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HomeMy WebLinkAboutItem 11 Date: Item No. KENRICK LIQUOR STORE PROPERTY SALE AND LEASE AGREEMENTS Proposed Action Staff recommends adoption of the following motion: Move to approve a resolution for the sale and lease back of real property located at 16179 Kenrick Avenue, Lakeville, Minnesota and dispensing with statutory requirements for review by Planning Commission for the disposal of property. Overview The City owns a 9,616-square foot municipal liquor store on 2.11 acres of land located at 16179 Kenrick Avenue. In early 2016, the City was approached by a developer interested in adding additional retail space to the Kenrick property. The City evaluated the site, and found there was excess land available for the possible construction of additional retail space and associated parking. It was also determined that marketing the site, building-out the retail spaces, expanding the parking lot, and managing the on- going lease spaces and tenants could be done more cost effectively by a private developer rather than by the City. By adding additional retail space, it would also increase customer base for our liquor operations at this location. Therefore, the City advertised a Request for Proposal (RFP) to purchase/develop the Kenrick property; the City received four proposals back in response to the RFP. Staff analyzed each of the proposals and presented the findings to the Liquor Committee at their July 17th meeting, the Finance Committee at their July 18th meeting, and the City Council at their July 24th Work Session. The direction from all three groups was to move forward with negotiations regarding the proposal submitted by the Driessen Group. The Driessen Group proposal included purchasing the entire property, building three additional retail spaces, reconstructing and expanding the parking lot, and leasing the liquor store space back to the City. Staff, with direction from the Liquor Committee, worked with the Driessen Group over the past several months to negotiate the final sale price of the property and the terms of the lease for the liquor store space. The final sale price and terms include: • The sale of the property for $2,625,000 • A 20-year lease for the liquor store space • A lease rate of $19.00 per square foot • No lease rate increase for years 1-5 • A 7% increase for years 6-10, 11-15, 16-20 November 20, 2017 Primary Issues to Consider How was the sale price determined? • The proposal submitted by the Driessen Group offered a purchase price of $2,250,000 with a 15- year lease term at a rate of $16.25 per square foot and 10% rent increases every five years. The City had an appraisal completed for the property that indicated the overall value, including the existing store and surplus developable land, to be $2,540,000. In addition, staff felt there was intrinsic value added to the property with the municipal liquor store being a very low risk long-term tenant for the potential buyer. The Driessen Group accepted the counter offer terms which included a final purchase price of $2,625,000, a 20-year term at $19.00 per square foot, and no rent increases until years 6-10, 11-15, and 16-20 at a 7% increase for each consecutive five-year term. How do the lease rates compare with other retail centers in the area? • Lease rates for multi-tenant retail spaces within the south metro range in price from $15.00 to $30.00 per square foot depending on the location and quality of the development. The initial lease rate of $19.00 per square foot with a max rate of $23.27 in years 16-20 was determined to be a very reasonable rate considering the improvements the Driessen Group is proposing to invest into the property. What is the schedule for the improvements to be completed and closing on the property? • The preliminary and final plat and site plan for the proposed improvements will be considered by the Planning Commission at their December 7th meeting and by the City Council at their December 18th meeting. After final plat and site plan approval, the Driessen Group is proposing to close on the property and initiate the lease with the City by March of 2018. Construction of the new retail spaces, parking lot and site improvements will begin by April 2018 with a tentative completion date of October. Supporting Information • Resolution approving the conveyance of property • Purchase agreement • Lease agreement • Proposed site plan Financial Impact: $ Budgeted: Y☐ N☐ Source: Related Documents: (CIP, ERP, etc.): Envision Lakeville Community Values: Good Value for Public