Exhibit 10.3
SECOND AMENDMENT OF LEASE
THIS SECOND AMENDMENT OF LEASE is made as of May 10, 1995, by and between
Rushmore Plaza Partners Limited Partnership, a South Dakota limited partnership
("Landlord") and Select Comfort Corporation, a Minnesota corporation ("Tenant").
RECITALS:
a. Opus Corporation, a Minnesota corporation ("Opus"), as Landlord's
predecessor in title, and Tenant made and entered into that certain Net Lease
Agreement dated December 3, 1993, with respect to the following described
property situated in the City of Plymouth, Hennepin County, Minnesota:
Xxx 0, Xxxxx 0, Xxxx Xxxxx Xxxxxxxx Xxxx 0xx Addition.
The above described land ("Land") has been improved with certain improvements
("Improvements"), which Land and Improvements are referred to as the "Demised
Premises".
b. By Amendment of Lease made and entered into August 10, 1994, by Opus
and Tenant, said parties amended the December 3, 1993 Net Lease Agreement. The
December 3, 1993 Net Lease Agreement, as amended by the August 10, 1994
Amendment of Lease, is hereinafter referred to as the "Lease".
c. Section 3.1 of the Lease provides for the payment of Basic Rent.
Basic Rent currently payable under the Lease is set forth on Schedule A hereto.
Section 20.27 of the Lease provides Tenant a right to terminate the Lease as of
May 31, 1997, provided Tenant complies with the conditions for early termination
as set forth in Section 20.27, which conditions include payment of a lease
termination payment (the "Termination Payment") representing the unamoritized
cost of the Improvements.
d. Tenant desires to have additional improvements (the "Additional
Improvements") made to the Demised Premises, as contemplated by, and as
described in, that certain Design/Build Construction Contract made May 10, 1995
(the "Construction Contract") by the between Landlord and Opus. Landlord is
willing to enter into the Construction Contract and to otherwise provide for the
construction of the Additional Improvements, provided Tenant agrees to reimburse
Landlord for the agreed upon $565,739.00 cost thereof and associated financing
and legal costs (collectively, the Additional Improvements Cost) through an
increase in the amount of the Basic Rent, and provided further that Tenant
agrees to an increase in the amount of the Termination Payment.
e. The parties desire to enter into this Second Amendment of Lease to
amend the Lease to reflect the foregoing, and to make certain other amendments
to the Lease.
NOW, THEREFORE, IT IS AGREED by and between Landlord and Tenant, for
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, as follows:
1. CONSTRUCTION OF ADDITIONAL IMPROVEMENTS. Landlord agrees to cause the
construction of the Additional Improvements in accordance with the terms and
conditions of the Construction Contract and in accordance with the working
drawings and base building specifications as are listed on Exhibit A to the
Construction Contract; provided, however, Landlord shall not be required to
authorize Change Orders which would increase the Contract Sum above the agreed
upon amount of $565,739.00. Tenant agrees to cooperate with Opus and Landlord
in the construction of the Additional Improvements and to make every reasonable
effort to conduct its business in such a way as will cause as little
interference as possible with the construction of the Additional Improvements.
Further, Tenant agrees to supervise the construction of the Additional
Improvements and to otherwise take an active role in ensuring that the
construction of the Additional Improvements complies with the plans and
specifications therefor, which plans and specifications were prepared with the
participation of Tenant, and which plans and specifications have been approved
by Tenant.
2. BASIC RENT. Commencing with the first day of the month following the
date of substantial completion of the Additional Improvements, as such date is
determined by Landlord and Opus, Tenant agrees to pay increased installments of
monthly Basic Rent, which increased installments of monthly Basic Rent will be
that amount necessary to pay, on a level monthly basis, the Basic Rent now
provided for in the Lease, plus the amount necessary to amortize, over the
remaining period of the Initial Term, the Additional Improvements Cost with
interest calculated at an annual rate of 11% (Interest calculations shall be
based on the assumption of twelve 30-day months per year, at a monthly
compounded rate of .8735%.) Schedule B sets forth an example of the calculation
of the level monthly installments of Basic Rent that would be payable by Tenant
following substantial completion of the construction of the Additional
Improvements.
