1
EXHIBIT 10(M)
L E A S E
ARTICLE 1. LEASE TERMS
1.1 LANDLORD AND TENANT. This lease ("Lease") is entered into this 23RD DAY
OF DECEMBER, 1997 by and between Thomas Edward Limited Partnership, a
Minnesota Limited Partnership, ("Landlord") and Norstan, Inc., a Minnesota
Corporation ("Tenant").
1.2 PREMISES. Landlord hereby rents, leases, lets and demises to tenant the
following property ("Premises") consisting of (i): Approximately 85,819
square feet of office space on floors one, two, three and four as depicted
on the floor plans attached hereto as EXHIBIT A ("Phase I Premises") and
(ii): Approximately 148,302 square feet consisting of the future floor 5,
the second floor warehouse annex, the third floor warehouse annex and the
warehouse area as depicted on EXHIBIT B attached hereto ("Phase II
Premises") in the property located at 5101 SHADY OAK ROAD IN MINNETONKA,
MINNESOTA ("Building"). A site plan of the building and a description of the
shell improvements to the future fifth (5th) floor portion of the Premises
are attached hereto as EXHIBITS C AND D. All other areas of the Premises
shall be delivered in the "as is" condition except as depicted in sections
6.1, 6.2, 6.3, and 6.4. The total square foot area of the Phase I and Phase
II Premises is approximately 234,121 square feet. The square foot area of
the building is currently 198,011 square feet, and will increase to
approximately 234,121 square feet upon addition of the future fifth floor.
For the purposes of this Lease, the determination of the number of square
feet in the Premises, and the number of square feet in the Building shall be
made using the "BOMA" measurement method. "As-built" measurements will be
taken of the Buildings and Premises as soon as construction has progressed
to the point where such measurement is possible. Landlord will certify such
"as-built" measurements to Tenant, which measurements Tenant shall have the
right to review and confirm. In the event that Landlord and Tenant are
unable to agree upon the "as built" measurements, landlord and Tenant agree
to adhere to the measurements determined by a neutral third party, which
third party shall be determined mutually by Tenant and Landlord. Landlord
and Tenant shall thereafter execute an addendum to this Lease in the form of
attached EXHIBIT E, confirming said measurements and adjusting (i) the area
of the Building and Premises, (ii) the Base Rent, and (iii) Tenant's pro
rata share, to reflect the actual rentable square foot area of the Building
and Premises, and such addendum shall thereupon be deemed attached hereto,
incorporated herein, and by this reference made a part of this Lease. Until
such time as said as-built measurements are available, Tenant agrees that
the estimated square footage of the Premises and Building as set forth in
this section shall be utilized to compute Base Rent, Tenant's pro-rata share
of Operating Expenses, and any other sums due hereunder based in whole or in
part on the square footage of the Premises or the Building.
1.3 LEASE TERM. The term of this Lease shall commence on JULY 1, 1998
("Commencement Date") and shall terminate 161 MONTHS thereafter on NOVEMBER
30, 2011, unless sooner terminated as hereinafter provided. The Landlord
shall deliver the Phase I Premises on the commencement Date and the Phase II
Premises on the Commencement of Lease Month eighteen (18). Upon written
notice to Landlord prior to February 13, 1998, Tenant shall have the option
to delay its occupancy of portions of the Phase I Premises by substituting
some or all of the Phase II second floor annex, third floor annex, or if
available the Phase II warehouse into the Premises. No such substitution
shall result in a reduction of the initial area of the Premises below 85,819
square feet. Upon receipt of notice from Tenant indicating the areas to be
substituted, Landlord and Tenant shall enter into an addendum to the Lease
to reflect the newly constituted Premises and if the substitution results in
a net increase in the area of the Premises, the addendum will adjust the
area of the Premises and pro-rata share of operating expenses, and will
adjust the Base Rental Rate to reflect the net gain area at a Base Rental
Rate of $3.85 per square foot in addition to the Base Rent depicted in
section 1.4. In the event of a substitution (i) the Tenant improvement
allowance described in section 6.3 shall be available for the substitution
space, and (ii) the Phase I area which was subject to the substitution shall
be delivered to Tenant no later than December 1, 1999, and (iii) the Tenant
improvement allowance described in section 6.2 shall be available for the
Phase I area, which was subject to the substitution. In the event that
Tenant does not vacate the Premises upon the expiration or termination of
this Lease, Tenant shall be a tenant at will for the holdover period and all
of the terms and provisions of this Lease shall be applicable during that
period, except that Tenant shall pay Landlord as base rental for the period
of such holdover an amount equal to one and one half (1 1/2) times the base
rent which would have been payable by Tenant had the holdover period been a
part of the original term of this Lease, together with all additional rent
as provided in this Lease. Tenant agrees to vacate and deliver the Premises
to Landlord upon Tenant's receipt of notice from Landlord to vacate. The
rental payable during the holdover period shall be payable to Landlord on
demand. No holding over by Tenant, whether with or without the consent of
Landlord, shall operate to extend the term of this Lease.
Tenant, upon written notice to Landlord, shall have the right to accelerate
the delivery date for and its occupancy of the Phase I area which was
subject to a substitution, the second floor annex, third floor annex
2
of Phase II, or the future fifth floor or warehouse area during the first
eighteen (18) months of the Lease. In the event Tenant exercises this right,
Landlord shall be obligated to and shall deliver such areas to Tenant as
soon as such areas can be accessed and improved by Landlord for occupancy by
Tenant. Upon delivery of such areas, the Tenant's Base Rent and pro rata
share of operating expenses shall be increased to reflect the addition of
such space to the Premises effective as of the date of delivery. Base Rent
shall be adjusted based upon the applicable rental rates set forth in
section 1.4.
Landlord agrees to allow Tenant to occupy the Premises for the purpose of
installing its furnishings, fixtures and equipment for a thirty (30) day
period immediately preceding the Commencement Date, ("early occupancy
period"). During the first fifteen (15) days of the early occupancy period
the Tenant's installation workers shall cooperate and coordinate their work
with Landlord's contractor such that Tenant's work will not interfere with
the completion of Landlord's work. During the last fifteen (15) days of the
early occupancy period, the Tenant shall have exclusive occupancy of the
Premises, subject to Landlord's right of access for the purpose of
maintenance of the premises and completion of punch list items thereon.
Tenant's early occupancy shall be subject to all of the terms and conditions
of this lease, except payment of rent and operating expenses.
1.4 BASE RENT. The Initial Base Rent is: Months Monthly Base Rent Per Sq. Ft.
------ ----------------- -----------
1-17 $ 42,909.50 $6.00
18-48 $100,282.38 $5.12
49-96 $106,746.43 $5.45
97-161 $113,209.97 $5.78
Such Base Rent is subject to adjustment as provided in sections 1.2,
6.2, and 6.3.
Option Terms:
162-221 MARKET MARKET
222-281 MARKET MARKET
Base Rent payable during the term of this Lease is based on the following
rates for each area of the Premises:
Months Phase I Phase II Phase II Phase II
------ Premises Premises Premises Premises
-------- (5th Floor) (annex) (whse.)
----------- -------- --------
1-17 $6.00 psf N/A N/A N/A
18-48 $6.00 psf $7.00 psf $3.85 psf $3.85 psf
49-96 $6.50 psf $7.50 psf $4.00 psf $4.00 psf
97-161 $7.00 psf $8.00 psf $4.15 psf $4.15 psf
Such Base Rent is subject to adjustment as provided in sections 6.2 and 6.3.
1.5 PERMITTED USE: OFFICE AND WAREHOUSE FUNCTIONS RELATED TO SERVICES AND
PRODUCTS OF COMMUNICATION.
1.6 SECURITY DEPOSIT: INTENTIONALLY OMITTED
1.7 PRO RATA SHARE: FORTY-THREE FOURTEEN ONE-HUNDREDTHS PERCENT (43.34%),
adjusting to one-hundred percent (100%) upon occupancy of the Phase II Premises.
* subject to adjustment as provided in Section 2.2 hereof.
1.8 ADDRESSES. LANDLORD'S ADDRESS: TENANT'S ADDRESS:
--------- ------------------- -----------------
Thomas Edwards Limited Partnership Norstan, Inc.
C/O CSM CORPORATION, INC. 5101 Shady Oak Road
2575 UNIVERSITY AVE. W., SUITE 150 Minnetonka, MN 55343
ST. PAUL, MN 55114-1024
ARTICLE 2. RENT, OPERATING EXPENSES AND SECURITY DEPOSIT
2.1 BASE RENT. Tenant agrees to pay monthly as base rent during the term of this
Lease the sum of
-2-
3
money set forth in Section 1.4 of this Lease, which amount shall be payable to
Landlord at the address shown above. One monthly installment shall be due and
payable on or before the Commencement Date; provided, if the Commencement Date
should be a date other than the first day of a calendar month, the monthly
rental set forth above shall be prorated to the end of that calendar month. All
succeeding installments of rent shall be due and payable on or before the first
day of each succeeding calendar month during the term of this Lease. Tenant
shall pay, as additional rent, all other sums due under this Lease. Except as
otherwise provided in this section, if Landlord, for any reason whatsoever
(other than Tenant's default), cannot deliver possession of the Premises to the
Tenant on the Commencement Date, this Lease shall not be void or voidable, nor
shall Landlord be liable for any loss or damage resulting therefrom (except as
depicted in this section), nor shall the expiration of the term be extended, but
all rent shall be abated until Landlord delivers possession.
