. PAYMENT OF UTILITIES. ........................................................................................ 6 9. REPORTING AND PROGRAM OVERSIGHT. ......................................................... 6 10. LESSEE REPRESENTATIONS, WARRANTIES AND COVENANTS. ................ 6 11. LESSOR REPRESENTATIONS, WARRANTIES AND COVENANTS. .................. 8 12. WARRANTIES OF TITLE AND QUIET POSSESSION. .......................................... 9 13. USE OF PREMISES. .................................................................................................... 9 14. ABANDONMENT OF PREMISES. ............................................................................ 9 15. LESSOR’S RIGHT OF ENTRY.. ................................................................................. 9 16. ENCUMBRANCE OF LESSEE’S LEASEHOLD INTEREST. ................................ 10 17. EARLY TERMINATION OF THIS LEASE. ............................................................ 10 19. NOTICES. ................................................................................................................... 13 20. CONSTRUCTION OF IMPROVEMENTS.. ............................................................. 14 21. CONSTRUCTION OF ADDITIONAL BUILDINGS AND IMPROVEMENTS. .. 14 23. REPAIRS AND DESTRUCTION OF IMPROVEMENTS. ...................................... 15 24. MECHANICS’ LIENS. ............................................................................................... 16 25. INDEMNIFICATION OF LESSOR. .......................................................................... 16 ii 26. INSURANCE. ............................................................................................................. 18 27. PROHIBITION OF INVOLUNTARY ASSIGNMENT. ........................................... 20 28. EVENTS OF LESSEE DEFAULT. ............................................................................ 20 29. NOTICE OF DEFAULT. ............................................................................................ 22 30. INTENTIONALLY OMITTED. ................................................................................. 23 31. ADDITIONAL REMEDIES. ...................................................................................... 23 32. SPECIAL TERMINATION PROCEDURE. .............................................................. 23 33. LESSOR’S RIGHT TO PERFORM.. ......................................................................... 24 34. LESSOR DEFAULTS AND TENANT’S LIMITED REMEDIES. ........................... 24 35. NO REMEDY EXCLUSIVE.. .................................................................................... 25 36. EFFECT OF EMINENT DOMAIN. ........................................................................... 25 37. SURRENDER OF LEASE: EFFECT ON SUBLEASES.. ......................................... 26 38. INTENTIONALLY OMITTED. ................................................................................. 26 39. AMENDMENT, MODIFICATION, AND WAIVER. ............................................... 26 40. APPROVAL BY STATE OF MINNESOTA. ............................................................ 26 41. EFFECT OF LESSEE’S HOLDING OVER. ............................................................. 26 42. PARTIES BOUND.. ................................................................................................... 26 43. TIME OF ESSENCE. .................................................................................................. 26 44. CAPTIONS. ................................................................................................................ 27 45. NO PARTNERSHIP, JOINT VENTURE, OR FIDUCIARY RELATIONSHIP CREATED HEREBY. ................................................................................................ 27 46. CUMULATIVE RIGHTS. .......................................................................................... 27 47. SEVERABLE PROVISIONS. .................................................................................... 27 48. ENTIRE AGREEMENT.. ........................................................................................... 27 49. REFERENCE TO GENDER. ..................................................................................... 27 iii 50. MINNESOTA LAW, JURISDICTION AND VENUE.. ............................................ 27 51. FURTHER ASSURANCES. ....................................................................................... 27 52. SHORT-FORM RECORDABLE LEASE. ................................................................. 28 53. FEDERAL INCOME TAX DEDUCTIONS.. ............................................................ 28 54. BROKERAGE FEES.. ................................................................................................ 28 55. INTENTIONALLY OMITTED. ................................................................................. 28 56. LISTING OF JOBS. .................................................................................................... 28 57. RECORD KEEPING AND REPORTING. ................................................................ 29 58. NON-DISCRIMINATION. ........................................................................................ 29 59. INTENTIONALLY OMITTED .................................................................................. 29 60. PREVAILING WAGE. ............................................................................................... 29 61. INTENTIONALLY OMITTED. ................................................................................. 29 62. REVIEW OF PLANS AND COST ESTIMATES...................................................... 29 63. HAZARDOUS WASTE POLLUTION AND CONTAMINANTS. .......................... 30 64. WAIVER OF SUBROGATION. ................................................................................ 31 65. WAIVER OF CERTAIN DAMAGES. ....................................................................... 31 66. COMPLIANCE WITH LAWS. .................................................................................. 32 67. INTENTIONALLY OMITTED. ................................................................................. 32 68. GRANT AGREEMENT PREVAILS.. ....................................................................... 32 69. RECITALS. ................................................................................................................. 32 70. EXHIBITS INCORPORATED. .................................................................................. 32 EXHIBIT A – LEGAL DESCRIPTION EXHIBIT B – IMPROVEMENTS EXHIBIT C – GRANT AGREEMENT EXHIBIT D – PERCENTAGES AND SOURCES OF PROJECT FUNDS EXHIBIT E – ALLOCATION PERCENTAGES EXHIBIT F – PERMITTED ENCUMBRANCES LEASE AND USE AGREEMENT Water Tower Barn Scandia Arts and Heritage Center THIS LEASE AND USE AGREEMENT (this “Agreement” or “Lease”) is entered into this __ day of ______, 2025, by and between the CITY OF SCANDIA, MINNESOTA, a Minnesota statutory city, (“Lessor”) and SCANDIA HERITAGE ALLIANCE, a Minnesota nonprofit corporation (“Lessee” or “SHA”). RECITALS A. Under the authority contained under Minnesota law, such as those set forth in Minn. Stat. §§471.15 and 471.16 (Recreational Facilities by Municipality and Operation of Program, respectively). 471.191 (cultural facilities, museums, concert halls), and 471.193 (historical preservation) (the “Statutory Authority”) and the specific language contained in 2023 Minn. Laws, Ch. 73, Art. 2, Sec. 9, Subd. 7 (the “Grant Legislation”), the State of Minnesota (the “State”) has allocated $2,200,000 of general fund monies for a grant (the “Grant”) to the City to partially fund predesign, design, construct, furnish, and equip the Water Tower Barn Scandia Arts and Heritage Center consisting of the restoration of the historic Scandia Water Tower Barn, an amphitheater, other recreational facilities, and associated site improvements (the “Project”). The Project will allow operation of a program consisting of some or all of the following: museum, arts and heritage center, educational and recreational programs and facilities, an outdoor amphitheater, theater and event space in the restored Water Tower Barn, and other uses compatible therewith (the “Governmental Program”); B. The City is the fee owner of the real property on which the Project will be constructed and has agreed to lease the Project site in the City community commons, legally described in Exhibit A (the “Premises”) to SHA as the Lessee to provide the Governmental Program. This Lease is for an initial term of seventeen and one-half (17.5) years with subsequent renewals as provided herein. The initial term is less than half of the useful life of the facility; and C. SHA has demonstrated its capability to undertake the Project construction and to operate the Governmental Program as contemplated by the Grant Legislation, and the City desires to lease the Premises to SHA to construct the Project and use the Premises to provide the Governmental Program, as more fully provided herein. NOW, THEREFORE, in consideration of the mutual covenants contained herein, Lessor and Lessee hereby agree as follows: 1. PURPOSE. Lessor believes that it serves the public interest of the City to construct the Project to provide facilities for the Governmental Program in the City, consistent with the Statutory Authority of the City and the Grant Legislation. The City believes the Project will serve the St. Croix Valley region and provide multiple economic, cultural, historic, and recreational benefits to the citizens of the City and Region. The City has acted by SHA - Lease-Use Agreement: 03/14/2019 2 Resolution Nos. ________, Dated______________ to accept the Grant and to enter into this Agreement with SHA, to construct the Project and provide the programming to achieve the City’s goals of furthering economic development in the City and enriching the cultural, recreational, and civic life of the City. This Agreement is being entered into in accordance with the provisions of the Grant Legislation and the Grant Agreement between the State [acting through its Department of Economic Development (“DEED”)] and the City. SHA has raised sufficient funds from other public and private sources to fully fund the Project and to operate the Governmental Program and desires to provide this programming and enter into this Lease with the City. 2. DEMISE AND DESCRIPTION OF PREMISES. In consideration of the mutual promises and covenants contained herein, Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor the Premises, as described in Exhibit A attached hereto, together with all improvements (as further defined in Section 21 of this Lease and generally described on the attached Exhibit B, the “Project” or the “Improvements”) to be constructed thereon. The Premises are leased to Lessee on an AS-IS basis and Lessee acknowledges that Lessor has made no representations or warranties as to the condition, quality, buildability, or suitability for development of the Premises. Lessee’s rights and interest in the Premises are subject to the Grant Agreement, provided in Section 3 hereof. 3. GRANT AGREEMENT. Lessor and Lessee acknowledge that the costs of design and construction of the Improvements on the Premises will be funded in part through the proceeds of a State general fund grant in the amount of $2,200,000 from the State acting by and through DEED. The Grant is being made to Lessor pursuant to the terms of a Grant Agreement - Construction Grant for the Scandia Water Tower Barn (the “Grant Agreement”), a copy of which is attached hereto as Exhibit C. Capitalized terms set forth in the Grant Agreement shall have the meanings assigned therein, unless otherwise provided. Lessor agrees to comply with all terms and conditions of the Grant Agreement (unless Lessor’s failure to comply is the result of Lessee’s failure to comply with the terms and conditions of this Lease). Lessee acknowledges the terms of the Grant Agreement and will cooperate fully with Lessor in complying with such terms. Lessor and Lessee further agree that in the event that either party fails to comply with any provision in the Grant Agreement then, if the non-complying party fails to cure such failure within sixty (60) days of receipt of a written demand or the State’s notice of default, then the other party shall have the right to take such action to effect the cure or trigger other remedies available under this Lease. This Lease requires Lessee to comply with the Grant Agreement and to fulfill certain obligations therein, which are set out more fully herein. Lessor shall not agree to any amendment, modification or waiver of any condition, provision or term of the Grant Agreement, that would adversely impact the rights of Lessee hereunder, unless first approved in writing by Lessee. Lessor agrees that it will provide Lessee with copies of all notices that SHA - Lease-Use Agreement: 03/14/2019 3 are provided to Lessor as the “Public Entity” under the Grant Agreement in accordance with Section 20 hereof. 