Services Report Completed by: (Allyn G. Kuennen, Assistant City Administrator) n/a n/a 1 195233v1 CITY OF LAKEVILLE DAKOTA COUNTY, MINNESOTA RESOLUTION NO. _____ RESOLUTION APPROVING THE CONVEYANCE OF REAL PROPERTY AND DISPENSING WITH STATUTORY REQUIREMENTS FOR REVIEW BY PLANNING COMMISSION OF DISPOSAL OF PROPERTY WHEREAS, the City is proposing to convey certain property ("Property") legally described in the purchase agreement attached as Exhibit "A," under the terms of the proposed purchase agreement between The Driessen Group, LLC, a Minnesota limited liability company ("Purchaser") and the City of Lakeville ("Purchase Agreement") for development purposes; WHEREAS, the City’s Kenrick liquor store is located on the Property and the City will lease the liquor store from the Purchaser following the sale of the Property pursuant to the terms of the lease attached as an exhibit to the Purchase Agreement; WHEREAS, Minn. Stat. § 462.356, subd. 2 requires that the Planning Commission review the City's proposed acquisitions and dispositions of property, and; WHEREAS, Minn. Stat. § 462.356, subd. 2 provides for an exception from the Planning Commission review requirement upon 2/3 vote of the City Council dispensing with the requirement and finding that the acquisition or disposal of the property has no relationship to the comprehensive municipal plan. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Lakeville: 1. The City Council finds that the disposition of the Property under the Purchase Agreement has no relationship to the comprehensive municipal plan and approves the Purchase Agreement; 2. Review by the Planning Commission of the conveyance of the Property is hereby dispensed with; and 3. The Mayor, City Administrator, and City Clerk are authorized and directed to execute all documents, and take all appropriate measures to convey the Property pursuant to the terms of the Purchase Agreement. 2 195233v1 ADOPTED this _______ day of _____________, 2017, by a 2/3 vote of the City Council of the City of Lakeville. CITY OF LAKEVILLE BY: _______________________________ Douglas P Anderson, Mayor ATTEST: ______________________________ Charlene Friedges, City Clerk 194265v2 PURCHASE AGREEMENT THIS PURCHASE AGREEMENT is effective as of the ____ day of _______________, 2017, by and between the CITY OF LAKEVILLE, a Minnesota municipal corporation, 20195 Holyoke Avenue, Lakeville, MN 55044 (“Seller”), and THE DRIESSEN GROUP, LLC, a Minnesota limited liability company, located at 4999 France Avenue South, Suite 216, Minneapolis, MN 55410 (“Purchaser”). RECITALS: A The Seller is the owner in fee simple of the property located in the City of Lakeville, County of Dakota, State of Minnesota, legally described in Exhibit A attached hereto and made a part hereof, including existing buildings, together with all other existing improvements located thereon, all appurtenant rights, easements, mineral rights, and all right, title and interest of Seller in and to all streets, alleys, strips, and rights-of-way over or abutting said land, for which Seller has an interest (the “Property”); B. Purchaser desires to acquire the Property from the Seller and agrees to construct additional real estate space on the north and south sides of the existing building located on the Property together with additional parking lot improvements; C. Seller is willing to convey the Property to the Purchaser conditioned upon Purchaser leasing to Seller the existing building on the Property; D. Seller and the Purchaser wish to set forth in writing the terms of their agreement relating to the foregoing. AGREEMENT: In consideration of the mutual covenants and agreements herein contained and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Offer and Acceptance. Subject to compliance with the terms, covenants and conditions of this Purchase Agreement, Seller shall convey the Property to the Purchaser and the Purchaser shall accept the Property from Seller. 2. Purchase Price. The price for the Property included under this Purchase Agreement is Two Million Six Hundred Twenty-Five Thousand No/100 Dollars ($2,625,000.00), which the Purchaser shall pay as follows: A. Earnest money of $10,000.00 to be deposited within two (2) business days following the full execution and delivery of this Agreement, and held by Title Company, receipt of which is hereby acknowledged, to be applied to the Purchase Price at closing; 194265v2 2 B. The remainder of the Purchase Price in cash on the Closing Date as hereinafter defined. 