SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Check One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from ________________ to ________________
Commission file number 0-16577
CYBEROPTICS CORPORATION
(Exact name of small business issuer as specified in its charter)
Minnesota 41-1472057
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2505 Kennedy Street N.E. Minneapolis, Minnesota 55413
(Address of principal executive offices)
(612) 331-5702
(Issuer's telephone number)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes _X_ No__
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
At September 30, 1995, 5,603,906 shares of the issuer's Common Stock, no par
value, were outstanding.
Transitional small business disclosure format (check one):
Yes __ No _X_
PART 1. FINANCIAL INFORMATION
CYBEROPTICS CORPORATION
Balance Sheets
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Sept. 30, 1995 Dec. 31, 1994
(Unaudited)
Assets
<S> <C> <C>
Cash and cash equivalents $23,254 $1,428
Short-term investments 15,592 1,180
Accounts receivable, net 5,845 2,964
Inventories 5,269 2,335
Other current assets 714 340
Total current assets $50,674 8,247
Equipment and furnishings, net 878 478
Capitalized patent costs, net 64 98
Total assets $51,616 $8,823
Liabilities and Stockholders' Equity
Accounts payable $863 $572
Income taxes payable 778 212
Accrued expenses 1,728 561
Total current liabilities 3,369 1,345
Commitments
Stockholders' equity:
Preferred stock, no par value, 5,000,000 shares
authorized, none outstanding
Common stock, no par value, 10,000,000 shares
authorized, 5,603,906 and 4,235,141 shares issued
and outstanding, respectively 42,094 4,230
Retained earnings 6,153 3,248
Total stockholders' equity 48,247 7,478
Total liabilities and stockholders' equity $51,616 $8,823
</TABLE>
See the accompanying notes to interim financial statements.
CYBEROPTICS CORPORATION
Statements of Income
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Sept. 30,
1995 1994
Revenues $8,196 $4,346
Cost of revenues 3,821 1,954
Gross margin 4,375 2,392
Research and development expenses 1,016 648
Selling, general and administrative expenses 1,439 1,071
Income from operations 1,920 673
Interest income 58 20
Income before income taxes 1,978 693
Provision for income taxes 671 209
Net income $1,307 $484
Net income per share (fully diluted) $0.27 $0.11
Weighted average common and
common equivalent shares 4,863 4,318
Nine Months Ended Sept. 30,
1995 1994
Revenues $19,991 $10,723
Cost of revenues 9,256 4,475
Gross margin 10,735 6,248
Research and development expenses 2,786 2,029
Selling, general and administrative expenses 3,781 2,871
Income from operations 4,168 1,348
Interest income 116 54
Income before income taxes 4,284 1,402
Provision for income taxes 1,380 409
Net income $2,904 $993
Net income per share (fully diluted) $0.61 $0.23
Weighted average common and
common equivalent shares 4,788 4,312
See the accompanying notes to interim financial statements.
CYBEROPTICS CORPORATION
Statements of Cash Flows
(unaudited)
(In thousands)
Nine months ended September 30, 1995 1994
Cash flows from operating activities
Net income $2,904 $993
Adjustments to reconcile net income to
net cash (used) provided by operating
activities:
Depreciation and amortization 294 220
Provision for losses on accounts receivable 22
Provision for losses on inventories 176 86
Changes in operating assets and
liabilities:
Accounts receivable (2,903) (1,037)
Inventories (3,109) (701)
Other current assets (374) (34)
Accounts payable 292 336
Income taxes payable 565 172
Accrued expenses 1,167 21
Net cash (used) provided
by operating activities (966) 56
Cash flows from investing activities:
Maturities of short-term investments 1,357
Purchase of short-term investments (15,769) (757)
Additions to equipment and furnishings (648) (229)
Additions to patents (13) (46)
Net cash used by investing
activities (15,073) (1,032)
Cash flows from financing activities:
Repurchase of common stock (234)
Proceeds from issuance of common stock, net
of offering costs 37,391
Proceeds from issuance of common stock
under Employee Stock Purchase Plan 148 94
Proceeds from exercise of stock options 326 14
Net cash provided (used) by financing
activities 37,865 (126)
Increase (decrease) in cash and cash equivalent 21,826 (1,102)
Cash and cash equivalents - beginning
of period 1,428 1,778
Cash and cash equivalents - end of period $23,254 $676
See the accompanying notes to interim financial statements.
CYBEROPTICS CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
1. INTERIM REPORTING:
The interim financial statements are unaudited; however, in the opinion of
the Company, the interim statements include all adjustments, consisting
only of normal recurring adjustments, necessary for the fair statement of
the results and balances for the interim periods.
The results of operations for the nine-month period ended September 30,
1995 do not necessarily indicate the results to be expected for the full
year. These statements should be read in conjunction with the Company's
financial statements and notes thereto, contained in the Company's Annual
Report to Stockholders for the year ended December 31, 1994.
The year-end balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles.
2. INVENTORIES (IN THOUSANDS):
Sept. 30, Dec. 31,
1995 1994
Raw materials and purchased parts $3,702 $1,902
Work in process 1,463 406
Finished goods 104 27
Total inventories $5,269 $2,335
3. STOCK OFFERING:
In September 1995, the Company completed a public offering of Common Stock
that generated net proceeds of $37.4 million from the issuance of 1,200,000
shares.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors that have affected the Company's earnings and financial position during
the periods included in the accompanying financial statements. This discussion
should be read in conjunction with the financial statements and associated
notes.
The table below lists certain financial data expressed as a percentage of
revenues for the periods ended September 30, 1995 and 1994.
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Revenues 100% 100% 100% 100%
Gross margin 53% 55% 54% 58%
Research and development expenses 12% 15% 14% 19%
Selling, general and
administrative expenses 18% 25% 19% 27%
Income from operations 23% 15% 21% 12%
Net income 16% 11% 15% 9%
RESULTS OF OPERATIONS
REVENUES
Revenues increased 86% to $20.0 million during the nine month period ended
September 30, 1995 compared to $10.7 million for the comparable period in 1994.
For the third quarter of 1995, revenues increased 89% to $8.2 million from $4.3
million in 1994. This revenue growth comes from improvement in the revenue
levels of both sensors and systems. Sensor revenues increased 109% to $14.0
million during the nine months ended September 30, 1995 from the comparable
period in 1994, and 144% to $6.1 million for the third quarter of 1995 compared
to the third quarter of 1994. The primary reasons for this increase were
increased unit shipments of LaserAlign and other OEM sensor products, as demand
from OEM customers, including Philips Electronics N.V. ("Philips"), in the
surface mount industry continued to be strong. Philips accounted for
approximately 29% of the Company's revenue during the nine and three month
periods and the Company's five principal OEM sensor customers accounted for
approximately 62% and 52% of revenue during such periods. System revenues
increased 50% to $6.0 million during the nine months ended September 30, 1995
from the comparable period in 1994, and 17% to $2.1 million for the third
quarter of 1995 compared to the third quarter of 1994. This increase is
primarily due to revenues from the current version of CyberSentry which began
shipping in March 1995. International revenues comprised 66% and 52% of total
revenues during the nine months ended September 30, 1995 and 1994, and 75% and
50% of total revenues during the third quarter of 1995 and 1994.
COST OF REVENUES
Cost of revenues increased as a percent of total revenue to 46% during the nine
month period ended September 30, 1995 compared to 42% during the comparable
period in 1994. For the third quarter of 1995, cost of revenue was 47% of total
revenue compared to 45% in 1994. This increase in cost of revenue as a percent
of total revenue is partially due to the change in distribution channel during
1995, which included a larger percent of OEM products and end-user products
through distributors. In addition, the Company has incurred start-up
manufacturing expenses related to the LaserAlign sensor and the production of
the CyberSentry products.
RESEARCH AND DEVELOPMENT
Research and development expenses increased 37% to $2.8 million during the nine
month period ended September 30, 1995 compared to $2.0 million for the
comparable period in 1994, but decreased as a percent of revenue from 19% in
1994 to 14% in 1995. For the third quarter of 1995, research and development
expenses increased 57% to $1.0 million compared to $0.6 in 1994, but decreased
as a percent of revenues from 15% in 1994 to 12% in 1995. Research and
development expenses during the nine month period ended September 30, 1995
focused primarily on the completion of CyberSentry, CyberGage and CyberScan LV.
The Company anticipates that research and development expenses will increase in
future periods, and although the Company does not believe research and
development expenses will return to historical levels as a percentage of
revenue, they are expected to increase slightly.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 32% to $3.8 million
during the nine month period ended September 30, 1995 compared to $2.9 million
during the comparable period in 1994. For the third quarter of 1995, selling,
general and administrative expenses increased 34% to $1.4 compared to $1.1
million in 1994. As a percentage of revenue, expenses have decreased from 27% in
1994 to 19% in 1995 for the nine months, and from 25% in 1994 to 18% in 1995 for
the third quarter. The dollar increase in selling, general and administrative
expenses is the result of additional resources added to support increased
revenues. The decrease as a percent of revenues is primarily due to a larger
revenue base over which to spread fixed costs, but is also attributable to the
shift in revenue mix to OEM customers and end-user distributors, which carry a
lower selling cost to the Company.
EFFECTIVE TAX RATE
The Company applied an effective rate of 32% during the nine-months ended
September 30, 1995, compared to 29% during the comparable period in 1994. For
the third quarter quarter of 1995, the Company applied an effective rate of 34%
compared to 30% in 1994. Benefits from the Company's foreign sales corporation
and the use of the research and development tax credit will be primarily
responsible for reducing the effective tax rate below the statutory federal rate
in 1995. The increase in the effective rate during the third quarter of 1995 is
primarily the result of the research and development credit expiring as of June
30, 1995. Although the research and development credit has expired, the Company
anticipates that its tax rate will continue to benefit from sales through its
foreign sales corporation.
ORDER RATE AND BACKLOG
CyberOptics' order rate totaled $24.7 million during the nine months ended
September 30, 1995 compared to $10.9 million during the same period in 1994. For
the third quarter of 1995, the order rate totaled $9.0 million compared to $4.3
million in 1994. Backlog totaled $7.2 million and $2.7 million at September 30,
1995 and 1994, respectively. The scheduled shipment of the September 30, 1995
backlog is as follows (In thousands):
4th Quarter 1995 $5,962
1st Quarter 1996 1,228
Total Backlog $7,190
LIQUIDITY AND CAPITAL RESOURCES
In September 1995, the Company completed a public offering of Common Stock that
generated net proceeds of $37.4 million from the issuance of 1,200,000 shares.
Primarily as the result of funds generated from the offering, working capital
has increased from $6.9 million as of December 31, 1994 to $47.3 million as of
September 30, 1995. These amounts include cash, cash equivalents and short term
investments of $38.7 million and $2.6 million as of September 30, 1995 and
December 31, 1994, respectively.
The Company used $1.1 million of cash in operations during the first nine months
of 1995, primarily to finance a $2.9 million increase in accounts receivable and
a $3.1 million increase in inventory. The increases in accounts receivable and
inventory are primarily due to the increased level of shipments and orders.
These working capital requirements were offset by net income of $2.9 million,
non-cash expenses of $0.5 million and an increase in current liabilities of $2.0
million.