4. TERM AND OPTIONS TO RENEW. The initial term of this Lease shall be for seventeen and one-half (17.5) years, commencing on the date of this Agreement, and ending ____________________, unless sooner terminated as hereinafter provided. Notwithstanding the foregoing sentence, upon completion of construction of the Project, Lessor and Lessee agree this Lease will be automatically amended to increase the ending date of the initial term to that date which is seventeen and one-half (17.5) years from the Completion Date, as defined in Section 21 of this Lease. This term is less than 50% of the useful life of the Project. As used herein, “Term” refers to the initial term and to any renewal thereof as herein provided. Subject to the conditions set forth below, Lessee shall renew this Lease for three successive periods, the first of which shall be for seventeen and one-half (17.5) years and the second of which shall be for eight and three-quarters (8.75) years. Upon the expiration of the second renewal Term, the City and SHA agree they will negotiate a further extension of this Lease for a further Term of fifty-five and one-quarter (55.25) years (to make a total Term of 99-years), as previously approved by the City, on terms and conditions substantially the same as provided in this Lease, except that the State provisions related to the Grant Agreement shall no longer apply and shall be removed. Lessor and Lessee agree to communicate in the six months prior to each renewal Term regarding these extensions. Before each renewal, the Lessor shall be reasonably satisfied that Lessee has sufficient capacity, including but not limited to financial and staffing capacity and qualifications, to perform its obligations hereunder. Each renewal shall be automatic, unless the City in its reasonable discretion, as Lessor shall have determined by action of its City Council that the Lessee is no longer able to carry out the Governmental Program (or such comparable program as the City approves). Absent a determination that the Lessee is not suited and able to perform the functions contained in this Lease, the Lessor shall act in good faith to renew this Lease. Provided, in no event shall Lessee be entitled to renew the term hereof, if (a) the Lease has been terminated, or (b) a Default has occurred and is continuing as of the date of the expiration of the initial or renewal term. 5. STATUTORY TERMINATION AND TIME FOR LEGISLATIVE RECONSIDERATION. a. Notwithstanding any other provisions of this Lease to the contrary, if the Governmental Program is terminated or changed in response to changes in state law in such a manner as to cause this Lease and the operation of the Project to be inconsistent with the changed Governmental Program, then this Lease may, at the option of Lessor, be terminated by 485 days written notice to Lessee, provided however that Lessor agrees that it will not terminate or change the Governmental Program unless required to do so by applicable State law. Any termination must be approved by the City Council of the City and provided further that any termination pursuant to this Section 5 will be deemed automatically rescinded and of no force or SHA - Lease-Use Agreement: 03/14/2019 4 effect if, within said 485 day period, either (i) the State law requiring the Governmental Program to be terminated or changed is repealed or modified in such a manner as to permit the Governmental Program to continue in a form that does not cause this Lease and operation by SHA on the Premises to be inconsistent therewith, or (ii) Lessee conforms its operation of the Premises to the changed Governmental Program. b. Notwithstanding any other provisions of this Lease to the contrary, if the State law that provides the statutory authority under which Lessor is operating the Governmental Program is repealed or modified in a manner that would prevent Lessor from operating the Governmental Program (“Repealing or Modifying Law”), then Lessor and Lessee shall cease the operation of the Project by SHA 485 days after written notice described in Section 5.a. above (“Termination Date”), if such written notice is given by Lessor and not rescinded. Either Lessor’s or Lessee’s failure to cease operation by SHA of the Project on the Termination Date shall be a Default under this Lease without the requirement of notice of such failure and without any cure period; provided, however, if the Repealing or Modifying Law is repealed or modified in such a manner as to reinstate Lessor’s statutory authority to operate the Governmental Program, then Lessor and Lessee shall no longer be required to cease operation of the Governmental Program. c. The parties agree to use their best efforts and cooperate in a good faith attempt to obtain State legislation that permits the Governmental Program and this Lease to continue. 6. RENT. No “base” rent is required to be paid by Lessee for the initial or renewal Terms provided herein, however, it is the intention of the parties that this Lease is a complete “net” lease and that all costs and expenses, of any nature or kind whatsoever, attributable to the Premises or Lessee’s use thereof during the Term or any renewals hereof, including but not limited to the costs of operation of the Governmental Program, shall be the sole responsibility of Lessee, and Lessor shall not have any liability therefor, all such amounts to be “Additional Rent” as provided in Section 7. 7. PAYMENT OF TAXES AND ASSESSMENTS. a. Taxes as Additional Rental. As “Additional Rent” hereunder, Lessee shall pay and discharge as they become due, promptly and before delinquency, all real estate taxes, assessments, levies, governmental charges, whether general or special, including all governmental charges of any kind which shall be levied, assessed, charged, or imposed, , or which may become a lien or charge on or against the Premises, the Leasehold interest, or the Improvements, or any part thereof, excepting only those taxes being validly contested as provided in subsection d. b. Assessments Affecting Improvements. Specifically, but without in any way limiting the generality of the requirements of subsection a., Lessee shall pay all special assessments and levies or charges made by any municipal or political SHA - Lease-Use Agreement: 03/14/2019 5 subdivision for local improvements before they shall become delinquent, or in installments each year as assessed by any such municipal or political subdivision. If, by making any such election to pay in installments, any such installments shall be payable after the termination of this Lease such unpaid installments shall be prorated as of the date of termination and amounts payable after such date shall be paid by Lessor. c. Proration. All of the taxes and any other charges under this Section shall be prorated at the commencement and expiration of the term hereof. d. Contesting Taxes. If Lessee shall in good faith desire to contest the validity or amount of any tax, assessment, levy, or other governmental charge herein agreed to be paid by Lessee, and to the extent permitted by law Lessee shall be permitted to do so and to defer payment of such tax or charge, until final determination of the contest. Lessee shall give Lessor written notice thereof prior to the commencement of any such contest. Provided, however, that Lessee shall be absolutely obligated to pay such tax or charge when required by law and absolutely no later than 30 days before such unpaid tax or charge will result in a forfeiture of the Premises or any part thereof and Lessee shall diligently pursue such contest to settlement, resolution and completion. e. Disposition of Rebates. All rebates on account of any such taxes, rates, levies, charges, or assessments required to be paid and paid by Lessee under the provisions hereof shall belong to Lessee, and Lessor will on the request of Lessee execute any documents that may be necessary in order to secure such rebates payable to Lessor. f. Lessor’s Right to Pay Taxes and Fees on Behalf of Lessee. In the event Lessee shall fail to comply with the preceding terms of this Section, Lessor may, but shall not be obligated to, pay any such taxes or assessments, including Lessor’s expenses (including City’s internal staff time), including attorney’s fees, and charge all of them against Lessee, plus interest on the entire amount at a rate of 8% per annum from the date paid, as Additional Rent immediately due and payable, subject, however, to subsections d. and (e) above. g. Receipts. Lessee shall at the request of Lessor obtain and deliver to Lessor proof of payment for all taxes, assessments, levy, governmental charges, and other items required to be paid by Lessee. h. Acknowledgement. Lessee acknowledges that Lessor has made no representations or warranties of any kind with respect to the amount of any real estate taxes, special assessments, or other charges which may be levied against the Premises. Lessor agrees to cooperate with Lessee in the taking of any reasonable action determined by Lessee to be necessary to obtain or maintain tax exempt status for Lessee’s use of the Premises, provided, however, that Lessee shall be responsible for SHA - Lease-Use Agreement: 03/14/2019 6 any actual out of pocket costs and expenses incurred by Lessor in connection with such cooperation. i. Reimbursement. Lessee shall pay or reimburse for any of Lessor’s consultant or professional fees and expenses, including attorney’s fees and costs incurred for drafting, executing, and implementing any and all leases and agreements including but not limited to Grant Agreement, Government Program, or Premises and Improvements. Lessee shall promptly reimburse Lessor for any payments or expenses Lessor made or incurred that under this Agreement that were or are Lessee’s responsibility. 8. PAYMENT OF UTILITIES. As Additional Rent, Lessee shall fully and promptly pay when due for all water, sewer, gas, heat, light, power, telecommunications, and all other utilities of every kind furnished to the Premises throughout the Term hereof and any renewals, and Lessor shall have no responsibility of any kind for any thereof. 9. REPORTING AND PROGRAM OVERSIGHT. a. Lessee shall submit to the City, upon written request, which shall not be more often than annually, such documentation, information and reports as are needed by the City to assure the Lessee is providing the Governmental Program and to allow Lessor to file the annual reports to the State required by the Grant Agreement. Such information may include: i) A report of major activities at the Project for the current fiscal year of Lessee, and a description of how the major activities meet the elements of the Governmental Program; and ii) Lessee’s operating budget for the current fiscal year, including revenues and expenses that demonstrates revenues equal to or exceeding forecast program expenses. The Lessee shall meet with the City Designee and respond to any questions or requests for further information in connection with the foregoing. 10. LESSEE REPRESENTATIONS, WARRANTIES AND COVENANTS. Lessee covenants with and warrants and represents to Lessor as follows: a. It has legal authority to enter into, execute, and deliver this Lease, and that it has taken all corporate and other actions necessary and incident to its execution and delivery of such documents. b. It will comply with all of the terms, conditions, covenants, requirements, and/or warranties in this Lease, at all times during the term hereof. SHA - Lease-Use Agreement: 03/14/2019 7 c. It will comply with the terms, conditions, covenants, requirements and/or warranties in the Grant Agreement. d. It will construct the Improvements and operate the Project in compliance with this Lease and the Grant Agreement. e. It has made no material false statement, or material misstatement of fact, in connection with its receipt of this Lease, and all of the information previously submitted to Lessor or the State, relating to this Lease or the Grant or the disbursement of any of the proceeds of the Grant, is and will be true, complete and correct by Lessee in all material respects. f. The execution and delivery of this Lease by Lessee will not constitute a violation of any provisions of its Articles of Incorporation or Bylaws, or of the laws of the State, and there are no actions, suits, or proceedings pending, or to the actual knowledge of the undersigned officers of Lessee, threatened, before or by any judicial body or governmental authority against or affecting it relating to the Premises, and it is not in default with respect to any order, writ, injunction, decree, or demand of any court or any governmental authority which would impair its ability to enter into this Lease, or to perform any of the acts required of it in this Lease. g. Neither the execution or delivery of this Lease, nor compliance with any of the terms, conditions, requirements, or provisions contained herein, is prevented by, is a breach of, or will result in a breach of any term, condition, or provision of any agreement or document to which it is now a party, or by which it, or any of its properties, is bound. h. Subject to Unavoidable Delays (as defined in the Section 21), by no later than the Completion Date, the Improvements will be substantially completed in such a manner as will allow the Governmental Program to be operated in the manner specified in Section 1 of this Lease. i. As of the date hereof, the Premises and the contemplated use thereof will not violate in any material respect any applicable zoning or use statute, ordinance, building code, rule or regulation, or any covenant or agreement of record, relating to the Premises. j. The construction of the Improvements will be performed in material compliance with all applicable laws, statutes, rules, ordinances, and regulations, including but not limited to building code, disability, access, zoning, air quality, pollution control, and prevailing wage requirements as issued by any federal, state, or local political subdivisions having jurisdiction over the Premises. k. All applicable licenses, permits, and other conditions required for the construction of the Improvements have been or shall be obtained. SHA - Lease-Use Agreement: 03/14/2019 8 l. It has not taken and will not take any actions inconsistent with this Lease. m. It has reviewed the City’s title to the Premises and determined that the City’s ownership and title is adequate and sufficient and waives any title objections, conditions, or claims it may have as of the date of this Agreement, subject to City’s obligation to advise of any known title issues as of the closing. 