3. Deed and Marketable Title. Upon performance by the Purchaser, Seller shall execute and deliver a Limited Warranty Deed, conveying good and marketable title of record, subject to: A. Building and zoning laws, ordinances and state and federal regulations. B. Any encumbrances shown on the title commitment to which Purchaser has not objected to under Section 8 of this Agreement (“Permitted Encumbrances”). 4. “As Is” Purchase. Except as specifically set forth in this Agreement or any document contemplated hereby, (i) the Property is being sold, conveyed, assigned, transferred and delivered “as is, where is” on the date hereof and in its condition on the date hereof, “with all faults,” and Seller is not making, and expressly disclaims, any other representation or warranties written or oral, statutory, express or implied, concerning the Property, including but not limited to, representations or warranties relating to value or quality of the Property or the prospects, financial or otherwise, risks or other incidents of the Property or with respect to this Agreement or the transactions contemplated hereby or thereby, and (ii) Seller specifically disclaims any representation or warranty of merchantability, usage, suitability or fitness for any particular purpose with respect to the Property or any part thereof, or as to the workmanship thereof, or the absence of any defects therein, whether latent or patent. 5. Access Prior to Closing. Seller shall allow Purchaser and its agents access to the Property for an inspection thereof. Purchaser may conduct soil tests, soil borings and other tests of the Property. As a condition of such entry, Purchaser indemnifies and saves Seller harmless from and against any liability (including liability for bodily injury, death and reasonable attorneys' fees) and any mechanic lien attaching to the Property as a result of the work performed in making any such inspection. If, as a result of Purchaser’s inspection of the Property and such documents, Purchaser, for any reason, is dissatisfied with the Property or such documents, Purchaser shall have the absolute right to terminate this Agreement. 6. Possession. Seller shall deliver legal possession of the Property to Purchaser not later than the actual date of closing (Seller shall remain in physical possession as a tenant). The parties acknowledge that there shall be no proration of fuel oil, liquid petroleum gas, and all charges for city water, city sewer, electricity, and natural gas and that Seller shall be responsible for payment of the same as owner before closing, and as tenant, after closing. 7. Title Issuance. The parties acknowledge that Purchaser has obtained a commitment for an Owner’s title insurance policy for the Property (the “Commitment”) issued by Commercial Partners Title, LLC (“Title Company”) pursuant to which the Title Company agrees to issue to the Purchaser upon the recording of the documents of conveyance referred to herein an Owner’s title insurance policy insuring the Property in an amount equal to the total Purchase Price. Purchaser may, at its sole cost and expense, obtain a survey of the Property. Purchaser shall be 194265v2 3 allowed twenty (20) business days after the receipt of the Commitment and the survey for examination of title and making any objections, which shall be made in writing or deemed waived. 8. Title Corrections and Remedies. Upon receipt of Purchaser's title objections, Seller shall, within ten (10) business days, notify Purchaser of Seller's intention to cure any or all of said objections within 120 days. Liens or encumbrances for liquidated amounts which can be released by payment or escrow from proceeds of closing shall be cured and shall not delay the closing. Seller shall have 120 days from receipt of Purchaser's written title objections to cure any such objections. Cure of the objections by Seller shall be reasonable, diligent, and prompt. Pending correction of title, all payments required herein and the closing shall be postponed, but upon correction of title and within ten (10) days after written notice to Purchaser, the parties shall perform this Agreement according to its terms. If no such notice is given or if notice is given but title is not corrected within the time provided for, the Purchaser (at Purchaser's option) shall have the right to: (a) terminate this Agreement and earnest money shall be refunded to Purchaser, without interest; or (b) waive such objections and take title to the Property subject to such objections. Any exceptions waived or accepted by Purchaser shall be deemed to be Permitted Encumbrances. 