In September 1995, the Company executed a lease agreement for 70,000 square feet
of mixed office and warehouse space in a new facility. The Company anticipates
an investment of approximately $750,000 in furniture, fixtures and equipment in
connection with its new facility.
At the present time, the Company has no material capital commitments, except as
described above. The Company believes current working capital and anticipated
funds from operations will be adequate for anticipated operating needs.
PART II. OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON 8-K
a. Exhibits
Exhibit 10--Lease Agreement between MEPC American Properties, Inc. and the
Company dated September 1, 1995
Exhibit 27--Financial Data Schedule (For SEC use only)
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 30,
1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CyberOptics Corporation
/s/ Kent O. Lillemoe
Kent O. Lillemoe, Treasurer
(Principal Financial Officer and
Duly Authorized Officer)
Dated: November 8, 1995
EXHIBIT 10
LEASE
This Lease is entered into as of September 1, 1995, between MEPC AMERICAN
PROPERTIES INC., a Delaware corporation ("Lessor") and CYBEROPTICS CORPORATION,
a Minnesota corporation ("Tenant").
1. Definitions. In this Lease:
(a) "Building" means the industrial or office/warehouse building located
or to be located on the Land in the Golden Hills Development, in the
City of Golden Valley, approximately as shown on the Site Plan
attached as Exhibit A-1 ("Site Plan") and on the Building elevation
drawings attached as Exhib it A-2, and containing at least 90,000
Square Feet of space.
(b) "Premises" means that certain portion of the Building shown on the
preliminary floor plan attached to this Lease as Exhibit A-3, which
contains approximately 70,329 Square Feet of space, based upon the
final floor plan for the Premises which is a part of the plans and
specifications identified on Exhibit D (the "Plans"), together with a
non-exclusive right of Tenant and its employees, agents, invitees and
customers to use the Common Areas.
(c) "Warehouse Space" means that portion of the Premises, based upon the
final floor plan for the Premises, constructed for purposes of
warehouse use and designated as such in the Plans and in the
supplemental agreement referred to in Section 2.
(d) "Office Space" means that portion of the Premises, based upon the
final floor plan for the Premises, constructed for purposes of office,
manufacturing, production or any other use other than warehouse use,
and designated as such in the Plans and in the supplemental agreement
referred to in Sect ion 2.
(e) "Term" means the period of 10 years, beginning on the Commencement
Date, plus any Renewal Periods (as defined in Section 35). If the
extended Term would end on a day other than the last day of a month,
the Term will be further extended to the last day of the month in
which the Term ends.
(f) "Commencement Date" means the earlier of the date on which Tenant
commences business in the Premises or the date on which Lessor has
substantially completed Lessor's Work as evidenced by a Certificate of
Substantial Completion issued by Lessor's architect and a Certificate
of Occupancy (or its equivalent) issued by the City of Golden Valley
(the "City") for the Building. Lessor will give Tenant at least 15
days prior notice of the estimated date of substantial completion of
Lessor's Work.
(g) "Lease Year" means a period of 12 consecutive months commencing on the
first day of the first full month of the Term and each 12-month period
thereafter during the Term.
(h) "Monthly Base Rent" means the following amounts per Rentable Square
Foot multiplied by the number of Square Feet of Office Space and
Warehouse Space, as the case may be, in the Premises divided by 12:
Lease Year Office Space Rate Warehouse Space Rate
1 & 2 $7.75 $3.50
3, 4 and 5 $8.25 $4.00
6 through 10 $8.75 $4.50
After the Monthly Base Rent is determined, the amount of the Monthly
Base Rent will not change during the Term unless space is added to or
deleted from the Premises as provided in this Lease or by written
amendment of this Lease.
(i) "Costs" means the estimated monthly Tax Costs plus the estimated
monthly Operating Costs.
(j) "Monthly Rent" means the Monthly Base Rent plus Tenant's Share of the
Costs.
(k) "Tenant's Share" means the percentage obtained by dividing the Square
Feet in the Premises by the Square Feet in the Building.
(l) "Operating Costs" means all costs, charges and expenses incurred by
Lessor in connection with ownership, operation, security, maintenance
and repair of the Land, the Building, other improvements (but not
other buildings) on the Land, appurtenances to the Building, parking,
roadways, landscaping , lighting, sidewalks, and common or public
areas on the Land, including but not limited to interior and exterior
maintenance of the Common Areas and exterior maintenance of the
Building; insurance, utilities not separately metered and utilities
servicing the Common Areas, fees or expenses for mana gement by Lessor
or any other party (not to exceed 5% of the annual Base Rent in any
Lease Year), amortization of capital investments made to reduce
Operating Costs , or permitted under Section 11, and amortization of
repairs made to extend the life of the Building and other improvements
(provided the amortization is over the useful life of the
improvements). Operating Costs will not include Tax Costs, mortgage
principal costs or interest; depreciation on the Building or fixtures;
advertising expenses; real estate brokers' commissions or the cost of
tenant improvements; the cost of correcti ng defects in the original
design or construction of the Building, the Common Areas or the
Lessor's Work; reserves for anticipated future expenses; legal,
accounting or other professional fees and costs incurred with respect
to tenants of the Building, title to the Building or Land, the initial
des ign or construction of the Building and appurtenant improvements
or financing of the Building, Land or improvements thereon; costs
reimbursable by insurance; the cost (or any depreciation or
amortization thereof) of any alteration, addition or change,
replacement, improvement, repair or other item that is normally
classified as a capital expense under generally accepted accounting
principals consistently applied to the real estate industry (except as
expressly permitted above); structural repairs which are the
obligation of Lessor; or interest or other penalties incurred as a
result of the f ailure to pay expenses when due.
(m) "Tax Costs" means all real estate taxes, levies, charges, and
installments of special assessments (provided the same are amortized
over the longest period of time available to Lessor and are not solely
and directly attributable to Lessor's Work) (including interest on
deferred assessments) asse ssed, levied or imposed on, or allocated
to, the Land and Building and all reasonable attorneys' fees,
consultants' fees, witness fees, court costs and other expenses of
Lessor in connection with any proceeding to contest these amounts with
Lessor's reasonable expectation that Tax Costs, including such costs
of contest, will be reduced as a result of such contest.
(n) "Square Feet" means the number of square feet calculated from
dimensional architect's drawings by measuring to the outside surface
of exterior walls and to the centerline of walls separating areas
leased or held for lease to others.
(o) "Lease" means this Lease, all Exhibits attached to this Lease, and all
properly executed amendments, modifications and supplements to this
Lease.
(p) "Section" means a section of this Lease.
(q) Exhibit" means an Exhibit attached to and thereby made a part of this
Lease.
(r) "Land" means the land described on Exhibit B.
(s) "Taking" means acquisition by a public authority having the power of
eminent domain of all or part of the Land or Building by condemnation
or conveyance in lieu of condemnation.
(t) "Casualty" means a fire, explosion, tornado, or other cause of damage
to or destruction of the Building.
(u) "Lessor's Work" means the work described in the Plans to be provided
by Lessor at its expense except for the Tenant's Contribution defined
in Section 2.B.
(v) "Common Areas" means any halls, lavatories or loading facilities used
in common by more than one tenant, landscaped areas, driveways, open
lot parking areas and other exterior areas shown on the Site Plan,
designed for the nonexclusive use of the owner and occupants of the
Building, and not des igned or intended for the exclusive use of a
single tenant, as designated by Lessor from time to time.
(w) "Tenant's Work" means all improvements, alterations, fixtures and
equipment other than the Lessor's Work which is constructed or
installed in addition to Lessor's Work for Tenant's use and occupancy
of the Premises or desired by Tenant in addition to Lessor's Work to
complete the Premises for o ccupancy.
2. Contingencies and Construction.
A. Contingencies.
Subject to the following contingencies, Lessor leases the Premises to Tenant,
and Tenant leases the Premises from Lessor, for the Term, under the terms and
conditions of this Lease:
(1) Lessor will provide to Tenant and its counsel on or before September
15, 1995 evidence that title to the Land has been conveyed to Lessor
by the Housing and Redevelopment Authority in and for the City of
Golden Valley (the "HRA").
(2) Prior to commencement of construction of the Building, Lessor shall
obtain from the Minnesota Pollution Control Agency ("MPCA") the MPCA
Response (as defined in Section 12) in form and substance acceptable
to Lessor and Tenant with respect to any remedial action or
contamination relating to the Land.
(3) Prior to September 15, 1995, Lessor shall deliver to Tenant and its
counsel a commitment for a leasehold policy of title insurance in the
amount of $1,000,000, together with copies of all encumbrances
referred to therein, a copy of any plat which will replat the Land, a
letter from the City se tting forth the zoning for the Land, a draft
of the MPCA Response, the platted legal description of the Land, an
ALTA survey of the Land certified to Tenant (on which the Site Plan
has been superimposed) and a list of and copies of all encumbrances
against the Land currently existing or contemplate d to exist against
the Land at the time Lessor acquires fee title to the Land (the
"Permitted Encumbrances"). Tenant shall have 10 days after receipt of
the last of such documents to be delivered to Tenant to review the
same, and shall provide Lessor with written notice of Tenant's
acceptance of or objections to the same within the 10-day period. If
the Permitted Encumbrances are accepted by Tenant, then Lessor and
Tenant shall promptly execute an amendment to this Lease acknowledging
the newly platted legal description of the Land and that Lessor's fee
title to the Land is subject to the Pe rmitted Encumbrances.
(4) Tenant shall determine that it is satisfied with the items referred to
in items (2) and (3) of this Section prior to a date 10 days after the
last of said items is delivered to Tenant.
(5) Lessor shall have obtained at its sole cost and expense on or before
September 15, 1995, and will provide written confirmation to Tenant
and its counsel that Lessor has obtained all final governmental
approvals necessary in order to commence construction of the Building.
(6) Lessor shall have commenced construction of the Building on or before
September 15, 1995.
If any of the foregoing contingencies has not been satisfied on or before the
respective date set forth above, then this Lease may be terminated by written
notice from Tenant to Lessor if the contingency has not been met within 15 days
after Tenant's notice. Upon such termination, neither party wi ll have any
further rights or obligations regarding this Lease or the Land. All
contingencies set forth in this Lease are specifically stated and agreed to be
for the sole and exclusive benefit of the Tenant and the Tenant shall have the
right to unilaterally waive any contingency by written noti ce to the Lessor,
except for the contingency set forth in item (6) above, which shall be for the
benefit of both Lessor and Tenant.
B. Construction.
Lessor will be responsible for the design and construction of the Building;
provided, however, that the Building shall be designed and constructed in
substantial accordance with the Site Plan attached as Exhibit A-1, the Building
elevation drawings attached as Exhibit A-2, and the outline specifica tions for
the Building attached as Exhibit E.
The Site Plan and elevation drawings attached as Exhibits A-1 and A-2 are
material consideration for the execution of this Lease by Tenant, and Lessor
will not make any material changes in the Building from the conditions shown by
said Exhibits without Tenant's prior written approval.
Lessor will complete the Lessor's Work in accordance with the Plans. Tenant will
also be responsible for $278,913.00 of the total costs of Lessor's Work (the
"Tenant Contribution") and for the cost of all additional work not described in
the Plans.
Lessor will perform Lessor's Work in a good and workmanlike manner using new and
first quality materials and in compliance with all applicable laws, orders,
ordinances, rules and statutes, including but not limited to the Americans with
Disabilities Act of 1991 ("ADA") and all environmental laws an d orders.