11. LESSOR REPRESENTATIONS, WARRANTIES AND COVENANTS. Lessor covenants with and warrants and represents to Lessee as follows: a. It has legal authority to enter into, execute, and deliver this Lease, and that it has taken all official and other actions necessary and incident to its execution and delivery of such documents. b. It will comply with all of the terms, conditions, covenants, requirements, and/or warranties in this Lease applicable to Lessor at all times during the term hereof. c. It will comply with all of the terms, conditions, covenants, requirements and/or warranties in the Grant Agreement and any applicable DEED or other State requirements, subject to Lessee’s compliance with all terms and conditions of this Lease. d. The execution and delivery of this Lease by Lessor will not constitute a violation of any provisions of the laws of the State, and there are no actions, suits, or proceedings pending, or to the actual knowledge of the undersigned officers of Lessor, threatened, before or by any judicial body or governmental authority against or affecting it relating to the Premises, and it is not in default with respect to any order, writ, injunction, decree, or demand of any court or any governmental authority which would impair its ability to enter into this Lease, or to perform any of the acts required of it in this Lease. e. Neither the execution or delivery of this Lease, nor compliance with any of the terms, conditions, requirements, or provisions contained herein, is prevented by, is a breach of, or will result in a breach of any term, condition, or provision of any agreement or document to which it is now a party, or by which it is bound. f. It has made no material false statement, or material misstatement of fact, in connection with its execution of this Lease, and all of the information previously submitted to Lessee or the State, or to be submitted to Lessee or the State in the future, relating to this Lease or the Grant or the disbursement of any of the proceeds of the Grant, is and will be true, complete and correct by Lessor in all material respects. g. It has not taken and will not take any actions inconsistent with this Lease. SHA - Lease-Use Agreement: 03/14/2019 9 12. WARRANTIES OF TITLE AND QUIET POSSESSION. City has full right to make this Lease subject to the provisions hereof, and, assuming SHA fully performs as required by this Lease, SHA shall have quiet and peaceable possession of the Premises during the term hereof and any renewals as against the acts of all parties claiming title to or a right to the possession of the Premises, with the exception, however, of the following: a. Easements, covenants, conditions, restrictions, and limitations, if any, set forth on Exhibit D; b. Reservation of any minerals or mineral rights reserved to the State of Minnesota; c. Building and zoning laws, ordinances, and State and federal regulations; and d. Any liens or other encumbrances created by Lessee. 13. USE OF PREMISES. Subject to the other terms and provisions contained herein, Lessee shall be permitted to use the Premises for the construction of the Project and for construction of additional buildings and improvements pursuant to Section 22 herein, maintenance and repair of the Premises, and operation of the Project to achieve the Governmental Program. The Project has been approved by Lessor through Resolution No. ____and other City Resolutions prior to entry into this Lease. No use shall be made or shall be permitted to be made of the Premises nor shall any acts be done which will cause a cancellation of any insurance policy covering any building located on the Premises, or any part thereof. Lessee shall, at its sole cost, comply with all requirements pertaining to the Premises of any insurance covering the improvements on the Premises. Furthermore, during the term of this Lease, Lessee shall comply with all applicable laws affecting the Premises, including: (a) the breach of such laws might result in any penalty on Lessor or the forfeiture of Lessor’s title to the Premises; or (b) the breach of which would have an adverse effect on public health or safety. Lessee shall not commit or allow to be committed any waste of or nuisance on the Premises. Throughout the term of this Lease, the operation of the Governmental Program on the Premises shall be subject to Unavoidable Delays, as defined in Section 21 herein. 14. ABANDONMENT OF PREMISES. If Lessee shall abandon, vacate, or surrender the Premises or shall be dispossessed by process of law, or otherwise, any personal property belonging to Lessee and left on the Premises shall be deemed to be abandoned, at the option of Lessor. 15. LESSOR’S RIGHT OF ENTRY. Lessee shall permit Lessor and the agents and employees of Lessor to enter into and on the Premises at all reasonable times during business hours and with at least five days’ written notice for the purpose of inspecting them or for the SHA - Lease-Use Agreement: 03/14/2019 10 purpose of posting notices of non-responsibility for alterations, additions, or repairs, without any charge to Lessor and without any liability to Lessor for any loss of occupancy or quiet enjoyment of the Premises. 16. ENCUMBRANCE OF LESSEE’S LEASEHOLD INTEREST. Lessee may encumber by mortgage or other proper instrument its leasehold interest in the Premises including all buildings and Improvements thereon, as security for any indebtedness of Lessee incurred to finance or refinance Improvements on the Premises provided such mortgage contains an acknowledgement that the mortgagee’s rights are subject to the rights of Lessor under this Lease and the rights of the State under the Grant Agreement. Any such lien shall give Lessee access to insurance and condemnation proceeds so as to allow Lessee the right to rebuild or restore any portions of the Premises destroyed or condemned in the event that Lessor permits such rebuilding or restoration under the terms of this Lease. No such encumbrance, or any foreclosure, conveyance, or exercise of right by any secured lender shall relieve Lessee from its liabilities hereunder, nor prevent Lessor from exercising its rights herein to terminate the Lease. If Lessee shall so encumber its leasehold interest and if Lessee or the holder of the indebtedness secured by such encumbrance shall give notice to Lessor of the existence thereof and the address of such holder, then Lessor will mail or deliver to such holder at that address a duplicate copy of all notices in writing which Lessor may, from time to time, give to or serve on Lessee under and pursuant to the terms and provisions hereof. Such copies shall be mailed or delivered to such holder at or as near as possible to the same time such notices are given to or served on Lessee. Such holder may, at its option, at any time before the rights of Lessee shall be terminated as provided herein, pay any of the amounts due hereunder or pay any taxes and assessments or do any other act or thing required of Lessee by the terms hereof or do any act or thing that may be necessary and proper to be done in the observance of the covenants and conditions hereof or to prevent the termination hereof. All payments so made, and all things so done and performed by such holder, if done prior to the rights of Lessee having been terminated, shall be as effective to prevent a termination of the rights of Lessee hereunder as they would have been if done and performed by Lessee. Upon such holder succeeding to the interest of Lessee hereunder, such holder shall be bound by all terms and conditions of this Lease and Grant Agreement and shall be deemed to have assumed all of Lessee’s obligations hereunder from and after such time as it succeeds to the interest of Lessee. 17. EARLY TERMINATION OF THIS LEASE. a. Sale. Notwithstanding Sections 23 and 36, in the event that (a) this Lease is terminated prior to the end of the term or is not renewed pursuant to Section 4 of this Lease, (b) the Premises are subject to the Grant Agreement and the Declaration, and (c) the City determines by action of the City Council that the Premises are no longer usable or needed to carry out the Governmental Program, then, the City may sell the SHA - Lease-Use Agreement: 03/14/2019 11 City’s interest in the Premises, on the conditions that such sale is for fair market value and if required by law, also upon terms authorized by law and approved by the Commissioner of MMB in its reasonable discretion. For purposes of this Lease, “fair market value” shall mean (i) the price that would be paid by a willing and qualified buyer to a willing and qualified seller as determined by an appraisal which assumes that any and all mortgage liens or encumbrances on the Premises, which negatively affect the value of the Premises, will be released, or (ii) the price bid by a purchaser under a public bid procedure after reasonable public notice with the proviso that any and all mortgage liens or encumbrances on the Premises, which negatively affect the value of the Premises, will be released at the time of acquisition by such purchaser. The City shall not sell its interest in the Premises until it has first offered to sell its interest in the Premises to Lessee, as hereinafter provided, and Lessee has elected in writing to not purchase the City’s interest in the Premises. The City hereby grants to Lessee a right of first option to purchase the City’s interest in the Premises. Upon exercise of such purchase option, if the Grant Agreement remains in effect, then (i) the City shall promptly pay such sums to the Commissioner of MMB in full satisfaction of the Grant Agreement, and (ii) the Premises shall be released from the Grant Agreement and the Declaration and shall no longer be considered State Grant financed property. In the event of a sale of the City’s interest in the Premises (a “Sale”) to a third party, after deducting the City’s reasonable and customary costs incurred in such Sale, the net proceeds of such Sale must be applied as follows: (v) first, to pay to the Commissioner of MMB the amount of Grant proceeds actually disbursed and used to better the Premises in accordance with the Grant Agreement, less any payments that have been made pursuant to Section 2.08.B of the Grant Agreement; (w) second, to pay in full any approved and outstanding public or private debt incurred to acquire or better the City’s interest in the Premises; (x) third, to pay to Lessor the value of the City’s interest in the Premises; (y) fourth, to pay to Lessee, and any other interested public or private entities holding Priority Private Debt, other than such entity that has already received the full amount of its contribution, the amount of money contributed initially and subsequently by each to the acquisition or betterment of the Premises; and (z) fifth, any excess over those amounts must be divided in proportion to the shares contributed initially as set forth in Exhibit D and subsequently for acquisition and betterment of the Premises, other than any public and private lenders already paid in full. Exhibit D and subsection (y) in the preceding sentence shall be adjusted to include the amount of contributions made by Lessee subsequently and to pay for capital improvements to the Premises or the Improvements. Upon receipt of such sums, the Premises shall be released from the Grant Agreement and the Declaration and shall no longer be considered State Grant financed property. Nothing in this or any other agreement shall be construed as requiring the City to sell its interest in the Premises. To the extent, but only to the extent, disposition of the sale proceeds is not controlled by the Grant Agreement , the proceeds of any sale will be shared by Lessee SHA - Lease-Use Agreement: 03/14/2019 12 and the City in accordance with the percentages set forth on Exhibit E; provided that all public and private indebtedness incurred to acquire or better the Premises shall first be paid in full. b. Payment of Investment. Notwithstanding Sections 23 and 36, in the event that (a) this Lease is terminated prior to the end of the term or is not renewed pursuant to Section 4 of this Lease, (b) the Premises are subject to the Grant Agreement and the Declaration, and (c) the City has determined to continue to carry out the Governmental Program in the Premises, then, at the time of the termination or renewal, the City shall reimburse Lessee for its investment in the Premises (which investment is the amount of money or like-kind contributions contributed initially and subsequently to the acquisition and betterment of the Premises by Lessee). The sums to be paid by the City to SHA for reimbursement of its investment shall be due and payable on the termination or expiration date of this Lease, except those sums which cannot be determined as of such date shall be due and payable upon determination and shall earn interest from and after the date until paid in full at the rate of two percent (2%) over the prime rate announced from time to time by U.S. Bank National Association. All additional sums to be paid by the City to SHA shall be due and payable at the time of the City’s election to purchase the interest of Lessee in the Premises and shall be approved by the Commissioner of MMB. The parties agree that the projected amount of investment by or on behalf of Lessee, as of the date of entry into this Lease, is agreed to be as provided on Exhibit E. c. Payment Based on Appraisal. Fair market value for the purposes of Sections 17 and 18 of this Lease shall be established by the average of the following three amounts: 1) appraisal prepared by an MAI or comparable certified appraiser selected by the City, in its commercially reasonable discretion; 2) appraisal prepared by an MAI or comparable certified appraiser selected by SHA, in its commercially reasonable discretion; 3) the property tax value of the leased portion of the property as of that date The cost of appraisals under this subsection will be paid by the entity ordering the appraisal. d. Sale Costs. In the event of a Sale described in subsection 17.a., Lessor shall pay for the reasonable and customary costs incurred by the City in such Sale that are not allowed by the State to be deducted first from the gross proceeds from such Sale (by way of example to the extent not allowed by the State, the City’s costs for interim property management, relocation, appraisal, marketing, staff administration, legal fees, survey, and title work). e. Intentionally omitted. f. Survival. This Section 17 shall survive the termination of this Lease. 