Landlord and Tenant agree that payment of Base Rent and operating expenses
payable under the Lease shall commence upon expiration of the early occupancy
period described in section 1.3 of this Lease. Landlord agrees to provide Tenant
15 days prior written notice of the date on which the early occupancy period
will commence.
In the event that Landlord has not delivered the Phase I Premises on or before
July 1, 1 998, subject to force majeure or Tenant caused delays, Landlord agrees
to pay Tenant's base rent, operating expense charges and holdover rent charges,
if applicable at Tenant's existing Wedgewood facility from July 1, 1998 until
such time that Landlord delivers the Phase I Premises to Tenant. Tenant
Represents that the scheduled Base Rent obligation under the Wedgewood Lease is
$61,382.46 per month and the Tenant's estimated 1997 contribution to operating
expenses is $47,221.07 per month. Tenant agrees that Landlord's liability shall
not exceed 150% of the scheduled Base Rent and 100% of the 1998 estimated
operating expenses, monthly.
If Landlord is unable to deliver the Phase I Premises to Tenant on or before
July 1, 1998, Tenant may request partial occupancy of the Premises on a floor by
floor basis until such time as the entire Premises are available, and Landlord
will permit such occupancy subject to availability and city approval.
Should Landlord fail to deliver the Phase I Premises to Tenant on or before
September 1, 1998, subject to force majeure or Tenant caused delays, Tenant may
terminate this Lease with no further obligation upon delivery of written notice
to Landlord on or before September 5, 1998, whereupon this Lease shall be null
and void and of no force and effect.
2.2 OPERATING EXPENSES. Tenant shall also pay as additional rent Tenant's pro
rata share of the operating expenses of Landlord for the Building. Landlord may
invoice Tenant monthly for Tenant's pro rata share of the estimated operating
expenses for each calendar year, which amount shall be adjusted once per year by
Landlord based upon anticipated operating expenses. Within six (6) months
following the close of each calendar year, Landlord shall provide Tenant an
accounting showing in reasonable detail the computations of additional rent due
under this Section. In the event the accounting shows that the total of the
monthly payments made by Tenant exceeds the amount of additional rent due by
Tenant under this Section, the accounting shall be accompanied by evidence of a
credit to Tenant's next rental due. In any event the accounting shows that the
total of the monthly payments made by Tenant is less than the amount of
additional rent due by Tenant under this Section, the accounting shall be
accompanied by an invoice for the additional rent. Notwithstanding any other
provisions in this Lease, during the year in which this Lease terminates,
Landlord, prior to the termination date, shall invoice Tenant for Tenant's pro
rata share of the then current estimate for operating expenses. If this Lease
shall terminate on a day other than the last day of a calendar year, the amount
of any additional rent payable by Tenant applicable to the year in which the
termination shall occur shall be prorated on the ratio that the number of days
from the Commencement of the calendar year to and including such termination
date bears to 365. Tenant agrees to pay any additional rent due under this
Section within thirty (30) days following receipt of the invoice or accounting
showing additional rent due. Within ninety (90) days of receipt of the operating
expense reconciliation for the previous year, Tenant shall have the right to
audit Landlord's books and records as they pertain to operating expenses for the
immediate preceding calendar year, in Landlord's office and with reasonable
notice. If Tenant does not provide notice to Landlord within ninety (90) days of
its intent to audit, Tenant shall automatically waive and release its right to
audit for the preceding calendar year. The cost of said audit shall be borne by
Tenant unless the audit discloses that Tenant has overpaid its proportionate
share of operating expenses for the calendar year in question by more than five
percent (5%), in which case the reasonable expense of the audit shall be borne
by Landlord. If the audit reveals that Landlord's actual statement was incorrect
in any amount, the resulting excess or deficiency shall be paid by or reimbursed
to Tenant as the case may be. Tenant's pro rata share set forth in Section 1.7
shall, subject to reasonable adjustment by Landlord, be equal to a percentage
based upon a fraction, the numerator of which is the net rentable area of the
Premises as set forth and the denominator of which shall be the net rentable
area of the completed
-3-
4
portions of the building (i.e., the fifth floor will be excluded from this
computation until completed), as the same may change from time to time.
2.3 DEFINITION OF OPERATING EXPENSES. The term "operating expenses" includes
all reasonable expenses incurred by Landlord with respect to the maintenance and
operation of the Building, including, but not limited to, the following:
maintenance, repair and replacement costs; electricity, fuel, water, sewer, gas
and other common Building utility charges; equipment used for maintenance and
operation of the Building; operational expenses; exterior window washing and
janitorial services; trash and snow removal; landscaping and pest control;
management fees not to exceed three percent (3%) of gross rents (exclusive of
the amortization of the Tenant Improvement Allowance depicted in sections 6.2
and 6.3), wages and benefits payable to employees of Landlord whose duties are
directly connected with the operation and maintenance of the Building; all
services, supplies, repairs, replacements or other expenses for maintaining and
operating the Building or project including parking and common areas;
improvements made to the Building which are required under any governmental law
or regulation that was not applicable to the Building at the time it was
constructed; installation of any device or other equipment which improves the
operating efficiency of any system within the Premises and thereby reduces
operating expenses; all other expenses which would generally be regarded as
operating, repair, replacement and maintenance expenses; all real property taxes
and installments of special assessments, including dues and assessments by means
of deed restrictions and/or owners' associations which accrue against the
Building during the term of this Lease and legal fees incurred in connection
with actions to reduce the same so long as any reduction associated with said
action accrues to Tenant; and all insurance premiums Landlord is required to pay
or deems necessary to pay, including fire and extended coverage, and rent loss
and public liability insurance, with respect to the Building. Roof replacements
shall be amortized over the useful life of the roof. Parking lot replacements
shall be recovered in the year the work was performed so long as no more than
20% of the Parking area is replaced in one calendar year. The cost of Parking
lot replacement involving replacement of in excess of 20% of the parking area in
any year shall be amortized over the useful life of the replacement.
Notwithstanding the above, Landlord agrees that the total cost of operating
expenses including property taxes for the building shall not exceed the
following during the calendar years 1998-2000:
CALENDAR YEAR OPERATING EXPENSES
1998 $329,000.00
1999 $342,400.00
2000 $356,100.00
Provided that increases in property taxes resulting from the addition of the
fifth floor shall not be subject to the cap, and shall be recoverable as
operating expenses without regard to the cap.
2.4 INCREASE IN INSURANCE PREMIUMS. During any part of the Lease Term during
which the building is being operated as a multi-tenant facility, if an increase
in any insurance premiums paid by Landlord for the Building is caused by
Tenant's use of the Premises. If Tenant vacates the Premises and causes an
increase in such premiums, then Tenant shall pay as additional rent the amount
of such increase to Landlord.
2.5 SECURITY DEPOSIT. Intentionally deleted.
ARTICLE 3. OCCUPANCY AND USE
3.1 USE. Tenant warrants and represents to Landlord that the Premises shall be
used and occupied only for the purpose as set forth in Section 1.5. Tenant shall
occupy the Premises, conduct its business and control its agents, employees,
invitees and visitors in such a manner as is lawful, reputable and will not
create a nuisance. Tenant shall not permit any operation which emits any odor or
matter which intrudes into other portions of the Building or otherwise interfere
with, annoy or disturb any other lessee in its normal business operations or
Landlord in its management of the Building. Tenant shall not permit any waste on
the Premises to be used in any way which would, in the reasonable opinion of
Landlord, be extra hazardous on account of fire or which would, in any way,
increase or render void the fire insurance on the Building.
3.2 SIGNS. No sign of any type or description shall be erected, placed or
painted in or about the Premises or Building which are visible from the exterior
of the Premises, except those signs submitted to Landlord in writing, and which
signs are in conformance with Landlord's sign criteria, if any, established for
the Building.
Notwithstanding the above, Landlord agrees that, subject to city approval,
Tenant shall have the right to install and maintain two (2) building signs and
one ground monument sign within the project in a size, location and design
reasonably acceptable to Landlord.
-4-
5
3.3 COMPLIANCE WITH LAWS, RULES, REGULATIONS. Tenant, at Tenant's sole cost and
expense, shall comply with all laws, ordinances, orders, rules and regulations
of state, federal, municipal or other agencies or bodies having jurisdiction
over the use, condition or occupancy of the Premises. Tenant will comply with
the reasonable rules and regulations of the Building adopted by Landlord.