During construction of Lessor's Work, Lessor will maintain public liability and
worker's compensation insurance (and/or require its contractors to so maintain
such insurance) and Lessor will indemnify Tenant against all claims, demands and
actions, and all costs and expenses arising from constructi on (including
reasonable attorneys' fees), for injury, death, disability or illness of any
person or persons occurring in, on or about the Land and Building, except to the
extent caused by the negligence or willful misconduct of Tenant or its officers,
employees, agents or contractors.
If Tenant requests Lessor's approval of a change order to modify any portion of
Lessor's Work ("Change Order"), Lessor's approval of the Change Order will not
be unreasonably withheld or delayed. If Lessor approves a requested Change
Order, Lessor shall prepare and submit to Tenant a written certi fication of the
Change Order (the "Verification"), which shall state the amount , if any, by
which the Change Order increases (an "Increase") or decreases (a "Decrease") the
cost of Lessor's Work as set forth in the Plans. The Verification will also
state Lessor's estimate of any delays in completi on of Lessor's Work expected
to result from the Change Order. Within five business days after Tenant's
receipt of the Verification, Tenant shall approve or reject the same in writing.
If the requested Change Order results in an Increase, Tenant shall acknowledge
in writing its consent to the Incre ase and the Change Order before Lessor shall
be obligated to do the work contemplated by the Change Order. If the Increase is
so approved by Tenant, the amount of the Increase will be paid by Tenant within
30 days after completion of the work covered by the Change Order. If any Change
Order require s an additional period of time for completion of Lessor's Work,
all dates referred to in Subsection C of this Section will be extended by that
same period of time.
If the requested Change Order results in a Decrease, the Tenant's Contribution
shall be reduced by the amount of the Decrease. If the aggregate amount of all
Decreases exceeds $278,913.00, there shall be no Tenant Contribution, but no
payment shall be made to Tenant and no credit shall be given to Tenant for any
Decreases in excess of $278,913.00. The amount of the Tenant Contribution (as
reduced by the aggregate amount of any Decreases) will be paid by Tenant to
Lessor within 10 days after Tenant takes full possession of the Premises.
C. Completion of Construction.
Lessor will use reasonable efforts to substantially complete the Lessor's Work
on or before March 1, 1996 (the "Deadline"). If Lessor's Work has not been
substantially completed prior to the Deadline, as the Deadline may be extended
as extended by extension for Change Orders and by the period of a ny delays
suffered by Lessor or any of its contractors, subcontractors or materialmen as a
direct result of action or inaction by the City or any other governmental
authority or agency, labor disputes, unavoidable accidents, injunctions by third
parties, civil disturbance, fire, acts of God or the public enemy, shortage of
construction labor or materials, or other conditions beyond the reasonable
control of Lessor, then Tenant shall have the right to abatement of one day's
Base Rent for each day completion is delayed beyond the Deadline as extended by
any such unavoidable delays. If Lessor's
Work has not been substantially completed by June 1, 1996, as extended by any
extension for Change Orders provided in Subsection B of this Section and by any
delay due to fire, tornado, earthquake or other natural disaster, Tenant may at
any time thereafter give Lessor notice of its intention to terminate this Lease.
If Lessor's Work has not been substantially completed within 30 days after
Tenant's notice, this Lease will terminate and will be of no further force or
effect, but if the Lease is not terminated, Tenant shall have the right to
abatement of one day's Base Rent for each day com pletion is delayed beyond July
1, 1996 as extended by any extension for Change Orders and by any delay due to
fire, tornado, earthquake or other natural disaster.
When Tenant takes full possession of the Premises, that will be deemed
conclusive evidence that the Premises is in satisfactory condition on that date,
and that Lessor has completed all work for which it is responsible, subject only
to latent defects and to deficiencies (if any) listed in a written notice
delivered by Tenant to Lessor not more than 60 days after the date of taking
possession, which listed items will be completed by Lessor within 60 days after
Tenant's notice.
Within 60 days after the Commencement Date, Lessor and Tenant will execute an
agreement supplementing this Lease setting forth: the Commencement Date and
expiration date of the Term, the "as-built" Square Feet of Office Space and
Warehouse Space in the Premises, the total Square Feet in the Premis es, and the
total Square Feet in the Building (based on a certification of Lessor's
architect to Lessor and Tenant setting forth the architect's calculation of such
square footages), the Monthly Base Rent, and the Tenant's Share percentage.
3. Rent.
Tenant will pay the Monthly Rent to Lessor at P.O. Box 73547, Chicago, Illinois
60673-7547, or such other place as Lessor may designate, in advance on the first
day of each month during the Term, without demand, deduction or setoff. The
Monthly Rent may change as the Costs are adjusted annually un der Sections 4 and
5. Monthly Rent will begin on the Commencement Date. If the Term begins on a day
other than the first day of a month, the Monthly Rent for that month will be
prorated by multiplying the Monthly Rent by the number of days of that month
included in the Term and dividing the produ ct by the number of days in that
month.
Any Monthly Rent or other amounts payable by Tenant to Lessor under this Lease
which are not paid within 10 days after the date due will bear interest from the
date due to the date paid at the rate of 12% per annum or the maximum rate of
interest permitted by law, whichever is less, and the interes t will be paid to
Lessor on demand. In addition, Tenant will pay Lessor a $100 service charge for
all Monthly Rent not paid by the 10th day of the month for which it is payable,
which service charge is to partially cover expense involved in handling
delinquent payments. All amounts to be paid by Tenant to Lessor under this Lease
will be deemed to be additional rent for purposes of payment and collection.
If any taxes, special assessments, fees or other charges are imposed against
Lessor by any governmental unit or agency with respect to rentals under this
Lease, Tenant will pay these amounts to Lessor when due, except that Tenant will
have no obligation to pay any income tax on rentals unless the t ax is imposed
in lieu of real estate taxes.
4. Cost Adjustments.
The initial Monthly Rent is based in part on the estimated Operating Costs and
Tax Costs. Prior to the first day of each calendar year after the date of this
Lease, or as soon as reasonably possible after the first day of the year, Lessor
will furnish Tenant with an estimate of the Costs for such calendar year, and
the Monthly Rent will be increased or decreased (as the case may be) by 1/12th
of Tenant's Share of the difference between the initial estimate of Costs and
the current estimate.
Within 120 days, after the end of each calendar year, including the year in
which the Term expires, Lessor will give Tenant a statement of the actual Costs
for that calendar year. If the actual Costs exceed the estimated Costs for that
year, Tenant will pay Tenant's Share of the excess to Lessor w ithin 30 days
after receiving the statement. If the actual Costs are less than the estimated
Costs for that year, Lessor will pay Tenant's Share of the difference to Tenant
with the statement. If Tenant does not give Lessor written notice within one
year after receiving Lessor's statement that Te nant disagrees with the
statement and specifying the amounts in dispute, Tenant will be deemed to have
waived the right to contest the statement. Tenant will file no petition in Tax
Court regarding the Tax Costs without Lessor's prior written consent. If Lessor
reasonably contests Tax Costs and r eceives a refund or incurs additional Tax
Costs after adjustments for actual Tax Costs have been made, the actual Tax
Costs will be corrected accordingly and the appropriate adjustment will be made
between Lessor and Tenant. The portion of Costs to be paid by Tenant for the
years in which the Term begins and ends will be prorated by multiplying the
actual Costs by a fraction, the numerator of which is the number of days of that
year in the Term and the denominator of which is 365.
Within 60 days after receiving Lessor's statement of Costs, Tenant may request
the right to review Lessor's records relating to Costs, which will then be made
available to Tenant for review. If the records are made available to Tenant,
Tenant will give Lessor notice of any objections to the Stateme nt of Costs
within 60 days after the records are made available to Tenant, or Tenant may
request an audit of the Costs by an independent certified public accountant
chosen by Lessor from a list of not fewer than three submitted by Tenant in
conjunction with the request. If Lessor does not make the
choice within 15 days, Tenant may do so. The auditor will be given access to
those records of Lessor pertaining to Costs for the year in question. The
auditor will report to the parties within 30 days after being chosen. The report
of the auditor will be final and binding on both parties with respect to the
year in question unless Lessor disputes the audit by notice to Tenant within 15
days after receiving the report. If the report is disputed by Lessor, the
parties will select a mutually acceptable auditor to review the report, and the
determination of the mutually acceptable reviewin g auditor will be final and
binding on both parties. If the actual Costs differ from those charged to
Tenant, payments required to make adjustments in rent to conform to the final
report shall be made within 30 days after receipt of the final report. All
expenses of the audit shall be borne by Te nant unless such audit, or the final
determination by the reviewing auditor if Tenant's audit is disputed by Lessor,
discloses an overstatement of Costs of 10% or more, in which case all reasonable
expenses of Tenant's audit and of the reviewing auditor resolving a disputed
audit will be borne by L essor, and payment of Costs will be adjusted
accordingly.
If Tenant's audit is disputed by Lessor and the reviewing auditor determines
that no adjustment is required, Tenant will pay all costs of its audit and all
costs of the reviewing auditor. If the final resolution of a disputed audit
requires an adjustment in favor of Tenant, but the adjustment is less than 10%,
Tenant will pay the cost of the initial audit, and each party will pay one-half
of the costs of the reviewing auditor.
5. Cost Computations and Allocations.
The parties acknowledge that Lessor owns and/or manages other commercial
buildings in the Minneapolis metropolitan area and that some of the Costs
attributable to the Building may be incurred by Lessor as a result of master
contracts with vendors that service the Building and such other buildings o wned
or managed by Lessor. Lessor will in its reasonable discretion, determine from
time to time, the method of computing and allocating Costs between the Building
and other buildings owned or managed by Lessor in the Minneapolis metropolitan
area according to standards and methods customarily app lied in the Minneapolis
metropolitan area. If the Building is not fully occupied during any partial or
full year, an adjustment will be made in computing Tenant's payment of Operating
Costs for such year for water, refuse removal and snow removal so that the full
amounts of such costs are shared p roportionately on a square foot basis by
those tenants which occupied the Building during that year.
6. Fiscal Year.
The year used to determine Costs may be changed to a different 12-month period
designated by Lessor. If the calendar year is changed to a fiscal year, or if a
fiscal year is changed to a different fiscal year, prorations will be made for
the estimated Costs and the actual Costs so that the same ti me period is used
to determine each and so that Costs are not included in more than one time
period.
7. Possession.
Tenant shall not conduct business in all or any portion of the Premises before
the Commencement Date, provided, however, that Tenant may have access to the
Building and the Premises with Lessor's approval (not to be unreasonably
withheld) without accrual of rental obligations prior to the Commencem ent Date
for purposes of installing and moving in its equipment, personal property and
furnishings and conducting Tenant's Work so long as the same does not interfere
with the timely completion of Lessor's Work by Lessor.
Except as provided in Section 2, this Lease will not be void or voidable and
Lessor will not be liable to Tenant for any loss or damage resulting from any
delay in delivering possession of the Premises to Tenant, but unless the delay
is principally caused by or attributable to Tenant, its employees , agents or
contractors, no Monthly Rent will be due for the period prior to the date Lessor
delivers possession of the Premises, unless Tenant elects to take possession of
a portion of the Premises, in which case Monthly Rent will be due for the
portion of the Premises taken. Tenant's occupancy o f the Premises will
constitute Tenant's acceptance of the Premises, subject to Lessor's obligations
under Section 2.