18. SUBLETTING AND ASSIGNMENTS. Except as provided herein, Lessee shall not assign any of its rights hereunder, or sublet all or any portion of the Premises, without Lessor’s prior written consent which consent may not be unreasonably delayed or withheld. SHA - Lease-Use Agreement: 03/14/2019 13 Provided, an assignment to an operating non-profit 501(c)(3) entity, created by SHA whose performance is guaranteed by SHA shall be a permitted assignment. Further notwithstanding the foregoing, Lessee shall be permitted to mortgage its interest hereunder to any mortgagee, provided such mortgage is in connection with Lessee’s financing or refinancing of the development or improvement of the Premises as contemplated herein subject to the requirements of Section 16 hereof. On the foreclosure of any such mortgage, the mortgagee may thereafter assign or transfer its interest in the leasehold to any other assignee or transferee, subject to the provisions of the Grant Agreement, provided that any assignee thereof shall agree to be bound by the terms and conditions of this Lease. Thereafter, there shall be no other assignments or transfers of the leasehold interest without the prior written consent of Lessor, which consent may be given or withheld in Lessor’s sole discretion, and Lessor’s consent to one assignment or transfer shall not be deemed to be a consent to any subsequent assignment or transfer. Any other transfer or assignment without Lessor’s consent shall be void and shall at the option of Lessor constitute a Default hereunder. 19. NOTICES. All communications, demands, notices, or objections permitted or required to be given or served under this Lease shall be in writing and shall be deemed to have been duly given or served when delivered in person to the other party or its authorized agent or two (2) days after being deposited in the United States mail, postage prepaid, for mailing by certified or registered mail, return receipt requested, and addressed to the other party to this Lease, to the address set forth next to such party’s signature at the end of this Lease, or if to a person not a party to this Lease, at the following addresses: To Lessee: With a Copy to the Project: To Lessor: Scandia Heritage Alliance P.O. Box 159 Scandia, MN 55073 Attention: Executive Director Water Tower Barn Scandia Arts and Heritage Center 20835 Olinda Trail North Scandia, MN 55073 City of Scandia City Hall 14727 209th Street North Scandia, MN 55073 Attention: City Administrator Any party may change its address by giving notice in writing, stating its new address, to any other party as provided in the foregoing manner. Commencing on the tenth (10th) day after the giving of such notice, such newly designated address shall be such party’s address for the purposes of all communications, demands, notices, or objections permitted or required to be given or served under this Lease. SHA - Lease-Use Agreement: 03/14/2019 14 20. CONSTRUCTION OF IMPROVEMENTS. Lessee shall construct the Improvements, described on Exhibit B (the “Improvements”), attached hereto and incorporated herein, at its own expense and subject to and in accordance with all terms and conditions of this Lease, the Grant Agreement, the Construction Disbursing Agreement between Lessor, Lessee, the title insurer, and other parties dated as of the date hereof (the “Disbursing Agreement”) and in material compliance with all applicable federal, state and local laws, rules and regulations, and in material compliance with the terms and conditions of all applicable licenses and permits. Lessor agrees it shall authorize the disbursal of the State Grant Proceeds to Lessee to be used to construct the Improvements as provided herein and in accordance with the Grant Agreement and the Disbursing Agreement. The Improvements shall be substantially completed not later than the Construction Completion Date, subject to delays in the performance obligations for construction of the Improvements due to the unforeseeable causes beyond the control of Lessee and without the fault or negligence of Lessee, including but not limited to adverse or severe weather conditions, acts of God, acts of the public enemy, strikes, lock-outs, or other similar labor troubles, fire, floods, epidemics, quarantines, unavailability of power, unavailability of materials, delays due to damage or destruction of the Premises or the equipment used to construct the same, discovery of hazardous materials or other concealed site conditions including environmental issues, or delays of contractors due to such discovery, and litigation commenced by third parties which by injunction or other similar judicial action directly results in delays and other casualty to the Premises, or affect the validity of this Lease (“Unavoidable Delays”). Lessor and Lessee acknowledge that during such construction, the Governmental Program will not commence or may be interrupted as is reasonably necessary for orderly and safe construction to occur, provided that the Governmental Program shall commence or resume within a reasonable time after the Completion Date, subject to Unavoidable Delays. Upon the termination or expiration of this Lease, all of the Improvements, including any fixtures related to the operation of any Improvements located on the Premises, shall immediately become the property of the Lessor. Upon request of the Lessor after termination of this Lease, Lessee will execute and deliver to the Lessor bills of sale transferring to the Lessor title to any personal property that has become a fixture and property of the Lessor under the preceding sentence. Lessee is hereby authorized by Lessor to provide for the construction and equipping of the Improvements in accordance with the Grant Agreement and the Grant Legislation. 21. CONSTRUCTION OF ADDITIONAL BUILDINGS AND IMPROVEMENTS. Lessee shall, with the prior written approval of Lessor which approval shall not be unreasonably delayed or withheld, have the right to make such alterations, improvements, and changes (other than the initial Improvements, which have been previously approved by Lessor) to any building or Improvement which may from time to time be on the Premises, as Lessee may deem necessary, subject to the limitations in Section 13. Notwithstanding the preceding sentence, Lessor agrees that changes to the Improvements or the Project do not require the consent of Lessor if (i) Lessee in its reasonable judgment determines such changes do not reduce the value of the Project as a whole or reduce the ability of Lessee to operate the Governmental Program, (ii) each such change costs less than $100,000, and (iii) before commencing the change, Lessee provides Lessor notice and receives all necessary permits for the change. Lessor and Lessee acknowledge that during such SHA - Lease-Use Agreement: 03/14/2019 15 additional construction, the Governmental Program may be interrupted as is reasonably necessary for orderly and safe construction to occur, provided that the Governmental Program shall resume within sixty (60) days after completion of construction. Any new building constructed by Lessee on the Premises, and any changes to the existing Improvements or subsequently to new buildings, shall be constructed in material compliance with all applicable federal, state and local laws, rules and regulations; and in compliance with the terms and conditions of all applicable licenses and permits; and, together with any fixtures related to the operation of any buildings located on the Premises, shall, upon termination or expiration of this Lease, become the property of Lessor. Upon request of Lessor after the termination or expiration of this Lease, Lessee will execute and deliver to Lessor bills of sale transferring to the Lessor title to personal property which has become a fixture and consequently property of the Lessor under the preceding sentence. 23. REPAIRS AND DESTRUCTION OF IMPROVEMENTS. a. Maintenance of Improvements. Lessee shall, throughout the term of this Lease, at its own cost and without any expense to Lessor, keep and maintain the Premises and the Improvements, of every kind which may be a part thereof, and all appurtenances thereto, including public and private sidewalks located thereon and adjacent thereto, in good, sanitary, lawful, and neat order, condition, and repair and, except as specifically provided herein, shall restore and rehabilitate any Improvements which may be destroyed or damaged by fire, casualty, or any other cause whatsoever. Lessor shall not be obligated to make any repairs, replacements, or renewals of any kind, nature, or description whatsoever to the Premises or any buildings or improvements thereon. b. Damage to and Destruction of Buildings or Improvements. The damage or destruction or partial destruction of any building or other Improvement which is a part of the Premises shall not release Lessee from any obligation hereunder, except as hereinafter expressly provided. In case of damage to or destruction of such building or Improvement which is not substantial, Lessee shall at its own expense promptly repair and restore the same to a condition as good or better than that which existed prior to such damage or destruction, and Lessee shall have the right to any insurance proceeds the premium for which has been paid by Lessee to be used by Lessee to pay the cost of such repair and restoration. In the case of damage to or destruction of such building or Improvement which is substantial, Lessee shall at its own expense promptly repair and restore the same to a condition as good or better than that which existed prior to such change or destruction, unless Lessee, in its judgment, determines that it is inappropriate to rebuild the building or Improvements on the Premises, in which case this Lease and Lessee’s interest in the Premises shall be terminated and shall have the same effect as if a Sale shall have occurred (subject to Lessor’s determination that the Premises are no longer usable or SHA - Lease-Use Agreement: 03/14/2019 16 needed by Lessor to carry out the Governmental Program), and the insurance proceeds shall be paid in accordance with the provisions of Section 17 above; provided, however, if Lessee pays to Lessor the sums required by Section 2.08.C. of the Grant Agreement or such lesser amount permitted under Minnesota law, in full satisfaction of the Grant Agreement, then the insurance proceeds shall be paid to Lessee. Lessee shall give written notice to Lessor of its determination whether or not to rebuild within one hundred and eighty (180) days of the damage or destruction of the buildings or Improvements. If Lessee does not elect to rebuild, this Lease shall terminate as of the date specified in Lessee’s notice to Lessor, and all rent and other obligations of Lessee shall terminate on that date. No settlement with the insurance company shall be agreed to by Lessee without the prior written consent of Lessor and the State. Except as otherwise provided in this Section, and without limiting such obligations of Lessee, if Lessee elects to rebuild, and any mortgagee consents to rebuilding, if necessary, it is agreed that the proceeds of any insurance covering such damage or destruction shall be paid to Lessor and Lessee, to be held in escrow for such repair or replacement with an escrow agent acceptable to Lessor, Lessee, and any mortgagee, to be disbursed in accordance with standard commercial construction lending conditions customarily required by institutional lenders. The Lessee shall not be obligated to operate the Governmental Program on the Premises from the date of damage or destruction of the buildings or Improvements until repair or reconstruction of the buildings or improvements on the Premises is complete. 24. MECHANICS’ LIENS. Lessee hereby covenants and agrees that Lessee will not permit or allow any mechanics or materialmen’s liens to be placed on Lessor’s interest in the Premises during the term hereof. Notwithstanding the previous sentence, however, in the event any such lien shall be so filed against Lessor’s interest, Lessee shall take all steps necessary to remove it within 120 days of its being filed; and provided further, however, that Lessee may contest any such lien provided Lessee first provides a surety bond, title insurance, or letter of credit or cash with the applicable court sufficient to release the Premises from such lien, or otherwise protect Lessor from foreclosure thereof. 