Landlord shall have the right at all times to change and amend the rules and
regulations in any reasonable manner and with reasonable notice as may be deemed
advisable for the safety, care, cleanliness, preservation of good order and
operation or use of the Building or the Premises. All rules and regulations of
the Building will be sent by Landlord to Tenant in writing and shall thereafter
be carried out and observed by Tenant.
3.4 WARRANTY OF POSSESSION. Landlord warrants that it has the right and
authority to execute this Lease, and Tenant, upon payment of the required rents
and subject to the terms, conditions, covenants and agreements contained in this
Lease, shall have possession of the Premises during the full term of this Lease
as well as any extension or renewal thereof. Landlord shall not be responsible
for the acts or omissions of any other lessee or third party that may interfere
with Tenant's use and enjoyment of the Premises.
3.5 RIGHT OF ACCESS. Landlord or its authorized agents shall at any and all
reasonable times and with reasonable notice have the right to enter the Premises
to inspect the same, to show the Premises to prospective purchasers, mortgagees,
insurers other interested parties or in the last six (6) months of the Lease
prospective lessees, and to alter, improve or repair the Premises or any other
portion of the Building. Tenant hereby waives any claim for damages for injury
or inconvenience to or interference with Tenant's business, any loss of
occupancy or use of the Premises, and any other loss occasioned thereby unless
such loss is caused by the gross negligence of the Landlord. Landlord shall have
the right to use any and all means which Landlord may deem proper to open any
door in an emergency without liability therefor. Tenant shall permit Landlord to
erect, use, maintain and repair pipes, cables, conduits, plumbing, vents and
wires in, to and through the Premises as often and to the extent that Landlord
may now or hereafter deem to be necessary or appropriate for the proper use,
operation and maintenance of the Building.
ARTICLE 4. UTILITIES AND ACTS OF OTHERS
4.1 BUILDING SERVICES. Tenant shall pay when due, all charges for utilities
furnished to or for the use or benefit of Tenant or the Premises. Tenant shall
have no claim for rebate of rent on account of any interruption in service,
unless such interruption was caused by the gross negligence of Landlord.
4.2 THEFT OR BURGLARY. Landlord shall not be liable to Tenant for losses to
Tenant's property or personal injury caused by criminal acts or entry by
unauthorized persons into the Premises or the Building, unless such loss or
injury was caused by the gross negligence of Landlord.
ARTICLE 5. REPAIRS AND MAINTENANCE
5.1. LANDLORD REPAIRS. Landlord shall not be required to make any improvements,
replacements or repairs of any kind or character to the Premises or the Building
during the term of this Lease except as are set forth in this Section. Landlord
shall maintain only the roof, foundation, parking and common areas, the
structural soundness of the exterior walls, doors, corridors, and other
structures serving the Premises, provided, that Landlord's cost of maintaining,
replacing and repairing the items set forth in this Section are operating
expenses subject to the additional rent provisions in Section 2.2 and 2.3.
Landlord shall not be liable to Tenant, except as expressly provided in this
Lease, for any damage or inconvenience, and Tenant shall not be entitled to any
abatement or reduction of rent by reason of any repairs, alterations or
additions made by Landlord under this Lease, unless such damage or inconvenience
constitutes a constructive eviction of Tenant and is the result of Landlord's
negligent acts or omissions. Notwithstanding the above, Landlord shall be
responsible, at its sole expense, for repair and replacement of the structural
elements of the building shell, and for replacement, if necessary of the cooling
tower and boiler, electric transformers and switch gear provided that normal
maintenance and repair of the cooling tower and boiler including minor
replacements shall be performed by Tenant at Tenant's expense. Landlord's repair
and replacement of the roof and normal maintenance of the structural components
of the exterior of the building shall be a component of and included in
operating expenses under section 2.3.
5.2 TENANT REPAIRS. Tenant shall, at all times throughout the term of this
Lease, including renewals and extensions, and at its sole expense, keep and
maintain the Premises in a clean, safe, sanitary and first class condition and
in compliance with all applicable laws, codes, ordinances, rules and
regulations. Tenant's obligations hereunder shall include, but not be limited
to, the maintenance, repair and replacement, if necessary, of all heating,
ventilation, air conditioning, lighting and plumbing fixtures and equipment,
fixtures, motors and machinery, all interior walls, partitions, doors and
windows, including the regular painting thereof, all exterior entrances,
windows, doors and docks and the replacement of all broken glass. When used in
this provision, the term "repairs" shall include replacements or renewals when
necessary, and all
-5-
6
such repairs made by the Tenant shall be equal in quality and class to the
original work. The Tenant shall keep and maintain all portions of the Premises
and the sidewalk and areas adjoining the same in a clean and orderly condition,
free of accumulation of dirt, rubbish, ice and snow in accumulations of less
than one (1) inch. If Tenant fails, refuses or neglects to maintain or repair
the Premises as required in this Lease after notice shall have been given
Tenant, in accordance with this Lease, Landlord may make such repairs without
liability to Tenant for any loss or damage that may accrue to Tenant's
merchandise, fixtures or other property or to Tenant's business by reason
thereof, and upon completion thereof, Tenant shall pay to Landlord all costs
plus fifteen percent (15%) for overhead incurred by Landlord in making such
repairs upon presentation to Tenant of bill therefor.
5.3. TENANT DAMAGES. Tenant shall not allow any damage to be committed on any
portion of the Premises or Building or common areas, and at the termination of
this lease, by lapse of time or otherwise, Tenant shall deliver the Premises to
Landlord in as good condition as existed at the Commencement Date of this Lease,
ordinary wear and tear excepted. The cost and expense of repairs necessary to
restore the condition of the Premises shall be borne by Tenant.
ARTICLE 6. ALTERATIONS AND IMPROVEMENTS
6.1 LANDLORD IMPROVEMENTS. Landlord shall complete the exterior site and
parking lot improvements to the west of the Premises as depicted on EXHIBIT C
and the majority of the fifth floor construction on or before July 1, 1998.
Landlord shall exercise reasonable efforts to minimize disruption of Tenant's
business activities during Landlord's completion of work after July 1, 1998,
provided that most work may be completed during normal construction hours.
Landlord shall complete the exterior site and parking lot improvements to the
southeast of the Premises as depicted on EXHIBIT C on or before December 1,
1999.
In the event that Tenant elects to accelerate its Phase II Premises occupancy,
and the area of accelerated occupancy exceeds 35,000 square feet, Landlord
agrees to complete the exterior improvements to the southeast of the Premises as
depicted on EXHIBIT C no later than 90 days after Tenant's notice of projected
occupancy of the Phase II Premises, except that Landlord shall not be required
to perform such work during the calendar months of November, December, January,
February, March and April.
6.2 PHASE I PREMISES INTERIOR IMPROVEMENTS. On or before February 13, 1998
Tenant shall submit to Landlord construction drawings for the Phase I
improvements, which plans shall be subject to Landlord's review and approval,
which approval shall not be unreasonably withheld. In the event that acceptable
working drawings are not received by Landlord on or before February 13, 1998,
then Landlord's obligation to pay Tenant's base rent, operating expenses and
holdover costs for the Wedgewood facility, pursuant to section 2.1 hereof, shall
be delayed one (1) day for each day after February 13, 1998 that Tenant has
failed to provide acceptable working drawings to Landlord, provided that the
delay contributes to the late delivery of the Premises. Landlord agrees to seek
competitive bids for the construction of the Phase I improvements based on a
standard construction schedule. Landlord and Tenant agree to mutually select
contractor(s) to perform the improvements and enter into a contract(s) for the
improvements at a mutually agreed upon price. Any changes to the scope of work
must be made through written change orders signed by Tenant. Landlord and Tenant
agree that Landlord shall have the sole discretion to schedule the construction
work including fast tracking of the construction of the improvements, provided
that fast track costs shall not be a component of the improvement allowance
depicted in this section, and Landlord shall endeavor to deliver the Premises on
or before July 1, 1998.
Landlord shall provide an allowance of up to $17.50 per square foot towards
construction of the improvements of the Premises described as Phase I in section
1.2 of the Lease (Phase I Improvements), which allowance shall be paid directly
to the contractor under customary and normal construction lending procedures.
Upon completion of the Phase I Improvements, Landlord shall provide Tenant
documentation of final construction costs, with back up and detail information
related thereto. Tenant agrees to immediately reimburse Landlord for any costs
for construction of the Phase I Improvements in excess of the allowance set
forth above. Landlord and Tenant agree that the Phase I Tenant Improvement costs
incurred by Landlord, up to $17.50 per square foot, shall be amortized over the
initial term of this lease at a 9% annual interest rate. The amortization shall
be paid monthly in addition to and as a part of the Base Rent for the premises.