Lessor warrants and represents to Tenant that, upon commencement of construction
of the Building, Lessor shall own marketable fee title to the Land, subject only
to the Permitted Encumbrances referred to in Section 2.A(3).
Lessor warrants and represents that Tenant, upon paying the rents and keeping
the agreements of this Lease on Tenant's part to be kept and performed, shall
have peaceful and uninterrupted possession of the Premises during the Term of
this Lease subject to the Permitted Encumbrances, except as other wise
specifically set forth herein. Lessor further warrants and represents to Tenant
that, subject only to Lessor's acquisition of fee simple title to the Land,
Lessor has the right and power to enter into this Lease and to perform its
covenants and agreements pursuant to the provisions of this Lea se.
8. Use.
Tenant will use the Premises for the purpose of office, warehouse, design,
manufacturing and sales functions related thereto which are permitted under the
City's zoning ordinances, and for no other purpose. Tenant will not commit or
permit any act or omission which results in the violation of any law,
governmental regulation, or insurance policy of Lessor, relating to the
Building, or which will increase Lessor's insurance rates on the Building.
Tenant will not permit any conduct or condition which may unduly disturb or
endanger other occupants of the Building.
9. Care of Premises and Building.
Tenant will, at all times during the Term and any renewals and extensions, at
its sole expense, keep and maintain the interior of the Premises (and those
exterior portions of the Premises which are expressly the obligation of Tenant)
in a clean, safe, sanitary, and good condition, and in compliance with all
applicable laws, codes, ordinances, rules, and regulations as provided in
Section 11. Tenant's obligations will include but not be limited to maintaining
an HVAC contract for maintenance of the HVAC system, and paying for any repairs
not covered by the HVAC contract. Tenant will also be responsible for all
equipment and systems within the interior of the Premises, and for maintaining
and repairing (and replacing if necessary) all lighting and plumbing fixtures,
all interior walls, partitions, interior doors and interior windows. Tenant will
also be responsible for the replacemen tof all broken glass in the Premises.
When used in this Section, the term "repairs" shall include replacements and
overhauling equipment when necessary, and all such repairs made by the Tenant
shall be equal in quality and class to the original work, except that if it
becomes necessary to replace HVAC equipment, such replacement will be done at
Lessor's initial expense, and Tenant will pay to Lessor on a monthly basis as
additional rent together with the Monthly Rent the amortized portion of the cost
of replacing the HVAC equipment, with such amortization being over the useful
life of the replacement equipment. The Tenant shall keep and maintain all
portions of the interior of the Premises and the sidewalk and areas adjoining
the same in clean and orderly condition, free of accumulation of dirt, rubbish,
snow, and ice except for those portions of the exterior which are Lessor's res
ponsibility. Lessor shall assign to Tenant all warranties and guaranties
applicable to the portions of the Premises to be maintained by Tenant.
Notwithstanding any provision to the contrary, Lessor shall remain responsible
for all defects in the design or original construction of the Premises.
If Tenant fails, refuses or neglects to maintain or repair the Premises as
required in this Lease within 30 days after notice has been given Tenant, or
after such shorter period as may be appropriate in the case of an emergency,
Lessor 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 its
business, and upon completion, Tenant will pay to Lessor all costs plus 10% for
overhead incurred by Lessor in making such repairs upon presentation to Tenant
of bill for the repairs.
Lessor will maintain and repair, the Common Areas and the structural portions
and exterior of the Building in a good and workmanlike condition. Structural
maintenance and repairs will be at Lessor's expense, except that where
structural repairs are required to be made by reason of the acts of Tenant, the
costs will be reimbursed by Tenant and payable by Tenant to Lessor upon demand.
Lessor will keep the sidewalks, parking areas and drive lanes of the Common
Areas at all times free of ice and free of snow accumulation in excess of two
inches; to the extent Lessor fails to do so and removal i s necessary for
Tenant's access to the Premises, then after reasonable notice to Lessor, Tenant
may remove any ice and snow (when snow accumulation exceeds two inches) and
collect the reasonable costs of such removal from Lessor. Costs of maintaining
and repairing the Common Areas will be a part of Operating Costs.
Tenant, at its own cost and expense, will enter into a regularly scheduled
preventive maintenance and service contract with a maintenance contractor
approved by Lessor for servicing all hot water, heating and air conditioning
systems and equipment within the Premises. The service contract must in clude
all services suggested by the equipment manufacturer in its operations and
maintenance manual and must become effective within 30 days of the date Tenant
takes possession of the Premises.
10. Building Rules.
Rules and Regulations for the Premises and the Building in effect on the date of
this Lease are attached as Exhibit C. Lessor will have the right to adopt
different or additional reasonable rules and regulations, and to rescind or
amend the attached rules and regulations, from time to time. Tenan t will abide
by the rules and regulations then in force and will cause Tenant's employees to
observe and comply with them.
11. Compliance with Laws.
Tenant will pay any taxes or other charges by any governmental authority on
Tenant's property or trade fixtures in the Premises or relating to Tenant's use
of the Premises.
The Premises shall not be used in any manner which under any requirement of law
or of any public authority would require Lessor to make any addition or
alteration to or in the Building. After the construction of any initial
improvements by Lessor in the Premises, Tenant will be responsible for com
pliance with the ADA as it applies to any future alteration or addition made by
Tenant to the Premises or any use of the Premises by Tenant. The Premises shall
not be used in any manner which will increase the rates required to be paid for
public liability or for all risk insurance covering the Bu ilding. Tenant shall
occupy the Premises, conduct its business and control its agents, employees,
invitees, and visitors in such a way as is lawful and reputable and will not
permit or create any nuisance, noise, odor, or otherwise interfere with, annoy,
or disturb any other Tenant in the Building in its normal business operations or
Lessor in its management of the Building. Outside storage on the Land of any
type of equipment, property, or materials owned or used by Tenant or its
customers and suppliers (other than for trash and refuse receptacles) is not
permitted.
Subject to Lessor's right to contest the same, Lessor will comply with all
present and future laws, ordinances, orders, and regulations of federal, state,
county and city governments, and or other governmental authorities having or
claiming jurisdiction over the Land and Building, including but not limited to
the ADA, and any applicable federal, state, county or local statutes, laws,
regulations, rules, ordinances, codes, standards, orders, licenses, and permits
of any governmental authorities relating to environmental matters, except those
which are related to Tenant's use of the Premises, property or equipment within
the Premises or which exclusively serve the Premises, or alterations made or
requested by Tenant after the initial improvements in the Premises. Expenses of
such compliance which are not capital expenses under generally accepted
accounting principals will be included in Operating Costs. If compliance by
Lessor with the preceding sentence requires capital improvements to be made by
Lessor, the cost thereof will be amortized over the useful life of the
improvements and amortization of the cost will be included as a part of
Operating Costs.
12. Hazardous Substances.
The term "Hazardous Substances", as used in this Lease, means pollutants,
contaminants, toxic or hazardous wastes or any other substances, the removal of
which is required or the use of which is restricted, prohibited or penalized by
an "Environmental Law", which term means any federal, state or lo cal law or
ordinance relating to pollution or the protection of the environment and
includes asbestos, petroleum products and underground storage tanks. Tenant
agrees that (a) no activity will be conducted on the Premises that will produce
any Hazardous Substance, except for activities which are p art of the ordinary
course of Tenant's business (the "Permitted Activities"), provided the Permitted
Activities are conducted in accordance with all Environmental Laws and have been
approved in advance in writing by Lessor; (b) the Premises will not be used for
storage of any Hazardous Substances, except for temporary storage of materials
used in the Permitted Activities (the "Permitted Materials"), provided the
Permitted Materials are properly stored in a manner and location meeting all
Environmental Laws and approved in advance in writing by Lessor; (c) no portion
of the Premises or Land w ill be used by Tenant as a landfill or a dump; (d)
Tenant will not install any underground tanks of any type; (e) Tenant will not
cause any surface or subsurface conditions to exist or come into existence that
constitute, or with the passage of time may constitute, a public or private
nuisance; (f) Tenant will not permit any Hazardous Substances to be brought onto
the Premises, except for Permitted Materials, and if so brought, Tenant will
immediately remove them, with proper disposal, and will undertake all required
cleanup procedures under the Environmental Laws. If, at any time during or after
the term of the Lease, the Premises are found to be contaminated by Tenant or
subject to conditions prohibited in this Lease caused by Tenant, Tenant will
indemnify and hold Lessor harmless from all claims, demands, actions,
liabilities, costs, expenses, damages and obligations of any nature arising from
or as a result of the use of the Premises by Tenant. The foregoing
indemnification will survive the termination or expiration of this Lease.
Except for those matters ("Existing Contamination") disclosed in those certain
reports described on the attached Exhibit F (the "Environmental Reports"),
Lessor represents and warrants that to the best of Lessor's actual knowledge
there are no Hazardous Substances located on, under or about the Lan d. The
Environmental Reports disclose to Tenant the presence of certain Hazardous
Substances described in detail in the Reports, which Lessor and the City have
also disclosed to the MPCA. Lessor has requested and anticipates receipt from
the MPCA of a No Association Determination, No Action Determi nation, and an
Off-Site Source Determination ("MPCA Response"). In the event that any Hazardous
Substance other than the Existing Contamination is discovered at any time in,
under or about the Land (unless released by Tenant), Lessor shall, at Lessor's
sole cost and expense, promptly remediate the same to the extent necessary to
comply with all applicable laws, rules and regulations. Lessor further covenants
that it will comply with all terms of the MPCA Response and any other plans,
orders, regulations or judgments concerning the Existing Contamination. Lessor
will indemnify and save and hold Tenant harmless from and against any liability,
obligation, damage or cost, resulting from claims, demands or actions by
governmental authorities or by other property owners claiming migration of the
Existing Contamination, including without limitation, attorneys' fees and
consultant fees and costs, resulting directly or indirectly from the presence,
removal or disposal of any Hazardous Substance (unless such substance is
released by Tenant) or the Existing Contamination. Prior to commencement of
construction of the Building, Lessor shall deliver to Tenant the MPCA Response,
which shal l confirm that Tenant shall have no liability to the State of
Minnesota for any Existing Contamination.
13. Signs.
Tenant will not place or permit any signs on the exterior or windows of the
Building, or within the Premises if visible from the exterior of the Building or
from hallways or other common areas of the Building, except lettering and
numerals for identification purposes on or near doorways as approved in advance
by Lessor and standard Building signage established by Lessor and approved by
the City.
14. Alterations.
After completion of the Building, the Premises and the Lessor's Work, Lessor
will have no obligation to do any redecorating or remodeling of the Building or
the Premises.