25. INDEMNIFICATION OF LESSOR. a. To the fullest extent permitted by law, Lessee shall, and hereby does, indemnify, save, hold harmless, and defend Lessor, its officials, employees, representatives, and agents but only when acting in their capacities as such (collectively, the “Indemnified Party” or “Indemnified Parties”), from and against all claims, costs (including reasonable attorney’s fees to the extent provided in clause e. below), liabilities, losses, or damages suffered or incurred by any of the Indemnified Parties arising from or as a result of any loss, injury, death, or damage to persons or property arising out of the use, possession, construction of Improvements, operation, or maintenance of the Premises or any part thereof, or as a result of Lessee’s failure to comply with the Grant Agreement, except when such loss, injury, death, or damage SHA - Lease-Use Agreement: 03/14/2019 17 shall be caused by or in any way result from or arise out of any act, omission, or negligence of the Indemnified Parties as provided in subsection c. hereof. b. Lessee hereby waives and releases all claims against the Indemnified Parties for damages to any building and Improvements which are now on or hereafter placed or built on the Premises and to the property of Lessee in, on, or about the Premises. Lessee also agrees that it will not assert against the Indemnified Parties in any legal proceeding any claim, cross-claim or third party claim for which Lessee is obligated under the provisions of clause a. of this Section 25 to provide indemnification to the Indemnified Parties. c. (1) No person or entity other than the Indemnified Parties shall have any benefit whatsoever from the agreements contained in this Section, other than any incidental indirect benefit accruing to taxpayers or residents of the City by reason of the benefit to Lessor and the Indemnified Parties and shall not in any case be deemed to be a third party beneficiary of the agreements of Lessee contained in clauses a. and b. above. (2) Notwithstanding the provisions of clauses a. and b. above, the provisions of clause a. and b. shall not apply to claims, costs, liabilities, losses, or damages which are caused by the willful or intentional misconduct or gross negligence of the Indemnified Parties, and in such case the Indemnified Parties shall owe the same indemnity and other obligations to the Lessee as provided in clauses a. and b. d. Nothing in this Section 25 shall be construed to, and shall not, expand Lessor’s maximum liability over the limits set forth in Minnesota Statutes, Chapter 466, as amended from time to time, or any other or successor law which has the effect of limiting Lessor’s liability. e. Promptly after receipt by an Indemnified Party of notice of the commencement of any action for which Lessee has indemnified the Indemnified Parties hereunder, the Indemnified Party will notify Lessee in writing of the commencement thereof, and, subject to the provisions hereinafter stated, Lessee shall assume, at its expense, the defense of such action (including the employment of counsel, who shall be reasonably satisfactory to the Indemnified Parties) insofar as such action shall relate to any alleged liability for which Lessee has indemnified the Indemnified Parties hereunder. The Indemnified Parties shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of Lessee unless (i) the employment of such counsel has been specifically authorized by Lessee, or (ii) the named parties to any such action (including any impleaded parties) include more than one of the Indemnified Parties and a conflict of interest among Lessee and Indemnified Parties exists, and as a result Lessee and the Indemnified Parties cannot adequately be represented by the same counsel. In the case of such a conflict of interest, Lessee shall not have the right to assume the defense of such action on behalf of such Indemnified Parties and the Indemnified Party shall have the right to select separate counsel, at the expense of Lessee but subject to the limitation set forth in the following sentence, to assume such SHA - Lease-Use Agreement: 03/14/2019 18 legal defense and to otherwise participate in the defense of such action on behalf of the Indemnified Parties. Subject to the rules of professional responsibility and conflicts of interest, in connection with any one such action or separate but substantially arising out of the same general allegations or circumstances, Lessee shall not be liable for the fees and expenses of more than one separate firm of attorneys for all such Indemnified Parties, which firm shall be reasonably acceptable to Lessee and shall be designated in writing by the Indemnified Parties. Lessee shall not be liable for any settlement of any such action effected without its written consent. If such action is settled with the written consent of Lessee, or if there be a final judgment for the plaintiff in any such action, with or without the consent of Lessee, Lessee agrees to indemnify and hold harmless the Indemnified Parties from and against any loss or liability by reason of such settlement or judgment, but only to the extent provided in subsection a. of this Section 25. This indemnity includes reimbursement for expenses reasonably incurred by any of the Indemnified Parties in investigating the claim and in defending it if Lessee declines to assume the defense. 26. INSURANCE. a. Insurance Coverage of Premises. Lessee shall at all times during the terms of this Lease and at Lessee’s sole expense keep all improvements which are now or hereafter a part of the Premises insured against “all risks”, for those risks that are available at commercially reasonable rates, for the full insurable value of such improvements, and during the construction of the Improvements “builders risk” and standard fire and extended coverage, with a deductible not to exceed $25,000.00, and with loss payable to Lessor, Lessee, the State, and any mortgagee as their respective interests may appear. Any loss adjustment shall be made in accordance with the requirements for the use and distribution of insurance proceeds in the event of damage as otherwise provided herein, but shall require the prior written consent of Lessor, the State, Lessee, and any mortgagee. Lessee shall be responsible for any insurance deductible. b. Commercial General Liability Insurance. Lessee shall maintain in effect throughout the term of this Lease, at its own expense, commercial general liability insurance covering the Premises and its appurtenances and the sidewalks fronting on the Premises in the amount of at least Two Million Dollars ($2,000,000) combined single limit, and insurance on all boilers and other pressure vessels, fired or unfired, or the tort liability minimums set forth under Minnesota law, whichever is greater. Such insurance shall: (i) be primary with respect to Lessor’s insurance or self-insurance; (ii) not exclude explosion, collapse and underground property damage; (iii) be written on an “Occurrence” Form policy basis; (iv) shall name Lessor, the State, and any mortgagee as additional insureds thereunder; and (v) not contain an “aggregate” policy limit (combined general liability and excess liability) of less than Ten Million Dollars per annual policy period unless specifically approved in writing by Lessor. Additionally, Lessor, the State, and any mortgagee shall be named as additional insureds on any contractor’s general liability insurance maintained by the general SHA - Lease-Use Agreement: 03/14/2019 19 contractor or construction manager responsible for constructing the improvements to the Premises. c. Workers’ Compensation Insurance. Lessee shall maintain Workers’ Compensation Insurance with not less than statutory minimum limits, and Employers’ Liability Insurance with minimum limits of at least One Hundred Thousand Dollars ($100,000) per accident and with an all states endorsement. d. Insurance Certificates. Lessee shall supply to Lessor, concurrently with signing this Lease and thereafter as reasonably requested by Lessor, current insurance certificates for policies required in this Section. Lessee shall promptly furnish to Lessor all endorsements and other written notices which modify or change any insurance coverage with respect to the Premises or Lessee’s operation at the Premises, and all paid premium receipts by Lessee regarding such required insurance. e. Additional Required Insurance. The limits cited under each insurance requirement above established minimums; and it is the sole responsibility of Lessee to purchase and maintain additional insurance that Lessee may determine to be necessary in relation to this Lease or its operation of the Premises. f. Non-waiver of Statutory Limits. Nothing in this contract shall constitute a waiver by Lessor of any statutory limits or exceptions on liability. g. Placement of Insurance. Lessee shall place the insurance with responsible insurance companies authorized and licensed to do business in the State of Minnesota having an A.M. Best Company rating of at least A:VIII, and shall deliver certificates in the form required above evidencing such coverage to Lessor on the date of Lessee’s execution of this agreement and from time to time thereafter as reasonably required by Lessor. The policies required in this Section shall be endorsed to indicate that the insurer cannot cancel or change the insurance without first giving Lessor and the State thirty (30) days’ written notice. h. Lessor’s Right to Pay Premiums on Behalf of Lessee. Lessee shall pay all of the premiums therefor and deliver such policies, or certificates thereof, to Lessor. In the event of the failure of Lessee, either to effect such insurance in the names called for or to pay the premiums therefor or to deliver such policies or certificates thereof to Lessor, Lessor shall be entitled, but shall have no obligation, to effect such insurance and pay the premiums therefor. Such premiums, together with interest thereon at the rate of ten percent per annum accruing from the date of payment by Lessor, shall be repayable to Lessor within thirty (30) days after written notice of the payment of such insurance, and failure to repay the premiums shall carry with it the same consequences as failure to pay any installment of Rent. All rebates on account of any such premiums paid by Lessor shall belong to Lessor, provided Lessee has not reimbursed Lessor for such premiums and Lessee shall have no obligation to reimburse Lessor to the extent of such rebates received and retained by Lessor. SHA - Lease-Use Agreement: 03/14/2019 20 Each insurer mentioned in this Section shall agree, by endorsement on the policy or policies issued by it, or by independent instrument furnished to Lessor, and in form acceptable to Lessor, that it will give to Lessor and the State thirty (30) days’ written notice before the policy or policies in question shall be altered or cancelled. i. Increase in Coverage. The insurance and the size of any applicable deductible required to be maintained pursuant to this Lease shall be subject to review as to its adequacy by Lessee and Lessor once every five (5) years beginning in the year 2030. j. Blanket Insurance Policies. Notwithstanding anything to the contrary contained in this Section, Lessee’s obligations to carry the insurance provided for herein may be brought within the coverage of a so-called blanket policy or policies of insurance carried and maintained by Lessee; provided, however, that the coverage afforded Lessor will not be reduced or diminished or otherwise be different from that which would exist under a separate policy meeting all other requirements of this Lease by reason of the use of such blanket policy of insurance. 27. PROHIBITION OF INVOLUNTARY ASSIGNMENT. Neither this Lease nor the leasehold estate of Lessee nor any interest of Lessee hereunder in the Premises or in any buildings or improvements thereon shall be subject to involuntary assignment, transfer, or sale, by operation of law or otherwise, and any such attempt at involuntary assignment, transfer, or sale shall be void and of no effect. For purposes of this subsection, the merger or consolidation of Lessee with any other entity or entities shall be deemed to be a transfer and prohibited by this subsection unless either: (i) such merger is with another entity and Lessee is the survivor and remains exempt from income tax under § 501(c)(3) of the Internal Revenue Code of 1986 as amended (the “Code”); or (ii) such merger is with another entity which is exempt from income tax under § 501(c)(3) of the Code, Lessee is not the surviving entity, said surviving entity expressly assumes all obligations of Lessee hereunder, said surviving entity remains exempt from income tax under § 501(c)(3) of the Code, and said surviving entity has comparable or higher “net worth” (or its equivalent under accounting principles applicable to Section 501(1)(3) organizations) as Lessee has on the date hereof. The occurrence of any involuntary assignment prohibited by the provisions of this Section 27 shall be deemed to constitute a under Section 28 hereof, and upon the expiration of the applicable cure period contained in Section 29 hereof, Lessor shall be entitled to exercise all remedies set forth in this Lease, subject, however, to the provisions of Section 32 hereof. 