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HomeMy WebLinkAbout10C - Purchase Thrift Store MEETING DATE: AGENDA #: PREPARED BY: REVIEWED BY: AGENDA ITEM: DISCUSSION: CITY COUNCIL AGENDA REPORT February 3, 2003 10C Kelly Meyer, Administrative Assistant Frank Boyles, City Manager CONSIDER APPROVAL OF RESOLUTION AUTHORIZING MAYOR AND CITY MANAGER TO ENTER INTO PURCHASE DOCUMENTS FOR PROPERTY LOCATED AT 16950 PANAMA AVENUE IN CONNECTION WITH CONSTRUCTION OF PHASE III OF THE RING ROAD. Historv: At its Novernber 4, 2002 City Council meeting, the City Council adopted Resolution 02-183 authorizing staff to prepare a Feasibility Report for the realignment and reconstruction of CSAH 23 and Five Hawks Avenue intersection with TH13, and the third phase of the Ring Road from Duluth to TH13 as approved by the Council in the 2003-2007 Capital Improvement Program. At its January 21, 2003 meeting, the City Council took action authorizing the staff to proceed with easement acquisitions necessary for construction of the 3'd Phase of the Ring Road, accepting the Feasibility Report, and setting a public hearing for February 18, 2003 at 7:30pm. A rnap of the project area is attached. As you will see, the property at 16950 Panama Avenue (the current Thrift Store site) will be significantly impacted by the project. This site is different from other cornmercial sites impacted by the construction of the Ring Road in that removal of the building will be required.As such, the staff began discussions with the property owner for acquisition of the site. Current Circumstances: The subject property is 52,300 foot site zoned C4 that is improved with a 3600 square foot block building that was constructed in 1967. The property is owned by Gary and Bonnie VanErp. There is also a current Lease on the property through August 31, 2004 with Carole and William Stufflebeam, who operate a non-profit Thrift Store on the site. The Lessee also has a right of first refusal to purchase the property. An appraisal of the property was prepared in October 2002 when discussions for acquisition of the site began. The appraisal indicated a market value of $215,000. This cornpares with an appraisal conducted in April 2000 of $182,000. City staff, the Seller and Lessee have now negotiated terms subject to City Council approval for the acquisition and lease of the property. Various documents necessary to the acquisition were prepared in cooperation with the City Attorney's office. Those documents include a Purchase Agreement, Assignment of Lease, Addendurn to Lease, Waiver of Right of First Refusal and an Estoppel Certificate. 16200 Eagle Creek Ave, S.E. Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 R:\COUNCIL AGENDA REPORTS\2003 DRAINl13l1Jlf\J!-rnl"NHQl'I1{B'I'll::lROMI;l\l3E2.DOC Conclusion: The Council should determine if the property is required and if the terms of the purchase are acceptable. ISSUES: Several steps took place to accommodate each of the parties to this purchase. First, the terrns of the purchase had to be reached with the Seller, subject to City Council approval. Second, the City needed to negotiate terms for the remainder of the Lease term with the Lessee. Finally, a document was prepared terminating the Lessee's right of first refusal. The terms or need for the Purchase Agreement, Assignment of Lease, Lease Addendurn, Waiver of Right of First Refusal, and Estoppel Certificate are set forth below: Purchase Aqreernent: An appraisal completed in October of 2002 indicated that the property had a market value of $215,000. The City has negotiated a purchase price of $250,000 for the site. The terrns of the City's purchase involve factors other than rnarket value. The property has value beyond the market value because of the current Lease and the Lessee's right of first refusal. The City would assume the Lease with a rnonthly rent of $1575 per month for the 17 months remaining in the Lease term. This means an additional $23,289 ($26,775 less property taxes) if the Lease term is fulfilled. Staff believes it is in the best interest of the City to acquire the full parcel, rather than only easements for the necessary right-of-way. The City will eventually need to rernove the building from the site to complete the installation of the roadway. Further, once the existing CSAH 23 and 170'h Street are vacated and turned back to the City, additional land can be added to this site to make a larger, more attractive, vacant developable parcel. The City could authorize acquisition of the property via a 90-day quick take condemnation action. (Actually, staff is also seeking the authority to condemn this property as part of agenda item 10B. This action would only occur in the event the City and Seller for some reason are unable to close the transaction.) The City staff believes a negotiated sale of the property is likely to be more favorable than condemnation. Not only does a negotiated sale garner the cooperation of all parties, acquiring the property and Lease through condemnation could potentially subject the City to state and federal statutes regarding relocation costs. Because of this potential and our inability to determine the potential exposure over and above the market value of the property, the City staff believes a negotiated purchase involving the owner and Lessee is appropriate. Assiqnment of Lease and Lease Addendurn: As negotiated, the Seller would assign the existing Lease to the City. The City Engineer and Public Works Director have advised that construction of the project can be scheduled so that the City can honor the current Lease term, which expires August 31, 2004. The rent payment of $1575 per rnonth would be payable to the City over the remaining 17 months of the Lease term. The staff has negotiated the attached addendum to the Lease Agreement executed by the Lessee, that would limit the City's liability for rnaintenance or repairs to the building, not require the City to re-build or repair the structure in the event of destruction or to carry fire or extended damage R:ICOUNCIL AGENDA REPORTSI2003 DRAFTSITHRIFT STORE PURCHASE2.DOC insurance, clarifying provisions and responsibilities under the Lease, and adding the City's standard indemnity language to the contract. In return, the City has agreed that if the Lessee in some manner acquires a suitable location for its business prior to the expiration of the Lease term, it may terminate the Lease upon 30 days written notice. In the event that the building is destroyed or rendered uninhabitable for the conduct of the Lessee's business, the City shall pay the lesser of the Lessee's actual costs to relocate, or $3150. Lastly, if the Lessee fulfills the term of the Lease, the City will waive the final month's rent. Of particular importance is that under the Lease Addendum, the Lessee does not have the right to extend the Lease term beyond August 31, 2004. Riaht of First Refusal: This document has been executed by the Lessee, and waives the Lessee's right under the existing Lease Agreement to acquire the property from the VanErps. Estoppel Certificate. This docurnent has also been executed by the Lessee, and establishes that the VanErps have fulfilled all of their responsibilities as Lessor under the existing Lease Agreernent to date. The City Attorney's office has either prepared or reviewed each of the documents necessary to proceed with the terrns and conditions of this purchase, and has found thern acceptable. The necessary documents have been executed by the Seller and Lessee respectively and are attached hereto. FISCAL IMPACT: Funds for this purchase are proposed to be drawn from the Collector Street fund. ALTERNATIVES: (1) Approve a Resolution Authorizing the Mayor and City Manager to enter into all docurnents necessary for the purchase of property at 16950 Panama Avenue as proposed. (2) Take no action and direct staff accordingly. RECOMMENDED MOTION: Alternative (1). REVIEWED BY: anager R;\COUNCIL AGENDA REPORTS\2003 DRAFTS\THRIFT STORE PURCHASE2.DOC RESOLUTION AUTHORIZING ACQUISITION OF PROPERTY LOCATED AT 16950 PANAMA AVENUE, PRIOR LAKE, FOR ROADWAY PURPOSES, AND AUTHORIZING THE MAYOR AND CITY MANAGER TO ENTER INTO A PURCHASE AGREEMENT. MOTION BY: SECOND BY: Whereas, pursuant to Resolution 03-13, the City Council accepted the Feasiblity Report and setting a public hearing on the CSAH 23/ Five Hawks / TH13 / 170'h Street / Tower Street (Ring Road Phase 3) Irnprovement Project (City Project #02-06); and Whereas, the City staff has advised that the property located at 16950 Panama Avenue. Prior Lake, Minnesota, is necessary for the construction of the roadway improvements; and Whereas, the City Council of the City of Prior Lake does hereby determine that it is necessary and for public purpose to acquire the property located at 16950 Panama Avenue, Prior Lake, Minnesota; and Whereas, a Purchase Agreernent and other corresponding documents satisfactory to Buyer and Seller have been voluntarily negotiated and executed by the Seller and Lessee. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA, 1 . The recitals set forth above are incorporated herein. 2. The acquisition of the property is hereby approved, and funds for this purchase shall be drawn frorn the Collector Street Fund. 3. The Mayor and City Manager are hereby authorized to execute all necessary documents to effectuate the closing of the transaction. Passed and adopted this 3rd day of February, 2003. Haugen Haugen Blomberg Blomberg LeMair LeMair Petersen Petersen Zeiska Zeiska YES NO Frank Boyles, City Manager 16.;;;OQJi,;;lgkl,";;WdiIl'&II!1...s,~"J;;\jQ,J-ake, Minnesota 55372-1714 / Ph, (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER ~"~p~ O"~;~ "i\>"~- - ---~, ~"U~(\. _.J~_4' , ~.\,.~ u 1: ~ ~ U - ~ ~~ -, "",0""" ~oo '" ,:)~nS ~ c'" 1h: ~c 0.,"- \. -' ~- ., :;lpl!J ;;)P!S~~~~ .-r.--<r- --_ ~nU~A V enJ'h -'''''d' anU:}A V sJlMeH ~A!.:I ~ ~ ~ ~ "3 i: E ~ '0; ~ ~ -~ '" ~ ~ u " " '" -= 5 .... \_---'~ ~.._I I , j I ~ . " ~ ~ ] ~ &3 , , > B ~ !i " 00010000 <II ~~ ~. ~ .0 E " z ~ " 5 0> u: . I ~ - - - u '" '" '" -= ";;j 0... ;> "'" 0 '" E 0 " ~ ~ '" Oll "'" - 0 :: a on 02 <l) " '" '" -E '" '" u ~ " s '" :I: '" <l) " -'" " 0 ;> u '" ~ - .....l - " .... " M ~ 0 N - "C Cfl :I: "'" p... .0: " '" Cfl 0 U 0- - 0 - M 0... - ,.,. ~ "<- " .",~ ~., . ii n !~ ~ i @ ~~lll PURCHASE AGREEMENT THIS PURCHASE AGREEMENT (this" Agreement") is made on January _, 2003 between the City of Prior Lake, a Minnesota municipal corporation, with offices at 16200 Eagle Creek Avenue SE, Prior Lake, Minnesota (" Buyer"), and Gary A. Van Erp and Bonnie R. Van Erp, husband and wife, whose address is 4650 Detelemark Road, Dundas, Minnesota (collectively, "Seller"). IN CONSIDERATION of the promises and covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Seller and Buyer agree as follows: 1. Sale of Property. Seller agrees to sell to Buyer, and Buyer agrees to buy from Seller the following real property located at 16950 Panama Avenue S.E., City of Prior Lake, County of Scott, Minnesota, and legally described as follows, together with all improvements, easements and rights benefiting or appurtenant thereto (collectively referred to as the " Property"). The purchase is subject to that certain Lease dated September 1, 2000 by and among Gary A Van Erp and Bonnie Van Erp, husband and wife (the "Van Erps"), collectively as Lessor thereunder, and Carole Stufflebeam and William Stufflebeam, wife and husband, (the" Stufflebeams") collectively as Lessee thereunder, (the" Original Lease"), as extended by letter agreement dated June 4, 2002, (the" Letter Agreement" and together with the Original Lease, are collectively referred to herein as the" Lease"), a copy of which is attached hereto as Exhibit A. There is no personal property as part of this sale. That part of the East Yo of the Southwest y., of Section 2, Township 114, Range 22, Scott County, Minnesota, described as follows: Commencing at the southwest corner of said East Yo of the Southwest y., and thence running North along the West line of said East Yo of Said Southwest y., approximately 283.36 feet to the intersection of said West line of said East Yo of said Southwest y., with the Easterly right of way line of old Trunk Highway No. 13; thence Northeasterly along the right of way line of said old Trunk Highway No. 13 to the intersection thereof with the westerly right of way line of County Aid Road No. 23; Thence South along the Westerly right of way line of said County Aid Road 23 to the intersection thereof with the South line of said Southwest y.,; thence Westerly along said South line of said Southwest y., to the point of beginning. PID #25-902096-0 Address: 16950 Panama Avenue Prior Lake, MN 55372 2. Purchase Price and Manner of Payment. The total purchase price (the " Purchase Price") to be paid by Buyer to Seller for the Property shall be Two Hundred Fifty DN: 174309 Ver: 3 Thousand and 00/100 Dollars ($250,000.00). The Purchase Price shall be payable as follows: a. $5,000.00 as earnest money (the" Earnest Money") which shall be deposited with such title insurance company as may be designated by Buyer (the "Title Company" ). b. The balance in cash or by wire transfer on the Date of Closing (as defined in Paragraph 4 of this Agreement). 