Except for decorating changes which do not exceed $25,000 in cost and do not
adversely affect the Building's systems, exterior appearance or value, Tenant
will not make any alterations, additions or improvements in or to the Premises
without first obtaining the written consent of Lessor; provided, however, that
Lessor shall consent to nonstructural alterations or improvements or additions
to the interior of the Premises so long as the same do not adversely affect the
Building's systems, exterior appearance or value. Tenant will get Lessor's prior
written approval of any contractor or subcon tractor who is to perform
structural or systems work on the Premises at Tenant's request. All alterations
by Tenant will be constructed with new materials, in a good and workmanlike
manner, and in compliance with the plans and specifications approved by Lessor
(except for decorating changes which do not require approved plans and
specifications) and all applicable laws, ordinances, rules, orders, regulations,
or other requirements of governmental authorities. Tenant will pay for any
labor, services, materials, supplies or equipment furnished to Tenant in or
about the Premises, and will pay and discharge any mechanic's, materialmen's or
other lien against the Premises resulting from Tenant's failure to make such
payment, or will contest the lien and deposit with Lessor cash equal to 125% of
the amount of the lien. If the lien is reduced to final judgment, Tenant will
discharge the judgment and Lessor will return the cash deposited by Tenant.
Lessor may post notices of nonresponsibility on the Premises as provided by law.
All alterations, additions and improvements to the Premises made at Lessor's or
Tenant's expense, except movable office furniture and Tenant's movable trade and
office fixtures and equipment, will become the property of Lessor upon
installation and will be surrendered with the Premises upon termina tion of this
Lease unless Lessor elects otherwise in writing.
15. Utilities and Services.
Lessor will provide and maintain mains and conduits to supply water, gas,
electricity and sanitary sewer services to the Premises, and will separately
meter the Premises for gas and electrical services. Tenant will pay all charges
for sewer usage, garbage disposal, refuse removal, water, electrici ty, gas,
heating, air conditioning and ventilation costs, telephone, and any other
utility services furnished to the Premises during the Term which are not
included in Operating Costs. If any of such services are furnished by Lessor,
the cost of all such services furnished by Lessor will be a part of the
Operating Costs. Lessor will not be liable for any loss or damage resulting from
any temporary interruption of these services due to repairs, alterations or
improvements, or any variation, interruption or failure of these services due to
governmental controls, unavailability of energy, or any other cause beyond
Lessor's control. No such interruption or failure of these services will be
deemed as an eviction of Tenant or will relieve Tenant from any of its
obligations under this Lease.
If services are interrupted for a period of five consecutive days and all or a
portion of the Premises are untenantable because of the lack of services, the
Monthly Rent will abate for the period the Premises are untenantable in
proportion to the portion of the Premises which is untenantable.
16. Entry by Lessor.
Upon at least 24 hours prior notice to an officer of Tenant (except in the case
of an emergency or a showing to a prospective tenant in the last 12 months of
the Term which will require only prior notice) Lessor and its agents and
contractors and mortgagees will have the right to enter the Premises at
reasonable times for inspecting, cleaning, repairing, or exhibiting the
Premises, but Lessor will have no obligation to make repairs, alterations or
improvements except as expressly provided in this Lease. Lessor will not
knowingly disclose Tenant's trade secrets, and Tenant may require third p arties
to sign a confidentiality agreement in connection with access of third parties
to the Premises.
17. Subordination.
At the request of any mortgagee or ground lessor, this Lease will be subject and
subordinate to any mortgage or ground lease which may now or hereafter encumber
the Building, and Tenant will execute, acknowledge and deliver to Lessor any
document reasonably requested by Lessor to evidence the subor dination. Such
subordination is on the condition that this Lease and Tenant's right of
possession of the Premises as provided in this Lease will not be disturbed by
the mortgagee or ground lessor so long as Tenant is not in default under this
Lease. If the interest of Lessor is transferred to any party by reason of
foreclosure of a mortgage or cancellation of a ground lease, or by delivery of a
deed in lieu of foreclosure or cancellation, Tenant will immediately and
automatically attorn to such party. Tenant agrees that upon notification by
Lessor or any mortgagee or ground lessor having a recorded interest in the Land
of the election of a mortgagee or ground lessor to subordinate its interest in
the Premises to this Lease, this Lease will become prior to the mortgage or
ground lease.
18. Estoppel Certificates.
Within 10 days after written request from Lessor, Tenant will execute,
acknowledge and deliver to Lessor a document furnished by Lessor, which document
may be relied upon by Lessor and any prospective purchaser or mortgagee of the
Building, stating (a) that this Lease is unmodified and is in full f orce and
effect (or if modified, that the Lease is in full force and effect as modified
and stating the modifications), (b) the dates to which rent and other charges
have been paid, (c) the current Monthly Rent, (d) the dates on which the Term
begins and ends, (e) that Tenant has accepted the Premi ses and is in
possession, (f) that Lessor is not in default under this Lease, or, if Lessor is
in default, specifying any such default, and (g) including such other
information as the prospective purchaser or mortgagee may reasonably require.
19. Waiver of Claims and Assumption of Risks.
Lessor and Tenant release each other from any liability for loss or damage by
fire or other casualty coverable by a standard form of "all risk" insurance
policy, whether or not the loss or damage resulted from the negligence of the
other, its agents or employees. Each party will use reasonable eff orts to
obtain policies of insurance which provide that this release will not adversely
affect the rights of the insureds under the policies. The releases in this
Section will be effective whether or not the loss was actually covered by
insurance. Tenant assumes all risk of loss or damage of Tena nt's property
within the Premises, including any loss or damage caused by water leakage, fire,
windstorm, explosion, theft, act of any other tenant, or other cause. Lessor
will not be liable to Tenant, or its employees, for loss of or damage to any
property in the Premises.
20. Indemnification.
Tenant will indemnify Lessor and its agents and employees against all claims,
demands and actions, and all related costs and expenses (including reasonable
attorneys' fees) for injury, death, disability or illness of any person, or
damage to property, occurring in the Premises or arising out of Ten ant's use of
the Premises, except to the extent caused by the willful misconduct or
negligence of Lessor or someone acting on its behalf.
Lessor will indemnify Tenant and its agents and employees against all claims,
demands and actions, and all costs and expenses relating thereto (including
reasonable attorneys' fees), for injury, death, disability or illness of any
person or persons occurring in, on or about the Land and Building ex clusive of
the Premises, except to the extent caused by the willful misconduct or
negligence of Tenant or its officers, employees, agents or contractors or
someone acting on Tenant's behalf.
21. Insurance.
Tenant will keep commercial liability insurance covering the Premises in force
at its expense by an insurer and policy acceptable to Lessor in its reasonable
opinion. The policy will name Lessor and its mortgagee as additional insureds,
for limits of at least $2,000,000 for bodily injuries or deat h of one or more
persons and at least $500,000 for property damage. Tenant will carry fire and
"all risk" coverage insurance for Tenant's property and improvements in the
Premises. Prior to Tenant's occupancy of the Premises, Tenant will deliver to
Lessor the liability and casualty policies or ce rtificates by the insurer
showing this coverage to be in effect with premiums paid. The insurance will
provide that Lessor will be notified in writing 30 days prior to cancellation
of, material change in, or failure to renew, the insurance.
Lessor shall maintain insurance on the Building against fire and such other
risks as may be included in "all risk" coverage insurance from time-to-time
available in an amount not less than the greater of 80% of the full insurable
value of the Building or the amount sufficient to prevent Lessor from becoming a
co-insurer under the terms of the applicable policies. Such policies shall
contain a replacement cost endorsement and a clause pursuant to which the
insurance carriers waive all rights of subrogation against the Tenant with
respect to losses payable under such policies. Upon Tenant's r equest, Lessor
will provide Tenant with evidence that such insurance is in full force and
effect.
Lessor will keep commercial liability insurance covering the Land and Building
in force for limits of at least $2,000,000 for bodily injuries or death of one
or more persons and at least $500,000 for property damage. Upon Tenant's
request, Lessor will provide Tenant with evidence that such insuranc e is in
full force and effect.
All insurance policies required to be obtained by either party shall be with a
company or companies licensed to do business and write insurance in the State of
Minnesota.
22. Assignment and Subletting.
Tenant may assign this Lease or sublet all or part of the Premises only with
Lessor's prior written consent. If Tenant receives a bona fide offer for an
assignment of Tenant's interest under this Lease or to sublease all or part of
the Premises and Tenant requests Lessor's consent, a copy of the o ffer will be
furnished to Lessor. In the case of a proposed assignment or sublease of all of
the Premises, Lessor may terminate this Lease by notice to Tenant within 30 days
after Tenant's notice (which termination will be effective on the date that the
proposed assignment or sublease was to comme nce), either conditioned on
execution of a new lease between Lessor and the party making the offer on the
same terms as the offer to Tenant or without that condition. In the case of a
proposed sublease for less than all of the Premises, Lessor may amend this Lease
by notice to Tenant within 30 day s after Tenant's notice to exclude the portion
of the Premises to be subleased, either conditioned on execution of a new lease
between Lessor and the party making the offer on the same terms as in the offer
to Tenant or without that condition.
If Lessor fails to give Tenant written notice of its decision to terminate or
amend this Lease within 30 days after receiving a copy of the offer to Tenant,
Lessor will not unreasonably withhold its consent to the assignment or sublease
described in the offer and will give Tenant notice of its cons ent or refusal to
consent within said 30-day period. The provisions of this Section will be
binding on Tenant and any assignee or subtenant of Tenant and will apply to all
portions of the Premises remaining subject to this Lease and to each request by
Tenant, or its assignee or subtenant, for Less or's consent to a further or
subsequent assignment or subletting.
If Lessor consents to one or more assignments or subleases, Tenant will still
remain liable for all obligations of the Tenant under this Lease.
Lessor's interest in this Lease will be freely assignable and the obligations of
the Lessor arising or accruing under this Lease after an assignment will be
enforceable only against the assignee. Lessor shall give Tenant notice of any
assignment by Lessor within 30 days thereafter.
23. Damage or Destruction.
If the Premises or Building is damaged by Casualty, the damage (excluding damage
to improvements paid for by Tenant or trade fixtures, equipment or personal
property of Tenant) will be repaired by Lessor at its expense to a condition as
near as reasonably possible to the condition prior to the Casu alty, but if more
than 25% of the total Square Feet in the Building is rendered untenantable,
Lessor may terminate this Lease as of the date of the Casualty by giving written
notice to Tenant within 30 days after the Casualty. If this Lease is not
terminated, Lessor will begin repairs within 90 da ys after the Casualty and
complete the repairs within a reasonable time, and in any event within 180 days,
subject to acts of God, strikes and other matters not within the control of
Lessor. If Lessor fails to begin and proceed with repairs as required, Tenant
may give Lessor notice to do so. If Lessor has not begun the repairs within 30
days after Tenant's notice, Tenant may terminate this Lease by written notice to
Lessor within 15 days after expiration of the 30-day period. If this Lease is
terminated because of the Casualty, rents and other payments will be prorated as
of the terminat ion and will be proportionately refunded to Tenant or paid to
Lessor, as the case may be. During any period in which the Premises or any
portion of the Premises is made untenantable as a result of the Casualty, the
Monthly Rent will be abated for the period of time untenantable in proportion to
th e square foot area untenantable.