28. EVENTS OF LESSEE DEFAULT. Any of the following events shall constitute a “Default” by Lessee under this Lease: a. Subject to Unavoidable Delays, if construction of the Improvements has not been commenced or completed by the dates required by Section 21 and have not been completed substantially in accordance with the plans and specifications as SHA - Lease-Use Agreement: 03/14/2019 21 amended from time-to-time in accordance with the provisions contained in Section 21 and the Grant Agreement; b. Subject to any payments being contested in good faith, if Lessee fails to fully and completely pay all sums lawfully owing for the completion of the Improvements in accordance with the plans and specifications, or under this Agreement, respecting the Premises or the Improvements or their respective operations, repair, maintenance, or replacement; c. If, without the written consent of Lessor, any part of the Premises ceases to be used to achieve the Governmental Program; d. If a Default under Section 27 hereof occurs; e. If, without the written consent of Lessor and the Commissioner of MMB, and except for any permitted encumbrances identified Exhibit F attached hereto, and except as allowed under Sections 16, 17, 18 or 19 hereof, Lessee sells, transfers, leases, encumbers, or otherwise conveys, in any way or manner, whether voluntary or involuntary, or by action of law, all or any part of its interest in the Premises, or amends or modifies any agreement relating to such sale which had previously been so consented to and approved by Lessor and the Commissioner of MMB; f. If, without the written waiver of Lessor, Lessee fails to annually certify that the Premises is being used to achieve the Governmental Program as required in Section 1 of this Lease; g. If, without the written waiver of Lessor, Lessee fails to provide the annual information to Lessor for Lessor’s reporting to the State; h. If Lessee fails to continuously maintain the insurance required by Section 26 of this Lease; i. If Lessee, upon request, refuses to allow Lessor, the representative of DEED, or any auditor for the State or for the Minnesota Legislature, to inspect audit, copy, or abstract any and all of Lessee’s financial records (books, records, papers) or other documents relevant to this Lease or the Grant to Lessor, or the Premises; j. If Lessee, upon request, refuses to allow Lessor or any authorized representative of the State, to inspect the Premises; k. If Lessee fails to cooperate fully with Lessor in complying with any of the provisions of the Grant Agreement or any applicable MMB or DEED requirements, or Lessee fails to comply with the Grant Agreement or MMB or DEED orders; SHA - Lease-Use Agreement: 03/14/2019 22 l. If any material representation or warranty made by Lessee hereunder proves to have been untrue or incorrect in any significant respect, as of the time such representation or warranty was made; m. If, without the written consent or waiver of Lessor, Lessee fails to fully comply with any other provision, term, condition, covenant, or warranty contained in this Lease, or fails to fully comply with any provisions of the Declaration; n. If, under any material document, instrument or agreement relating to the acquisition, construction, financing, or refinancing, of the improvements to the Premises, there occurs an event which constitutes a Default by Lessee thereunder, applicable grace and cure periods have passed without cure, and the other party thereto gives notice to Lessee of the Default if notice is required before the exercise of remedies; or o. If Lessee breaches this Agreement and, if applicable, the breach remains uncured after Notice of Default per section 29. 29. NOTICE OF DEFAULT. a. Upon the occurrence of a Default, such Default shall not be deemed to have occurred under this Lease unless Lessor has given Lessee written notice of the Default and Lessee has failed to cure such Default within the time period specified in subsection b. or c., as applicable, below. b. For those Defaults described in Section 27 and subsections 28 (i) and (j) the notice and cure period shall be ten (10) days; for those Defaults described in subsection 28 h. the notice and cure period shall be thirty (30) days (provided said insurance does not expire); and for all other Defaults the notice and cure period shall be sixty (60) days prior to the Completion Date and ninety (90) days after the Completion Date. c. Notwithstanding the preceding paragraph of this Section 29, (i) in the event that a Default occurs prior to the Completion Date and cannot be cured within the applicable cure period provided in subsection b. above, and in the event that Lessee has commenced the action necessary to cure the Default during the applicable cure period provided in the subsection b. above, then Lessee shall have such time as shall be reasonably necessary to cure such Default on the condition that Lessee is reasonably, continuously and diligently pursuing efforts to cure such Default; (ii) in the event that a Default occurs after the issuance of the Completion Date and cannot be cured within the applicable cure period provided in subsection b. above, and in the event that Lessee has commenced the action necessary to cure the Default during the applicable cure period provided in subsection b. above, then Lessee shall have such time as shall be reasonably necessary to cure such Default so long as Lessee is reasonably, continuously and diligently pursuing efforts to cure such Default; and (iii) provided, further, in no event shall any cure period, including any extension of a cure period, be greater than SHA - Lease-Use Agreement: 03/14/2019 23 the cure period available under the Grant Agreement if the Default by Lessee hereunder also causes a Default by Lessor under the Grant Agreement. Additionally, no extensions of the cure period set forth in subsection b. above shall be granted or allowed for a Default under Section 27 hereof. 30. Intentionally omitted. 31. ADDITIONAL REMEDIES. a. In addition to other remedies available to either party as a matter of law for a Default, if the Grant has not been fully disbursed, and after giving the notice required by Section 29, Lessee does not immediately commence and continuously pursue the cure of same, Lessor may refrain from making any payments to the Lessee from the Grant Agreement. b. In addition, during the continuance of a Default under this Lease, and after giving Lessee any notice required by Section 29 hereof and the running of any applicable time period without Lessee having cured, Lessor may, if the State issues a demand, commences an action, actually receives payment from Lessor, or exercises any other remedies against Lessor, then Lessor may also similarly demand, commence an action, or exercise any other remedies against, and be immediately entitled to receive from Lessee, or do to Lessee that which the State does to Lessor on the condition that such demand, action, payment, or other action by the State against Lessor is caused by a Default by Lessee under this Lease. c. In addition, Lessor’s damages, expenses (including internal), and attorneys fees and costs. 32. SPECIAL TERMINATION PROCEDURE. After the Completion Date for the Improvements, if Lessee is in Default under subsection 28.c, Lessor agrees that it will not exercise the remedy of termination of the Lease provided in Section 30 hereof on the condition that Lessee does each of the following: a. Within ninety (90) days of the occurrence of a Default, Lessee shall have retained, at its sole expense, an independent consultant qualified to analyze Lessee’s operation at the Premises and reasonably acceptable to Lessor, (hereinafter the “Consultant”); b. Within sixty (60) days of the retention of the Consultant, Lessee shall have delivered to Lessor a written report of the Consultant analyzing its operations at the Leased Premises (the “Consultant’s Report”); and c. Within fifteen (15) days of the delivery of the Consultant’s Report, Lessee shall have met with Lessor to discuss the findings and recommendations of the Consultant; provided, however, that in the event that Lessee has not retained the SHA - Lease-Use Agreement: 03/14/2019 24 Consultant, delivered the Consultant’s Report, or met with Lessor, within the required time period, then Lessor shall have the right to proceed to exercise the remedy of termination of this Lease without regard to the succeeding provisions of this Section 32. Lessor and Lessee acknowledge and agree that Lessee shall not be required to pay more than $25,000 (adjusted for inflation) for the fees and expenses of each Consultant’s Report. Lessor agrees that if after any time during the process set forth in subsections a., b. or c. above, the Default has been cured, Lessee shall not be required to proceed with the remaining portion of the process set forth in such subsections. In the event that Lessee has retained the Consultant, delivered the Consultant’s Report, and met with Lessor as required hereinabove, Lessor further agrees that it will not exercise the remedy of termination of this Lease unless and until (i) the governing body of Lessor has considered a resolution at which meeting representatives of Lessee shall have the right to be heard; (ii) Lessor’s governing body shall adopt a resolution authorizing the termination of this Lease, and (iii) Lessee shall have failed to cure the Default within thirty (30) days of the adoption of such resolution. Lessee acknowledges and agrees that: a) Lessor is not required to accept or adopt all or any portion of the Consultant’s Report; and b) in the event that Lessor determines, in its sole discretion, to accept any of the recommendations of the Consultant’s Report, the acceptance of which requires an amendment to this Lease, or a waiver of the Default, Lessor shall have the right, as a condition to agreeing to any such amendment or waiver, to impose any conditions Lessor deems appropriate, in its reasonable discretion. 33. LESSOR’S RIGHT TO PERFORM. In addition to any other provision contained herein, in the event that a Default by Lessee shall have occurred and be continuing, Lessor may, at Lessor’s option but without any obligation, take any action to perform the obligations of Lessee which gave rise to the Default or with respect to which Lessee is otherwise in Default under this Lease, and Lessor shall not be liable, or be held liable or in any way responsible for any loss, inconvenience, annoyance, or damage resulting to Lessee on account thereof, other than for Lessor’s willful or intentional misconduct. Lessee shall repay to Lessor on demand the entire expense of Lessor’s performance together with interest at the rate of ten percent per annum accruing from the date of any disbursement. Lessor shall be permitted to enter the Premises while exercising any right given to it by the terms of this Section. Any act or thing done by Lessor pursuant to the provisions of this Section shall not be or be construed to be a waiver of any such Default by Lessee, or as a waiver of any covenant, term, or condition herein contained or the performance thereof, or of any other right or remedy of Lessor, hereunder or otherwise. 34. LESSOR DEFAULTS AND TENANT’S LIMITED REMEDIES. In the event that (i) Lessor (a) fails to observe, perform or comply with any provision, term, condition, covenant, agreement or warranty required to be observed, performed or complied with by Lessor under this Lease, or (b) fails to observe, perform or comply with any obligation, SHA - Lease-Use Agreement: 03/14/2019 25 provision, term, covenant, condition or agreement to be observed, performed or complied with by Lessor under the Grant Agreement, unless Lessor’s failure is the result of a Default by Lessee under this Lease, and (ii) Lessor fails to cure such Default within ten (10) days of written notice of default from Lessee, or fails to commence and diligently pursue reasonable steps to commence and effect a cure if a cure cannot be completed within such ten-day period, then a Lessor Default shall exist under this Lease. Upon the occurrence and during the continuance of a Lessor Default, Lessee may exercise either or both of the following remedies: a. subject to Sections 65 and 67 hereof, commence an action at law to recover the damages incurred by Lessee and caused by Lessor’s Default, which damages shall be limited to the cost of curing Lessor’s Default; b. commence an action in equity to compel the performance by Lessor of those actions or inactions which serve as the basis of a Lessor Default. 35. NO REMEDY EXCLUSIVE. Subject to Section 65 below, no remedy herein conferred upon or reserved to Lessor is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Lease 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. 36. EFFECT OF EMINENT DOMAIN. a. Effect of Total Condemnation. In the event that the entire Premises shall be appropriated or taken under the power of eminent domain by any public or quasi-public authority, this Lease shall be terminated and all proceeds shall be payable in the same manner as if the Premises were sold pursuant to Section 17 above; provided, however, if Lessee pays to Lessor the sums required by Section 2.08.C. of the Grant Agreement or such lesser amount permitted under Minnesota law, then the proceeds shall be paid to Lessee. b. Effect of Partial Condemnation. In the event that a portion of the Premises shall be so appropriated or taken to an extent that Lessee can no longer operate the Governmental Program, then Lessee shall have the right to give Lessor written notice of the right to treat the partial condemnation as a sale pursuant to Section 17 above within one hundred twenty (120) days after such portion of the Premises has been so appropriated or taken. In that event, this Lease shall be terminated and the proceeds of the condemnation shall be applied as if the condemned portion of the Premises were sold in accordance with Section 17 above; provided, however, if Lessee pays to Lessor the sums required by Section 2.08.C. of the Grant Agreement or such lesser amount permitted under Minnesota law, then the proceeds shall be paid to Lessee. In the event of partial taking in which Lessee elects to continue this Lease in the Premises, this Lease shall continue in full force as to the part not taken, and the SHA - Lease-Use Agreement: 03/14/2019 26 condemnation award for the Premises shall be applied first to restore the remaining portion of the Premises to a configuration and condition so that the Premises can be used for the purposes set forth in Section 1 hereof (with the condemnation proceeds to be held by a mutually agreeable escrow agent in escrow for such restoration to be disbursed in accordance with standard commercial construction conditions customarily required by institutional lenders), and, to the extent of any remaining proceeds, as if the condemned portion of the Premises were sold in accordance with Section 17 above; None of the foregoing provisions shall preclude Lessee from making a separate claim against the condemning authority for the value of any trade fixtures, furniture, and equipment taken, loss of value of the leasehold interest, loss of value of the business, or other claims compensable in condemnation of a Lessee’s interest, by said condemning authority and its relocation expenses, provided such claim does not diminish or impair the award with respect to the Premises. 