Landlord and Tenant agree to promptly enter into an addendum to the lease in a
form similar to EXHIBIT E, to confirm such increase in the Base Rent.
6.3 PHASE II PREMISES INTERIOR IMPROVEMENTS. On or before May 31, 1999, Tenant
shall submit to Landlord construction drawings for the leasehold improvements to
the second (2nd) floor warehouse annex, the third (3rd) floor warehouse annex
the future fifth (5th) floor, and for conversion of up to 14,000 square feet of
the 83,000 square foot warehouse area currently occupied by K-Tel International,
Inc., to
-6-
7
office space (the "Phase II Improvements"), which plans shall be subject to
Landlord's review and approval, which approval shall not be unreasonably
withheld. Landlord agrees to seek competitive bids for the construction of the
Phase If improvements based on a standard construction schedule and Landlord and
Tenant agree to mutually select contractors to perform the improvements.
Landlord shall provide an allowance of up to $25.00 per square foot towards
construction of the Phase II Improvements, which allowance shall be paid
directly to the contractor under customary and normal construction lending
procedures; provided that said allowance shall only be applicable and payable
with respect to Phase II Improvements which are commenced prior to December 1,
1999. Upon completion of the Phase II Improvements, Landlord shall provide
Tenant documentation of final construction costs, with back up and detail
information related thereto. Tenant agrees to immediately reimburse Landlord for
any costs for construction of the Phase II Improvements in excess of the
allowance set forth above. Landlord and Tenant agree that the Phase II Tenant
Improvement costs incurred by Landlord, up to $25.00 per square foot, shall be
amortized over the remaining initial term of this lease at a 9% interest rate.
The amortization shall be paid monthly in addition to and as a part of the Base
Rent for the premises. Landlord and Tenant agree to promptly enter into an
addendum to the lease in a form similar to EXHIBIT E, to confirm such increase
in the Base Rent.
6.4 BUILDING CODE COMPLIANCE ALLOWANCE. Landlord shall provide Tenant an
allowance of $100,000.00 towards the cost of any modifications required to
comply with current building codes, including but not limited to requirements of
the Americans With Disabilities Act. This allowance shall not include nor be
applicable to costs of relocation of the sprinkler system lateral runs or heads
to accommodate specific space plan designs.
In the event that the cost of modifications required to comply with current
building codes is expected to exceed $100,000.00, Tenant may terminate this
Lease with no further obligation on or before February 13, 1998 with written
notice delivered to Landlord on or before February 17, 1998. If Tenant exercises
its option to terminate depicted in this section, Landlord shall have the right
to fund the cost over $100,000.00 and Tenant's option to terminate shall be null
and void.
6.5 ADDITIONAL TENANT IMPROVEMENTS. After the original construction of the Phase
I and Phase II improvements, tenant shall not make or allow to be made any
alterations or physical additions in or to the Premises without first obtaining
the written consent of Landlord, which consent may not be unreasonably denied.
Any alterations, physical additions or improvements to the Premises made by
Tenant shall at once become the property of Landlord and shall be surrendered to
Landlord upon the termination of this Lease; provided, however, Landlord, at its
option, may, as a condition of its approval of the alteration or addition,
require Tenant to remove any physical additions and/or repair any alterations in
order to restore the Premises to the conditions existing at the time Tenant took
possession, all costs of removal and/or alterations to be borne by Tenant. This
clause shall not apply to moveable equipment or furniture owned by Tenant, which
may be removed by Tenant at the end of the term of this Lease.
6.6 TENANT IMPROVEMENT WARRANTY. Landlord agrees that all Tenant improvement
work performed in and about the Premises will be warranted for a period of
twelve (12) months following the completion of the work. The warranty shall not
be applicable to repairs necessitated by normal wear and tear or Tenant-caused
damages.
ARTICLE 7. CASUALTY AND INSURANCE
7.1 SUBSTANTIAL DESTRUCTION. If all or a substantial portion of the Premises or
the Building should be totally destroyed by fire or other casualty, or if the
Premises or the Building should be damaged so that rebuilding cannot reasonably
be completed within one hundred eighty (180) working days after the date of
written notification by Tenant to Landlord of the destruction, or if insurance
proceeds are not made available to Landlord, or are inadequate, for restoration,
this Lease shall terminate at the option of Landlord by written notice to Tenant
within sixty (60) days following the occurrence, and the rent shall be abated
for the unexpired portion of the Lease effective as of the date of the written
notification.
7.2 PARTIAL DESTRUCTION. If the Premises should be partially damaged by fire or
other casualty, and rebuilding or repairs can reasonably be completed within one
hundred eighty (180) working days from the date of written notification by
Tenant to Landlord of the destruction, and insurance proceeds are adequate and
available to Landlord for restoration, this Lease shall not terminate, and
Landlord shall at its sole risk and expense proceed with reasonable diligence to
rebuild or repair the Building or other improvements to substantially the same
condition in which they existed prior to the damage. If the Premises are to be
rebuilt or repaired and are untenantable in whole or in part following the
damage, and the damage or destruction
-7-
8
was not caused or contributed to by act or negligence of Tenant, its agents,
employees, invitees or those for whom Tenant is responsible, the rent payable
under this Lease during the period for which the Premises are untenantable shall
be adjusted to such an extent as may be fair and reasonable under the
circumstances. In the event that Landlord fails to complete the necessary
repairs or rebuilding within one hundred eighty (180) working days from the date
of written notification by Tenant to Landlord of the destruction, Tenant may at
its option terminate this Lease by delivering written notice of termination to
Landlord, whereupon all rights and obligations under this Lease shall cease to
exist.
7.3 PROPERTY INSURANCE. Landlord shall not be obligated in any way or manner to
insure any personal property (including, but not limited to, any furniture,
machinery, goods or supplies) of Tenant upon or within the Premises, any
fixtures installed or paid for by Tenant upon or within the Premises, or any
improvements which Tenant may construct on the Premises. Tenant shall maintain
property insurance on its personal property and shall also maintain plate glass
insurance. Tenant shall have no right in or claim to the proceeds of any policy
of insurance maintained by Landlord even if the cost of such insurance is borne
by Tenant as set forth in Article 2.
7.4 WAIVER OF SUBROGATION. Anything in this Lease to the contrary withstanding,
Landlord and Tenant hereby waive and release each other of and from any and all
right of recovery, claim, action or cause of action, against each other, their
agents, officers and employees, for any loss or damage that may occur to the
Premises, the improvements of the Building or personal property within the
Building, by reason of fire or the elements, regardless of cause or origin,
including negligence of Landlord or Tenant and their agents, officers and
employees. Landlord and Tenant agree immediately to give their respective
insurance companies which have issued policies of insurance covering all risk of
direct physical loss, written notice of the terms of the mutual waivers
contained in this Section.
7.5 HOLD HARMLESS. Landlord shall not be liable to Tenant's employees, agents,
invitees, licensees or visitors, or to any other person, for an injury to person
or damage to property on or about the Premises caused by any act or omission of
Tenant, its agents, servants or employees, or of any other person entering upon
the Premises under express or implied invitation by Tenant, or caused by the
improvements located on the Premises becoming out of repair, the failure or
cessation of any service provided by Landlord (including security service and
devices), or caused by leakage of gas, oil, water or steam or by electricity
emanating from the Premises. Tenant agrees to indemnify and hold harmless
Landlord of and from any loss, attorney's fees, expenses or claims arising out
of any such damage or injury.
Tenant shall not be liable to Landlord or its employees, agents, invitees,
licensees or visitors, or to any other person, for an injury to person or damage
to property in the Building or common areas serving the Building caused by any
act or omission of Landlord, its agents, servants or employees. Landlord agrees
to indemnify and hold harmless Tenant of and from any loss, attorneys' fees,
expenses or claims arising out of any such damage or injury.
7.6 PUBLIC LIABILITY INSURANCE. Tenant shall during the term hereof keep in full
force and effect at its expense a policy or policies of public liability
insurance with respect to the Premises and the business of Tenant, on terms and
with companies approved in writing by Landlord, in which Landlord shall be
covered by being named as an additional insured party, under reasonable limits
of liability not less than $2,000,000, or such greater coverage as Landlord may
reasonably require, combined single limit coverage for injury or death. Such
policy or policies shall provide that thirty (30) days' written notice must be
given to Landlord prior to cancellation thereof. Tenant shall furnish evidence
satisfactory to Landlord at the time this Lease is executed that such coverage
is in full force and effect.
7.8 LANDLORD'S INSURANCE. Landlord shall maintain in full force and effect
during the lease term: an "all risk" commercial property insurance coverage
policy in the amount of the full replacement value of the Building, as the value
may exist from time to time.