24. Eminent Domain.
If there is a Taking of 25% or more of the Premises or 25% or more of the total
Square Feet in the Building, or if there is a Taking of 25% or more of the
parking areas within the Common Areas or if there is a Taking of access from a
public road and Tenant's access to the Premises is materially imp aired, or
parking for the Premises does not meet City requirements, either party may
terminate this Lease as of the date the public authority takes possession, by
written notice to the other party within 30 days after the Taking. If this Lease
is so terminated, any rents and other payments will be prorated as of the
termination and will be proportionately refunded to Tenant, or paid to Lessor,
as the case may be. All damages, awards and payments for the Taking will belong
to Lessor irrespective of the basis upon which they were made or awarded, except
that Tenant will be entitled to any am ounts specifically awarded for Tenant's
trade fixtures or equipment or as a relocation payment or allowance. If this
Lease is not terminated as a result of the Taking, Lessor will restore the
remainder of the Premises to a condition as near as reasonably possible to the
condition prior to the Taki ng, the rent will be abated for the period of time
the space is untenantable in proportion to the square foot area untenantable,
this Lease will be amended appropriately to reflect the deletion of the space
taken and all rents payable hereunder and Tenant's Share of Costs shall be
proportionately reduced.
25. Defaults.
If (a) Tenant defaults in the payment of rent or other amounts under this Lease
and the default continues for 10 days after written notice by Lessor to Tenant,
(b) Tenant defaults in any other obligation under this Lease and the default
continues for 30 days after written notice by Lessor to Tenant , (c) any
proceeding is begun by or against Tenant to subject the assets of Tenant to any
bankruptcy or insolvency law or for an appointment of a receiver of Tenant or
for any of Tenant's assets and is not discharged or dismissed in 90 days, or (d)
Tenant makes a general assignment of Tenant's asse ts for the benefit of
creditors, then Lessor may, with or without terminating this Lease, cure the
default and charge Tenant all reasonable costs and expenses of doing so, or
Lessor may terminate this Lease, or Lessor may reenter or retake possession of
the Premises as provided by law, without waiv er or loss of any of Lessor's
rights under this Lease, including Lessor's right to payment of Monthly Rent.
Lessor also may terminate this Lease as to all future rights of Tenant, without
terminating Lessor's right to payment of Monthly Rent and other charges due
under this Lease.
Tenant waives any right of restoration to possession of the Premises after
termination, or after judgment in favor of Lessor for possession. If Lessor
retakes possession under this Section, Tenant promises and agrees to pay all
Monthly Rent and other charges due for the remainder of the original T erm, and
all attorneys' fees and other expenses of Lessor in retaking possession and for
releasing the Premises and preparing the Premises for occupancy, less any rental
income received by Lessor upon such retaking. If Tenant defaults in any of its
obligations under this Lease, it will promptly pa y all reasonable costs
(including attorneys' fees) of enforcing Tenant's obligations, whether or not
this Lease is terminated and whether or not suit is brought. No right or remedy
will preclude any other right or remedy, no right or remedy will be exclusive of
or dependent upon any other right or remedy, and any right or remedy may be
exercised independently or in combination.
If this Lease or Tenant's right to possession of the Premises has been
terminated under this Section, Tenant shall have the right to seek and propose
to Lessor prospective tenants to lease the Premises from Lessor or to occupy the
Premises under an assignment of this Lease or a sublease, as the ca se may be.
If Tenant makes such a proposal and this Lease is then in effect, the provisions
of Section 22 will apply. If this Lease has been terminated by reason of
Tenant's default, and Tenant proposes a new lease by Lessor to a tenant obtained
by Tenant, Lessor will give its good faith considerat ion to leasing all or a
portion of the Premises to that prospective tenant.
If Lessor fails to pay any amount owed by Lessor to Tenant pursuant to the terms
of this Lease or to pay any costs and expenses for which Lessor is obligated to
reimburse Tenant, Tenant may, at its option, pay such amount after 30 days prior
written notice to Lessor. Lessor shall reimburse Tenant for all amounts so paid
by Tenant in accordance with the provisions of this paragraph and the other
provisions of this Lease.
Any amount payable by one party to the other pursuant to the terms of this Lease
shall bear interest at the rate of 12% per annum from the date payment to the
other party was due, and shall be paid together with such interest, within the
time period specified in this Lease for such payment (or, if no such time period
is specified, within 30 days).
Tenant shall give Lessor written notice of any nonmonetary default by Lessor
under this Lease. Lessor shall have 30 days after Lessor's receipt of Tenant's
default notice to cure such default; provided, however, that if such default
cannot reasonably be cured within 30 days, Lessor shall have as m uch time to
cure such default as is necessary provided Lessor promptly commences and
diligently pursues such cure; and provided further, that if the default relates
to a matter which is of an emergency nature, the Lessor shall have only 48 hours
(or such lesser period as is reasonable under the cir cumstances) to cure such
default. If Lessor fails to cure any such default within such cure period, then
Tenant may cure the default, in which event Lessor shall reimburse Tenant for
all amounts spent on such cure together with interest as provided in the
preceding paragraph.
Each and every right and remedy contained herein shall be cumulative and in
addition to any other right or remedy given hereunder. In the event that either
party brings a legal action to enforce the terms of this Lease or to exercise
any right or remedy provided for herein, the prevailing party sh all be paid its
reasonable expenses of suit, including reasonable attorneys' fees, by the other
party.
26. Waiver of Lease Provisions.
No waiver of any provision of this Lease will be deemed a waiver of any other
provision or a waiver of that same provision on a subsequent occasion. The
receipt of rent by Lessor with knowledge of a default under this Lease by Tenant
will not be deemed a waiver of the default. Neither party will be deemed to have
waived any provision of this Lease by any action or inaction and no waiver will
be effective unless it is done by expressed written agreement signed by the
party waiving the provision. Any payment by Tenant and acceptance by Lessor of a
lesser amount than the full amount of all Monthly Rent and other charges then
due will be applied to the earliest amounts due. No endorsement or statement on
any check or letter for payment of rent or other amount will be deemed an accord
and satisfaction, and Lessor may accept such check or payment without prejudice
to its right to recove r the balance of any rent or other amount or to pursue
any other remedy provided in this Lease. No acceptance of payment of less than
the full amount due to either party will be deemed a waiver of the right to the
full amount due together with any interest and service charges.
27. Return of Possession to Lessor.
On expiration of the Term or sooner termination of this Lease, Tenant will
return possession of the Premises to Lessor, without notice from Lessor, in good
order and condition, except for ordinary wear and damage, destruction or
conditions Tenant is not required to remedy under this Lease. If Tena nt does
not return possession of the Premises to Lessor, Tenant will pay Lessor all
resulting damages Lessor may suffer and will indemnify Lessor against all claims
made by any new tenant of all or any part of the Premises. Tenant will give
Lessor all keys for the Premises and will inform Lessor of combinations on any
locks and safes on the Premises. Any property left in the Premises after
expiration or termination of this Lease or after the Premises have been vacated
by Tenant will become the property of Lessor to dispose of as Lessor chooses.
28. Holding Over.
If Tenant remains in possession of the Premises after expiration of the Term
without a new lease, it may do so only with written consent by Lessor, and any
such holding over will be from month-to-month subject to all the same provisions
of this Lease, except that the Monthly Base Rent will be the Monthly Base Rent
stated in Lessor's consent if a new Monthly Base Rent is stated, or 150% of the
Monthly Base Rent under this Lease if no new Monthly Base Rent is stated in
Lessor's consent. Any holding over without Lessor's consent will be at double
the Monthly Rent under this Lease. The month-to-month occupancy may be
terminated by Lessor or Tenant on the last day of any month by at least 30 days'
prior written notice to the other.
29. Brokers.
Lessor and Tenant represent and warrant one to another that neither of them has
employed or otherwise used any broker or agent in relation to this Lease except
for Brian Doyle of Welsh Companies, whose commission will be paid by Lessor.
Lessor will indemnify and hold Tenant harmless, and Tenant will indemnify and
hold Lessor harmless, from and against any claims for brokerage or other
commissions or fees arising out of any breach of the foregoing representation
and warranty by the respective indemnitors.
30. Notices.
Any notice under this Lease will be in writing, and will be personally delivered
or sent by prepaid certified mail, or by facsimile confirmed by certified mail,
addressed to Tenant at 2505 Kennedy Street N.E., Minneapolis, Minnesota 55413
(Fax No.: 331-3826) Attn: Vice President of Finance and Admi nistration, prior
to Tenant's occupancy of the Premises and thereafter at the Premises, and to
Lessor at 1550 Utica Avenue South, Suite 120, St. Louis Park, Minnesota 55416
(Fax No.: 542-9297), or to such other address as is designated in a notice given
under this Section. A notice will be deemed given on the date mailed. Lessor's
statements of Costs and other routine mailings to tenants need not be sent by
certified mail.
31. Governing Law.
This Lease will be construed under and governed by the laws of Minnesota. If any
provision of this Lease is illegal or unenforceable, it will be severable and
all other provisions will remain in force as though the severable provision had
never been included, and any action by either party against the other will be
brought in Hennepin County District Court or Federal District Court for
Minnesota, 4th Division.
32. Entire Agreement.
This Lease contains the entire agreement between Lessor and Tenant regarding the
Premises. Tenant agrees that it has not relied on any statement, representation
or warranty of any person except as set out in this Lease. This Lease may be
modified only by an agreement in writing signed by Lessor and Tenant. No
surrender of the Premises, or of the remainder of the Term, will be valid unless
accepted by Lessor in writing.
33. Successors and Assigns.
All provisions of this Lease will be binding on and for the benefit of the
successors and assigns of Lessor and Tenant, except that no person or entity
holding under or through Tenant in violation of any provision of this Lease will
have any right or interest in this Lease or the Premises.
34. I-394 Traffic Zoning Ordinance.
The Cities of Golden Valley and St. Louis Park have established an I-394 Traffic
Zoning Ordinance. It will require traffic management plans for traffic generated
by this and certain adjacent developments when certain conditions occur. Under
such conditions it will restrict traffic generated by th ese developments. The
plan is intended to promote improved traffic circulation and reduce pollution
and congestion, particularly during peak times, for all users of city streets.
The traffic management plans prepared by the owners may require the use of
rideshare incentive programs, public transit incentives, bicycle and pedestrian
incentive measures, variable work hours or flex-time programs under which
employees are required to stagger their work hours, measures to reduce reliance
on single occupying vehicles, shared parking and the like. A copy of the
complete ordinance may be obtained by calling the city offices of Golden Valley
or St. Louis Park.
35. Renewal Options.
Lessor grants Tenant the option ("Renewal Option") to extend the term of this
Lease for two additional periods of three Lease Years each (the "Renewal
Periods"), commencing immediately upon the expiration of the Term and expiration
of the first Renewal Period (as the case may be), subject to the following
conditions:
(a) This Lease is in full force and effect and Tenant is not in default or
curing the default during any applicable cure period under this Lease
at the time the Renewal Option is exercised and at the commencement of
the Renewal Period.
(b) Tenant gives Lessor prior written notice of Tenant's election to
exercise the Renewal Option at least 12 months before the expiration
of the Term or the first Renewal Period, as the case may be. Failure
of Tenant to deliver timely notice of its election to exercise the
Renewal Option will cons titute Tenant's waiver of its right to renew
the Lease.
(c) The Monthly Base Rent for the Renewal Period will be 90% of the
monthly fair market rent ("Fair Market Rent") for the Premises at the
commencement of the Renewal Period, considering all provisions of this
Lease and the rates for comparable space in a comparable building if
leased subject to the same provisions as this Lease, and considering
any tenant improvements allowances and other inducements which are or
are not included, and assuming a willing Lessor and a willing tenant
each of which is under no obligation to lease the space.