9. Representations and Warranties by Seller. Seller, as part of the consideration therefore, represents to Purchaser and its successors and assigns that to the best of Seller’s actual knowledge and without any investigation or inquiry, as follows: A. Seller has or as of the Date of Closing will have marketable and insurable title to the Property of record, free and clear of all liens, encumbrances, leases, claims and charges, all material easements, rights-of-way, covenants, conditions and restrictions and any other matters affecting the title, except for the Permitted Encumbrances. B. To Seller’s actual knowledge, the conveyance of the Property pursuant hereto will not violate any applicable statute, ordinance, governmental restriction or regulation, or any private restriction or agreement. C. As of the Date of Closing there will be no outstanding or unpaid claims, actions or causes of action related to any transaction or obligation entered into or incurred by Seller with respect to the Property prior to the date hereof. D. Except as provided herein, Seller shall indemnify and defend Purchaser and otherwise hold Purchaser harmless of, from and against any broker who may be entitled to any commission or finder’s fee in connection with the transaction contemplated herein to the extent arising from Seller’s actions. E. Seller is not a foreign person as defined in §1445(f)(3) of the Internal Revenue Code or regulations issued thereunder. F. To Seller’s actual knowledge, there is no action, litigation, investigation, condemnation or other proceedings of any kind pending or threatened against Seller with respect to the Property. 194265v2 4 G. To Seller’s actual knowledge,: (i) no toxic materials, hazardous wastes or hazardous substances, as such terms are defined in the Resource Conservation and Recovery Act of 1996, as amended (42 U.S.C. §6901, et seq.) or in the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended (42 U.S.C. §9601, et seq.), and in Minnesota state and local environmental statutes and laws, including, without limitation, any asbestos or asbestos-related products or materials and any oils, petroleum-derived compounds or pesticides ("Hazardous Materials") have been generated, treated, stored, released or disposed of or otherwise placed, deposited in or located on the Property; and (ii) the Property is free of Hazardous Materials and is not subject to any “superfund” type liens or claims by governmental regulatory agencies or third parties arising from the release or threatened release of hazardous substances in, on, or about the Property. Seller shall indemnify and hold Purchaser harmless from any and all claims, causes of action, damages, losses, or costs (including reasonable lawyer’s fees) relating to breach of the foregoing representations and warranties by Seller or to hazardous substances or petroleum products in the subsoil or ground water of the Property which arise from or are caused by acts or occurrences upon the Property prior to Purchaser taking possession. H. To Seller’s actual knowledge, there are no wells on or individual sewage treatment systems on or serving the Property, and no methamphetamine production has occurred within the Property. All of Seller's representations in this Agreement shall be materially true as of the date hereof and of the Closing Date, and shall be a condition precedent to the performance of Purchaser’s obligations hereunder. If Purchaser discovers that any such covenant, representation, or warranty is not true, Purchaser may elect prior to Closing, in addition to any of its other rights and remedies, to cancel this Agreement and the earnest money shall be returned to Purchaser without interest, or Purchaser may notify Seller and postpone the Closing Date up to ninety (90) days to allow time for correction and Seller agrees to use reasonable efforts to cause such covenant, representation, or warranty to be made true. If Purchaser elects to proceed with the Closing following such discovery, Purchaser shall be deemed to have waived its rights to assert a claim against Seller arising from the inaccuracy or untruthfulness of any such covenant, representation, or warranty. Seller indemnifies Purchaser from any breaches of the covenants, warranties and representations set forth in this Section for a period of one year after Closing. 10. Representations and Warranties by Purchaser. Purchaser represents and warrants to Seller that: A. Prior to October 1, 2018, Purchaser will complete parking lot improvements consistent with the site plan attached hereto as Exhibit B (“Site Plan”), except as otherwise approved by the Seller. 