ARTICLE 8. CONDEMNATION
8.1 SUBSTANTIAL TAKING. If all or a substantial part of the Premises are taken
for any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain or by purchase in lieu thereof, and
the taking would prevent or materially interfere with the use of the Premises
for the purpose for which it is then being used, this Lease shall terminate and
the rent shall be abated during the unexpired portion of this Lease effective on
the date physical possession is taken by the condemning authority. Tenant shall
have no claim to the condemnation award or proceeds in lieu thereof, except that
Tenant shall be entitled to maintain an action for and recover a separate award
as permitted under applicable law.
-8-
9
8.2 PARTIAL TAKING. If all or a substantial part of the Premises are taken for
any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain or by purchase in lieu thereof, and
this Lease is not terminated as provided in Section 8.1 above, the rent payable
under this Lease during the unexpired portion of the term shall be adjusted to
such an extent as may be fair and reasonable under the circumstances. Tenant
shall have no claim to the condemnation award or proceeds in lieu thereof,
except that Tenant shall be entitled to maintain an action for and recover a
separate award as permitted under applicable law.
ARTICLE 9. ASSIGNMENT OR SUBLEASE
9.1 LANDLORD ASSIGNMENT. Landlord shall have the right to sell, transfer or
assign, in whole or in part, its rights and obligations under this Lease and in
the Building. Any such sale, transfer or assignment shall operate to release
Landlord from any and all liabilities under this Lease arising after the date of
such sale, assignment or transfer.
9.2 TENANT ASSIGNMENT. Tenant shall not assign, in whole or in part, this Lease,
or allow it to be assigned, in whole or in part, by operation of law or
otherwise or mortgage or pledge the same, or sublet the Premises, in whole or in
part, without the prior written consent of Landlord, which consent shall not be
unreasonably withheld, and in no event shall said such assignment or sublease
ever release Tenant or any guarantor from any obligation or liability hereunder.
No assignee or sublessee of the Premises or any portion thereof may assign or
sublet the Premises or any portion thereof, without Landlord's prior written
consent.
9.3 CONDITIONS OF ASSIGNMENT. If Tenant desires to assign or sublet all or any
part of the Premises, it shall so notify Landlord at least fifteen (15) days in
advance of the date on which Tenant desires to make such assignment or sublease.
Tenant shall provide Landlord with a copy of the proposed assignment or sublease
and such information as Landlord might request concerning the proposed sublessee
or assignee to allow Landlord to make informed judgments as to the financial
condition, reputation, operations and general desirability of the proposed
sublessee or assignee. Within seven (7) days after Landlord's receipt of
Tenant's proposed assignment or sublease and all required information concerning
the proposed sublease or assignee, Landlord shall have the following options:
(1) cancel this Lease as to the Premises or portion thereof proposed to be
assigned or sublet; (2) consent to the proposed assignment or sublease, and, if
the rent due and payable by any assignee or sublessee under any such permitted
assignment or sublease (or a combination of the rent payable under such
assignment or sublease plus any bonus or any other consideration or any payment
incident thereto) exceeds the rent payable under this Lease for such space after
subtracting costs of procurement of sublessee, Tenant shall pay to Landlord half
(1/2) of such excess rent and other excess consideration within ten (10) days
following receipt thereof by Tenant; or (3) refuse, with reasonable discretion
and judgement, to consent to the proposed assignment or sublease. Upon the
occurrence of an event of default, if all or any part of the Premises are then
assigned or sublet, Landlord, in addition to any other remedies provided by this
Lease or provided by law, may, at its option, collect directly from the assignee
or sublessee all rents becoming due to Tenant by reason of the assignment or
sublease, and Landlord shall have a security interest in all properties on the
Premises to secure payment of such sums. Any collection directly by Landlord
from the assignee or sublessee shall not be construed to constitute a novation
or a release of Tenant or any guarantor from the further performance of its
obligations under this Lease.
9.4 RIGHTS OF MORTGAGE. Tenant accepts this Lease subject and subordinate to any
recorded mortgage presently existing or hereafter created upon the Building and
to all existing recorded restrictions, covenants, easements and agreements with
respect to the Building. Landlord is hereby irrevocably vested with full power
and authority to subordinate Tenant's interest under this Lease to any first
mortgage lien hereafter placed on the Premises, and Tenant agrees upon demand to
execute additional instruments subordinating this Lease as Landlord may require.
If the interests of Landlord under this Lease shall be transferred by reason of
foreclosure or other proceedings for enforcement of any first mortgage or deed
of trust on the Premises, Tenant shall be bound to the transferee (sometimes
called the "Purchaser") at the option of the Purchaser, under the terms,
covenants and conditions of this Lease for the balance of the term remaining,
including any extensions or renewals, with the same force and effect as if the
Purchaser were Landlord under this Lease, and, if requested by the Purchaser,
Tenant agrees to attorn to the Purchaser, including the first mortgagee under
any such mortgage if it be the Purchaser, as its Landlord. Notwithstanding the
foregoing, Tenant shall not be disturbed in its possession of the Premises so
long as Tenant is not in default hereunder.
9.5 TENANT'S STATEMENT. Tenant agrees to furnish, from time to time, within ten
(10) days after receipt of a request from Landlord or Landlord's mortgagee, a
statement certifying, if applicable, the following: Tenant is in possession of
the Premises; the Premises are acceptable; the Lease is in full force and
effect; the Lease is unmodified; Tenant claims no present charge, lien, or claim
or offset against rent;
-9-
10
the rent is paid for the current month, but is not prepaid for more than one
month and will not be prepaid for more than one month in advance; there is no
existing default by reason of some act or omission by Landlord; and such other
matters as may be reasonably required by Landlord or Landlord's mortgagee.
Tenant's failure to deliver such statement, in addition to being a default under
this Lease, shall be deemed to establish conclusively that this Lease is in full
force and effect except as declared by Landlord, that Landlord is not in default
of any of its obligations under this Lease, and that Landlord has not received
more than one month's rent in advance. Tenant agrees to furnish, from time to
time, within ten (10) days after receipt of a request from Landlord, a current
financial statement of Tenant, certified as true and correct by Tenant.
ARTICLE 10. LANDLORD'S LIEN AND SECURITY AGREEMENT
10.1 LANDLORD'S LIEN. Intentionally Deleted
ARTICLE 1 1. DEFAULT AND REMEDIES
11.1 DEFAULT BY TENANT. The following shall be deemed to be events of default
("Default") by Tenant under this Lease: (1) Tenant shall fail to pay when due
any installment of rent or any other payment required pursuant to this Lease
within five (5) days of written notice from Landlord; (2) Tenant shall fail to
comply with any term, provision or covenant of this Lease, other than the
payment of rent, and the failure is not cured within ten (10) days after
written notice to Tenant; (3) Tenant shall file a petition or if an involuntary
petition is filed against Tenant, or becomes insolvent, under any applicable
federal or state bankruptcy or insolvency law or admit that it cannot meet its
financial obligations as they become due; or a receiver or trustee shall be
appointed for all or substantially all of the assets of Tenant; or Tenant shall
make a transfer in fraud of creditors or shall make an assignment for the
benefit of creditors; or (4) Tenant shall do or permit to be done any act which
results in a lien being filed against the Premises or the Building and/or
project of which the Premises are a part.
In the event that an order for relief is entered in any case under Title 11,
U.S.C. (the "Bankruptcy Code") in which Tenant is the debtor and: (A) Tenant as
debtor-in-possession, or any trustee who may be appointed in the case (the
"Trustee") seeks to assume the lease, then Tenant, or Trustee if applicable, in
addition to providing adequate assurance described in applicable provisions of
the Bankruptcy Code, shall provide adequate assurance to Landlord of Tenant's
future performance under the Lease by depositing with Landlord a sum equal to
the lesser of twenty-five percent (25%) of the rental and other charges due for
the balance of the Lease term or six (6) months' rent ("Security"), to be held
(without any allowance for interest thereon) to secure Tenant's obligation under
the Lease, and (B) Tenant, or Trustee if applicable, seeks to assign the Lease
after assumption of the same, then Tenant, in addition to providing adequate
assurance described in applicable provisions of the Bankruptcy Code, shall
provide adequate assurance to Landlord of the proposed assignee's future
performance under the Lease by depositing with Landlord a sum equal to the
Security to be held (without any allowance or interest thereon) to secure
performance under the Lease. Nothing contained herein expresses or implies, or
shall be construed to express or imply, that Landlord is consenting to
assumption and/or assignment of the Lease by Tenant, and Landlord expressly
reserves all of its rights to object to any assumption and/or assignment of the
Lease. Neither Tenant nor any Trustee shall conduct or permit the conduct of any
"fire", "bankruptcy", "going out of business" or auction sale in or from the
Premises.