The Fair Market Rent shall be determined as follows: Within 30 days
after Lessor receives notice from Tenant regarding Tenant's election
to exercise the Renewal Option, Lessor will give notice to Tenant of
Lessor's determination of the Fair Market Rent of the Premises, and
Lessor's determination will constitute the Fair Market Rent unless
Tenant objects in writing within 30 days after Tenant's receipt of
Lessor's notice. If Tenant so objects, and the parties are unable to
agree upon the Fair Market Rent within 30 days after the Tenant's
objection, then by written notice to Lessor within 1 0 days thereafter
Tenant may rescind its exercise of the option to renew. If such notice
of recision is not given, Tenant will be deemed to have requested
arbitration of the Fair Market Rent under this paragraph, in which
case the Fair Market Rent will be determined by appraisal within 120
days a fter Tenant's objection notice by a board of appraisers
consisting of three reputable real estate appraisers (each an
"Expert"), each of whom is a member of the American Institute of Real
Estate Appraisers with the designation of "MAI" and each of whom has
at least 10 years experience with real est ate appraising in the
Minneapolis metropolitan area. One Expert will be appointed by Tenant,
and the second Expert will be appointed by Lessor. The third Expert
will be appointed by the first two Experts. If the first two Experts
are unable to agree on a third Expert within 10 days after the appo
intment of the second Expert, or if either party refuses or neglects
to appoint an Expert as herein provided within 10 days after the
appointment of the first Expert, then the third Expert or the second
Expert, whose appointment was not made as provided above, may be
appointed by the chief judge of the Hennepin County District Court. If
determinations of at least two of the Experts are identical in amount,
that amount will be determined to be the Fair Market Rent. If the
determinations of all three Experts are different in amount, the
highest appraised value will be averaged with the middl e value (that
average being referred to as "Sum A"). The lowest appraised value will
be averaged with the middle value (that average being referred to as
"Sum B"), and the Fair Market Rent will be determined as follows: (i)
if neither Sum A nor Sum B differs from the middle appraised value by
mor e than 10% of the middle appraised value, then the Fair Market
Rent will be the average of the three appraisals, (ii) if either Sum A
or Sum B (but not both) differs from the middle appraised value by
more than 10% of the middle appraised value, then the Fair Market Rent
will be the average of the middle appraised value and the appraised
value closer in amount to the middle appraised value, and (iii) if
both Sum A and Sum B differ from the middle appraised value by more
than 10% of the middle appraised value, then the Fair Market Rent will
be equal to the middle appraised value. Written not ice of the Fair
Market Rent as duly determined in accordance with this Section shall
be promptly given to Lessor and Tenant and will be binding and
conclusive on them. Each party will bear its own expenses in
connection with the board proceeding (including the Expert appointed
by it), and the fees of the third Expert will be borne equally. If,
for any reason, the Fair Market Rent has not been determined at the
time of the commencement of the Renewal Period, then the Fair Market
Rent will be the amount set forth in Lessor's determination, and if
the determination of the Experts as provided above indicates that a
lesser or greater amount should have been paid than that which was
actually paid, a proper adjustment will be made in a payment from
Lessor to Tenant, or Tenant to Lessor, as the case may be. If a refund
of an overpayment is owing from Lessor and the refund is not made by
Les sor, Tenant may deduct the overpayment from the Monthly Rent.
(d) All of the other terms, covenants and conditions applicable to the
Renewal Period, including Costs, shall be the same as set forth in
this Lease, except that there will be no further option to extend the
Term after the second Renewal Period, and no provisions of this Lease
relating to leasehold improvements, allowances, or other incentives or
concessions, if any, will apply to any Renewal Period, unless
hereafter agreed upon between the parties in writing.
(e) On written request by Tenant no more than 30 days prior to the date
Tenant's notice to extend must be given, Lessor will provide Tenant
with the monthly base rental rate it would charge for the Premises
under paragraph (c) above.
(f) At the request of either, Lessor and Tenant will execute and deliver
appropriate document(s) setting forth all of the terms, covenants and
conditions applicable to the Renewal Period.
(g) The rights of Tenant under this Section shall not be severed from the
Lease or separately sold, assigned or transferred, and will expire in
accordance with the provisions of this Section, or upon the expiration
or earlier termination of this Lease.
36. Phase I Expansion Option.
Tenant shall have the option to add to the Premises effective July 1, 1999 (or
such earlier date as may be approved by Lessor) all of the remaining space in
the Building ("Expansion Space"), if all of the following requirements are met:
(a) This Lease is in full force and effect and Tenant is not in default
under this Lease.
(b) Tenant has not assigned this Lease and on July 1, 1999 no portion of
the Premises described in this Lease is subleased to another party.
(c) Tenant leases from Lessor all of the Expansion Space.
(d) Tenant delivers to Lessor written notice exercising its right to lease
the Expansion Space on or before October 1, 1998.
If Tenant's notice is not given by the date set forth in item (d) of this
Section, Tenant shall have no further right to lease the Expansion Space. The
Monthly Base Rent will be 90% of the Fair Market Rent (as defined in and
determined under Section 35) for the Expansion Space on July 1,1999, considering
the rates for comparable space in a comparable building if leased subject to the
same provisions as this Lease, and considering any tenant improvements or
allowances and other inducements which are or are not included, and assuming a
willing Lessor and a willing tenant each of which is under no obligation to
lease the space.
On written request by Tenant no more than 30 days prior to the date Tenant's
notice to expand must be given, Lessor will provide Tenant with a proposal
setting forth information regarding any existing leasehold improvements in the
Expansion Space, any new improvements Lessor proposes to construct i n the
Expansion Space for Tenant, and the monthly base rental rate Lessor would
propose to charge for the Expansion Space under this Section.
All terms and provisions of this Lease other than the Monthly Base Rent,
Lessor's Work and any expansion rights other than those set forth in this
Section and Section 37 shall be applicable to Expansion Space which is added to
the Premises, and this Lease shall expire or otherwise terminate with re spect
to the Expansion Space at the same time it expires or otherwise terminates with
respect to the remainder of the Premises.
The rights of Tenant under this Section shall not be severed from the Lease or
separately sold, assigned or transferred, and will expire in accordance with the
provisions of this Section, or upon the expiration or earlier termination of
this Lease.
37. Phase II Expansion Option.
Lessor intends to construct a second building as a part of its Golden Hills
Development (the "Phase II Building"), and intends to have at least 30,000
Square Feet of space in the Phase II Building (the "Phase II Space") available
for occupancy by Tenant on or before July 1, 2002. For purposes of this Section,
the term Phase II Space will mean any space in the Phase II Building consisting
of a single block of 30,000 Square Feet in the Phase II Building (which may or
may not be contiguous to the Building) which is available for leasing to Tenant
effective July 1, 2002.
Tenant shall have the option at any time to add the Phase II Space to the
Premises effective July 1, 2002 (or such earlier date as may be approved by
Lessor in writing), if all of the following requirements are met:
(a) This Lease is in full force and effect and Tenant is not in default
under this Lease.
(b) Tenant has exercised its option to lease the Expansion Space under
Section 36.
(c) Tenant has exercised its first three-year Renewal Option under Section
35.
(d) Tenant has not assigned this Lease and on July 1, 2002 no portion of
the Premises or Expansion Space is subleased to another party.
(e) Tenant leases from Lessor all of the Phase II Space.
(f) Tenant delivers to Lessor written notice exercising its right to lease
the Phase II Space on or before October 1, 2001.
If Tenants notice is not given by the date set forth in the preceding paragraph,
Tenant shall have no further right to lease the Phase II Space.
On written request by Tenant no more than 30 days prior to the date Tenant's
notice to expand must be given, Lessor will provide Tenant with a proposal
setting forth information regarding any existing leasehold improvements in the
Phase II Space, any new improvements Lessor proposes to construct in the Phase
II Space for Tenant, and the monthly base rental rate Lessor would propose to
charge for the Phase II Space under this Section.
If Tenant exercises the Phase II Space option, the lease of the Phase II Space
under this Section will contain the following:
(1) The Monthly Base Rent will be Fair Market Rent (as defined in and
determined under Section 35) for the Phase II Space on July 1, 2002,
considering the rates for comparable space in a comparable building
constructed at approximately the same time as the Phase II Building,
if leased subject to th e same provisions as this Lease, and
considering any tenant improvements or allowances and other
inducements which are or are not included, and assuming a willing
Lessor and a willing tenant each of which is under no obligation to
lease the space.
(2) Taxes and Operating Expenses will be determined in the manner set out
in this Lease.
(3) The commencement date for the lease will be July 1, 2002 or such other
date as may be agreed upon by the parties in writing.
(4) The Term will end on the expiration or earlier termination of this
Lease as extended by the first three-year Renewal Option referred to
Section 35.
(5) Tenant will take the space in an "as_is" condition with all
improvements to be Tenant's responsibility at Tenant's cost, unless
otherwise agreed upon in writing by Lessor and Tenant, in which case
the costs of such improvements will be taken into account in
determining the Monthly Base Rent.
(6) All other terms and conditions will be the same as contained in this
Lease, except that there will be no rent concessions, inducements,
allowances, or similar provisions applicable to the Phase II Space,
unless otherwise agreed upon in writing by Lessor and Tenant, in which
case the costs there of will be taken into account in determining the
Monthly Base Rent.
If on January 1, 2002 Tenant is leasing all of the rentable space in the
Building and if the Phase II Space has not been constructed prior to January 1,
2002, Tenant may give Lessor notice that Tenant intends to terminate this Lease
effective February 28, 2003 if the Phase II Space is not constructed and
available for leasing to Tenant prior to December 31, 2002. If Lessor has not
completed construction of the Phase II Space prior to December 31, 2002, Tenant
may terminate this Lease effective February 28, 2003 by written notice to
Lessor.
The rights of Tenant under this Section shall not be severed from the Lease or
separately sold, assigned or transferred, and will expire in accordance with the
provisions of this Section, or upon the expiration or earlier termination of
this Lease.
38. Antennas.
Tenant will have the right to use the roof of the Building for the installation
and operation of antennas and related facilities ("Antennas"), subject to the
prior written approval of Lessor as to the location, nature, design, appearance
and size of the Antennas. If Antennas are installed by Tenan t, Tenant will not
commit or permit any act or omission which results in the violation of any law,
governmental regulation, or insurance policy of Lessor, relating to the
Building. Tenant will not permit any conduct or condition which may unduly
disturb or endanger occupants of any other building.
Any installation of Tenant's Antennas ("Antenna Work") will be completed by
Tenant, at Tenant's expense, in strict accordance with plans approved in writing
by Lessor, and no modifications, additions or alterations will be made without
Lessor's prior written consent, which consent will not be unre asonably
withheld. Aesthetic concerns will be deemed valid reasons for withholding
consent. All working drawings for Antenna Work will be prepared by Tenant at
Tenant's expense and will be submitted to Lessor for approval. All Antenna Work
will be done in a good and workmanlike manner and as exp editiously as possible.
Tenant's installation and use of the Antennas will be subject to the following
(the "Conditions"):
(a) No Antennas may be installed without Lessor's prior written approval.
Lessor's approval will not be unreasonably withheld or delayed so long
as the work complies with the plans approved by Lessor and Tenant is
not in default under this Lease and so long as all other conditions
set forth in thi s Section are met.
(b) Tenant will submit the working drawings for the Antenna Work and the
Antennas to Lessor at least 20 days before the date the Antenna Work
is to commence.