3. TERMINATION PAYMENTS. The Termination Payment shall be increased by
the amount necessary to reimburse Landlord for the unamortized portion of the
Additional Improvements Cost. Schedule B hereto also sets forth an example of
the calculation that would be made to determine the increased Termination
Payment due Landlord, should Tenant duly elect to exercise its right of early
termination following the construction of the Additional Improvements.
4. INITIAL TERM. The Initial Term of the Lease is from and including
June 6, 1994, through and including May 31, 2004.
5. SECURITY DEPOSIT. Section 3.6 of the Lease is hereby deleted, and the
following shall be inserted in place thereof:
Section 3.6 Security Deposit. Tenant has paid a security deposit in
the amount of $257,833.00 to be increased or decreased as provided
below (the "Security Deposit"). The Security Deposit shall be held by
Landlord as security for the performance by Tenant of Tenant's
covenants and obligations under this Lease. Such deposit shall not be
considered an advance payment of Base Rent or Additional Rent or a
measure of Landlord's damages in case of default of Tenant. If
Tenant's net worth as of June 30, 1995, is less than $2,842,000, or if
Tenant's
net income before taxes for the twelve month period ending
June 30, 1995 is less than $456,000, Tenant shall, by no later than
August 15, 1995, deposit an additional $73,667 with Landlord. If
Tenant's net worth as of June 30, 1995, is over $3,474,000, and
Tenant's net income before taxes for the twelve month period ending
June 30, 1995, is $557,000 or more, then, by no later than August 15,
1995, Landlord shall refund to Tenant $26,833 of the Security Deposit.
Upon the occurrence of any Event of Default by Tenant, Landlord may,
from time to time, without prejudice to any other remedy, use the
Security Deposit to the extent necessary to make good any arrearages
of Base Rent, Additional Rent and any other damage, injury, expense or
liability caused to Landlord by such Event of Default. Following any
such application of the Security Deposit, Tenant shall pay to Landlord
on demand the amount so applied in order to restore the Security
Deposit to its original amount. Provided there exists no Event of
Default hereunder, any remaining balance of the Security Deposit shall
be returned by Landlord to Tenant upon expiration or earlier
termination of this Lease. If Landlord transfers its interest in the
Demised Premises during the term of this Lease, Landlord may assign
the Security Deposit to the transferee and thereafter shall have no
further liability for the return of the Security Deposit. Landlord
shall pay interest on the Security Deposit at the rate of six percent
per annum, payable semi-annually on July 1 and January 1 of each year
during the term, except that, if there is an uncured Event of Default
hereunder, interest shall be added to the Security Deposit. If at the
end of the fifth year of the Initial Term of this Lease, Tenant's net
worth exceeds $3,474,000, Landlord shall reduce the Security Deposit
to $110,499.00
6. NOTICE. Section 20.4 of the Lease is amended to provide that notices
to the Landlord shall be sent to the following address:
Rushmore Plaza Partners Limited Partnership
0000 XXX Xxxxxx
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
7. LEASE INTERPRETATION. Attached hereto are true and correct copies of
the December 3, 1993 Lease between Opus and Tenant, and of the August 10, 1994
Amendment of Lease made by Opus and Tenant. Capitalized terms used in this
Second Amendment of Lease, and not otherwise defined herein, shall have the
meanings set forth in the Lease. Except as amended by this Second Amendment of
Lease, the Lease is hereby ratified and confirmed, and the provisions thereof
shall remain in full force and effect.
Rushmore Plaza Partners Limited
Partnership, a South Dakota limited
partnership
By: Xxxxxxxxx Rushmore Plaza Civic
Center, Inc.