3. Acceptance Deadline. The offer to purchase contained in this Agreement (the " Offer") shall be revoked and shall be null and void on January 31, 2003 at 4:00 p.m. (the "Acceptance Deadline"), unless Seller has accepted the Offer by the Acceptance Deadline. In order to constitute acceptance of the Offer, Seller must execute this Agreement and provide a copy of the fully executed Agreement to Buyer in the manner provided for giving notices specified in Paragraph 17 of this Agreement. Seller must also provide to Buyer a waiver of the right of first refusal under the Lease in the form set forth in attached Exhibit B (the "Waiver"), executed by the Van Erps prior to the Acceptance Deadline. Failure to deliver the executed Waiver prior to the Acceptance Deadline shall constitute failure to accept the offer. 4. Closing and Possession. The closing of the purchase and sale contemplated by this Agreement (the" Closing") shall be on or before March 3, 2003, or such other date as may be mutually agreed to by the parties (the" Date of Closing" or "Closing Date"). The Closing shall take place at the offices of the Title Company or at such other place as may be agreed to by the parties. The parties shall deliver the following executed and notarized documents at Closing: a. Seller's Closinq Documents. On the Closing Date, Seller shall execute and deliver to Buyer the following (collectively, " Seller's Closing Documents"): i. Deed. A Warranty Deed, Minnesota Uniform Conveyancing Form, conveying the Property to Buyer, free and clear of all encumbrances, liens, covenants, conditions, easements, restrictions, reservations, and assessments, except as shown in the attached Exhibit C (the" Permitted Encumbrances") and in a form acceptable to Buyer in its discretion (the " Deed"). ii. Assiqnment of Lease. An Assignment of Lease in the form attached hereto as Exhibit 0 (the "Assignment") executed by Seller. Said Assignment shall be dated effective as of the Closing Date hereof. iii. Estoppel Certificate. Seller must cause the Stufflebeams to execute and deliver to Buyer that Estoppel Certificate in the form set forth on attached Exhibit E, which shall be dated effective as of the Closing Date. Said Estoppel Certificate shall certify, among other things, that all of Seller's -2- duties and responsibilities under the Lease have been met as of the Closing Date. iv. Waiver of Riqht of First Refusal. The Waiver executed and notarized by the Stufflebeams must be dated on or before the date of the Acceptance Deadline and delivered to Buyer on or before the Acceptance Deadline. v. Seller's Affidavit. An Affidavit of Title by Seller indicating that on the Closing Date there are no outstanding, unsatisfied judgments, tax liens or bankruptcies against or involving Seller or the Property; that there has been no skill, labor or material furnished to the Property for which payment has not been made or for which mechanic's liens could be filed; and that there are no other unrecorded interests in the Property. vi. FIRPTA Affidavit. A non-foreign affidavit, properly executed and in recordable form, containing such information as is required by IRC Section 1445(b) (2) and its regulations. vii. Abstract of Title. The Abstract of Title to the Property, if the Property is Abstract property. viii. Well Certificate. If there is a well located on the Property, a Well Disclosure Certificate signed by Seller in the form required by law. ix. Addendum to Lease. Seller must cause the Stufflebeams to execute and deliver to Buyer that certain Addendum to Lease in the form set forth on attached Exhibit F, which shall be dated effective as of the Closing Date. b. Buyer's Closinq Documents. On the Closing Date, Buyer will execute and deliver to Seller the following (collectively, "Buyer's Closing Documents"): i. Purchase Price. The Purchase Price, less the Earnest Money paid by Buyer, by certified check. ii. Title Documents. Such Affidavits of Purchaser, Certificates of Value or other documents as may be reasonably required in order to record the Seller's Closing Documents. 5. Possession of Property. Seller shall deliver possession of the Property to Buyer immediately after the Closing, subject to the Lease, said Lease being assigned to Buyer pursuant to Paragraph 4a(ii) hereto. 6. Prorations. Seller and Buyer agree to the following allocations of costs regarding this Agreement. -3- a. Seller's Closinq Costs. Seller shall pay (i) the State Deed Tax payable on the recording of the Warranty Deed to be delivered by Seller under this Agreement, (ii) the cost of the Title Commitment as required in this Agreement not to exceed $200, (iii) the cost of preparing the Seller's Closing Documents, (iv) one-half (1/2) of the closing fee charged by the Title Company, not to exceed $125, and (v) any other cost or expenses allocated to Seller under this Agreement. b. Buver's Closinq Costs. Buyer shall pay (i) the cost of preparing the Buyer's Closing Documents, (ii) one-half (1/2) of the closing fee charged by the Title Company, (iii) the premium for any title insurance policy purchased by Buyer, and (iv) any other cost or expense allocated to Buyer under this Agreement. c. Real Estate Taxes and Special Assessments. i. General real estate taxes payable in 2002 and prior years, plus any penalty and interest, if any, shall be paid by Seller. Real Estate taxes payable in 2003 shall be prorated between Buyer and Seller as of the Closing Date. ii. Seller shall pay all special assessments levied or constituting a lien against the Property as of the Closing Date, including without limitation any installments of special assessments (including interest) payable with general real estate taxes in 2002 (the" Special Assessments"). d. Miscellaneous. All rents and interest, and all charges for city water, city sewer, natural gas, fuel oil, liquid petroleum gas, electricity, garbage removal, and other operating costs, if any, shall be prorated between the parties as of the Date of Closing. 7. Title Evidence. As soon as reasonably possible but no later than ten (10) business days after the date of the Acceptance Deadline, Seller shall, at Seller's sole cost and expense, deliver the following to Buyer (collectively, the "Title Evidence"): a. A commitment by the Title Company to issue an AL T A Form B 1990 Owner's Policy of Title Insurance, in an amount equal to the Purchase Price and the cost of Buyer's improvements to the Property, if any, to insure Buyer's title to the Property (the "Title Commitment"), including copies of documents referenced in Schedule B thereof. The Title Commitment shall have an effective date of no earlier than the date of this Agreement. The Title Commitment shall include affirmative coverages for appurtenant easements, if any, and such endorsements as may be reasonably required by Buyer or its lender. The Title Commitment shall obligate the Title Company to delete standard exceptions from the Title Commitment and the policy upon the Title Company's receipt of a satisfactory survey of the Property, a seller's affidavit in the form described in Paragraph 4a(v), and any documentation described in Paragraph 4b(ii). -4- b. Seller has provided to Buyer a copy of a boundary survey of the Property. Buyer may, at Buyer's sole cost and expense, have a current survey of the Property prepared by a surveyor registered under the laws of Minnesota. Such survey shall be certified to Buyer and the Title Company, and shall meet the 1997 Minimum Standard Detail Requirements for AL T AlACSM Title Surveys, Urban Class. 8. Title Examination, Title Corrections and Remedies. Within ten (10) business days of Buyer's receipt of the Title Evidence, Buyer shall deliver written objections thereto to Seller (the "Objections"). Seller shall have sixty (60) days from receipt of the Objections to make title marketable. Cure of the defects by Seller shall be diligent and prompt. Upon correction of title, and within ten (10) days after written notice to the Buyer, the parties shall perform this Agreement according to its terms. If Seller does not undertake to make title marketable, or if notice is given but the aforementioned sixty 60-day period expires without title being made marketable due to Seller's failure to make good faith attempts to make title marketable, Buyer may, as permitted by law: i. Proceed to closing; or ii. Rescind this Purchase Agreement by notice as provided herein, in which case the Purchase Agreement shall be null and void and the Earnest Money shall be refunded to Buyer; 9. Inspections. Buyer may perform such inspections of the Property, in Buyer's sole discretion, deems appropriate (the" Inspections"). The Inspections shall be done at Buyer's sole cost and expense. Buyer and Buyer's agents shall have the right, upon reasonable advance notice to Seller, to go upon the Property to perform the Inspections. 10. Representations and Warranties by Seller. Seller makes the following representations to Buyer as of the date of this Agreement and as of the Date of Closing: a. Authority. Seller represents and warrants to Buyer that Seller has the requisite of power and authority to enter into this Agreement and the Seller's Closing Documents to be signed by Seller; that the execution, delivery and performance by Seller of such documents do not conflict with or result in violation of any judgment, order, or decree of any court or arbiter to which Seller is a party; and such documents are valid and binding obligations of Seller, and are enforceable in accordance with their terms. b. Title to Property. Seller owns the Property and free and clear of all encumbrances, liens, covenants, conditions, easements, restrictions, reservations, and assessments, except the Permitted Encumbrances. c. Utilities. The Property is served by the following public and private utility services: electric, gas, water, sanitary sewer and telephone, all of which services are available in adequate capacities to properly service the Property. -5- Seller has received no notice of actual or threatened reduction or curtailment of any utility service now supplied to the Property. To the best knowledge of Seller, all utility lines reach the boundaries of the Property through public rights- of-way or valid private easements, the interest of Seller in which shall be assigned by Seller to Buyer on the Closing Date. d. Assessments. Seller has not received any notice of actual or threatened special assessments or reassessments of the Property. e. Environmental Laws. To the best of Seller's knowledge, no toxic or hazardous substances or wastes, pollutants or contaminants (including, without limitation, asbestos, urea formaldehyde, the group of organic compounds known as polychlorinated biphenyls, petroleum products including gasoline, fuel oil, crude oil and various constituents of such products, and any hazardous substance as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA", 42 U.S.C. !l9601-9657, as amended)) have been generated, treated, stored, released or disposed of, or otherwise placed, deposited in or located on the Property, nor, to the best of Seller's knowledge has any activity been undertaken on the Property that would cause or contribute to (i) the Property becoming a treatment, storage or disposal facility within the meaning of, or otherwise bring the Property within the ambit of, the Resource Conservation and Recovery Act of 1976 (" RCRA"), 42 U.S. C. !l6901 et.