(c) Tenant will provide Lessor with evidence acceptable to Lessor that the
Antennas and their proposed installation comply with all applicable
laws, ordinances, rules and regulations, and that Tenant has obtained
any licenses, permits or other governmental consents or approvals
required for the ins tallation or use of the Antennas and the other
Antenna Work.
(d) Upon request, Tenant will provide Lessor with evidence acceptable to
Lessor that the Antennas are owned or leased by Tenant and that the
installation of the Antennas will comply with all provisions of this
Lease relating to alterations.
(e) Tenant will promptly pay all costs of the Antenna Work and the
Antennas and any construction, installation, repair, maintenance, or
governmental approval or licensing costs associated with the Antenna
Work and the Antennas.
(f) Tenant will provide Lessor with evidence that the Antennas if owned by
Tenant are insured against fire, theft and other risks normally
covered by an "all risk" policy of casualty insurance, and evidence
that the Tenant's liability insurance required under this Lease
applies to all of the Antenn as and their installation, use,
maintenance and repair.
(g) Neither the Antennas nor their installation, use, maintenance or
repair shall:
(1) be disruptive or disturbing to tenants of any other building by
reason of noise, vibration, radio or electromagnetic
interference, or similar cause, or to Lessor's operation or
maintenance of the Land or Building or other buildings,
(2) be architecturally or aesthetically inharmonious with the Land or
Building,
(3) affect the structural or mechanical integrity of the Building or
the operation or maintenance of the systems serving the Building
or serving other buildings,
(4) increase the insurance costs for the Building (except for costs
to be paid solely by Tenant),
(5) endanger the safety or well-being of Lessor, any tenant of any
other building, or any employees or invitees of Lessor or any
other tenant.
(h) Tenant agrees to comply with and obtain all necessary approvals,
permits, licenses, etc., required by the Federal Communications
Commission (the "FCC") and any other governmental authorities
asserting jurisdiction over the installation or operation of any of
Tenant's Antennas. Tenant warrants, represents and agrees that the
installation and operation of the roof installations shall in no way
materially interfere with the operation of any other Building system
or antenna system(s) presently in operation in or on the Building and
that in the event such interference should occur, Tenant, a fter
having received notice of such interference, will take immediate
action to eliminate said interference and restore the proper operation
of such system(s) as required by law or directive of the FCC. In the
event that Tenant fails to eliminate the interference as required by
law or directive of the FCC within a reasonable time, Lessor may, at
its discretion, (a) cure such interference and thereafter add the cost
and expense incurred by Lessor therefor to the next Monthly Rent to
become due and Tenant shall pay said amount as additional Monthly
Rent, or (b) treat such failure on the part of Tenant to eliminate
said interference, as required by the FCC within the time allotted by
the FCC, as a default under this Lease.
Tenant agrees to indemnify and hold Lessor harmless from and against
any claims and expenses Lessor may incur arising from Tenant's failure
to comply with the Conditions or the rules and orders of the FCC with
respect to the installation and operation of any of Tenant's antennae
or antenna system( s).
39. Memorandum of Lease.
Neither party shall record this Lease, but on the request of either party the
parties will executed a Memorandum of Lease for purposes of giving record notice
of this Lease.
40. Miscellaneous
(a) Captions. The captions of this Lease are for convenience and ease of
reference only, and in no way define, limit or describe the scope or
intent of this Lease, nor in any way affect this Lease, and shall be
disregarded in the interpretation hereof.
(b) Severable. If any provisions of this Lease shall be declared invalid
or unenforceable, the remainder hereof shall remain unaffected thereby
and shall continue in full force and effect.
(c) Interpretation. It is acknowledged that in preparation of this Lease,
indistinguishable contributions have been made by representatives of
both Lessor and Tenant, and that Lessor and Tenant each waives any and
all rights, either at law or in equity, to have this Lease, or any
term or provision herein contained, construed in favor of either party
over the other by reason of who drafted the same.
(d) Entire Agreement. This Lease, including any rider or addendum attached
hereto, contains the entire and only agreement between the parties
hereto with respect to the Leased Premises; and no oral statements,
agreements or representations not embodied in this lease shall have
any force or effect. This lease shall not be modified or amended in
any manner except in writing, by instrument executed by both parties.
(e) Interpretation of Terms. All personal pronouns used in this agreement
shall include the other genders whether used in masculine or feminine
or neuter gender, and the singular shall include the plural whenever
and as often as may be appropriate.
(f) No Partnership. This Lease does not create the relationship of
principal and agent or of partnership or of joint venture or of any
association between Lessor and Tenant, the sole relationship between
the parties being that of landlord and tenant. The laws of the State
of Minnesota shall govern the validity, performance and enforcement of
this lease.
(g) Corporate Authority. Each individual executing this Lease on behalf of
Lessor and Tenant represents and warrants that he or she is duly
authorized to execute and deliver this Lease on behalf of the
corporation for which he or she has signed.
41. Parking.
In conjunction with construction of the Building, Lessor shall initially
construct the parking lot as shown on the Site Plan, which Landlord covenants
and agrees shall contain a minimum of 255 vehicular parking spaces. In the event
that Lessor determines that total loading dock requirements in the rear of the
Building for Tenant and other tenants of the Building are less than the areas
available for loading docks as shown on the Site Plan, Lessor shall reconfigure
the parking at the rear of the Building to provide the maximum number of parking
spaces reasonably possible within the paved are a shown on the Site Plan in view
of the reduced loading dock requirements and other relevant circumstances.
Lessor acknowledges that upon commencement of the Term, Tenant shall require,
and Landlord shall provide, a minimum of 230 parking spaces available for use by
Tenant and Tenant's invitees, c ustomers and employees. Lessor further agrees
that in its leases with other tenants of the Building, Lessor will limit
collective use of the parking area as shown on the Site Plan by such other
tenants to the difference between the total number of parking spaces constructed
within the parking area s shown on the Site Plan plus any additional parking
spaces at the rear of the Building, and the 230 parking spaces to be available
for Tenant, such that at least 230 parking spaces shall at all times remain
available for use by Tenant, and its invitees, customers and employees.
If Tenant exercises the Phase I Expansion Option set forth in Section 36 of this
Lease then, prior to the addition of the Expansion space to the Premises (as
contemplated in Section 36 hereof), Lessor shall reconfigure the parking spaces
in the rear of the Building to provide for a total of at leas t 330 parking
spaces on the Land for use by Tenant, or such lesser number as may be possible
in view of other facilities in that area designed for Tenant's use, while also
accommodating semitruck trailer traffic to the two loading docks to be
constructed at the rear of the Building for Tenant's use as shown on the Site
Plan. The final plans for such reconfiguration shall be submitted to Tenant for
Tenant's review and approval no later than April 1, 1999, and such approval
shall not be unreasonably withheld.
Notwithstanding any other provision in this Section 41 or in this Lease to the
contrary, Lessor shall not, without the prior written consent of Tenant,
reconfigure the parking areas in any manner that either (a) restricts access to
Tenant's loading docks by semitruck or other delivery vehicles; or (b) reduces
the number of parking spaces available for Tenant's use below the numbers set
forth in this Section 41.
At Tenant's option, Tenant may install "visitor parking only" signs with respect
to the nine (9) parking spaces at the front entrance of the Building as shown on
the Site Plan.
Lessor and Tenant have executed this Lease to be effective as of the date stated
in the first paragraph of this Lease.
Tenant: Lessor:
CYBEROPTICS CORPORATION MEPC AMERICAN PROPERTIES INC.
By By
Its Its
And And
Its Its
EXHIBIT A-1
SITE PLAN
EXHIBIT A-2
BUILDING ELEVATION DRAWINGS
EXHIBIT A-3
PREMISES
[Attach most current floor plan of Premises available
and identify the "Warehouse Space"]
EXHIBIT B
LAND
That part of Lot 2, Block 1, Golden Hills West 2nd Addition, according to the
recorded plat thereof, Hennepin County, Minnesota, shown in the Site Plan
attached to this Lease as Exhibit A-1.
EXHIBIT C
RULES AND REGULATIONS
1. Tenant will not use the Premises in any manner which conflicts with any
law, ordinance, or governmental rule or regulation now or subsequently in
force.
2. Tenant will not install any awnings or other attachments or structures on
the exterior of the Building.
3. Curtains, draperies or other window coverings will not be installed in the
Premises without first obtaining written approval by Lessor of the exterior
color and material.
4. Tenant will not operate or permit to be operated in the Premises any sound
producing equipment or device which can be heard outside the Premises.
5. Tenant will not bring or permit to be brought into the Building any animals
or birds.
6. Tenant will not disturb, solicit or canvass any occupant of the Building
and will cooperate to prevent same.
7. Lessor may designate the maximum weight and proper position of any heavy
equipment, including safes and large files to be placed in the Building,
and only those which in the opinion of Lessor will not damage the floors,
structures or elevators may be moved into the Building.
8. Any damage in connection with the moving or installing of Tenant's
furniture, equipment, appliances or other articles will be paid for by
Tenant.
9. Lessor may at its option set aside a parking area to be used by Tenant and
its employees, which area will be used by Tenant and its employees to the
exclusion of other areas.
10. Tenants will not locate furnishings or cabinets adjacent to mechanical or
electrical access panels or over air conditioning outlets so as to prevent
operating personnel from servicing such units as routine or emergency
access may require.
11. No portion of the Building shall be used for the purpose of lodging rooms
or sleeping quarters.
EXHIBIT D
PLANS AND SPECIFICATIONS
Those certain plans and specifications prepared by Weld Ransom Design consisting
of 17 pages dated August 25, 1995, and a lighting plan prepared by Edward Farr
Architects, Inc. dated August 29, 1995.
EXHIBIT E
OUTLINE BUILDING SPECIFICATIONS
EXHIBIT F
ENVIRONMENTAL REPORTS
"Supplemental Data to Phase II Investigation Report Former Bury & Carlson
Asphalt Plant Site, 6008 Wayzata Blvd., Golden Valley" June 12, 1995, Dahl &
Associates, Inc.
"Phase II Investigation Report Former Bury & Carlson Asphalt Plant" January 24,
1995, Dahl & Associates, Inc. Dahl & Associates, Inc.
"Subsurface Investigation Report Former Bury & Carlson Asphalt Plant (MPCA Site
ID# LEAK 00003598)" April 29, 1992, Braun Intertec Environmental, Inc.
"1991 Annual Report for Continued Groundwater Monitoring Former Bury & Carlson
Asphalt Plant" April 29, 1992, Braun Intertec Environmental, Inc.
"A Report to City of Golden Valley 1990 Annual Report Former Bury & Carlson
Asphalt Plant" May 23, 1991, Braun Intertec Environmental, Inc.
"Underground Storage Tank Excavation Former Bury & Carlson Asphalt Plant" August
30, 1990, Braun Intertec Environmental, Inc.
"EG-292 Site Study and Closure Plan Bury & Carlson Asphalt Plant Property Golden
Valley, Minnesota" September 20, 1989, Braun Environmental Laboratories, Inc.
"EG-168 Environmental Evaluation Bury Carlson Site Golden Valley Minnesota" June
28, 1989, Braun Environmental Laboratories, Inc.
"Contaminated Soil Excavations Bury & Carlson Asphalt Plant" December 1, 1987,
Braun Environmental Laboratories, Inc.
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