11.2 REMEDIES FOR TENANT'S DEFAULT. Upon the occurrence of a Default as defined
above, Landlord may elect (i) to cancel and terminate this Lease and this Lease
shall not be treated as an asset of Tenant' bankruptcy estate or (ii) to
terminate Tenant's right to possession only without canceling and terminating
Tenant's continued liability under this lease. Notwithstanding the fact that
initially Landlord elects under (ii) to terminate Tenant's right to possession
only, Landlord shall have the continuing right to cancel and terminate this
Lease by giving three (3) days' written notice to Tenant of such further
election, and shall have the right to pursue any remedy at law or in equity that
may be available to Landlord.
In the event of election under (ii) to terminate Tenant's right to possession
only, Landlord may, at Landlord's option, enter the Premises and take and hold
possession thereof, without such entry into possession terminating this Lease or
releasing Tenant in whole or in part from Tenant's obligation to pay all amounts
hereunder for the full stated term. Upon such reentry, Landlord may remove all
persons and property from the Premises and such property may be removed and
stored in a public warehouse or elsewhere at the cost and for the account of
Tenant, without becoming liable for any loss or damage which may be occasioned
thereby. Such reentry shall be conducted in the following manner: without resort
to judicial process or notice of any kind if Tenant has abandoned or voluntarily
surrendered possession of the Premises; and, otherwise, by resort to judicial
process. Upon and after entry into possession without termination of the Lease,
Landlord may, but is not obligated to, relet the Premises, or any part thereof,
to any one other than
-10-
11
the Tenant, for such time and upon such terms as Landlord, in Landlord's sole
discretion, shall determine. Landlord may make alterations and repairs to the
Premises to the extent deemed by Landlord necessary or desirable to relet the
Premises.
Upon such reentry, Tenant shall be liable to Landlord as follows:
A. For all attorneys' fees incurred by Landlord in connection with
exercising any remedy hereunder;
B. For the unpaid installments of base rent, additional rent or other
unpaid sums which were due prior to such reentry, including
interest and late payment fees, which sums shall be payable
immediately.
C. For the installments of base rent, additional rent, and other sums
falling due pursuant to the provisions of this Lease for the period
after reentry during which the Premises remain vacant, including
late payment charges and interest, which sums shall be payable as
they become due hereunder.
D. For all expenses incurred in releasing the Premises, including
leasing commissions, attorneys' fees, and costs of alteration or
repairs, which shall be payable by Tenant as they are incurred by
Landlord; and
E. While the Premises are subject to any new lease or leases made
pursuant to this Section, for the amount by which the monthly
installments payable under such new lease or leases is less than
the monthly installment for all charges payable pursuant to this
Lease, which deficiencies shall be payable monthly.
Notwithstanding Landlord's election to terminate Tenant's right to possession
only, and notwithstanding any reletting without termination, Landlord, at any
time thereafter, may elect to terminate this Lease, and to recover (in lieu of
the amounts which would thereafter be payable pursuant to the foregoing, but not
in diminution of the amounts payable as provided above before termination), as
damages for loss of bargain and not as a penalty, an aggregate sum equal to the
amount by which the present value of the rental value of the Premises for the
unexpired portion of the term of this Lease at the time of such election, is
less than the Present Value of the Base Rent, additional rent and all other
charges which would have been payable by Tenant for the unexpired portion of the
term of this Lease, using a nine percent (9%) discount rate, which deficiency
and all expenses incident thereto, including commissions, attorneys' fees,
expenses of alterations and repairs, shall be due to Landlord as of the time
Landlord exercises said election, notwithstanding that the term had not expired.
If Landlord, after such reentry, leases the Premises, then the rent payable
under such new lease shall be conclusive evidence of the rental value of the
Premises for the unexpired portion of the term of this Lease, so long as the
rental rate for the new Lease is commercially reasonable.
If this Lease shall be terminated by reason of bankruptcy or insolvency of
Tenant, Landlord shall be entitled to recover from Tenant or Tenant's estate, as
liquidated damages for loss of bargain and not as a penalty, the amount
determined by the immediately preceding paragraph.
11.3 LANDLORD'S RIGHT TO PERFORM FOR ACCOUNT OF TENANT. If Tenant shall be in
Default under this Lease, Landlord may cure the Default at any time for the
account and at the expense of Tenant. If Landlord cures a Default on the part of
Tenant, Tenant shall reimburse Landlord upon demand for any amount expended by
Landlord in connection with the cure, including, without limitation, attorneys'
fees and interest.
11.4 INTEREST, ATTORNEY'S FEES AND LATE CHANGE . In the event of a Default by
Tenant: (1) if a monetary default, interest shall accrue on any sum due and
unpaid at the rate of the lesser of fifteen percent (1 5%) per annum or the
highest rate permitted by law and, if Landlord places in the hands of an
attorney the enforcement of all or any part of this Lease, the collection of any
rent due or to become due or recovery of the possession of the Premises, Tenant
agrees to pay Landlord's costs of collection, including reasonable attorney's
fees for the services of the attorney, whether suit is actually filed or not.
Other remedies for nonpayment of rent notwithstanding, if the monthly rental
payment or any other payment due from Tenant to Landlord is not received by
Landlord on or before the seventh (7th) day of the month for which the rent is
due, a late payment charge of five percent (5%) of such past due amount shall
become due and payable in addition to such amounts owed under this Lease.
11.5 ADDITIONAL REMEDIES, WAIVERS, ETC.
A. The rights and remedies of Landlord set forth herein shall be in
addition to any other right and
-11-
12
remedy now and hereafter provided by law. All rights and remedies
shall be cumulative and not exclusive of each other. Landlord may
exercise its rights and remedies at any times, in any order, to any
extent, and as often as Landlord deems advisable without regard to
whether the exercise of one right or remedy precedes, concurs with
or succeeds the exercise of another.
B. A single or partial exercise of a right or remedy shall not
preclude a further exercise thereof, or the exercise of another
right or remedy from time to time.
C. No delay or omission by Landlord in exercising a right or remedy
shall exhaust or impair the same or constitute a waiver of, or
acquiesce to, a Default.
D. No waiver of Default shall extend to or affect any other Default or
impair any right or remedy with respect thereto.
E. No action or inaction by Landlord shall constitute a waiver of
Default.
F. No waiver of a Default shall be effective unless it is in writing
and signed by Landlord.
ARTICLE 12. RELOCATION
12.1 RELOCATION OPTION. Intentionally Deleted
ARTICLE 13. AMENDMENT AND LIMITATION OF WARRANTIES
13.1 ENTIRE AGREEMENT. IT IS EXPRESSLY AGREED BY TENANT, AS A MATERIAL
CONSIDERATION FOR THE EXECUTION OF THIS LEASE, THAT THIS LEASE, WITH THE
SPECIFIC REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS THE ENTIRE AGREEMENT OF
THE PARTIES: THAT THERE ARE, AND WERE, NO VERBAL REPRESENTATIONS, WARRANTIES,
UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO THIS LEASE OR
TO THE EXPRESSLY MENTIONED WRITTEN EXTRINSIC DOCUMENTS NOT INCORPORATED IN
WRITING IN THIS LEASE.
13.2 AMENDMENT. THIS LEASE MAY NOT BE ALTERED, WAIVED, AMENDED OR EXTENDED
EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY LANDLORD AND TENANT.
13.3 LIMITATION OF WARRANTIES. LANDLORD AND TENANT EXPRESSLY AGREE THAT THERE
ARE AND SHALL BE NO IMPLIED WARRANTIES OR MERCHANTABILITY, HABITABILITY, FITNESS
FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT OF THIS LEASE, AND
THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE EXPRESSLY SET FORTH IN THIS
LEASE.
ARTICLE 14. MISCELLANEOUS
14.1 SUCCESSORS AND ASSIGNS. This Lease shall be binding upon and inure to the
benefit of Landlord and Tenant and their respective heirs, personal
representatives, successors and assigns. It is hereby covenanted and agreed that
should Landlord's interest in the Premises cease to exist for any reason during
this Lease, then notwithstanding the happening of such event this Lease
nevertheless shall remain unimpaired and in full force and effect, and Tenant
hereunder agrees to attorn to the then owner of the Premises.
14.2 USE OR RENT TAX. If applicable in the jurisdiction where the Premises are
issued, Tenant shall pay and be liable for all rental, sales and use taxes or
other similar taxes, if any, levied or imposed by any city, state, county or
other governmental body having authority, such payments to be in addition to all
other payments required to be paid to Landlord under the terms of this Lease.
Any such payment shall be paid concurrently with the payment of the rent,
additional rent, operating expenses or other charge upon which the tax is based
as set forth above.
14.3 ACT OF GOD. Neither Tenant nor Landlord shall not be required to perform
any non-monetary covenant or obligation in this Lease, or be liable in damages
to the other party, so long as the performance or non-performance of the
covenant or obligation is delayed, caused or prevented by an act of God, force
majeure or by the other party.