~., or any similar state law or local ordinance, (ii) a release or threatened release of toxic or hazardous wastes or substances, pollutants or contaminants, from the Property within the meaning of, or otherwise bring the Property within the ambit of, CERCLA, or any similar state law or local ordinance, or (iii) the discharge of pollutants or effluents into any water source or system, the dredging or filling of any waters or the discharge into the air of any emissions, that would require a permit under the Federal Water Pollution Control Act, 33 U.S.C. !l1251 et.~., or the Clean Air Act, 42 U.S.C. !l7401 et. seq., or any similar state law or local ordinance. To the best knowledge of Seller, there are no substances or conditions in or on the Property that may support a claim or cause of action under RCRA, CERCLA or any other federal, state or local environmental statutes, regulations, ordinances or other environmental regulatory requirements, including without limitation, the Minnesota Environmental Response and Liability Act, Minn. Stat. !l 115B (" MERLA") and the Minnesota Petroleum Tank Release Cleanup Act, Minn. Stat.!l115C. f. Riqhts of Others to Purchase Property. Other than those encumbrances disclosed by the Title Evidence or otherwise referenced in this Agreement, there are no unrecorded mortgages, contracts, leases, purchase agreements, options, easements or other agreements or interests relating to the Property that the Seller has not provided, to Buyer's sole satisfaction, a waiver of such interest and/or a termination thereof. -6- g. Seller's Defaults. Seller is not in default in the performance of any of Seller's obligations or liabilities under any easement agreement, covenant, condition, restriction or other instrument relating to the Property, including without limitation, the Lease. h. FIRPTA. Seller is not a "foreign person," "foreign partnership," "foreign trust" or "foreign estate" as those terms are defined in Section 1445 of the Internal Revenue Code. i. Proceedinqs. There is no action, litigation, investigation, condemnation or proceeding of any kind pending or, to the best knowledge of Seller, threatened against Seller or the Property. j. Wells. Seller certifies that Seller does not know of any "Wells" described Property within the meaning of Minn. Stat. ~ 1 031. representation is intended to satisfy the requirements of that statute. on the This k. Private Sewer Svstems. Seller certifies that Seller does not know of any private sewer system on or serving the Property, nor have any been installed or removed during Seller's ownership of the Property. I. StoraQe Tanks. To the best knowledge of Seller, no storage tanks are located under, in, or about the Property, and no storage tanks have been located under, in, or about the Property and subsequently been removed or filled. m. Compliance. The Property fully conforms with all applicable statutes, laws, codes, ordinances and restrictions including all zoning, platting, subdivision and use laws and all building, energy and environmental codes and regulations. All improvements are located entirely within the boundary lines of the Property and do not encroach upon any adjacent property and no improvements on any adjacent property encroach upon the Property. n. Access. To the best of Seller's knowledge, the Property abuts on and has direct vehicular access to a public road. Seller will indemnify Buyer, and Buyer's successors and assigns, against, and will hold Buyer, and Buyer's successors and assigns, harmless from, any expenses or damages, including reasonable attorney's fees, that Buyer incurs because of the breach of any of the above representations and warranties, whether such breach is discovered before or after Closing. Consummation of this Agreement by Buyer with knowledge of any such breach by Seller will not constitute a waiver or release by Buyer of any claims due to such breach. Each of the representations and warranties set forth above shall survive the Closing. 11. Seller's Contingencies. The obligations of Seller under this Agreement are contingent upon each of the following: -7- a. Representations and Warranties. The representations and warranties of Buyer contained in this Agreement shall be true at the time this Agreement is executed and on the Closing Date as if made on the Closing Date. b. Performance of Buver's Obliqations. Buyer shall have performed all of the obligations required to be performed by Buyer under this Agreement, as and when required by this Agreement. 12. Representations and Warranties of Buyer. Buyer represents and warrants to Seller that Buyer is a duly organized municipal corporation under the laws of the State of Minnesota; that Buyer is duly qualified to transact business in the State of Minnesota; that Buyer has the requisite of power and authority to enter into this Agreement and the Buyer's Closing Documents to be signed by Buyer; such documents have been, or will have been by the Date of Closing, duly authorized by all necessary action on the part of Buyer and have been duly executed and delivered; that the execution, delivery and performance by Buyer of such documents do not conflict with or result in violation of Buyer's governing documents or any judgment, order, or decree of any court or arbiter to which Buyer is a party; and such documents are the valid and binding obligations of Buyer and enforceable in accordance with their terms. Buyer will indemnify Seller, and Seller's successors and assigns, against, and will hold Seller, and Seller's successors and assigns, harmless from, any expenses or damages, including reasonable attorney's fees, that Seller incurs because of the breach of any of the above Buyer's representations and warranties, whether such breach is discovered before or after Closing. Consummation of this Agreement by Seller with knowledge of any such breach by Buyer will not constitute a waiver or release by Seller of any claims due to such breach. Each of the representations and warranties set forth above shall survive the Closing. 13. Buyer's Contingencies. The obligations of Buyer under this Agreement are contingent upon each of the following: a. Representations and Warranties. The representations and warranties of Seller contained in this Agreement shall be true at the time this Agreement is executed and on the Closing Date as if made on the Closing Date. b. Title. Title shall have been found acceptable to Buyer in its discretion, or been made acceptable, in accordance with the requirements and terms of this Agreement. c. Performance of Seller's Obliqations. Seller shall have performed all of the obligations required to be performed by Seller under this Agreement, as and when required by this Agreement, including without limitation, Seller shall have (i) caused Lessee to execute and deliver to Buyer the (a) Waiver dated effective as of a date earlier or the same as the Acceptance Deadline date; (b) Estoppel Certificate dated effective as of the Closing Date; and (c) Addendum to Lease dated effective as of the Closing Date; and (ii) executed and delivered -8- to Buyer the Assignment dated effective as of the Closing Date and other documents required to be executed and delivered by Seller to Buyer hereunder. d. Survey. Buyer shall be satisfied, in Buyer's sole discretion, with the Survey. e. Inspections. The results of the Inspections shall be satisfactory to Buyer, in Buyer's sole discretion. f. Utilities. Buyer shall have satisfied itself, in Buyer's sole discretion, that water and gas main, electric power lines, and sanitary and storm sewers are available to the Property and adequate for Buyer's proposed use of the Property. Unless each of the above contingencies is satisfied, removed, or waived by Buyer on or before the Date of Closing, Buyer shall have the right to cancel this Purchase Agreement by giving Seller written notification of Buyer's election to so cancel. Upon delivery of such written notification, (i) this Purchase Agreement shall be null and void, (ii) Buyer's earnest money shall be promptly returned to Buyer, and (iii) Seller and Buyer agree to execute a cancellation of this Purchase Agreement. 14. Operation Prior to Closing. During the time period between the date of this Agreement and the Closing Date (the" Executory Period"), Seller shall continue lease of the Property under all the conditions and provisions of the Lease. Seller shall execute no contracts, leases, or other agreements, including without limitation, amendments, terminations, or waivers regarding the Property during the Executory Period which extend beyond the Closing Date without the prior written consent of Buyer, which consent may be withheld by Buyer at its sole discretion. 15. Brokers. The parties represent to each other that they have retained no other brokers or agents in connection with this transaction and shall indemnify each other for any claims, demands, causes of action and costs, including reasonable attorneys' fees, arising from any broker or agent claiming a commission or fee with respect to this transaction. 16. Survival. All of the terms, conditions, representations, warranties, and indemnifications contained in this Agreement shall survive and be enforceable after the Closing. 17. Notices. Any notice required or permitted to be given by either party upon the other is given in accordance with this Agreement if notice is directed to Seller by delivering notice personally to anyone of the undersigned of sellers; or if notice is directed to Buyer, by delivering notice personally to anyone of the undersigned buyers; or if mailed in a sealed wrapper, properly addressed, by United States registered or certified mail, return receipt re- quested, postage prepaid; or if transmitted by facsimile, copy followed by mailed notice as above required; or if deposited cost paid with a nationally recognized, reputable overnight courier, properly addressed as follows: -9- If to Seller: Gary A. and Bonnie R. Van Erp 4650 Detelemark Road Dundas, MN 55019 If to Buyer: City of Prior Lake 16200 Eagle Creek Avenue SE Prior Lake, MN 55372 Attn: Frank Boyles, City Manager with a copy to: Suesan L. Pace, Esq. City Attorney for City of Prior Lake HALLELAND, LEWIS, NILAN SIPKINS & JOHNSON Pillsbury Center South 220 South Sixth Street, Suite 600 Minneapolis, MN 55402-4501 Notices shall be deemed effective on the earlier of the date of receipt or the date of deposit as aforesaid; provided, however, that if notice is given by deposit, that the time for response to any notice by the other party shall commence to run one (1) business day after any such deposit. Any party may change its address for the service of notice by giving written notice of such change to the other party, in any manner above specified, ten (10) days prior to the effective date of such change. 18. Miscellaneous GoverninQ Provisions. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, representatives, successors, and assigns. This Agreement shall be construed and interpreted in accordance with the laws of the State of Minnesota. No failure on the part of a party to this Agreement to exercise, and no delay in exercising, any rights contained in the Agreement shall operate as a waiver of such rights, nor shall any single or partial exercise of any rights hereunder preclude any other or further exercise of such rights or the exercise of any other right. The remedies provided in this Agreement are cumulative and not exclusive of any other remedy provided by law or equity. All terms and words used in this Agreement shall be construed to include any other number and any other gender as the context or sense of this Agreement or of any paragraph of this Agreement may require as if such terms or words had been fully and properly written in the appropriate number and gender. Any exhibits to this Agreement are a part of this Agreement. Captions are provided for convenience and ease of reference only and do not affect or modify the terms of any of the provisions of this Agreement. All of the provisions of this Agreement are severable, so if any provision of this Agreement is held to be ineffective by a court of competent jurisdiction, the remaining provisions of this Agreement shall remain in full force and effect unless the invalidated provision is so fundamental to this Agreement that the remaining provisions do not reflect the parties' intent. This Agreement contains the entire agreement of the parties with respect to the subject matter of this Agreement and supersedes any and all prior Agreements and understanding between the parties with respect to the -10- same. The terms of this Agreement have been cooperatively negotiated by and among the parties hereto, and this Agreement shall not be construed against any party hereto as its author. This Agreement may be modified only by a written instrument executed by both parties. There are no third party beneficiaries of this Agreement, intended or otherwise. Time is of the essence for each and every term of this Agreement. This Agreement may be executed in counterparts and, upon execution, each counterpart shall be considered an original. IN WITNESS WHEREOF, Seller and Buyer have executed this Purchase Agreement as of the date first written above. /C8-7 L.- ' / Gary A. Van Erp // ~~~:~ Er~ ~ CVV'- ~ BUYER: CITY OF PRIOR LAKE SELLER: By: Jack G. Haugen, Mayor By: Frank Boyles, City Manager -11- ITA Lease Aareement See attached 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph, (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER EXHIBIT B Waiver of Riqht of First Refusal -2- EXHIBIT C PERMITTED ENCUMBRANCES 1. Covenants, conditions, easements, restrictions, and reservations of record approved in writing by Buyer. 2. Real estate taxes not due and payable. -3- EXHIBIT D Assignment of Lease Agreement -4- EXHIBIT E Estoppel Certificate -5- EXHIBIT F Addendum to Lease -6- ASSIGNMENT OF LEASE THIS ASSIGNMENT OF LEASE (" Assignment") is dated March _,2003, by and among Gary A. Van Erp and Bonnie R. Van Erp. husband and wife, whose address is 4650 Detelemark Road, Dundas, Minnesota (collectively, "Seller," "Lessor" or the "Van Erps") and the City of Prior Lake, a Minnesota municipal corporation, with offices at 16200 Eagle Creek Avenue SE, Prior Lake, Minnesota (" Buyer"). RECITALS WHEREAS, Seller and Buyer are parties to that certain Purchase Agreement dated January _, 2003 (the" Purchase Agreement"), pertaining to certain real property situated in the City of Prior Lake, County of Scott, Minnesota and legally described on attached Exhibit A (the "Property" ); WHEREAS, Seller and Carole Stufflebeam and William Stufflebeam, wife and husband (hereinafter collectively referred to as "Lessee" or the" Stufflebeams") entered into that certain Lease dated September 1, 2000 (the" Original Lease"), in connection with the Property; WHEREAS, Gary Van Erp, on behalf of the Van Erps, and the Stufflebeams executed that certain Letter Agreement dated June 4, 2002, (the" Letter Agreement," and together with the Original Lease, are collectively herein referred to as the" Lease"), a copy of which is attached hereto as Exhibit B; WHEREAS, pursuant to the Purchase Agreement, the City requires, among other things, that Seller execute this Assignment effective as of the Date of Closing, as such term is defined in the Purchase Agreement; and WHEREAS, in connection with the sale of the Property to Buyer under the Purchase Agreement, Seller desires to assign all of its right, title, and interest in and to the Lease to Buyer, and Buyer desires to assume all of Seller's rights and obligations under the Lease. AGREEMENT 1. Effective Date. The assignment contained in this Assignment shall be deemed effective as of 12:01 a.m., March _, 2003 (the" Effective Date"). 2. Assignment and Assumption. Seller hereby assigns and transfers to Buyer all of Seller's right, title, and interest in, to and under the Lease, and Buyer accepts the assignment and assumes and agrees to perform, from and after the Effective Date, all of the Lessor's obligations under the Lease. 3. Release. Buyer agrees that Seller shall be released and exonerated from any further liability under the Lease and Buyer agrees to indemnify, defend, protect and hold Seller harmless from and against any and all claims, liabilities, injury, damages, causes of action related to or arising from the Lease. DN: 174314 Ver: 2 4. Copies of Lease. Buyer acknowledges that it has previously been provided copies of the Lease. At Closing (as such term is defined under the Purchase Agreement), Seller shall deliver to Buyer the originally executed lease documents pertaining to the Lease. 5. Notice to Tenants. Seller and Buyer shall reasonably cooperate to prepare and deliver notices of this Assignment of Lease to the Stufflebeams. 6. Successors. This Assignment shall be binding on and inure to the benefit of the parties and their respective successors, assigns, administrators, personal representatives, executors, and heirs. 7. Counterparts & Fax Signatures. This Assignment may be executed in counterparts, each of which shall be deemed an original and all of which together, shall constitute one and the same instrument. The parties agree to accept signatures transmitted by facsimile as if they were original signatures and such signatures transmitted by facsimile shall be fully binding upon the parties to this Assignment. IN WITNESS WHEREOF, Seller and Buyer have duly executed this Assignment, effective as of the day and year set forth herein above. BUYER: CITY OF PRIOR LAKE SELLER: ~ ..-/ By: Jack G. Haugen, Mayor ~('/YV)\ 0' 0 rx. V ~ ~ Bonnie R. Van Erp By: Frank Boyles, City Manager DN: 174314 Ver: 2 EXHIBIT A LeQal Description of Property The following real property located at 16950 Panama Avenue S.E., City of Prior Lake, County of Scott, Minnesota, and legally described as follows, together with all improvements, easements and rights benefiting or appurtenant thereto: That part of the East Y, of the Southwest Y. of Section 2, Township 114, Range 22, Scott County, Minnesota, described as follows: Commencing at the southwest corner of said East Y, of the Southwest Y. and thence running North along the West line of said East Y, of Said Southwest Y. approximately 283.36 feet to the intersection of said West line of said East Y, of said Southwest Y. with the Easterly right of way line of old Trunk Highway No. 13; thence Northeasterly along the right of way line of said old Trunk Highway No. 13 to the intersection thereof with the westerly right of way line of County Aid Road No. 23; Thence South along the Westerly right of way line of said County Aid Road 23 to the intersection thereof with the South line of said Southwest y.; thence Westerly along said South line of said Southwest Y. to the point of beginning. PID #25-902096-0 Address: 16950 Panama Avenue Prior Lake, MN 55372 ONo 174314 Ver: 2 EXHIBIT B Lease Aqreement See attached DN: 174314 Ver: 2 LEASE AGREEMENT This Lease, effective September 1, 2000, by and between Gary A. Van Erp and Bonnie Van Erp, husband and wife, as Lessor, and Carole Stu[ilebeam and William Stufflebeam, wife and husband, as Lessee. WITNESSETH That the said Lessor, in consideration of the rents and covenants hereinafter mentioned, does hereby demise, lease and let unto the said Lessee, and the said Lessee does hereby hire and take from the said Lessor that portion of the following described property defined as "Demised Premises", situated in the County of Scott, State of Minnesota, to-wit: THAT PART OF THE E1I2 OF SW1I4 OF SECTION 2, TOWNSHIP 114, RANGE 22, SCOTT COUNTY, MINNESOTA, DESCRIBED AS FOLLOWS: COMMENCING AT THE SW CORNER OF SAID E1/2 OF SAID SWII4 AND THENCE RUNNING NORTH ALONG THE WEST LINE OF SAID E1I2 OF SAID SW1I4 APPROXrMATELY 283.36 FEET TO ME INTERSECTION OF SAID WEST LINE OF SAID EII2 OF SAID SW1I4 WITH THE EASTERLY RIGHT OF WAY LINE OF OLD TRUNK HIGHWAY NO. 13; THENCE NORTHEASTERLY ALONG THE RIGHT OF WAY LINE OF SAID OLD TRUNK HIGHWAY 13 TO THE INTERSECTION THEREOF WITH THE WESTERLY RIGHT OF WAY LINE OF COUNTY AID ROAD NO. 23; THENCE SOUTH ALONG THE WESTERLY RIGHT OF WAY LINE OF SAID COUNTY AID ROAD 23 TO THE INTERSECTION THEREOF WITH THE SOUTH LINE OF SAID SWII4; THENCE WESTERLY ALONG SAID SOUTH LINE OF SAID SW1I4 TO THE POINT OF BEGINNING TO HAVE AND TO HOLD THE ABOVE PREMISES just as they are without any liability or obligation on the part of the Lessor for making any alterations, improvements or repairs of any kind or nature upon said prernises or the building or buildings of which they are a part, or the equipment, fixtures, plumbing, appliances or machinery therein, other than as specifically mentioned in this Lease, for the tenn of two (2) years, commencing September 1, 2000, and ending August 31, 2002, upon the following tenns and conditions. SECTION ONE RENT As and for rent, Lessee shall pay to Lessor the following surns: A. Commencing September 1, 2000, and thereafter due and payable on the first of each succeeding month to and including August 1, 2002, the sum of Fifteen Hundred Seventy Five Dollars ($1575.00) per month. B. On the same date as rent is due in A. above, Lessee shall pay the sum of Fifty Dollars ($50.00) per month, as a reimbursement for insurance premiums paid by Lessor. In the event the insurance premiums increase over the amount due and payable in the year 2000, the Lessee shall, in addition, pay the additional amount within thi11y (30) days of written notice by Lessor. 1 C. Lessee shaIl pay all taxes over Four Thousand DoIlars ($4000.00) per year due and payable in 2001, and 8112ths of all taxes over Four Thousand DoIlars ($4000.00) per year due and payable in 2002. These sums shaIl be due within thirty (30) days of written notice by Lessor. SECTION TWO ADDITIONAL RENT AIl taxes, insurance, charges, costs, and expenses that Lessee assumes or agrees to pay hereunder, together with all interest and penalties that may accrue thereon in the event of the failure of Lessee to pay those items, and all other damages, costs, expenses and sums that Lessor may suffer or incur, or that may become due, by reason of any default of Lessee or failure by Lessee to comply with the tenns and conditions of this Lease, shall be deemed to be additional rent and, in the event of nonpayment, Lessor shall have all the rights and remedies as herein provided for failure to pay rent SECTION THREE ALTERATIONS, ADDITIONS AND IMPROVEMENTS A. Subject to the limitation that no portion of the building on the Demised Premises shall be demolished or removed by Lessee without the prior written consent of Lessor, and, if necessary, of any mortgagee, Lessee may at any time during the Lease term, with Lessor's prior written approval, and subject to the conditions set forth below and at Lessee's own expense, make any alterations, additions or improvements in and to the interior of the Demised Premises and the building, including signage. Alterations shaIl be perfonned in a workmanlike manner and shaIl not weaken or impair the structural strength or lessen the value of the building on the premises, or change the purposes for which the building, or any part thereof, may be used. B. Conditions with respect to alterations, additions or improvements are as foIlows: I. Before commencement of any work, all plans and specifications shall be filed with and approved by all governmental departments or authorities having jurisdiction and any public utility company having an interest therein, and all work shaIl be done in accordance with the requirements of local regulations. The plans and specifications for any alterations shaIl be submitted to Lessor for written approval prior to commencing work. The decision as to whether or not to grant approval shall be in Lessor's sole discretion. 