LEASE
THIS LEASE is made as of February 15, 1999, by and between XXXXXX XXXXXX
AND XXXX XXXXXX, husband and wife ("Landlord") and TAURUS NUMERIC TOOL, INC.,
a Minnesota corporation ("Tenant").
RECITALS:
Landlord is the fee owner of (a) certain real estate located at 00000
Xxxxxxxxxxx Xxxx, Xxxxx, Xxxxxxxx Xxxxxx, Xxxxxxxxx as legally described on
Exhibit A and depicted on Exhibit B (the "Land"), (b) the approximately
twenty-eight thousand (28,000) square foot building and all improvements
located on the Land (the "Building"), and (c) the fixtures and equipment
located in the Building (the "Equipment"). The Building and Equipment are
collectively referred to in this Lease as the "Improvements". The Land,
Building and Equipment are collectively referred to in this Lease as the
"Premises".
As of the date of this Lease, 100% of the capital stock of Tenant has
been purchased from Xxxxxx Xxxxxx by WSI, Inc., a Minnesota corporation,
pursuant to the terms and conditions of that certain Stock Purchase Agreement
dated as of the date of this Lease (the "Stock Purchase Agreement").
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. PREMISES. Landlord hereby leases the Premises to Tenant and Tenant
hereby leases the Premises from Landlord. Landlord warrants and represents
that they are the owner of the Premises, and that they have the full right
and authority to enter into this Lease, and that there are no leases or other
rights with respect to the Premises which conflict with the terms of this
Lease. Landlord hereby represents and warrants to Tenant, as follows:
1.1. CONDITION. The Premises are structurally sound and are in
good condition and repair (ordinary wear and tear excepted), and all
material mechanical, electrical, heating, air conditioning, sewer,
water and plumbing systems are in proper working order.
1.2. CONDEMNATION. No portion of the Premises is subject to any
decree or order to be sold or is being condemned or otherwise taken by
any public authority, nor has Landlord been notified of any proposed
condemnation or other taking.
1.3. UTILITIES. All utilities required for the current operation
of the improvements on the Premises are installed and operating and
Landlord has not
received notice of actual or threatened reduction or limitation on
use of any utility service now supplied to the Premises.
1.4. COMPLIANCE. The zoning, deed restrictions, covenants and
applicable laws and ordinances applying to the Premises permit the
presently existing improvements and the continuation of the business
presently being conducted on the Premises.
1.5. FLOOD PLAIN/LANDFILL. To the best knowledge of Landlord, no
portion of the Premises is located in a flood plain or flood hazard
area or in a designated wetlands area and no portion of the Premises
has been used as a landfill.
1.6. ASSESSMENTS. Landlord has not received notice of actual or
threatened special assessments or reassessments of the Premises.
2. USE OF PREMISES. Tenant may use the Premises for any lawful use.
3. TERM. This Lease shall be for a term ("Term") of three (3) years
commencing on February 15, 1999 ("Commencement Date") and terminating
February 14, 2002. Tenant shall have the right, at its option, to renew the
Term of this Lease under the same terms and conditions as provided in this
Lease for three (3) consecutive periods of one (1) year each ("Renewal
Term(s)"). To exercise a renewal option, Tenant must notify Landlord in
writing of Tenant's election to so renew not later than sixty (60) days prior
to the end of the Initial Term or any previously exercised Renewal Term.
When used in this Lease, "Term" shall mean the Initial Term and any exercised
Renewal Term.
4. BASE RENT. During the Term of this Lease, Tenant shall pay
Landlord as base rent for the Premises ("Base Rent") an annual amount equal
to $106,800.00, payable in equal monthly installments of $8,900.00, payable
in advance, on the first day of each month. The parties acknowledge that the
Base Rent is equal to $3.81 per square foot as of the Commencement Date.
4.1 DAILY BASE RENT PRORATION. In the event this Lease shall
commence on a date other than the first day of a month, Base Rent for the
first month shall be prorated on a daily basis.