37. SURRENDER OF LEASE: EFFECT ON SUBLEASES. The voluntary or other surrender of this Lease by Lessee, or a mutual cancellation thereof, shall not work a merger and shall operate as an assignment to it of any or all such subleases, subtenancies, or license agreements. Lessee shall surrender the Premises in good condition, broom clean, and provide any and all keys and codes for access and use of the Premises and fully cooperate in the assignment and transfer of the Premises to Lessor. 38. Intentionally omitted. 39. AMENDMENT, MODIFICATION, AND WAIVER. No amendment, modification, or waiver of any condition, provision, or term of this Lease shall be valid or of any effect unless made in writing, signed by the party or parties to be bound or its duly authorized representative, and approved in writing by the State, and specifying with particularity the extent and nature of such amendment, modification, or waiver. Any waiver by any party of any Default of another party shall not affect or impair any right arising from any subsequent Default. 40. APPROVAL BY STATE OF MINNESOTA. This Lease shall not be valid or of any effect until signed by both parties and consent in writing has been given by the State. 41. EFFECT OF LESSEE’S HOLDING OVER. Any holding over after the expiration of the term of this Lease, with consent of Lessor, shall be construed to be a tenancy from month to month, at the same Rent as required to be paid by Lessee for the period immediately prior to the expiration of the terms hereof, and shall otherwise be on the terms and conditions herein specified, so far as they are applicable. 42. PARTIES BOUND. This Lease shall be binding upon and inure to the benefit of the parties hereto and their respective assigns, executors, heirs, and successors. 43. TIME OF ESSENCE. Time is of the essence in this Lease, and of each and every covenant, term, condition, and provision hereof. SHA - Lease-Use Agreement: 03/14/2019 27 44. CAPTIONS. All captions, headings, or titles in the subsections or Sections of this Lease are inserted for convenience of reference only and shall not constitute a part of this Lease as a limitation of the scope of the particular subsections or Sections to which they apply. 45. NO PARTNERSHIP, JOINT VENTURE, OR FIDUCIARY RELATIONSHIP CREATED HEREBY. Nothing contained in this Lease shall be interpreted as creating a partnership, joint venture, or relationship of principal and agent between Lessor and Lessee, it being understood that the sole relationship created hereby is one of landlord and tenant. All laws and statutes of the State relative to landlord and tenant relationships shall be applicable to the parties hereto. 46. CUMULATIVE RIGHTS. Except as otherwise expressly stated herein, no right or remedy herein conferred on or reserved to Lessee or Lessor is intended to be exclusive of any other right or remedy hereof provided by law, but each shall be cumulative in, and in addition to, every other right or remedy given herein or not or hereafter existing at law, in equity, or by statute. 47. SEVERABLE PROVISIONS. Each provision, section, sentence, clause, phrase, and word of this Lease is intended to be severable. If any provision, sentence, clause, phrase, and word hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the legality or validity of the remainder of the Lease. 48. ENTIRE AGREEMENT. This Lease contains the entire understanding of the parties hereto with respect to the transactions contemplated hereby and supersede all prior agreements and understandings between the parties with respect to such subject matter. No representations, warranties, undertakings, or promises, whether oral, implied, written, or otherwise, have been made by either party hereto to the other unless expressly stated in this Lease or unless mutually agreed to in writing between the parties hereto after the date hereof, and neither party has relied on any verbal representations, agreements, or understandings not expressly set forth herein. 49. REFERENCE TO GENDER. Where appropriate, the feminine gender may be read as the masculine gender or the neuter gender; the masculine gender may be read as the feminine gender or the neuter gender; and the neuter gender may be read as the masculine or the feminine gender. 50. MINNESOTA LAW, JURISDICTION AND VENUE. This Agreement shall be construed and enforced in accordance with the laws of the State of Minnesota. Any claim, dispute or litigation arising out of this Agreement shall be venued exclusively in Washington County District Court, Tenth Judicial District, State of Minnesota and shall not be removed therefrom to any other federal or state court. 51. FURTHER ASSURANCES. In addition to any other information which may reasonably requested, either party shall without charge at any time and from time to time hereafter, within ten (10) days after written request by the other party, certify by written SHA - Lease-Use Agreement: 03/14/2019 28 instrument duly executed and acknowledged to any person, firm, or corporation specified in such request: a. Whether this Lease has been supplemented or amended, and if so, the substance and manner of such supplement or amendment; b. The validity and force and effect of this Lease, in accordance with its tenor as then constituted; c. The existence of any Default known thereunder; d. The existence of any offsets, counterclaims, or defenses thereto known by such other party; and e. The commencement and expiration dates of the term of this Lease. Any such certificate may be relied on by the party who requested it and any other person, firm, or corporation to whom it may be exhibited or delivered, and the contents of such certificate shall be binding on the party executing it. 52. SHORT-FORM RECORDABLE LEASE. The parties will at any time, at the request of either one, promptly execute duplicate originals of an instrument, in recordable form, which will constitute a short form of this Lease, setting forth a description of the Premises, the Term of this Lease, and options to renew, and any other portions hereof, excepting the rent provisions, as either party may request. 53. FEDERAL INCOME TAX DEDUCTIONS. Only Lessee shall have the right to take deductions on its tax returns with respect to the Improvements, and any changes, alterations, repairs, additions, and installations thereto, and the depreciation or amortization thereof; provided, however, that Lessor makes no representations or warranties as to the amount of any taxes or deductions or the treatment of any particular tax item. 54. BROKERAGE FEES. Each party hereto warrants that it has not incurred any real estate brokerage fees, finders’ fees, loan brokerage fees, or any other fees to any third party in connection with this Lease, and in the event that any third party institutes legal action in an effort to recover such fees, the parties shall jointly defend such action. If a judgment is obtained against the parties jointly, the party responsible for breach of this warranty shall reimburse the other for the latter’s attorneys’ fees, court costs, expenses, and share of the judgment. 55. Intentionally Omitted. 56. LISTING OF JOBS. Lessee shall, during the term of the Grant Agreement, list any vacant or new positions it may have with state workforce centers, as required by Minn. Stat. § 116L.66 as such may subsequently be amended, modified or replaced. SHA - Lease-Use Agreement: 03/14/2019 29 57. RECORD KEEPING AND REPORTING. Lessee shall maintain books, records, documents, and other evidence pertaining to the costs or expenses associated with the construction of the Improvements, the operation of the Governmental Program, and compliance with the requirements contained in this Lease and the Grant Agreement, and shall, upon ten (10) days prior written request, allow Lessor, State, and either the Legislative Auditor or State Auditor for the State of Minnesota, upon request, to inspect, audit, copy, or abstract, any and all of its books, records, papers, or other documents relevant to this Lease or the Grant Agreement. Lessee shall use generally accepted accounting principles in the maintenance of such books and records, and shall retain all of such books, records, documents and other evidence (i) relating to the construction of the Improvements, for a period of six (6) years from the date that the Improvements have been initially constructed and put into operation, and (ii) relating to the operation of the Governmental Program, for a period of six (6) years from the date such books, records, documents and other evidence are created. Lessor agrees to protect such information as non-public or trade secret information to the extent such protection is available under Minnesota Statutes, Chapter 13. Nothing herein shall be construed to require Lessor to incur any costs or expenses in complying with this provision unless Lessee agrees in advance to pay or reimburse Lessor for any costs and expenses incurred by Lessor in complying with this agreement. 58. NON-DISCRIMINATION. Lessee agrees not to engage in unlawful discriminatory practices with respect to the Premises or the operation or management of the Governmental Program, and it shall, with respect thereto, fully comply with all applicable provisions in Minn. Stat. Chapters 363A and 181, as such may be amended, modified or replaced. 59. Intentionally omitted, provided elsewhere. See Section 26. Lessee agrees to fully comply with all applicable provisions relating to worker’s compensation contained in Minn. Stat. §§ 176.181 Subd. 2, and 176.182, as such may be amended, modified or replaced, with respect to the Premises. 60. PREVAILING WAGE. Lessee agrees to comply with the applicable provisions of Minn. Stat., Chapter 177, including, but not limited to §§ 177.41 - 177.435 as amended from time to time. 61. Intentionally omitted. 62. REVIEW OF PLANS AND COST ESTIMATES. a. Lessee and Lessor have complied with the applicable provisions and requirements contained in Minn. Stat. § 16B.335, as such may be amended, modified or replaced, for the Improvements, and the predesign package has been submitted and approved. b. The Lessee and Lessor have prepared a program plan and cost estimates for all elements necessary to complete the Improvements and present them SHA - Lease-Use Agreement: 03/14/2019 30 to Lessor and the Chairs of the Minnesota State Senate Finance committee and House Ways and Means Committee for their recommendation, and must notify the Chair and Ranking Minority Member of the Senate Capital Investment Committee and the Chair and Ranking Minority Member of the House Capital Investment Committee. Such program plan and cost estimates must note significant changes in the construction of the Improvements, including its costs, which have arisen since the appropriation for the Improvements was enacted. c. Any material change from such predesign package referred to in subsection a. hereinabove or the program plan and cost estimates referred to in subsection b. hereinabove, must be submitted to the State for recommendation. d. The Improvements must be (i) completed in substantial accordance with the pre-design package referred to in subsection a. hereinabove and the program plan and cost estimates referred to in subsection b. hereinabove, (ii) completed in accordance with the time schedule contained in the pre-design package referred to in subsection a. hereinabove and the program plan referred to in subsection b. hereinabove, and (iii) completed within the budgets contained in the predesign package referred to in subsection a. hereinabove and the cost estimates referred to in subsection b. hereinabove except as amended by Lessee from time to time, which amendments are approved by the State. 63. HAZARDOUS WASTE POLLUTION AND CONTAMINANTS. a. For purposes of this Section 63, the following defined terms shall have the following meanings: (1) Hazardous Substance means 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; (2) Environmental Laws means 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, §1802 et seq., the Federal Water Pollution Control Act, 33 U.S.C. §1251 et seq., the Clean Air 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, Minn. Stat. Ch. 115B, the Minnesota Petroleum Tank Release Cleanup Act, Minn. Stat. Ch. 115C, and any other federal, state, county, municipal, local or other statute, law relating to Hazardous Substances; SHA - Lease-Use Agreement: 03/14/2019 31 b. Lessee agrees to comply with all Environmental Laws applicable to the Premises. Lessee shall bear all costs and expenses arising from compliance with all Environmental Laws. If Lessee fails to comply with any Environmental Laws, Lessor shall have the right, but not the obligation, to undertake such compliance and charge Lessee the costs of compliance plus interest at the rate of ten percent per annum accruing from the date of disbursement and also with reasonable attorney fees. c. Lessee agrees to defend, indemnify and hold harmless Lessor, its officers, employees and agents (hereinafter collectively referred to as the “Indemnitees”) from and against and shall reimburse each such Indemnitee 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 the existence, use, handling, storage, transportation, manufacture, release or disposal of any Hazardous Substance in, on or under the Premises, whether foreseeable or unforeseeable, regardless of the source, the time of occurrence or the time of discovery (hereinafter 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 Premises are in compliance with, and of causing the Premises 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 consultants’ fees, court costs and expenses incurred in connection with any thereof. d. The obligations of Lessee to indemnify the Indemnitees shall survive expiration or termination of this Lease. The rights of the Indemnitees hereunder shall be in addition to any other rights or remedies which the Indemnitees may have against Lessee under this Lease or any other document, or at law or in equity. 