2. Prior to commencement of any work, Lessee shaIl pay the amount of any increase in premiums on insurance policies provided for herein because of endorsements to be made covering the risk during the course of work. In addition, if the estimated cost of work shaIl exceed One Thousand DoIlars ($1000.00), Lessee shall, without cost to Lessor, furnish Lessor with proof of financial ability to pay such as a letter of cornmitment or credit from a bank for the amount of the work. Immediately upon completion of the work, Lessee shall furnish Lessor with originals 01' copies of executed originals of Lien Waivers for all work. C. All alterations, additions and improvements on or in the Dernised Premises at the commencernent of the tenn, and that may be erected or installed during the tenn, shall become part of the Demised Premises and the sole property of Lessor. Provided, however, 2 that the Lessee may at any time prior to the end date of the Lease, remove any trade fIxtures which were installed and paid for by said Lessee on condition that the Lessee returns the premises from which the trade fIxture was removed to condition they were in before the fIxture was installed. D. Notwithstanding any other condition in this section or Lease to the contrary, all sign panels placed upon the property by the Lessee must be removed by the Lessee and the surface of the wall or fascia restored to its condition prior to the erection of the sign, all at Lessee's expense. E. Any non-attached leasehold improvements may be removed at any time by the Lessee. SECTION FOUR REPAIRS AND MAINTENANCE A. The Lessor shall be solely responsible for all roof and wall repair and maintenance. B. The Lessee shall be responsible for all other maintenance of the interior and exterior of the Demised Premises. In addition, the Lessee shall be responsible for keeping the interior and exterior of the Demised Premises in a clean and safe condition. At the termination of the lease the Lessee shall be required to turn the Demised Premises back to the Lessor in the same condition as at the commencement of the lease absent reasonable wear and tear. C. Lessee shall be responsible for the maintenance of the sidewalk and parking lot, including sweeping and snow removal. SECTION FIVE UTILITIES All utilities to the Demised Prernises shall be the responsibility of the Lessee to pay when due. SECTION SIX INSURANCE A. During the term of the Lease and for any further time that Lessee shall hold the Demised Premises, Lessee shall obtain and rnaintain at its expense, the following types and arnounts of insurance: Personal injury and property damage insurance. Insurance against liability for bodily injury and property damage, all to be in the amount of at least One Million Dollars ($1,000,000.00) and naming Lessor as an insured, with copies thereof to be provided by Lessee. B. All insurance provided by Lessee as required by this section shall be carried in favor of Lessor and Lessee as their respective interests may appear.r 3 SECTION SEVEN UN LA WFUL OR DANGEROUS ACTIVITY Lessee shall neither use nor occupy the Dernised Prernises or any part thereof for any unlawful, disreputable, or ultrahazardous business purpose, nor operate or conduct its business in a manner constituting any unlawful, disreputable or ultrahazardous use, and shall take action to halt such activity. SECTION EIGHT INDEMNITY Lessor and Lessee shall each indemnify the other against all expenses, liabilities, and claims of any kind, including reasonable attorneys fees, by or on behalf of any person or entity arising out of either (i) a failure by either to perform any of the terms or conditions of this Lease, (ii) any injury or damage happening on or about the Demised Premises, (iii) failure to comply with any law of any governmental authority, or (iv) any mechanic's lien or security interest filed against the Demised Premises or equipment, materials, or alterations of buildings or improvements thereon. SECTION NINE DEFAULT OR BREACH Each of the following events shall constitute a default or breach of this Lease by Lessee: I. If Lessee, or any successor or assignee of Lessee, while in possession, shall file a petition in bankruptcy or insolvency or for reorganization under any bankruptcy act, or shall voluntarily take advantage of any such act by answer or otherwise, or shall make an assignrnent for the benefit of creditors. 2. If involuntary proceedings under any bankruptcy law or insolvency act shall be instituted against Lessee, or if a recei ver or trustee shall be appointed of all or substantially all of the property of Lessee, and such proceedings shall not be dismissed or the receivership or uusteeship vacated within thirty (30) days after the institution or appoinunenl 3. If Lessee shall fail to pay Lessor any rent or additional rent when the rent shall become due and shall not make the payment within ten (10) days after notice thereof by Lessor to Lessee. 4. If Lessee shall fail to perform or comply with any of the conditions of this Lease and if the nonperformance shall continue for a period of thirty (30) days after notice thereof by Lessor to Lessee, or if the perfOlmance cannot be reasonably had within the thirty (30) day period, Lessee shall not in good faith have commenced penormance within the thirty (30) day period and shall not diligently proceed to completion of penormance. 5. If Lessee shall vacate or abandon the Demised Premises. 6. If this Lease shall be transferred to or shall pass to, or devolve to, any other person or party except in the manner herein permitted. 4 SECTION TEN EFFECT OF DEFAULT In the event of any default hereunder, as set forth in Section Ten, the rights shall be as follows: 1. Lessor shall have the right to cancel and terminate this Lease, as well as all of the right, title and interest of Lessee hereunder, by giving to Lessee not less than thirty (30) days notice of the cancellation and termination. On expiration of the time fixed in the notice, this Lease and the right, title and interest of Lessee hereunder, shall terminate in the same manner and with the same force and effect, except as to Lessee's liability, as if the date fixed in the notice of cancellation and telmination were the end of the term herein originally determined. 2. Lessor may elect, but shall not be obligated, to make any payment required of Lessee herein or comply with any agreement, term or condition required hereby to be performed by Lessee, and Lessor shall have the right to enter the Dernised Premises for the purpose of correcting or remedying any such default and to remain until the default has been corrected or remedied, but any expenditure for the correction by Lessor shall not be deemed to waive or release the default of Lessee or the right of Lessor to take any action as may be otherwise permissible hereunder in the case of any default. 3. Lessor may re-enter the premises immediately and remove the property and personnel of Lessee, and store the property in a public warehouse or at a place selected by Lessor at the expense of Lessee. After re-entry, Lessor may terminate the Lease on giving ten (10) days' notice of termination to Lessee. Without the notice, re-entry will not terminate the lease. On termination, Lessor may recover from Lessee all damages proximately resulting from the breach, including the cost of recovering the premises, and the wOlth of the balance of this Lease over the reasonable rental value of the premises for the remainder of the Lease term, which sum shall be immediately due Lessor from Lessee. 4. After re-entry, Lessor may re-Iet the premises or any part thereof for any term without terminating the Lease, at the rent and on the terms as Lessor may choose. Lessor may make alterations and repairs to the premises. The duties and liabilities of the parties if the premises are re-let as provided herein shall be as follows: a.) In addition to Lessee's liability to Lessor for breach of the Lease, Lessee shall be liable for all expenses of the re-Ietting, for the repairs made, and for the difference between the rent received by Lessor under the new lease agreernent and the rent installrnents that are due for the same period under this Lease. b.) Lessor shall apply the rent received frorn re-letting the premises (1) to reduce the indebtedness of Lessee to Lessor under the Lease, not including indebtedness for rent, (2) to reasonable expenses of the re-letting and reasonable repairs made as a result of damages caused by Lessee, (3) to rent due under this Lease, or (4) to payment of future rent under this Lease as it becornes due. 5 (I) If the new Lessee does not pay a rent installment prom ptly to Lessor, and the rent installment has been credited in advance of payment to the indebtedness of Lessee other than rent, or if rentals from the new Lessee have been othelWise applied by Lessor as provided for herein and during any rent installment period are less than the rent payable for the corresponding installment period under this lease, Lessee shall pay Lessor the deficiency, separately for each rent installment deficiency period, and before the end of that period. Lessor may at any tirne after a re-letting terminate the Lease for the breach on which Lessor had based the re-entry and subsequently re-Iet the premises. SECTION ELEVEN DESTRUCTION OF THE PREMISES In the event of a partial destruction of the premises during the term from any cause, Lessor shall forthwith repair the same, provided the repairs can be made within ninety (90) days under the law and regulations of applicable governmental authorities. Any partial destruction shall neither annul nor void this Lease, except that Lessee shall be entitled to a proportionate reduction of rent while the repairs are being made, any proportionate reduction being based on the extent to which the making of repairs shall interfere with the business carried on by Lessee in the premises. If the repairs cannot be completed within ninety (90) days of the destruction of part or all of the Demised Premises, then Lessee may, at Lessee's option, declare this Lease null and void. In the event that Lessor does not elect to make repairs that cannot be made in the specified time, or those repairs cannot be made under the laws and regulations of the applicable governmental authorities, this Lease may be terminated at the option of either party. SECTION TWELVE SUBORDlNA TION This Lease and all rights of Lessee hereunder shall be subject to and subordinate to the lien of any and all mortgages that may now or hereafter affect the Demised Premises, or any part thereof, and to any and all renewals, modifications, or extensions of any such mortgages. Lessee shall on demand, execute, acknowledge, and deliver to Lessor, without expense to Lessor, any and all instruments that may be necessary or proper to subordinate this Lease and all rights therein to the lien of any such mortgage or mortgages and each renewal, modilication, or extension, and if Lessee shall fail at any time to execute, acknowledge, and deliver any such subordination instrument, Lessor, in addition to