194265v2 5 B. Prior to October 1, 2018, Purchaser will construct a 6 foot sidewalk along the west side of Kenrick Avenue from County Road 46 to the retail center to be constructed on the Property, consistent with the Site Plan. 11. Closing. The closing (the "Closing") of the purchase and sale contemplated by this Agreement shall occur on or before April 1, 2018 (“Closing Date”). At closing, Seller and Purchaser shall disclose their Federal Tax Identification Numbers for the purposes of completing state and federal tax forms. If closing does not occur by May 31, 2018, then this Agreement shall be null and void unless otherwise extended in writing by the parties. 12. Closing Documents. A. At the Closing, Seller shall execute and/or deliver to Purchaser the following (collectively the "Closing Documents"): (1) Limited Warranty Deed. A limited warranty deed in recordable form and reasonably satisfactory to Purchaser, which shall include the following well representations: “Seller certifies that the Seller does not know of any wells on the described Property.” (2) Seller’s Affidavit. A standard form affidavit by Seller indicating, among other things, that on the date of Closing there are no outstanding, unsatisfied judgments, tax liens or bankruptcies against or involving Seller or the Property; that there has been no skill, labor or material furnished to the Property for which payment has not been made or for which mechanic's liens could be filed; and that there are no other unrecorded interests in the Property. (3) Non-Foreign Person Certification. A certification in form and content satisfactory to the parties hereto and their counsel, properly executed by Seller, containing such information as shall be required by the Internal Revenue Code, and the regulations issued there under, in order to establish that Seller is not a “foreign person” as defined in §1445(f)(3) of such Code and such regulations. (4) Storage Tanks. If required, an affidavit with respect to storage tanks pursuant to Minn. Stat. § 116.48. (5) Well Certificate. If there is a well located on the Property, a well disclosure certificate in form and substance true to form for recording. (6) Lease. The lease required pursuant to Section 15A. (7) Other Documents. All other documents reasonably determined by either party or the title insurance company to be necessary to transfer and provide 194265v2 6 title insurance for the Property. B. At the Closing, Purchaser shall execute and deliver to Seller the following: (1) Paym ent of the Purchase Price. (2) Lease. The lease required pursuant to Section 15A. (3) Other Documents. All documents reasonably determined by either party or the title insurance company to be necessary to provide title insurance for the Property. 13. Costs and Expenses; Prorations. A. Title Charges. Seller will pay all costs to obtain the Commitment. Purchaser will pay the premium the costs for the survey, for the title policy issued to Purchaser pursuant to the Title Commitment and for any title policy issued to Purchaser’s lender. Seller and Purchaser will each pay one-half (1/2) of any closing fee or charge imposed by the Title Company or any closing agent designated by the Title Company. B. State Deed Tax and Recording Fees; Mortgage Registry Tax. Seller will pay all state deed tax regarding the Limited Warranty Deed, when transferred to be delivered by Seller to Purchaser pursuant hereto. Seller will pay the cost of recording all documents necessary to place record title in the condition required by this Agreement. Purchaser will pay the cost of recording all other documents. Purchaser will pay all mortgage registry tax for any mortgages placed on the Property by Purchaser. C. Real Estate Taxes and Special Assessments. General real estate taxes payable in the year in which the Closing occurs will be prorated between Purchaser and Seller as of the Closing Date, based on a calendar fiscal year. Purchaser will pay all general real estate taxes payable in the year after the year in which the Closing occurs and in all subsequent years. All special assessments levied, pending or assessed against the Property as of the Closing Date will be paid by Seller on or before the Closing Date. D. Other Operating Costs. All other operating costs of the Property, if any, will be allocated between Seller and Purchaser as of the Closing Date, so that Seller pays that part of such operating costs payable with respect to the period prior to the Closing Date, and Purchaser pays that part of such operating costs