4.2 BASE RENT ADJUSTMENTS. If Tenant exercises its option to renew
the Term of this Lease, Base Rent for each such Renewal Term(s) shall be
adjusted to the then current fair market rent as hereinafter provided (the
"Fair Market Rent"). Upon receipt of Tenant's notice to renew, Landlord
and Tenant shall meet and use their best efforts to determine the Fair
Market Rent. If Landlord and Tenant are unable to agree upon a Fair Market
Rent within thirty (30) days of Tenant's notice to renew, then such rent
shall be determined as follows:
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A. If Landlord and Tenant are unable to agree on Fair Market
Rent within said thirty (30) day period, then within five
(5) days thereafter, Landlord and Tenant shall each
simultaneously submit to the other, in a sealed envelope,
its good faith estimate of the Fair Market Rent. If the
higher of such estimates is not more than one hundred five
percent (105%) of the lower of such estimates, then the Fair
Market Rent shall be the average of the two estimates.
B. If the Fair Market Rent is not resolved by such exchange of
estimates, then either Landlord or Tenant may, by written
notice to the other within ten (10) business days after the
exchange, require that the Fair Market Rent be determined by
an MAI appraiser as an arbitrator. Within ten (10) business
days after such notice, the parties shall select a mutually
acceptable MAI appraiser with experience in real estate
activities, including at least ten (10) years' experience in
appraising similar space in the Osseo, Minnesota area. If
the parties cannot so agree on an appraiser, then within a
second period of ten (10) business days, each shall select
an independent MAI appraiser meeting the aforementioned
criteria, and within a third period of ten (10) business
days, the two appointed appraisers shall select a third
appraiser meeting the aforementioned criteria, which third
appraiser shall determine the Fair Market Rent. If one
party shall fail to make such appointment within said second
ten (10) business day period, then the appraiser chosen by
the other party shall be the arbitrator.
C. Once the arbitrator has been selected as provided for above,
within ten (10) business days the arbitrator shall select
one of the two (2) estimates of Fair Market Rent submitted
by Landlord and Tenant, which must be the one that is closer
to Fair Market Rent as determined by the arbitrator. The
decision of the arbitrator shall be rendered in writing to
both Landlord and Tenant and shall be final and binding upon
them. If the arbitrator believes that expert advice would
materially assist him, s/he may retain one or more qualified
persons, including but not limited to, legal counsel,
brokers, architects or engineers, to provide such expert
advice. The party whose estimate is not chosen by the
arbitrator shall pay the costs of the arbitrator and of any
experts retained by the arbitrator. Any fees of any counsel
or expert engaged directly by Landlord or Tenant, however,
shall be borne by the party retaining such counsel or
expert.
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5. REAL ESTATE TAXES. Real estate taxes and installments of special
assessments payable with respect to the Premises, shall be paid by Tenant as
and when due and payable.
6. UTILITIES. Tenant shall pay for all utilities rendered or
furnished to the Premises during the Term of this Lease, which payments shall
be made directly to the provider of said utility service.
7. MAINTENANCE, REPAIRS AND REPLACEMENTS.
7.1 TENANT'S OBLIGATIONS. Tenant shall, at Tenant's sole cost and
expense, maintain on a day-to-day basis, all exterior and interior portions
of the Premises and all equipment in or on the Premises, specifically
including without limitation, walls, ceilings and floors, electrical,
plumbing, and HVAC systems, as well as maintain the parking area, which
includes snow removal and lawn maintenance.
7.2 LANDLORD'S OBLIGATIONS. Landlord shall, at Landlord's sole cost
and expense, repair and replace, as and when necessary, all exterior and
interior portions of the Premises and all equipment in or on the Premises
owned by Landlord, and shall repair and replace all structural parts of the
Premises, including without limitation, walls, footings, floors, ceilings
and roofs and electrical, plumbing, and HVAC systems, as well as repair and
replacement of the parking area and maintenance of the footings and roofs.
Landlord shall maintain, repair and replace the septic system and
underground storage or holding tanks.