Its: General Partner
By: /s/
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Its: Vice President
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Select Comfort Corporation,
a Minnesota corporation
By: /s/
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Its: CFO
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SCHEDULE A
TO THE SECOND AMENDMENT OF LEASE
BASIC RENT PAYMENT SCHEDULE BEFORE SECOND AMENDMENT
Payments Due During the 12 month period Monthly Basic Rent Annual Basic Rent
01-Jun-94 31-May-95 $ 42,267.75 $ 507,213.00
01-Jun-95 31-May-96 $ 42,267.75 $ 507,213.00
01-Jun-96 31-May-97 $ 39,193.83 $ 470,326.00
01-Jun-97 31-May-98 $ 40,601.83 $ 487,222.00
01-Jun-98 31-May-99 $ 40,601.83 $ 487,222.00
01-Jun-99 31-May-2000 $ 40,601.83 $ 487,222.00
01-Jun-2000 31-May-2001 $ 46,068.17 $ 552,818.00
01-Jun-2001 31-May-2002 $ 46,068.17 $ 552,818.00
01-Jun-2002 31-May-2003 $ 49,546.75 $ 594,561.00
01-Jun-2003 31-May-2004 $ 49,546.75 $ 594,561.00
SCHEDULE B
TO THE SECOND AMENDMENT OF LEASE
1. EXAMPLE OF BASIC RENT CALCULATION
Assumptions:
Substantial Completion Date: 15-Jul-95
Improvement Cost: $ 565,739.00
Legal & Financing Cost: $ 15,000.00
Other key parameters:
Annual Interest Rate 11.0000%
Monthly Interest Rate 0.8735%
Project Costs $ 580,739.00
Revised Lease Payment $ 51,374.01 per month
$ 616,488.07 annually
1st New Lease Payment Due 01-Aug-95
Payments Due During Current Basic New Basic Rent Net Change in
the 12 month* period Rent Basic Rent
01-Aug-95 31-May-96 $ 422,677.50 $ 513,740.06 $ 91,062.56
01-Jun-96 31-May-97 $ 470,326.00 $ 616,488.07 $ 146,162.07
01-Jun-97 31-May-98 $ 487,222.00 $ 616,488.07 $ 129,266.07
01-Jun-98 31-May-99 $ 487,222.00 $ 616,488.07 $ 129,266.07
01-Jun-99 31-May-2000 $ 487,222.00 $ 616,488.07 $ 129,266.07
01-Jun-2000 31-May-2001 $ 552,818.00 $ 616,488.07 $ 63,670.07
01-Jun-2001 31-May-2002 $ 552,818.00 $ 616,488.07 $ 63,670.07
01-Jun-2002 31-May-2003 $ 594,561.00 $ 616,488.07 $ 21,927.07
01-Jun-2003 31-May-2004 $ 594,561.00 $ 616,488.07 $ 21,927.07
* first year is a year 10 months
SCHEDULE B (continued)
TO THE SECOND AMENDMENT OF LEASE
II. EXAMPLE OF TERMINATION PAYMENT CALCULATION
Unamortized Balance on
01-May-96 $ 533,295.25
Interest to 31-May-96 4,658.33
Current Payment 198,409.00
------------
Total Termination Payment $ 736,362.58
PARTIAL AMORTIZATION SCHEDULE
Lease Current New Basic Incremental Unamortized
Month Basic Rent Rent Payment Basic Rent Improvements
Balance
$ 580,739.00
01-Aug-95 15 (1) $ 42,267.75 $ 51,374.01 $ 9,106.26 $ 571,632.74
01-Sep-95 16 $ 42,267.75 $ 51,374.01 $ 9,106.26 $ 567,519.70
01-Oct-95 17 $ 42,267.75 $ 51,374.01 $ 9,106.26 $ 563,370.73
01-Nov-95 18 $ 42,267.75 $ 51,374.01 $ 9,106.26 $ 559,185.52
01-Dec-95 19 $ 42,267.75 $ 51,374.01 $ 9,106.26 $ 554,963.74
01-Jan-96 20 $ 42,267.75 $ 51,374.01 $ 9,106.26 $ 550,705.10
01-Feb-96 21 $ 42,267.75 $ 51,374.01 $ 9,106.26 $ 546,409.25
01-Mar-96 22 $ 42,267.75 $ 51,374.01 $ 9,106.26 $ 542,075.88
01-Apr-96 23 $ 42,267.75 $ 51,374.01 $ 9,106.26 $ 537,704.65
01-May-96 24 (2) $ 42,267.75 $ 51,374.01 $ 9,106.26 $ 533,295.25
(1) Assumes payment in advance; i.e., no interest.