payable with respect to the period from and after the Closing Date. F. Attorneys’ Fees. Seller and Purchaser each will pay its own attorneys’ fees. 194265v2 7 14. Purchaser’s Contingencies. Purchaser’s obligations under this Agreement are contingent upon Purchaser’s satisfaction with each of the following (“Purchaser’s Contingencies”): A. The representations and warranties of Seller set forth in this Agreement must be true as of the date of this Agreement and on the Closing Date, and Seller shall have delivered to Purchaser at Closing a certificate dated the Closing Date, signed by Seller, certifying that such representations and warranties are true as of the Closing Date. B. Purchaser determining on or before the Closing Date, that it is satisfied, in its sole discretion, with the results of matters disclosed by a Phase I Environmental Audit or by any additional environmental/engineering investigation or testing of the Property performed by Purchaser or Purchaser's agent. By executing this Agreement, Seller hereby authorizes Purchaser to enter upon the Property at reasonable times to conduct the investigations and/or tests described herein. Purchaser shall be solely responsible for all environmental tests and shall hold Seller harmless from any such costs and shall indemnify Seller for breach of this provision including reasonable attorneys' fees. C. Purchaser’s satisfaction with its inspection of the Property pursuant to Section 5 and with title to the Property pursuant to Section 8. D. Purchaser obtaining all necessary governmental approvals and permits, including a building permit, for the re-construction of the parking lot improvements, the 6 foot sidewalk, and the additional real estate space on the north and south sides of the existing building, on terms and conditions reasonably acceptable to Purchaser. If the Purchaser’s Contingencies have not been satisfied on or before the Closing Date, then Purchaser may, at Purchaser’s option, extend the Closing Date in order to satisfy the Purchaser’s Contingencies or terminate this Agreement by giving notice to Seller on or before the Closing Date and the earnest money will be returned without interest. The contingencies set forth in this section are for the sole and exclusive benefit of Purchaser, and Purchaser shall have the right to waive the contingencies by giving notice to Seller. 15. Seller’s Contingencies. Seller’s obligations under this Agreement are contingent upon Purchaser’s satisfaction with each of the following (“Seller’s Contingencies”): A. Seller and Purchaser entering into a lease agreement in the form attached hereto as Exhibit C (“Lease”) at Closing; If the Seller’s Contingencies have not been satisfied on or before the Closing Date, then Seller may, at Seller’s option, extend the Closing Date in order to satisfy the Seller’s Contingencies or terminate this Agreement by giving notice to Purchaser on or before the Closing Date. The contingencies set 194265v2 8 forth in this section are for the sole and exclusive benefit of Seller, and Seller shall have the right to waive the contingencies by giving notice to Purchaser. 16. Operations Pending Closing. Seller will, at its expense, maintain the Property until the Closing Date or until the termination of this Agreement, whichever is earlier, substantially in its present condition, except damage by fire or other insured casualty and condemnation. During the period between the date hereof and the Closing Date, Seller will not, without the prior written consent of Purchaser, enter into or agree to enter into any lease or other agreement concerning occupancy or use of any portion of the Property, any service, management or other agreement relating to the ownership, leasing, management, operation, maintenance or repair of the Property, without the prior written consent of Purchaser. During such period, Seller will, at Seller’s sole cost and expense, continue to provide all services currently provided by Seller with respect to the Property or any portion thereof, and continue to operate, manage and maintain (including repairs and replacements) the Property in substantially the same manner as Seller currently operates, manages, and maintains (including repairs and replacements) the Property. 