8. ENVIRONMENTAL AGREEMENTS. Tenant hereby warrants and covenants
with Landlord that Tenant's use and occupancy of the Premises shall comply
with any and all local, state and federal laws, ordinances, rules,
regulations and requirements regarding the environmental condition of the
Premises, provided, however, Tenant shall not be responsible for such
compliance (and Landlord shall be responsible for such compliance) regarding
(i) the environmental condition of the Premises prior to the commencement of
the Term of this Lease; and (ii) for such matters as provided in Sections 5.1
and 6.17 of the Stock Purchase Agreement without regard to time or dollar
limitations.
9. INDEMNIFICATION. Tenant hereby agrees to pay and protect,
indemnify and hold Landlord harmless from and against any and all
liabilities, damages, costs, expenses (including attorneys' fees and
expenses), causes of action, suits, claims, demands or judgment, made or
otherwise claimed by any person or entity arising from Tenant's use or
occupancy of the Premises, except where the same result from the negligent or
intentional acts or omissions of Landlord, or their heirs, successors,
assigns, agents, contractors, or invitees. Landlord hereby agrees to pay and
protect, indemnify and hold Tenant harmless from and against any and all
liabilities, damages, costs, expenses (including attorneys' fees and
expenses), causes of action, suits, claims, demands or judgment, made or
otherwise claimed by any person or entity arising from Landlord's entry onto
the Premises, except where the same result from the negligent or
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intentional acts or omissions of Tenant, or its employees, officers,
directors, agents, contractors, or invitees.
10. ALTERATIONS. Tenant shall not make any alterations or additions to
the Premises or affix any signs to the Premises without first obtaining
Landlord's written consent, which consent shall not be unreasonably withheld
or delayed. Tenant shall not permit any laborer's, mechanic's, or
materialmen's liens to attach to the Premises by reason of any such
alterations or additions performed by or at the request of Tenant, provided,
however, Tenant shall have the right to contest any mechanic's lien or other
lien which attaches to the Premises, provided that Tenant provides Landlord
with reasonable security for the same.
11. CASUALTY INSURANCE. Tenant shall, at Tenant's sole cost and
expense, keep the Building and Improvements now or hereafter located on the
Premises insured against fire and such other hazards and risks customarily
covered by the standard form of extended coverage endorsement and the risks
of vandalism, malicious mischief and sprinkler leakage in an amount not less
then the full replacement cost of the Building and Improvements. Tenant
shall, at Tenant's sole cost and expense, insure all Tenant's personal
property in the same manner. Tenant shall provide Landlord with evidence of
such insurance on an annual basis.
12. LIABILITY INSURANCE. Tenant shall, at Tenant's sole cost and
expense, procure and maintain a Commercial General Liability Insurance
policy, which policy shall include without limitation, coverage for bodily
injury, property damage, personal injury, advertising injury, contractual
liability (applying to this Lease), independent contractors, and
products-completed operations liability, which policy shall (a) name Landlord
as an Additional Insured and (b) have a total combined liability policy limit
of at least $1,000,000.00 applying to liabilities for bodily injury, personal
injury and property damage. Tenant shall provide Landlord with evidence of
such insurance on an annual basis.
13. FIRE OR OTHER CASUALTY.
13.1 REPAIR. If the Premises are destroyed or damaged by fire, any
action of the elements or other casualty, Landlord agrees, with reasonable
dispatch after notice thereof, at its own cost and expense and with the
benefit of any insurance proceeds, to restore the Premises to substantially
the same condition as that existing as of the commencement of this Lease.
In such case, all Base Rent paid in advance shall be apportioned as of the
date of the destruction or damage, and any Base Rent, additional rent or
other charges thereafter accruing shall be equitably and proportionately
suspended and adjusted according to the nature, extent and duration of the
destruction or damage, pending completion of repairs, except that in the
event the destruction or damage is so extensive as to make it unfeasible to
conduct Tenant's business on the Premises, Base Rent, additional rent and
other charges hereunder shall be completely abated until Tenant resumes the
conduct of its business on the Premises or the repairs are completed,
whichever event first occurs.