64. WAIVER OF SUBROGATION. Lessee, on behalf of itself and its insurer, hereby waives all claims and rights of recovery against Lessor which it would, but for this Section, have to Lessor for losses occurring to the Premises and to the improvements, betterments, trade fixtures, equipment, personal property and other property located therein or thereupon: a. to the extent actually covered by insurance required to be carried by the party waiving; or b. to the extent actually covered by any other insurance being carried by the party waiving at the time of such occurrence. 65. WAIVER OF CERTAIN DAMAGES. IN CONSIDERATION OF ENTERING INTO THIS LEASE, LESSOR AND LESSEE HEREBY WAIVE AND FOREVER GIVE UP ANY RIGHT TO CLAIM OR RECOVER CONSEQUENTIAL DAMAGES, INCIDENTAL DAMAGES, OR DAMAGES FOR LOST INCOME OR SHA - Lease-Use Agreement: 03/14/2019 32 PROFITS AS A RESULT OF ANY BREACH OF THIS LEASE OR ANY DOCUMENTS OR AGREEMENTS REFERRED TO. THE AGREEMENTS AND WAIVERS SET FORTH HEREIN SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS LEASE. 66. COMPLIANCE WITH LAWS. Lessee agrees that it will comply with all present and future laws, ordinances, and regulations, as amended and in effect from time to time, applicable to its use, occupancy, alteration or improvement of the Premises. 67. Intentionally omitted. 68. GRANT AGREEMENT PREVAILS. Whenever there shall exist a conflict between the provisions of this Lease and the Grant Agreement, the Grant Agreement shall prevail. Lessor shall not amend or otherwise modify the Grant Agreement without the prior written consent of Lessee. 69. RECITALS. The Recitals set forth above are incorporated into this Lease as of fully set forth herein. 70. EXHIBITS INCORPORATED. The following exhibits attached hereto are incorporated into this Lease as if fully set forth herein: Exhibit A – Legal Description Exhibit B – Improvements Exhibit C – Grant Agreement Exhibit D – Percentages and Sources of Project Funds Exhibit E – Allocation Percentages Exhibit F – Permitted Encumbrances [Signature pages follow] [Signature page to Lease/Use Agreement] IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above written. Lessee’s address: City of Scandia City Hall 14727 209th Street North City of Scandia MN 55073 LESSEE: CITY OF SCANDIA, MINNESOTA, a Minnesota statutory city By Steve Kronmiller Its Mayor And by Kyle Morell Its: City Administrator STATE OF MINNESOTA ) ) ss. COUNTY OF WASHINGTON ) The foregoing instrument was acknowledged before me this ____ day of _________, 2025, by Steve Kronmiller, Mayor, and Kyle Morell, City Administrator, of the City of Scandia, a Minnesota statutory city, on behalf of the City. ________________________________________ Notary Public [Signature page to Lease/Use Agreement] Lessee’s address: Scandia Heritage Alliance PO Box 159 Scandia, MN 55073 SCANDIA HERITAGE ALLIANCE, a Minnesota nonprofit corporation By:_________________________________ Name: Susan Rodsjo Its Executive Director STATE OF MINNESOTA ) ) ss. COUNTY OF WASHINGTON ) The foregoing instrument was acknowledged before me this ____ day of _______, 2025, by Susan Rodsjo, the Executive Director of Scandia Heritage Alliance, a Minnesota nonprofit corporation, on behalf of the corporation. ________________________________________ Notary Public EXHIBIT A Legal Description of Premises That certain real property located in Washington County, Minnesota, described as follows: USE AREA PARCEL DESCRIPTION Part of Lot 31, Auditor's Plat No. 6, in the Northeast Quarter of the Northwest Quarter of Section 23, Township 32 North, Range 20 West, Washington County, Minnesota, as per the plat thereof on file and of record in the office of the County Recorder of said County, described as follows: Commencing at the southeast corner of said Lot 31; thence South 89 degrees 31 minutes 15 seconds West, bearings are oriented to the Washington County Coordinate System, NAD 83, 1986 adjustment, along the south line of said Lot 31 a distance of 416.61 feet to the point of beginning of the parcel to be described; thence North 10 degrees 41 minutes 40 seconds West a distance of 138.66 feet; thence North 55 degrees 00 minutes 00 seconds West a distance of 206.00 feet; thence North 14 degrees 45 minutes 46 seconds West a distance of 290.21 feet; thence North 58 degrees 43 minutes 14 seconds West a distance of 75.76 feet, more or less, to the intersection with the boundary line of real property described in Warranty Deed, Document Number 319741; thence southwesterly along said boundary line, being a non-tangential curve concave to the northwest, an arc distance of 328.60 feet, said curve has a radius of 457.58 feet and a central angle of 41 degrees 08 minutes 46 seconds, the chord of said curve bears South 51 degrees 51 minutes 07 seconds West; thence South 72 degrees 25 minutes 30 seconds West, tangent to the last described curve and along said boundary line, a distance of 171.21 feet, more or less, to the intersection with a line 150.00 feet East of, measured at right angles to and parallel with, the west line of said Lot 31; thence South 00 degrees 49 minutes 14 seconds West, along said parallel line a distance of 330.37 feet, more or less, to the intersection with the south line of said Lot 31; thence North 89 degrees 31 minutes 15 seconds East, along said south line a distance of 754.05 feet to the point of beginning. This parcel contains 6.288 acres, more or less, and is subject to the right of way of Olinda Trail North and all other easements, restrictions and covenants of record. EXHIBIT B Improvements Reconstruction of the historic Scandia Water Tower Barn as an Arts and Heritage Center, including, but not limited to:  The reconstructed Water Tower Barn for events, museum, historical and art shows and displays, events, and meetings;  construction of an amphitheater and stage for music and theater performances and other similar events,  construction of a water feature play area for children,  other accessory structures and hardscape such as wetland decks, coffee and food vending structures, portable or permanent toilets, storage buildings, ticket booths and other minor structures typical of such facilities,  site landscaping, trails, plazas, driveways, parking areas, interpretive areas and signage, and  other improvements necessary or incidental to the program. This description is not intended to be exhaustive and the plans and specifications approved by the City should be referenced for a more complete description. Certain elements, other than the Water Tower Barn and the amphitheater, may be delayed to a later time based on construction costs. EXHIBIT C Grant Agreement EXHIBIT D Water Tower Barn Scandia Arts and Heritage Center Sources of Project Funds [Drafting Note: figures to be confirmed prior to closing] SOURCES OF PROJECT FUNDS AMOUNT PERCENTAGE Scandia Heritage Alliance 3,800,000 % State of Minnesota $2,200,0001 % City $ 0 0 % Total $ 100% 1 $2,200,000 grant under the Grant Agreement. EXHIBIT E2 Contributions of City and SHA SOURCES OF PROJECT FUNDS AMOUNT PERCENTAGE ALLOCATION Scandia Heritage Alliance $3,800,000 100% City $ 0 0 % 100% Drafting Note: to be confirmed by SHA prior to closing 2 Based on closing pro forma. Includes SHA in kind contributions and City agreed land value. Exact amounts to be determined upon final completion and final draws under the Disbursing Agreement, at which time this Exhibit shall be revised and percentages adjusted accordingly. EXHIBIT F Permitted Encumbrances 1. TBD from Title Commitment DRAFT City ResoluƟon for DEED BE IT RESOLVED that the City of Scandia act as the legal sponsor for the project contained in Minnesota Laws, 2023, Ch. 72, Art. 2, §9, Subd. 7 entitled Scandia Water Tower Barn Arts and Heritage Center . BE IT FURTHER RESOLVED that the City of Scandia has the legal authority to receive financial assistance, and the institutional, managerial, and financial capability to ensure adequate project administration. BE IT FURTHER RESOLVED that the sources and amounts of the local match identified in the development proposal are committed to the project identified. (Note, since the Law appropriating Money to the Project is General Fund dollars and there is no match requirement, however funds sufficient to build the project to completion have been raised as of the current date. Additional funding will allow project enhancements.) BE IT FURTHER RESOLVED that the City of Scandia has not violated any Federal, State or local laws pertaining to fraud, bribery, graft, kickbacks, collusion, conflict of interest or other unlawful or corrupt practice. BE IT FURTHER RESOLVED that upon approval of its development proposal by the state, City of Scandia may enter into an agreement with the State of Minnesota for the above-referenced project, and that City of Scandia certifies that it will comply with all applicable laws and regulation as stated in all contract agreements. BE IT FURTHER RESOLVED that the non-DEED sources of funds identified in the sources and uses outlined in the application total the amount of $3,700,000* and are committed and adequate to fully fund the project identified in the application . The City of Scandia has provided the site valued at $200,000 and will construct a sidewalk on Olinda for access. All other funds have been raised by the proposed user, the Scandia Heritage Alliance. BE IT FURTHER RESOLVED that any sources of the Applicant’s funds to fully fund the project shall be from the City of Scandia’s Capital Budget (for the sidewalk) account which has an adequate amount of funds to cover the commitment. NOW, THEREFORE BE IT RESOLVED that the Mayor and the City Administrator/Clerk are hereby authorized to execute such agreements as are necessary to implement the projects on behalf of the City of Scandia. Pursuant to M.S. § 412.201, Statutory Cities must authorize both the Mayor and Clerk to execute all contracts. I CERTIFY THAT the above resolution was adopted by the City Council of the City of Scandia on ___________________(Date). SIGNED: WITNESSED: ________________________________ ___________________________________ Steve Kronmiller Date Kyle Morell Date Its Mayor Its City Administrator/Clerk *Amount as of Date of ResoluƟon; Fund raising is on-going and the final State Grant Agreement executed at Closing will reflect the final funding to build the project to compleƟon. CITY OF SCANDIA RESOLUTION NO. ______________________ AUTHORIZING THE MAYOR, THE CITY ADMINISTRATOR OR THE CITY CLERK TO ENTER INTO AGREEMENTS AND UNDERTAKE ACTIVITIES TO COMPLETE THE SCANDIA WATER TOWER BARN ARTS AND HERITAGE CENTER PROJECT WHEREAS, the State of Minnesota has allocated $2,200,000 in the 2023 Laws of Minnesota, Chapter 72, Article 2, Section 9, Subd. 7, to the City of Scandia as a grant (the “Grant”) to assist the City in the predesign, design, construct, furnish, and equip of the Scandia Water Tower Barn Arts and Heritage Center (the “Project”); and WHEREAS, the City owns the property on which the Project will be constructed, and has agreed to lease said property to the Scandia Heritage Association for execution of the Project; and WHEREAS, the City will need to review and sign documents as shown in Exhibit A, including but not limited to: General Fund Grant Agreement, Grant Declaration, Lease/Use Agreement, Short Form Lease/Use Agreement, Certification of Adopted Resolutions, Disbursing Agreement, Settlement Statement for Initial Closing, First Draw, and City Zoning Letter ; and WHEREAS, the following major documents have been drafted to near if not final form: General Fund Grant Agreement (Exhibit B) and Lease/Use Agreement (Exhibit C). NOW, THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF THE CITY OF SCANDIA, WASHINGTON COUNTY, MINNESOTA : That the Mayor and the City Administrator and/or the City Clerk are hereby authorized to enter into the General Fund and Grant Agreement and the Lease/Use Agreement substantially in the form as attached hereto; FURTHER, BE IT RESOLVED, That the City Administrator or the City Administrator’s designee are hereby authorized to: i. Enter into and execute all other contracts, agreements, and documents, subject to the review and approval of the Scandia City Attorney, and ii. Undertake all activities reasonably necessary to complete the Scandia Water Tower Barn Arts and Heritage Center Project. FURTHER, BE IT RESOLVED, that the City Council authorizes the waiver of performance bonds, subject to the review and approval of construction contract(s) and escrow/disbursement agreement(s), and further subject to the satisfaction of the City Administrator and the City Attorney that such documents provide sufficient security in lieu of performance bonds. Adopted by the Scandia City Council this 18th day of November, 2025. ___________________________________ Steve Kronmiller, Mayor ATTEST: ____________________________________ Kyle Morell, City Administrator EXHIBIT A Documents