17. Contracts. Seller will, at Seller’s sole cost and expense, at or prior to the Closing, terminate all contracts, except those Contracts, designated by Purchaser on or prior to the Contingency Date to be surviving contracts, which Purchaser elects to assume. Seller will pay any cost, penalty or fee associated with terminating those contracts not designated as surviving contracts. Purchaser will pay or reimburse Seller for any portion of the fees due for any surviving contracts which are attributable to the period from and after the Closing Date. 18. Damage or Destruction. If any material portion of the Property is damaged or destroyed by fire or other casualty before Closing, Seller shall immediately give notice thereof to Purchaser, and Purchaser, at its option (to be exercised within ten (10) days after Seller’s notice), may either (a) terminate this Agreement and the earnest money will be returned to Purchaser without interest, or (b) proceed to Closing and receive at Closing a payment or an assignment of all amounts recovered or recoverable by Seller on account of insurance on the Property, or (iii) postpone the Closing until Seller has restored the damage to its condition prior to the casualty, in which case Seller agrees to diligently pursue such restoration of the Property. If any part of the Property is damaged or destroyed by fire or other casualty before Closing, but the damage or destruction does not affect a material portion of the Property, then Purchaser may either proceed to Closing and will receive at Closing a payment or an assignment of all amounts recovered or recoverable by Seller on account of insurance on the Property, including any deductibles, or postpone the Closing until Seller has restored the damage to its condition prior to the casualty, in which case Seller agrees to diligently pursue such restoration of the Property. Prior to Closing, Seller shall not adjust any casualty insurance on the Property or commence any repair or restoration of any damage or destruction without the prior written consent of Purchaser. As used in this Section 18, the term “material portion of the Property” means damage to the Property that would cost $100,000.00 or more to repair. 19. Condemnation. If eminent domain proceedings are commenced against any material portion of the Property prior to Closing, Seller shall immediately give notice thereof to Purchaser, and Purchaser, at its option (to be exercised within thirty (30) days after Seller’s notice), may either (a) terminate this Agreement and have the earnest money returned to Purchaser without interest, or 194265v2 9 (b) proceed to Closing and receive at Closing either a credit against the Purchase Price in the amount of the award, in the case of a completed eminent domain proceeding, or an assignment of all rights in eminent domain, in the case of a pending eminent domain proceeding. Prior to Closing, Seller shall not designate counsel, appear in, or otherwise act with respect to any eminent domain proceedings, or commence any repair or restoration resulting therefrom, without the prior written consent of Purchaser. As used in this Section 19, the term “material portion of the Property” means any portion of the Property which, if taken, will result in a reduction of the rentable area of the buildings and improvements thereon or a reduction in the number of parking spaces on the Property, or materially adversely affect access to the Property. 20. Brokerage. Seller and Purchaser represent that they have not contracted with a broker, sales agent or similar party in connection with this transaction. Each party agrees to indemnify and hold the other harmless of any claim made by a broker or sales agent or similar party for a commission due or alleged to be due on this transaction on the basis of an agreement with said broker made by the indemnifying party. The parties’ obligations set forth in this paragraph shall survive termination of this Agreement. 21. Assignment; Survival. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns. Purchaser shall have the right to assign this Agreement and its rights and obligations hereunder to an entity in which Purchaser and/or its principals directly or indirectly own a majority interest and over which Purchaser and/or its principals have management control. All of the terms and provisions of this Agreement, and the covenants, obligations, agreements, representations and warranties contained herein shall survive and be enforceable after Closing. 22. Time is Of the Essence. Time is of the essence for all provisions of this Purchase Agreement. 23. Notices. All notices required herein shall be in writing and delivered personally or mailed to the address for each party as shown above and if mailed, are effective as of the date of mailing. 24. Minnesota Law. This contract is governed by the laws of the State of Minnesota. 