any other remedies available in consequent thereof, may execute, acknowledge, and deliver the same as Lessee's attorney-in-fact and in Lcssee's name. Lessee hereby irrevocably makes, constitutes and appoints Lessor, its successors and assigns, its attorney-in-fact for that purpose. SECTION THIRTEEN ACCESS TO PREMISES AND SIGNS POSTED BY LESSOR AND LESSEE A. Lessee shall permit Lessor or its agents to enter the Demised Premises at all reasonable business hours to inspect the premises or to make repairs required by Lessor under this Lease, or to make repairs that Lessee may neglect or refuse to make in accordance with the provisions of this Lease, and also to show the premises to prospective buyers or renters. Lessee shall, within one (1) month prior to expiration of the terms, permit the usual notice 6 of "For Rent" and "For Sale" to be placed on the Dernised Premises and to remain thereon without hindrance and molestation. B. No signs may be erected on the exterior of the building except as may be approved by the Lessor, which approval shall not be unreasonably withheld. SECTION FOURTEEN QUIET ENJOYMENT Lessor warrants that Lessee shall be granted peaceable and quiet enjoyment of the Demised Premises free from any eviction or interference by Lessor if Lessee pays the rent and other charges provided herein, and otherwise fully and punctually perfonns the tenns and conditions imposed on Lessee. Lessor warrants that Lessor owns the premises and has good right to lease same and that Lessee shall have the right to use said leased premises for its intended purpose during the tenn of the Lease and that Lessor, either by action or ornission, shall not pennit interference with Lessee's business. SECTION FIFTEEN LIABILITY OF LESSOR Lessee shall be in control and possession of the Demised Premises, and Lessor shall not be liable for any injury or damages to any property or to any person on or about the Demised Premises nor for any injury or damage to any property of Lessee unless caused by Lessor's conduct, intentional or negligent. The provisions herein pennitting Lessor to enter and inspect the Demised Premises during business hours are made to insure that Lessee is in compliance with the terms and conditions hereof and makes repairs that Lessee has failed to make. SECTION SIXTEEN RENT ABATEMENT No abatement, diminution, or reduction of rent shall be claimed or allowed to Lessee or any person claiming under him under any circumstances, whether for inconvenience, discomfort, interruption or business or otherwise, arising from Lessee's making of alterations, improvements or repairs to the premises or because of any govemmentallaws restricting Lessee's use of the premises or during the restoration of the Demised Premises after the destruction or damage thereof by fire or otherwise as a result of Lessee's activities on said premises. No such abatement, diminution or reduction of rent shall be claimed or allowed arising from Lessor's construction, maintenance or repair activities on adjacent premises unless it interferes with Lessee's business. SECTION SEVENTEEN WAIVERS The failure of Lessor to insist on a strict performance of any of the terms and conditions hereof shall be deemed a waiver of the rights or remedies that Lessor may have regarding that specific instance only, and shall not be deemed a waiver of any subsequent breach or default in any tenns and conditions. 7 SECTION EIGHTEEN NOTICE All notices to be given with respect to this Lease shall be in writing. Each notice shall be sent by registered or certified mail, postage prepaid and return receipt requested, to the party to be notified at the address either party may from time to time designate in writing. Every notice shall be deemed to have been given at the time it shall be deposited in the United States Mails in the manner prescribed herein. Nothing contained herein shall be construed to preclude personal service of any notice in the manner prescribed for personal service of a summons or other legal process. At the time of the execution of this Lease, notices may be given as follows: To Lessor: Gary A. Van Erp 4650 DeTelemark Rd. Dundas, MN 55019 To Lessee: Carole & William Stufflebeam 16050 St. Francis Lane Prior Lake, MN 55372 SECTION NINETEEN ASSIGNMENT, MORTGAGE OR SUBLEASE Neither Lessee nor its successors or assigns shall assign, mortgage, pledge or encumber this Lease or sublet the Demised Premises in whole or in part without the prior written consent of the Lessor in each instance, which consent shall not be unreasonably withheld. The Lessor shall be given a copy of the proposed assignrnent of sublease and shall have fifteen (I5) days thereafter to object to the same in advance of which the assignment or subletting shall be deemed to have been approved. If this Lease is assigned or transferred, or if all or any part of the Demised Premises is sublet or occupied by anybody other than Lessee, contrary to the terms of this Section, Lessor may, after default by Lessee, collect rent frorn the assignee, transferee, subtenant, or occupant, and apply the net amount collected to the rent reserved herein, but no such assignment, subletting, occupancy, or collection shall be deemed a waiver of any agreement or condition hereof, or the acceptance of the assignee, transferee, subtenant, or occupant as Lessee. Lessee shall continue to be liable hereunder in accordance with the tenns and conditions of this Lease and shall not be released from the perfonnance of the tenns and conditions hereof. The consent by Lessor to an assignment, mortgage, pledge, or transfer shall not be construed to relieve Lessee from obtaining the express written consent of Lessor to any future transfer of interest. SECTION TWENTY SURRENDER OF POSSESSION Lessee shall, on the last day of the term, or on earlier tennination and forfeiture of the Lease, peaceably and quietly surrender and deliver the Demised Premises to Lessor free of subtenancies, including all buildings, additions. and improvement constructed or placed thereon by Lessee, except moveable non-attached trade fixtures, all in good condition and repair. Any non- attached trade fixtures or personal property not used in connection with the operation of the Demised Premises and belonging to Lessee, if not removed at the tennination or default, and if Lessor shall so elect, shall be deemed abandoned and become the property of Lessor without any payment or offset therefor. Lessor may remove such fixtures or property from the Demised Premises and store thern at the risk and expense of Lessee if Lessor shall so elect. Lessee shall repair and restore all damage to the Demised Premises caused by the removal of equipment, trade fixtures and personal property. 8 SECTION TWENTY-ONE REMEDIES OF LESSOR A. In the event of a breach or a threatened breach by Lessee of any of the terms or conditions hereof, Lessor shall have the right of injunction to restrain Lessee and the right to invoke any rernedy allowed by law or in equity, as if the specific rernedies of indernnity or reimbursement were not provided herein. B. The rights and remedies given to Lessor in this Lease are distinct, separate and cumulative, and no one of them, whether or not exercised by Lessor, shall be deemed to be in exclusion of any of the others herein, by law or by equity provided. C. In all cases hereunder, and in any suit, action or proceeding of any kind between the patties, it shall be presumptive evidence of the fact of the existence of a charge being due if Lessor shall produce a bill, notice or celtificate of any public official entitled to give that notice to the effect that such charge appears of record on the books of his office and has not been paid. D. No receipt of money by Lessor from Lessee after default or cancellation of this Lease in any lawful manner shall (i) reinstate, continue or extend the term or affect any notice given to Lessee, (ii) operate as a waiver of the right of Lessor to enforce the payment of rent and additional rent then due or falling due, or (iii) operate as a waiver of the right of Lessor to recover possession of the Demised Premises by proper suit, action, proceeding, or other remedy. After (i) service of notice of termination and forfeiture as herein provided and the expiration of the time specified therein, (ii) the commencement of any suit, action, proceeding or other remedy, or (iii) final order of judgment for possession of the Demised Premises, Lessor may demand, receive and collect any monies due, without in any manner affecting such notice, order or judgment. Any and all such monies so collected shall be deemed to be payment on account of the use and occupation of the Demised Premises or at the election of Lessor, on account of the liability of the Lessee hereunder. SECTION TWENTY-TWO TOTAL AGREEMENT; APPLICABLE TO SUCCESSORS This Lease contains the entire agreernent between the parties and cannot be changed or terminated except by a written instrument subsequently executed by the parties hereto. This Lease and the terms and conditions hereof apply to, and are binding on, the heirs, legal representatives, successors and assigns of both parties. SECTION TWENTY-THREE APPLICABLE LAW This agreement shall be governed by and construed in accordance with the laws of the State of Minnesota. TWENTY-FOUR TIME OF THE ESSENCE Time is of the essence in all provisions of this Lease. 9 TWENTY -FIVE RIGHT OF FIRST REFUSAL Lessor hereby grants unto Lessee a right of first refusal to purchase the Demised Premises upon the following tenus and conditions: A. This right of first refusal shall last only so long as this lease is in effect and Lessee is not in default of any material part thereof. B. If the Lessor desires to sell the Demised Premises during the tenu of this lease, and any extension thereof, the Lessor shall first give written notice of the tenus of the proposed sale to the Lessee. Lessee shall have 7 days thereafter to agree to purchase the Demised Premises upon the same tenus and conditions by notifying Lessor in writing. If the Lessee does so agree, a purchase agreement shall be signed with those tenus and conditions, and the parties shall close on them. C. In the event the Lessee fails to notify the Lessor within 7 days after notification of the tenus of another offer, then the right of first refusal shall become null and void. TWENTY -SIX RIGHT TO RENEW The Lessee may renew this lease for an additional two year period commencing September 1, 2002, by notifying Lessor in writing no later than June I, 2002, of its desire to do so. All tenus and conditions shall remain the same except that the Lessee shall pay 4/l2ths of taxes over Four Thousand Dollars ($4,000.00) for the balance of 2002, all of 2003, and 8/l2lhs of 2004. The Lessee shall also pay any addition to the insurance premium over that charged in 2000. The monthly basic rent of Fifteen Hundred Seventy Five Dollars ($1575.00), and $50.00 for insurance, shall remain the same. TWENTY-SEVEN DEFINITION OF DEMISED PREMISES {.IO '...? ~ g t I II..'S';- The Demised Premises shall include that portion of the real estate described in the preamble which includes the building and black-topped surface only. " WHEREOF, the parties have set their hands the day and year first above . - // /:,? (7 ~ .f, _ ~ >" .d.L /~. -" ////~<~<---' -,"""'- -z'+:''I''...