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13.2 TERMINATION. Notwithstanding the provisions of Section 13.1 of
this Lease, in the event the Premises are completely destroyed or damaged
to an extent which requires repair or rebuilding which repair or rebuilding
cannot be completed within 180 days from the date such repair or rebuilding
is commenced, either Landlord or Tenant may terminate this Lease upon
giving written notice thereof to the other at any time within thirty (30)
days after the date of such destruction, and if the Lease be so terminated,
all Base Rent, additional rent and other charges payable hereunder shall
cease as of the date of destruction and any prepaid Base Rent shall be
refunded.
14. ACCESS BY LANDLORD. Landlord shall have reasonable access to the
Premises during business hours for the purposes of examining the same, or to
make any needed repairs, or alterations of the Premises which Landlord may
see fit to make, but the making of any inspections, repairs or alterations
shall not unreasonably interfere with the operation of Tenant's business.
15. RIGHTS TO CURE DEFAULTS. In the event either party hereto fails,
refuses or neglects to perform an obligation imposed on it pursuant to the
terms of this Lease, the other party may, after reasonable notice to the
party in default, cure such default. In the event the default is by Tenant,
the cost of curing such default shall be paid as additional rent due Landlord
hereunder, together with interest on the amount paid by Landlord at the rate
of eight percent (8%) per annum ("Default Interest"). In the event the
default is by Landlord, the cost of curing such default, together with
Default Interest shall be immediately payable to Tenant by Landlord and
failure to so pay the same shall be a further default by Landlord pursuant to
the terms of this Lease. Tenant may set off the cost of curing the default
against future installments of rent due hereunder.
16. DEFAULT IN MONETARY PAYMENT. If Tenant shall default in the
payment of Base Rent or any part thereof or in the payment of additional rent
or any part thereof or in the payment of any other monetary obligation or
indebtedness owing by Tenant hereunder to Landlord, and Tenant fails to cure
such default within ten (10) days after receipt of written notice from
Landlord of the existence of such default, Landlord shall have the right to
terminate this Lease without further notice to Tenant, as well as such other
rights and remedies provided in this Lease or as the law permits.
17. DEFAULT BY TENANT OTHER THAN NONPAYMENT OF RENT. If Tenant shall
be in default in performing any of the terms and provisions of this Lease
other than the provision relating to the payment of Base Rent, additional
rent or other charges, Landlord shall give Tenant written notice of such
default, and if Tenant shall fail to cure such default within thirty (30)
days after the date of receipt of such notice (or shall fail in that time to
commence to cure a default whose cure would require more than thirty (30)
days and diligently prosecute such cure to a reasonably prompt conclusion ),
then and in such event Landlord shall have the option of (a) curing such
default on behalf of and for the account of Tenant, in which case the sum so
expended by Landlord plus Default Interest shall be deemed to be additional
rent and on demand
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shall be paid by the Tenant on the day when rent shall next become payable,
or (b) terminating this Lease by serving written notice thereof on Tenant, as
well as such other rights and remedies as this Lease and the law permits.
18. REMEDIES OF LANDLORD. In the event Tenant defaults pursuant to
this Lease, and such default is not cured as therein provided, then and in
such event Landlord may, without further notice or demand:
18.1 ENTRY ON PREMISES. Enter into and upon said Premises or any part
thereof, in the name of Tenant, and take absolute possession of the same
fully and absolutely without such re-entry working a forfeiture of the
rents to be paid or the covenants to be performed by Tenant for the
remaining term of this Lease, and Landlord may lease or sublet the
Premises, or any part thereof, on such terms and conditions and for such
rents and for such terms as Landlord may reasonably elect, and after
crediting the rent actually collected by Landlord from such reletting on
all rentals stipulated to be paid under this Lease by Tenant from time to
time, collect from Tenant any balance remaining due from time to time on
the rent reserved under this Lease. Notwithstanding anything in this Lease
to the contrary, Landlord shall use reasonable effort to mitigate its
damages in the event of default by Tenant.