-12-
13
14.4 HEADINGS. The section headings appearing in this Lease are inserted only as
a matter of convenience and in no way define, limit, construe or describe the
scope or intent of any Section.
14.5 NOTICE. All rent and other payments required to be made by Tenant shall be
payable to Landlord at the address set forth in Section 1.8. All payments
required to be made by Landlord to Tenant shall by payable at the address set
forth in Section 1.8, or at any other address within the United States as Tenant
may specify from time to time by written notice. Any notice or document required
or permitted to be delivered by the terms of this Lease shall be deemed to be
delivered (whether or not actually received) when deposited in the United States
Mail, postage prepaid, certified mail, return receipt requested, addressed to
the parties at the respective addresses set forth in Section 1.8.
14.6 TENANT'S AUTHORITY. If Tenant executes this Lease as a corporation, each of
the persons executing this Lease on behalf of Tenant does hereby personally
represent and warrant that Tenant is a duly authorized and existing corporation,
that Tenant is qualified to do business in the state in which the Premises are
located, that the corporation has full right and authority to enter into this
Lease, and that each person signing on behalf of the corporation is authorized
to do so.
14.7 HAZARDOUS SUBSTANCES. Tenant, its agents or employees, shall not bring or
permit to remain on the Premises or Building any asbestos, petroleum or
petroleum products, explosives, toxic materials, or substances defined as
hazardous wastes, hazardous materials, or hazardous substances under any
federal, state, or local law or regulation ("Hazardous Materials"). Tenant's
violation of the foregoing prohibition shall constitute a material breach and
default hereunder and Tenant shall indemnify, hold harmless and defend Landlord
from and against any claims, damages, penalties, liabilities, and costs
(including reasonable attorney fees and court costs) caused by or arising out of
(i) a violation of the foregoing prohibition by Tenant or (ii) the presence of
any Hazardous Materials on, under, or about the Premises or the Building during
the term of the Lease caused by or arising, in whole or in part, out of the
actions of Tenant, its agents or employees. Tenant shall clean up, remove,
remediate and repair any soil or ground water contamination and damage caused by
the presence and any release of any Hazardous Materials in, on, under or about
the Premises or the Building during the term of the Lease caused by or arising,
in whole or in part, out of the actions of Tenant, its agents or employees, in
conformance with the requirements of applicable law. Tenant shall immediately
give Landlord written notice of any suspected breach of this paragraph; upon
learning of the presence of any release of any Hazardous Materials, and upon
receiving any notices from governmental agencies pertaining to Hazardous
Materials which may affect the Premises or the Building. The obligations of
Tenant hereunder shall survive the expiration of earlier termination, for any
reason, of this Lease. Landlord agrees to indemnify and hold Tenant harmless
from any and all claims, damages, penalties, liabilities or costs arising by
reason of the existence of hazardous substances on or about the Building prior
to Tenant's occupancy thereof.
14.8 SEVERABILITY. If any provision of this Lease or the application thereof to
any person or circumstances shall be invalid or unenforceable to any extent, the
remainder of this Lease and the application of such provisions to other persons
or circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
14.9 LANDLORD'S LIABILITY. If Landlord shall be in default under this Lease and,
if as a consequence of such default, Tenant shall recover a money judgment
against Landlord, such judgment shall be satisfied only out of the right, title
and interest of Landlord in the Building as the same may then be encumbered and
neither Landlord nor any person or entity comprising Landlord shall be liable
for any deficiency. In no event shall Tenant have the right to levy execution
against any property of Landlord nor any person or entity comprising Landlord
other than its interest in the Building as herein expressly provided.
14.10 BROKERAGE. Landlord and Tenant each represents and warrants to the other
that there is no obligation to PAY any brokerage fee, commission, finder's fee
or other similar charge in connection with this Lease, other than fees due to
KURT KNOFF AND MARIA MAUGHN OF CB COMMERCIAL/MADISON COMMERCIAL which are the
responsibility of LANDLORD. Each party covenants that it will defend, indemnify
and hold harmless the other party from and against any loss or liability by
reason of brokerage or similar services alleged to have been rendered to, at the
instance of, or agreed upon by said indemnifying party. Notwithstanding anything
herein to the contrary, Landlord and Tenant agree that there shall be no
brokerage fee or commission due on expansions, options or renewals by Tenant.
14.1 1 MANAGEMENT AGENT. Landlord hereby notifies Tenant that the person
authorized to execute this Lease and manage the Premises is CSM Corporation, a
Minnesota corporation, which has been appointed to act as the agent in leasing
management and operation of the Building for owner and is authorized to accept
service of process and receive or give receipts for notices and demands on
behalf of Landlord. Landlord reserves the right to change the identity and
status of its duly authorized agent upon written notice
-13-
14
to Tenant.
14.12 OPTION TO EXTEND. Tenant may extend the term of this Lease for two (2)
additional sixty (60) month terms under the same conditions contained herein,
except that the Base Rental shall be adjusted to reflect the prevailing market
rate for comparable space in the Minneapolis southwest suburbs. In no case
shall the adjusted Base Rent be less than the latest Base Rent paid by Tenant
during the primary term of the lease or extension thereof. Tenant may exercise
its option to extend the term of the Lease upon twelve (12) months prior written
notice to Landlord, stating its irrevocable exercise of its option to extend the
term of the Lease. In the event that Tenant falls to deliver timely notice of
its exercise of this option, Tenant's right and option to extend shall be deemed
null and void. It shall be a condition of the exercise of this option that
Tenant not be in default in the performance of its obligations under this Lease.
14.13 ARCHITECTURAL/DESIGN/CONSTRUCTION AGREEMENT. Landlord will provide tenant
a $2.00/square foot allowance to be applied towards architectural design, and
Tenant's project management fees incurred by Tenant in connection with the
design and construction of Phase I and Phase 11 Premises including but not
limited to all costs of interior design, construction drawings and supervision
of the construction of the interior office improvements, all of which shall be
paid by tenant, but excluding the design and construction of the structural
components of the fifth floor expansion which shall be paid by Landlord. The
allowance shall be payable to Tenant in two equal payments, the first half
payment shall be due to Tenant after landlord's receipt of acceptable Phase I
construction drawings, and the second half shall be due after the receipt of
acceptable Phase 11 construction drawings.
14.14 PARKING. Landlord agrees to provide at no expense to Tenant except as
depicted in sections 2.2 and 2.3, Tenant 583 parking spaces west of premises and
45 existing parking spaces southeast of the Premises depicted on EXHIBIT C upon
lease commencement. Sixty-two additional spaces southeast of the Premises will
be provided at no expense to Tenant except as depicted in sections 2.2 and 2.3
prior to the commencement of the Lease month 18 in the area marked "New Parking"
on EXHIBIT C. Additional parking spaces will be provided by Landlord at Tenant's
request. The location, scope and cost of the additional parking spaces shall be
mutually agreed upon by Landlord and Tenant, with Landlord's costs associated
with the construction of the additional parking area being paid by Tenant
monthly as additional Base Rent over the remaining term of the Lease, based on
an amortization of such costs over the remaining term of the Lease amortized at
a 10 1/2% interest rate, which payments shall commence on the first day of the
month first following the date of completion of the additional parking area.
14.15 TERMINATION OF K-TEL INTERNATIONAL LEASE. Landlord and Tenant acknowledge
that Landlord Has the option to terminate the Lease between K-tel International,
Inc. and Thomas Edward Limited Partnership pursuant to section 7 of the Addendum
to said Lease. Landlord agrees to exercise its option to terminate said lease
effective July 31, 1998, provided that Tenant, by written notice to Landlord
delivered before January 20, 1998, requests such termination, which request
shall include a payment by Tenant to Landlord of $35,000, to reimburse Landlord
for the termination fee that Landlord will be required to pay K-Tel
International by reason of such early termination.
In the event that Tenant requests that Landlord terminate the Lease with K-Tel
International, Inc. as aforesaid, then Tenant's obligation to pay Base Rent and
additional rent with respect to the warehouse space vacated by K-Tel
International, under the same terms and conditions contained herein, shall
commence August 1, 1998.
14.16 LANDLORD DEFAULT. In the event that landlord is in default of its
obligations under this Lease and has not cured said default, or made reasonable
effort towards curing said default within thirty (30) days of receipt of written
notice from Tenant, then Tenant shall have the right to cure said default and
withhold an amount equal to the reasonable cost of curing said default from
Tenant's next rent payment due.