-:--'({,(..ry{; /~-(.'" Carole Stuftlebeam, Lessee ~~~ ,-~ V Q/V\- c: ~ Bonnie Van Erp, Lessor ?i,//'df(~ William flebeam, Lessee 10 LEASE - OPTION TO RENEW Re, - Lease Agreement - Dated September 1.2000 Lessee - Carole & William Stufflebeam 16050 St. Francis Lane Prior Lake. MN. 55372 Lessor - Gary A. Van Erp 4650 Detelemark Rd. Dundas. MN. 550]9 Lessee hereby serves notice of intent to renew lease as per terms in Section 26 - Option to Renew All terms and conditions shall remain the same except that the Lessee shall pay 4112ths of taxes over Four Thousand Dollars ($4000.00) for the balance of2002, all of 2003, and 8/12ths of2004. The Lessee shall also pay any addition to the insurance premiwn over that charged in 2000. The monthly basic rent of Fifteen Hundred Seventy Five Dollars ($]575.00), and Fifty Dollars ($50.00) for insurance. shall remain the same. .7~1 ,2002. Lessee Cl?t,ft// ~~~~ arole tu ~,L ee Lessor ~~~0n;~ Alifdi~ William Stufflebeam essee ADDENDUM TO LEASE AGREEMENT THIS ADDENDUM TO LEASE AGREEMENT is made and entered into effective this day of March, 2003 by and among the CITY OF PRIOR LAKE, MINNESOTA, a Minnesota municipal corporation (hereinafter referred to as "Lessor" or the "City"), and CAROLE STUFFLEBEAM and WILLIAM STUFFLEBEAM, wife and husband (hereinafter collectively referred to as "Lessee" or the "Stufflebeams"). RECITALS WHEREAS, Gary Van Erp and Bonnie Van Erp, husband and wife (the "Van Erps"), collectively, as lessor, and the Stufflebeams, collectively, as Lessee, entered into that certain Lease dated September 1, 2000 (the "Original Lease"), in connection with that certain property situated in the City of Prior Lake and the County of Scott, Minnesota and described on attached Exhibit A (the "Demised Premises"); WHEREAS, Gary Van Erp, on behalf of the Van Erps, and the Stufflebeams executed that certain Letter Agreement dated June 4, 2002, (the "Letter Agreement," and together with the Original Lease, are collectively herein referred to as the "Lease"); WHEREAS, the Van Erps entered into a certain Purchase Agreement with the City dated January _' 2003 and pursuant to which the Van Erps transferred fee ownership of the Property to the City, effective as of the date hereof (the "Purchase Agreement"); WHEREAS, effective as of the date hereof, the Van Erps and the City entered into that certain assignment of Leases pursuant to which the Van Erps assigned all of their right, title, and interest in and to the Lease to the City, and the City assume all of the Van Erps' rights and obligations under the Lease; WHEREAS, pursuant to the Purchase Agreement, the City requires, among other things, that Lessee execute this Addendum, that certain Waiver of Right of First Refusal ("Waiver"), and that certain Estoppel Certificate for the benefit of the City (the "Estoppel Certificate"). WHEREAS, the City, as Lessor under the Lease, desires, among other things to provide Lessee with the option to terminate the Lease, to receive a relocation fee in the event of partial or total destruction of the Demised Premises, and waive the monthly rental fee due August 10, 2004, by execution of this Addendum, and on the terms and conditions set forth in this Addendum, and therefore, the Stufflebeams, as Lessee under the Lease, in exchange, will benefit from its execution of this Addendum, the Waiver, and the Estoppel Certificate. NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth, the sufficiency of which are hereby acknowledged, Lessor and Lessee do hereby agree to the terms and conditions set forth herein. ON: 174104 Ver: 5 AGREEMENT 1. Preamble. The Prearnble to the Lease shall be deleted in its entirety and replaced with the following: "WITNESSETH That Lessor, in consideration of the rents and covenants hereinafter mentioned, does hereby demise, lease and let unto Lessee, and Lessee does hereby hire and take from Lessor that portion of property described in attached Exhibit A, defined as the "Demised Premises," situated in the County of Scott, State of Minnesota, TO HAVE AND TO HOLD THE ABOVE PREMISES just as they are without any liability or obligation on the part of Lessor for making any alterations, improvernents or repairs of any kind or nature upon Demised Premises, for the balance of the term of this Lease which expires August 31, 2004, upon the following terms and conditions." 2. Term. The current Lease term terminates August 31, 2004. In the event that Lessee acquires a suitable location for its business prior to the termination of the Lease term, upon 30 days written notice to Lessor, Lessee rnay terminate the Lease Agreement. 3. No Lessor Responsibility for Building Improvements and Repairs to Demised Premises. Section Four (A) of the Lease shall be deleted in its entirety and replaced with the following: "A. Lessor shall not be responsible for any irnprovements or repairs to the Demised Premises." 4. Rent. Section One of the Lease shall be deleted in its entirety and replaced with the following: "A. As and for rent, Lessee shall pay to Lessor, commencing on 10, 2003, and thereafter due and payable on the tenth day of each succeeding month to and including August 10. 2004, the sum of Fifteen Hundred Seventy-Five and 00/100 Dollars ($1575.00) for the Demised Premises, provided, however, Lessor agrees to waive Lessee's obligation to pay rent due August 10, 2004 for the last month of the lease term. All rental payments required hereunder shall be paid to Lessor at the following address: City of Prior Lake 16200 Eagle Creek Ave. S.E. Prior Lake, Minnesota 55372 Attn: Finance DNe 174104 Ver: 5 B. Lessor will be responsible for the payment of all real estate taxes due and payable during the remainder of the Lease term with respect to the Demised Premises." 5. Utilities. At the end of the sentence in Section Five of the Lease, the following shall be inserted: "Lessee shall be responsible for the payment of all sewer, water, gas, electric, telephone, refuse, custodial services and supplies and electrical and telephone modifications to the Demised Premises necessary for Lessee's use of the Demised Premises. Lessor shall not be liable to Lessee for any loss or damage of any kind whatsoever caused or sustained by reason of Lessee's inability to obtain energy or utilities for any reason beyond Lessor's control." 6. Access. The following shall be inserted at the end of Section Thirteen of the Lease: "C. Lessor and Lessee acknowledge that over the course of the remaining term of the Lease, a street reconstruction and removal project ("City of Prior Lake Ring Road Phase III'J will be under construction and will impact the rear parking lot of the Demised Premises. Lessor assures that access to the Demised Premises via the current CSAH 23 will remain open during the remainder of the Lease term and reasonable access will be provided to the Demised Premises for the remainder of the Lease term. Lessor and Lessee agree and acknowledge that installation of sidewalks will not be done on the Demised Premises until after the expiration of the Lease term." 7. Insurance. Section Six (A) of the Lease shall be deleted in its entirety and replaced with the following: "A. Lessee shall maintain in full force and effect during the term hereof, a public liability insurance policy in a form acceptable to the City Attorney. The minimum limits of liability of such insurance shall be $1,000,000 for injury or death to anyone person, $1,000,000 for injury or death to more than one person and $500,000 for property damage." The following shall be added at the end of Section Six of the Lease: B. Lessee shall be responsible for the payment of any and all premiums for insurance which it binds, whether such insurance be the public liability policy required herein, an increase in the limits required herein, or any other insurance for the benefit of Lessee. Lessor shall be named as an additional insured in said public liability policy. Said policy shall contain a provision that the ON: 174104 Ver: 5 insurance coverage cannot be terminated without thirty days (30) days advance written notice by the insurance company to Lessor. Lessee shall provide Lessor with a Certificate of Insurance evidencing said public liability policy which conforms with the provisions herein, before Lessee rnay operate it business at the Demised Premises. Lessor shall not be liable to Lessee for any loss or damage of any kind whatsoever caused or sustained by reason of Lessee's failure to obtain insurance coverage, for whatever reason. C. Lessor shall have no responsibility to carry or cause to be in full force and effect any fire and extended coverage insurance policy in connection with the Demised Premises. D. Waiver of Subrogation: To the extent such waiver does not void or diminish the coverage under any policy, Lessee and Lessor hereby waive any rights each may have against the other on account of any loss or damage occasioned to Lessee or Lessor, as the case rnay be, or their respective property, to the extent such loss or damage is covered by insurance bound by either Lessee or Lessor." 8. Indemnity. Section Eight of the Lease shall be deleted in its entirety and replaced with the following: "Lessee agrees that it will, at all times, indemnify and save, protect and keep harmless Lessor and the Demised Premises from every and all costs, loss, damage, liability, expense, penalty and fine whatsoever, which may arise from or be claimed against Lessor or the Demised Prernises by any person or persons, for any injuries to person or property, or damage of whatever kind or character to the extent such damages are consequent upon or arising from the use or occupancy of the Demised Prernises by Lessee, or consequent upon or arising from any neglect or fault of Lessee or the agents and employees of Lessee, in the use and occupancy of the Demised Premises, or consequent upon or arising from any failure by Lessee to so comply and conform with all laws, statutes, ordinances and regulations of the United States, the State of Minnesota or Lessor, now or hereafter in force, and if any suits or proceedings shall be brought against Lessor, or the Demised Premises, on account of any alleged violation thereof, or failure to comply and conform therewith or on account of any damage, omission, neglect or use of the Demised Premises by Lessee, or the agents and employees of Lessee, or any other person on the Demised Premises, Lessee agrees that Lessee will defend the same, and will pay whatever judgments may be recovered against Lessor or against Demised Premises on account thereof." DN: 174104 Ver: 5 9. No RiQht of First Refusal. Section Twenty -Five of the Lease shall be deleted in its entirety and in place of the heading therein shall be inserted the following: "[This Section intentionally omitted]." 10. No RiQht To Renew. Section Twenty -Six of the Lease shall be deleted in its entirety and in place of the heading therein shall be inserted the following: "[This Section intentionally omitted]." 11. Recitals and Exhibits. A new Section Twenty-Eight shall be inserted into the Lease to read as follows: "SECTION TWENTY-EIGHT RECITALS AND EXHIBITS All recitals and exhibits to this Lease set forth above are hereby incorporated into the body of this Lease." 12. Notices. The last sentence of Section Eighteen of the Lease shall be deleted in its entirety and replaced with the following: "Notices shall be given as follows: To Lessor: City of Prior Lake 16200 Eagle Creek Ave. S.E. Prior Lake, Minnesota 55372 Attn: Finance To Lessee: Carole & Williarn Stufflebeam 16950 Panama Avenue Prior Lake, Minnesota 55372 E-Mail: STEM@HAITI.MFI.NET 13. Destruction of the Premises. Section Eleven of the Lease shall be deleted in its entirety and replaced with the following: "In the event of a partial! or total destruction of the Demised Premises during the term of the Lease frorn any cause and such destruction makes the Demised Premises uninhabitable and!or prevents Lessee from conducting its business as such business exists as of the date hereof, (i) Lessor shall have no responsibility to repair or restore the Demised Premises; and (ii) the Lease shall become null and void at the option of Lessee and if Lessee so elects to terminate the Lease, Lessee shall vacate the Demised Premises forthwith in the manner set forth herein. In the event Lessee elects to so terminate the Lease under subsection (ii) of this Paragraph 13, Lessor shall pay to Lessee the lesser of (a) the amount of $3,150.00; or (b) the amount actually ON: 174104 Ver: 5 --~-----'_.