18.2 TERMINATION OF LEASE. Declare this Lease forfeited and void, and
thereafter re-enter and take full possession of the Premises as the owner
thereof, free from any right or claim of Tenant or any person or persons
claiming through or under the Tenant.
The rights, options, powers and remedies of Landlord under this Lease shall
be cumulative and in addition to any other rights given to Landlord by law.
19. CONDEMNATION. If the entire Premises shall be condemned, or sold
under threat of condemnation, then this Lease shall terminate as of the date
title shall vest in the condemnor, and any prepayment of rent by Tenant shall
be refunded on a pro rata basis, and the parties hereto shall be released
from any further obligations hereunder. If a substantial part of the
Premises or a portion thereof which impairs Tenant's use of the Premises for
the business then conducted on the Premises shall be condemned or sold under
threat of condemnation, either Landlord or Tenant may terminate this Lease
upon not less than thirty (30) days notice in writing to the other party of
its intention to do so, and upon the dates set forth in said notice, this
Lease shall terminate in the same manner and with the same effect as if the
date were fixed herein for the expiration of the Term.
19.1 REPAIR OF PREMISES. In the event that a part of the Premises is
condemned or sold under threat of condemnation and this Lease is not
terminated by Tenant or Landlord as provided in this Section 19, then
Landlord shall at Landlord's sole cost and expense, but only to the extent
of the condemnation proceeds received by Landlord, make
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all necessary repairs or alterations so as to constitute the remaining
Premises a complete architectural unit and the Base Rent and other charges
to be paid by Tenant pursuant to this Lease shall be adjusted so that
Tenant shall be required for the remainder of the Term, to pay for only
the actual square footage of the Premises remaining after the condemnation.
19.2 CONDEMNATION PROCEEDS. All condemnation proceeds or damages
awarded for a taking under the power of eminent domain of all or any part
of the Premises shall belong to and be the property of Landlord, provided,
however, the parties specifically agree that Tenant shall be entitled to
any award made for relocation of Tenant's business and depreciation or
damage to and cost of removal of Tenant's personal property and trade
fixtures.
20. SUBORDINATION. This Lease and all payments required hereunder
shall be subject and subordinate to any mortgages, trust deeds or ground
leases now or hereafter placed upon the Premises, and to any advances made
thereunder, and to the interest thereon, and all renewals, replacements and
extensions thereof. Upon written request by Landlord, Tenant shall execute
and deliver a written agreement subordinating this Lease to any mortgage(s)
encumbering the Premises, provided, however, any subordination shall be upon
the express condition that the validity of this Lease shall be recognized by
the mortgagee(s), and that, notwithstanding any default by the mortgagor with
respect to a mortgage or any foreclosure of a mortgage, Tenant's possession
and right of use under this Lease in and to the Premises shall not be
disturbed by such mortgagee(s) unless and until Tenant shall breach any of
the provisions hereof and this Lease or Tenant's right to possession
hereunder shall have been terminated in accordance with the provisions of
this Lease.
21. SURRENDER OF PREMISES. Tenant shall, at the expiration or earlier
termination of this Lease, surrender the Premises to Landlord in as good
condition and repair as at the time Tenant took possession, except for (a)
damage from normal wear and tear and (b) damage from an insured casualty.
Notwithstanding the foregoing, Tenant may remove its trade fixtures and
personal property from the Premises at the expiration or earlier termination
of this Lease, whether or not the same are affixed to the Premises, provided
Tenant repairs any damage caused by such removal.
22. MEMORANDUM OF LEASE. This Lease shall not be recorded, but at the
request of either party a memorandum of lease of even date herewith
describing the Premises and stating the Term, shall be prepared and executed
by the parties and may be recorded by either party.
23. ASSIGNMENT. Neither Landlord nor Tenant shall assign this Lease or
sublet the Premises without the prior written consent of the other party,
which consent shall not be unreasonably withheld or delayed. Notwithstanding
the foregoing, Landlord or Tenant may, without the consent of another party,
assign this Lease to an entity which is owned or controlled by it. For
purposes of this Section 23, "control" shall mean more than a 50% ownership
interest.