14.17 OPTION TO TERMINATE. In the event that Landlord has not secured approval
of its application for rezoning of the Building to an industrial planned unit
development and approval of fifth floor on or before February 13, 1998, Tenant
may, by written notice to landlord given not later than February 1 8, 1 998, (i)
elect to terminate this Lease, in which case this Lease shall be null and void
and of no further force and effect, or, (ii) elect to have this Lease remain in
full force and effect, as to all of the Premises described in section 1.2
hereof, except the future fifth (5th) floor, in which case the Landlord shall
have no obligations with respect to the construction and delivery of the future
fifth (5th) floor and the area of the Premises, the Base Rental Rate, and
Tenant's prorated share of operating expenses shall be adjusted to reflect the
omission of the future floor five from the Premises. For the purposes of clause
(ii) above, Landlord and Tenant agree that the future floor five area is 36,110
square feet and that the Base Rental Rate for floor five (5) is $7.00 per square
foot for lease months 1 8 through 48, $7.50 per square foot for Lease months 49
through 96 and $8.00 per square foot for Lease months 97-161. In the event that
Tenant makes the election
-14-
15
described in clause (ii) above, Tenant further agrees to comply with any
conditions or limitations on office/warehouse mix imposed by the city of
Minnetonka, with respect to the use of the Premises.
14.18 SUBMISSION OF LEASE. Submission of this Lease to Tenant for signature does
not constitute a reservation of space or an option to lease. This Lease is not
effective until execution by and delivery to both Landlord and Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease effective the
day and year first above written.
LANDLORD: TENANT:
THOMAS EDWARD LIMITED PARTNERSHIP NORSTAN, INC.
BY: /s/ BY: /s/
---------------------------------- --------------------------------
ITS: Partner ITS: CFO
---------------------------------- --------------------------------
-15-
16
EXHIBIT A 1 OF 4
[MAP]
17
EXHIBIT A 2 OF 4
[MAP]
18
EXHIBIT A 3 OF 4
[MAP]
19
EXHIBIT A 4 OF 4
[MAP]
20
EXHIBIT B 1 OF 3
[MAP]
21
EXHIBIT B 2 OF 3
[MAP]
22
EXHIBIT B 3 OF 3
[MAP]
23
EXHIBIT C
[MAP]
24
EXHIBIT D
LANDLORD IMPROVEMENTS
For
NORSTAN, INC.
Modern Merchandising Building
Minnetonka, Minnesota
Prepared by
CSM CORPORATION
December 22, 1997
The landlord will provide the following improvements to the tenant at landlords
expense:
1. Exterior shell shall be structural steel and insulated metal frame
walls with brick veneer exterior. Interior elevations of the exterior
walls shall be plain exposed gypsum board, taped and sanded to the roof
deck (paint ready).
2. Exterior Window systems shall be thermally broken aluminum storefront
glazing, units with thermal insulated, reflective glass.
3. Shell building existing ceilings is an exposed prime painted structural
steel and metal deck with a single ply EPDM membrane, insulated roof
system.
4. Shell building floor is the existing 3 V-," inch reinforced, concrete
floor.
5. Brass upright sprinkler heads for minimum (light hazard) density
requirements (laterals only, no drops) are included as part of shell
building construction.
6. Four (4) toilet rooms, stacked above the corresponding toilets below,
finished to "paint-ready" condition are included as part of the shell
building construction. These shall include: (7) water closets, (1)
urinal (6) lavatories, toilet partitions and accessories. Toilet rooms
shall receive Dal Tile (group 1, group 2 colors) or equivalent, a 4'-4"
high wainscot of ceramic tile on plumbing wall and wall adjacent to
toilet only. Water closets shall be building standard pressure-assisted
tank type units. Lavatories shall be wall mounted type. One budding
standard handicap electric water cooler is included. Toilet accessories
include handicap crab bars as required by applicable code, toilet paper
holders, feminine napkin holders, soap dispensers, and paper towel
dispensers.
7. A 600 ampere 480/277 volt main electrical service to a 480/277 volt
distribution panel for the landlord supplied HVAC equipment within the
premises is included in the shell building construction.
8. Gas heating/electric cooling roof top heating and air conditioning
units (excluding distribution ductwork and diffusers) designed to
supply approx. 1 ton tempered air per 400 square feet of floor area,
shall be included as part of the shell building construction.
9. Modifications to the existing two-gang elevator to provide one (1)
additional stop, shall be provided as part of the shell building
construction.
25
All other improvements shall be at tenant's sole expense, including but not
limited to the following:
A. Gypsum wall construction.
B. Interior doors.
C. Interior hardware.
D. Interior hollow metal frames.
E. Tenant finish Heating, Ventilation, and Air Conditioning.
F. Muzak or telephone communication systems.
G. Security systems or access control systems.
H. Appliances, vending machines, kitchen equipment.
I. Office furniture, moveable partitions, etc.
J. Extra cooling capacity for tenant furnished equipment
K. Millwork/Built ins: counters, cabinets, shelving, closets, etc.
L. Computer terminal outlets, wiring, or systems.
M. Tenant finish electrical items, i.e., light fixtures, power feeds,
outlets, disconnects, etc., except as listed within the above Landlords
scope of work.
N. Plumbing rough ins, connections, stub ups, Vent risers, fixtures, etc..
0. Ramps and/or overhead doors to accommodate Drive-in capability, dock
revelers, shelters, etc.
P. Tenant signage.
Q. Additional structural reinforcement for tenant's roof top units,
including roof curb, roof deck penetration, and roof repair. These
items shall be performed by the owners shell building, roofing
contractor in order to maintain the roof warranty.
R. Increased City of Minnetonka, Sewer Access Charge (SAC) over and above
$0.38 per square foot.
S. Gas piping to tenant equipment. A meter socket is provided at the
nearest building manifold location.
T. Construction general conditions, including but not limited to: building
permits, field supervision, Clean up, dumpsters, and project
management, except as listed within the above Landlords scope of work.
26
ADDENDUM TO LEASE
This is an ADDENDUM to that certain Lease dated December 23, 1997, ('Lease") by
and between Thomas Edward Limited Partnership, a Minnesota Limited Partnership,
("Landlord") and Norstan, Inc., a Minnesota corporation, ("Tenant"), and is
entered into effective this 6th day of January, 1998.
In consideration of the mutual covenants herein contained, and other good and
valuable consideration, Landlord and Tenant hereby confirm and/or agree as
follows:
1. SECTION 1.4 PREMISES. Landlord and Tenant acknowledge and confirm that the
rentable area of the Premises, according to "as-build" measurements, is as
follows:
First Floor Office 4,641 Square Feet
Second Floor Office 7,098 Square Feet
Third Floor Office 37,970 Square Feet
Fourth Floor Office 36,110 Square Feet
Fifth Floor Office 36,110 Square Feet
Second Floor Warehouse Annex 14,617 Square Feet
Third Floor Warehouse Annex 14,575 Square Feet
Warehouse Area 83,000 Square Feet
Total: 234,121 Square Feet
(Pending verification
of the fifth floor
office area)
2. SECTION 1.7 PRO RATA SHARE. Landlord and Tenant acknowledge and confirm that
Tenant's pro rata share of operating expenses shall be forty-three and
thirty-four one hundredths (43.34%), (adjusting to 100% upon occupancy of the
Phase III premises).
3. MISCELLANEOUS. If any provision of the Lease is inconsistent with the
provisions contained herein, then and in such event the provisions of this
Addendum shall control. Except as expressly modified herein, all other terms and
conditions of the Lease shall remain unchanged, and in full force and effect.
LANDLORD: TENANT:
Thomas Edward Limited Partnership Norstan, Inc.
BY: /s/ BY: /s/
-------------------------- ------------------------------
ITS: Partner ITS: CFO
-------------------------- ------------------------------
27
EXHIBIT E
ADDENDUM TO LEASE
This is an ADDENDUM to that certain Lease dated __________________, ("Lease") by
and between CSM ______________, INC., a Minnesota corporation, ("Landlord") and
____________________, a _________________ corporation. ("Tenant"), and is
entered into effective this day of 1998.
In consideration of the mutual covenants herein contained, and other good and
valuable consideration, Landlord and Tenant hereby confirm and/or agree as
follows:
1. SECTION 1.2 PREMISES. Landlord and Tenant acknowledge and confirm that the
rentable area of the Premises, according to "as-built" measurements, is
____________.
2. SECTION 1.4 BASE RENT. The Base Rent for the Lease Term shall be:
Lease Monthly Annual Per
Months Base Rent Base Rent Sg. Ft.
The Landlord and Tenant acknowledge and agree that the above stated Base Rent
reflects and incorporates the adjustments required by Section of the Lease.
3. SECTION 1.7 PRO RATA SHARE. Landlord and Tenant acknowledge and confirm that
Tenant's pro rata share of operating expenses shall be _________________ percent
(____%).
4. MISCELLANEOUS. If any provision of the Lease is inconsistent with the
provisions contained herein, then and in such event the provisions of this
Addendum shall control. Except as expressly modified herein, all other terms and
conditions of the Lease shall remain unchanged, and in full force and effect.
LANDLORD: TENANT:
CSM , INC.
--------------- ------------------------------------
BY BY:
-------------------------- ---------------------------------
ITS: ITS:
------------------------- --------------------------------