__._--~--~----_..._...._..-..,. --..--.'....-.'.--..--..--.-----. expended by Lessee for relocation of its business from the Demised Premises." 14. Miscellaneous Terms and Conditions to this Addendum. Unless otherwise defined herein, capitalized terms of this Addendum shall have the meanings set forth in the Lease. Except as modified herein, all covenants, agreements, representations, warranties and provisions of the Lease by, between and among the parties thereto are hereby reaffirmed, incorporated herein and made a part hereof, and shall be applied hereto as if this Addendum were an integral part of the Lease. No supplement, modification, waiver or termination of the Lease or of this Addendum or of any provision hereof shall be binding unless executed in writing by the parties to be bound. No waiver of any provision of the Lease or of this Addendum shall constitute a waiver unless otherwise expressly provided. The Lease and this Addendum and any other supplement or addendum in writing constitute the entire contract between Lessor and Lessee and when read as an integrated document, supersede all other prior agreements or understandings except as set forth in the Lease, the Letter Agreement, and this Addendum and any other supplement or agreement in writing modifying or amending the Lease when read as one integrated document. 15. Recitals and Exhibits. The recitals and exhibits to this Addendum set forth above are hereby incorporated into the body of this Addendum. 16. Counterparts. This Addendum may be executed in counterparts, each of which shall be deemed an original and all of which together, shall constitute one and the same instrument. [The remainder of this page was intentionally left blank.] DNe 174104 Ver: 5 IN WITNESS WHEREOF, the parties hereto have caused this Addendum to Lease Agreement to be executed the day and year first above written. Lessor: CITY OF PRIOR LAKE Lessee: Jack G. Haugen, Mayor &W/.~ Carole Stufflebeam By: Frank Boyles, City Manager t/l/k ~ ~~'~r/ William Stufflebea By: DN: 174104 Ver: 5 1 Exhibit A Demised Premises The following real property located at 16950 Panarna Avenue S.E., City of Prior Lake, County of Scott, Minnesota, and legally described as follows, together with all improvements, easements and rights benefiting or appurtenant thereto: That part of the East 1'2 of the Southwest '/. of Section 2, Township 114, Range 22, Scott County, Minnesota, described as follows: Commencing at the southwest corner of said East 1'2 of the Southwest '/. and thence running North along the West line of said East 1'2 of Said Southwest '/. approximately 283.36 feet to the intersection of said West line of said East 1'2 of said Southwest '/. with the Easterly right of way line of old Trunk Highway No. 13; thence Northeasterly along the right of way line of said old Trunk Highway No. 13 to the intersection thereof with the westerly right of way line of County Aid Road No. 23; Thence South along the Westerly right of way line of said County Aid Road 23 to the intersection thereof with the South line of said Southwest '/.; thence Westerly along said South line of said Southwest '/. to the point of beginning. PID #25-902096-0 Address: 16950 Panama Avenue Prior Lake, MN 55372 DN: 174104 Ver: 5 2 WAIVER OF RIGHT OF FIRST REFUSAL This Waiver of Right of First Refusal ("Waiver") is dated as of the _ day of January, 2003 by CAROLE STUFFLEBEAM and WILLIAM STUFFLEBEAM, wife and husband (hereinafter collectively referred to as "Lessee" or the "Stufflebeams"). RECITALS WHEREAS, Gary Van Erp and Bonnie Van Erp, husband and wife (the "Van Erps" or "Lessor"), collectively, as Lessor, and the Stufflebeams, collectively, as Lessee, entered into that certain Lease dated September 1, 2000 (the "Original Lease"), in connection with that certain property situated in the City of Prior Lake (the "City") and the County of Scott, Minnesota and described on attached Exhibit A (the "Property"); WHEREAS, Gary Van Erp, on behalf of the Van Erps, and the Stufflebeams executed that certain Letter Agreement dated June 4, 2002, (the "Letter Agreement," and together with the Original Lease, are collectively herein referred to as the "Lease"); WHEREAS, Section Twenty-Five of the Lease provides Lessee with a right of first refusal to purchase the Property in the event Lessor elects to sell the Property; WHEREAS, the Van Erps propose to enter into a certain Purchase Agreement with the City pursuant to which the Van Erps will transfer fee ownership of the Property to the City (the "Purchase Agreement"); and WHEREAS, pursuant to the Purchase Agreement, the City requires, among other things, that Lessee execute, in the witness of a notary, this Waiver, that certain Addendum to Lease by and between Lessee and the City (the "Addendum"), and that certain Estoppel Certificate for the benefit of the City (the "Estoppel Certificate"). WHEREAS, the City, as Lessor under the Lease, desires, among other things to provide Lessee with the option to terminate the Lease, to receive a relocation fee in the event of partial or total destruction of the Demised Premises, and waive the monthly rental fee due August 10, 2004, by execution of this Waiver, and on the terms and conditions set forth in the Lease Addendum, and therefore, the Stufflebeams, as Lessee under the Lease, in exchange, will benefit from its execution of this Waiver, the Lease Addendum and the Estoppel Certificate. NOW, THEREFORE, in consideration of the above recitals, the undersigned agree to the following: ON: 174331 Ver: 3 1. Incorporation of Recitals. incorporated into this Waiver by reference. The above-recitals are hereby 2. Waiver of Riqht of First Refusal. In the event the Van Erps execute and deliver the Purchase Agreement to the City, the Stufflebeams waive any and all rights the Stufflebeams have to purchase the Property under the Lease. 3. Continued Effect. Except as specifically modified herein, the terms and conditions of the Lease shall continue in full force and effect. IN WITNESS WHEREOF, the undersigned have caused this Waiver of Right of First Refusal to be executed effective as of the day and year first above written. ~/~#~/~ Carole Stufflebeam , ~(//~.t: ~UA-M Wil iam Stufflebeam STATE OF MINNESOTA ) ) ss. COUNTY OF SCOTT ) ]' l(E\.1.y MEYER IlOWI'f P\8.lC-IoIINNESOTA loIyeonnatanEltpiresJm\.3~,2005 . on the Zr..j#- day of e,beam, wife and / ) The foregoing document was acknowledged before m January, 2003, by Carole Stufflebeam and William S husband. - DN: 174331 Ver: 3 EXHIBIT A Legal Description of Property The following real property located at 16950 Panama Avenue S.E., City of Prior Lake, County of Scott, Minnesota, and legally described as follows, together with all improvements, easements and rights benefiting or appurtenant thereto: That part of the East % of the Southwest '/. of Section 2, Township 114, Range 22, Scott County, Minnesota, described as follows: Commencing at the southwest corner of said East % of the Southwest '/. and thence running North along the West line of said East % of Said Southwest '/. approximately 283.36 feet to the intersection of said West line of said East % of said Southwest '/. with the Easterly right of way line of old Trunk Highway No. 13; thence Northeasterly along the right of way line of said old Trunk Highway No. 13 to the intersection thereof with the westerly right of way line of County Aid Road No. 23; Thence South along the Westerly right of way line of said County Aid Road 23 to the intersection thereof with the South line of said Southwest '/.; thence Westerly along said South line of said Southwest '/. to the point of beginning. PID #25-902096-0 Address: 16950 Panama Avenue Prior Lake, MN 55372 DN: 174331 Ver: 3 Carole and William Stufflebeam 16050 St. Francis Lane Prior Lake, Minnesota 55372 March _, 2003 Gary Van Erp Bonnie Van Erp 4650 Detelemark Road Dundas, Minnesota Re: That certain Lease Agreement entered into by and between Gary Van Erp and Bonnie Van Erp, husband and wife, collectively as Lessor, and Carole and William Stufflebeam, wife and husband, collectively as Lessee, dated September 1, 2000 (the "Original Lease"), as amended by that certain letter agreement dated June 4, 2002, (the "Letter Agreement," and together with the Original Lease, are collectively herein referred to as the "Lease"), a copy of which is attached hereto as Exhibit A in connection with that certain property situated in the City of Prior Lake and the County of Scott, Minnesota and described on attached Exhibit B (the "Property"); Dear Mr. and Mrs. Van Erp, The undersigned do hereby confirm to the best of his and her knowledge as of the date hereof, the following. Reference is made to the Lease, the terms of which are incorporated herein. 1. Lessee has accepted possession of the Property and is currently in full and complete possession. 2. Lessee executed and delivered that certain Waiver of Right of First Refusal dated March _, 2003 and attached hereto as Exhibit C and therefore has no purchase options under the Lease or otherwise giving it any right or option to purchase the Property and/or improvements, or a part thereof. 3. No rents have been prepaid under the Lease. 4. No security deposit has been paid by Lessee. 5. Rent payable under the Lease includes Lessee's obligation to pay (i) 4/12'h of taxes with respect to the Property over $4,000.00 for 2003 and 8/12ths of taxes with respect to the Property for 2004; (ii) any addition to the insurance premium over that charged in 2000; (iii) basic monthly rent of $1575.00; and (iv)$50.00 for insurance. 6. Lessee is taking no credits nor is it abating rent under the Lease. 7. No claims of offset with respect to rent payable under the terms of the Lease are presently being asserted by Lessee. As of the date hereof, the undersigned is not aware of any default by Lessor under the Lease. 8. The initial term of the Lease expired August 31, 2002 but was extended by that certain letter agreement dated June 4, 2002 and executed by Lessor and Lessee and therefore the Lease shall expire August 31, 2004 unless sooner terminated in accordance with the terms of the Lease. 9. The Lease has not been amended other than as set forth above and is in full force and effect. DNe 174322 Ver: 1 10. There are no actions, whether voluntary or involuntary or otherwise, pending against Lessee under the bankruptcy laws of the United States or any state thereof. . , ~ ~ c'd<~ 4- 4 1/ William Stufflebea ~ DN: 174322 Ver: 1 EXHIBIT A Lease See attached DN: 174322 Ver: 1 EXHIBIT B Legal Description of Property The following real property located at 16950 Panama Avenue S.E., City of Prior Lake, County of Scott, Minnesota, and legally described as follows, together with all improvements, easements and rights benefiting or appurtenant thereto: That part of the East Yz of the Southwest Y. of Section 2, Township 114, Range 22, Scott County, Minnesota, described as follows: Commencing at the southwest corner of said East Yz of the Southwest Y. and thence running North along the West line of said East Yz of Said Southwest Y. approxirnately 283.36 feet to the intersection of said West line of said East Yz of said Southwest Y. with the Easterly right of way line of old Trunk Highway No. 13; thence Northeasterly along the right of way line of said old Trunk Highway No. 13 to the intersection thereof with the westerly right of way line of County Aid Road No. 23; Thence South along the Westerly right of way line of said County Aid Road 23 to the intersection thereof with the South line of said Southwest y.; thence Westerly along said South line of said Southwest Y. to the point of beginning. PID #25-902096-0 Address; 16950 Panarna Avenue Prior Lake, MN 55372 ON: 174322 Ver: 1 DN: 174322 Ver: 1 EXHIBIT C Waiver of Right of First Refusal (attach executed copy of Waiver of Right of First Refusal)