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24. RELATIONSHIP OF PARTIES. It is understood and agreed that the
relationship of the parties hereto is strictly that of Landlord and Tenant
and that Landlord has no ownership in Tenant's enterprise, and that this
Lease shall not be construed as a joint venture or partnership. Landlord is
not and shall not be deemed to be an agent or representative of Tenant.
25. NOTICE. Whenever in this Lease it shall be required or permitted
that notice or demand be given or served upon either party to this Lease,
such notice or demand shall be given in writing and forwarded by certified
mail addressed as follows:
To Landlord: Xxxxxx Xxxxxx
00000 Xxxxxxxxx 00xx Xxxxxx
Xxx Xxxxx, XX 00000
To Tenant: Taurus Numeric Tool, Inc.
c/o WSI Industries, Inc.
0000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxx Xxxx, XX 00000
Such addresses may be changed from time to time by either party upon serving
notice of such change as above provided.
26. WAIVER. No terms or conditions of this Lease shall be in any
manner altered, waived or abandoned except by written instrument signed by
the party to be bound thereby. No assent, express or implied by Landlord or
any breach by Tenant of any of the terms or conditions of this Lease shall be
deemed taken to be a waiver of any succeeding breach of said terms and
conditions.
27. QUIET ENJOYMENT. Landlord covenants and agrees that they have good
and marketable title to the Premises, and that if Tenant shall perform all
the covenants and agreements herein stipulated to be performed on Tenant's
part, Tenant may quietly have, hold and enjoy the Premises during the term
hereof and any renewal thereof, subject to the terms of this Lease.
28. EXPANSION OPTION. Landlord and Tenant agree that during the Term
of this Lease, Landlord and Tenant shall act in good faith and use all
reasonable efforts to agree on the size, location and other terms of any
expansion of the Premises requested by Tenant. The parties have agreed that
any expansion would be approximately 17,000 square feet. The Base Rent for
the expansion area shall be the Fair Market Rent, as defined above.
29. RIGHT OF FIRST REFUSAL. During the Term of this Lease, Landlord
grants Tenant a right of first refusal to purchase the Premises, subject to
the following terms and conditions:
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29.1 NOTICE OF OFFER. If at any time during the Term, Landlord
desires to sell all or any part of the Premises, and receives a bona fide
offer which it is willing to accept from any person, firm or corporation,
ready, willing and able to purchase any or all of the Premises, then and in
such case Landlord shall immediately give written notice thereof to Tenant
including in said notice the name and address of the offeror, the price
offered and the terms and conditions of the offer. Said notice shall be
accompanied by a copy of the offer and of any letter of intent or other
memorandum of the offer.
29.2 NOTICE OF INTENT TO PURCHASE. Tenant shall have twenty (20)
business days after receipt of said written notice to agree to purchase the
Premises covered by said offer at the price and according to the terms
specified in said offer.
29.3 LOSS OF RIGHT TO PURCHASE. If Tenant does not exercise said
right to purchase by giving written notice thereof to Landlord within said
period, Landlord may accept said offer and complete said sale to the
offeror in accordance with said offer, after the expiration of said twenty
(20) business day period, which sale shall be subject to the terms and
conditions of this Lease.
29.4 REVIVAL OF RIGHT TO PURCHASE. If the terms of said offer are
changed, then the right of first refusal given hereby to Tenant shall be
revived and said offer shall again be submitted to Tenant for the period
and in the manner herein stated.
IN AGREEMENT, the parties have executed this Lease as of the day and
year first above written.
LANDLORD: TENANT:
TAURUS NUMERIC TOOL, INC.
/S/ XXXXXX XXXXXX By /S/ XXXXXXX X. XXXXX
----------------------------- ---------------------------
Xxxxxx Xxxxxx Its President
---------------------------
/S/ XXXX XXXXXX
-----------------------------
Xxxx Xxxxxx
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EXHIBIT A
LEGAL DESCRIPTION
EXHIBIT B
DIAGRAM OF PREMISES