(2) Payoff balance to include interest to May 31, 1996 payment date
AMENDMENT OF LEASE
THIS AMENDMENT OF LEASE, made this 10th day of August, 1994, between Opus
Corporation ("Landlord") and Select Comfort Corporation ("Tenant").
RECITALS
Landlord, as landlord, and Tenant, as tenant, are parties to a Net Lease
Agreement dated December 3, 1993 relating to real estate in Plymouth, Hennepin
County, Minnesota (the "Lease").
Landlord has provided $50,000 in change orders pursuant to Section 20.29 of
the Lease, resulting in an annual increase of $7,120 over the term of the Lease,
and has in addition provided an additional $65,779 of improvements, for which an
additional $36,887 in annual rent will be paid for the first two years of the
Lease term. The leased premises has been enlarged to provide land for
additional future parking, and the parties have agreed to a $2,500 annual rental
payment over the term of the Lease to reflect this additional land.
By this amendment, the parties desire to confirm the commencement date of
the term of the Lease and provide for the additional premises and the additional
rental referred to above.
NOW, THEREFOR, the parties hereto agree as follows:
1. The Commencement Date, as defined in the Lease, is June 6, 1994.
The last day of the Initial Term, as defined in the Lease, is June 1, 2004.
2. The legal description in Exhibit A to the Lease is changed to Xxx
0, Xxxxx 0, Xxxx Xxxxx Xxxxxxxx Xxxx 0xx Addition, which Landlord will complete
and record.
3. Lines 7 through 15 of Section 3.1 of the Lease are amended as
follows:
or at such other place as Landlord may from time to time
designate in writing, an annual rental for the Initial Term
of this Lease of $507,213 for the period beginning on the
Commencement Date and ending May 31, 1996, $470,326 for the
period beginning June 1, 1996 and ending May 31, 1997,
$487,222 for the period beginning June 1, 1997 and ending
May 31, 2000, $552,818 for the period beginning June 1, 2000
and ending May 31, 2002, and $594,561 for the balance of the
Initial Term, payable monthly, in advance, in equal
installments, commencing on the Commencement Date and
continuing on the first day of each month thereafter for the
succeeding months during the balance of the Initial Term.
The rent provided for in this Section 3.1 is hereafter
called the "Base Rent".
4. Except as hereby specifically amended, the Lease and all of the
terms and provisions thereof remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused these presents to
be made as of the day and year first above stated.
OPUS CORPORATION
By: /s/
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Its: Vice President, General Manager
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SELECT COMFORT CORPORATION
By: /s/
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Its: COO/CFO
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SCHEDULE B
TO THE SECOND AMENDMENT OF LEASE
1. EXAMPLE OF BASIC RENT CALCULATION
Assumptions:
Substantial Completion Date: 15-Sep-95
Improvement Cost: $ 565,739.00
Legal & Financing Cost: $ 15,000.00
Other key parameters:
Annual Interest Rate 11.0000%
Monthly Interest Rate 0.8735%
Project Costs $ 580,739.00
Revised Lease Payment $ 51,494.20 per month
$ 617,930.36 annually
1st New Lease Payment Due 01-Oct-95
Payments Due During Current Basic New Basic Net Change in
the 12 month* period Rent Rent Basic Rent
01-Oct-95 31-May-96 $ 338,142.00 $ 411,953.57 $ 73,811.57
01-Jun-96 31-May-97 $ 470,326.00 $ 617,930.36 $ 147,604.36
01-Jun-97 31-May-98 $ 487,222.00 $ 617,930.36 $ 130,708.36
01-Jun-98 31-May-99 $ 487,222.00 $ 617,930.36 $ 130,708.36
01-Jun-99 31-May-2000 $ 487,222.00 $ 617,930.36 $ 130,708.36
01-Jun-2000 31-May-2001 $ 552,818.00 $ 617,930.36 $ 65,112.36
01-Jun-2001 31-May-2002 $ 552,818.00 $ 617,930.36 $ 65,112.36
01-Jun-2002 31-May-2003 $ 594,561.00 $ 617,930.36 $ 23,369.36
01-Jun-2003 31-May-2004 $ 594,561.00 $ 617,930.36 $ 23,369.36
* first year is a year of 8 months