25. Signatures by Counterpart; Fascimile or Electronic Signature. This Agreement may be executed in counterparts. Signatures may be transmitted via facsimile or in “PDF” format via e-mail. 26. Benefit. This Agreement shall be binding upon and inure to the benefit of Seller and Purchaser and their respective successors and assigns. 27. Entire Agreement. This Agreement contains the entire agreement of the parties with respect to the transaction hereinabove set forth and may not be amended or modified in whole or in part except with the consent of both of the parties hereto in writing. 28. Survival. The covenants, warranties and representations made by Seller and Purchaser shall survive the Closing of this transaction. 194265v2 10 IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be duly executed as of the date first written above. SELLER: CITY OF LAKEVILLE By:____________________________ Douglas Anderson, Mayor And:___________________________ Charlene Friedges, City Clerk 194265v2 11 : THE DRIESSEN GROUP, LLC By:____________________________ Its:____________________________ 194265v2 12 EXHIBIT A TO PURCHASE AGREEMENT LEGAL DESCRIPTION OF PROPERTY: That part of the northeast quarter of the northeast quarter of Section 1, Township 114, Range 21, Dakota County, Minnesota, depicted as parcels 8E, 9B and 10A on Dakota County Road Right of way Map No. 146 on file in the Office of the County Recorder in and for said Dakota County. 194265v2 13 EXHIBIT B TO PURCHASE AGREEMENT SITE PLAN 194265v2 14 EXHIBIT C TO PURCHASE AGREEMENT LEASE 229679 194416v3 LEASE [THE DRIESSEN GROUP - TBD], LLC LANDLORD AND CITY OF LAKEVILLE TENANT 229679 194416v3 LEASE THIS LEASE made and entered into this _____ day of ____________, 2017, between [The Driessen Group, LLC - TBD], a Minnesota limited liability company (hereinafter called “Landlord”) and City of Lakeville, a Minnesota municipal corporation (hereinafter called “Tenant”). LEASE DATA SHEET Item 1. Name of Project: Lakeville Liquor Item 2. City, County & State: Lakeville, Minnesota (Dakota County). Item 3. (a) Square Footage of Demised Premises: 9,616 square feet. (b) Tenant’s proportionate share of real estate taxes, insurance and maintenance costs: “Tenant’s Proportionate Share” shall be equal to the number of square feet in the Demised Premises, divided by the number of square feet contained in the Building (excluding any interior common area (e.g., maintenance room)) as determined by Landlord. The number of square feet in the Building shall be equal to the number of square feet in the Demised Premises until the “Proposed Retail” space (as shown on Exhibit “A”) is constructed and the square footage of any such additional square footage shall be added to the square footage of the Building, and Tenant’s Proportionate Share recalculated, when a certificate of occupancy is issued for such additional square footage. Item 4. Street Address of Demised Premises: 16179 Kenrick Avenue, Lakeville, MN Item 5. Number of Lease Years in Primary Term: Twenty (20) years. Item 6. Number of Renewal Terms: Four (4). Number of Lease Years in each Renewal Term: Five (5) years. Item 7. Anticipated Delivery Date: Upon full lease execution. Item 8. Completion Date: October 31, 2018. Item 9. Reserved. Item 10. Rent Commencement: Rent to commence upon full lease execution. 229679 194416v3 2 Item 11. Base Rent Amount: Initial Term: Year P.S.F. Rent Annual Monthly 1 to 5 $19.00 $182,704.00 $15,225.33 6 to 10 $20.33 $195,493.28 $16,291.11 11 to 15 $21.75 $209,177.81 $17,431.48 16 to 20 $23.27 $223,788.36 $18,649.03 Renewal Terms: Year P.S.F. Rent Annual Monthly 21 to 25 $24.90 $239,427.82 $19,952.32 36 to 30 $26.64 $256,199.09 $21,349.92 31 to 35 $28.50 $274,102.16 $22,841.85 36 to 40 $30.50 $293,239.92 $24,436.66 ** Subject to timely and proper exercise by Tenant of its renewal rights as provided in Article 1.B. Timely and proper exercise of all prior Renewal Terms is a condition to exercise. Item 12. Address for Rent Payments: _____________________________ LLC c/o MidAmerica Real Estate – Minnesota LLC 5353 Wayzata Boulevard, Suite 650 Minneapolis, MN 55416 Item 13. Reserved. Item 14. Tenant’s Mailing Address for Notices: City of Lakeville 20195 Holyoke Avenue Lakeville MN 55044 Item 15. Landlord’s Mailing Address for Notices: _____________________________ c/o The Driessen Group, LLC Attn: Vincent J. Driessen 4999 France Avenue South, Suite 216 Minneapolis, MN 55410 Telephone: (612) 313-0105 229679 194416v3 3 GRANT OF LEASE A. Landlord and Tenant: In consideration of the mutual, dependent covenants and agreements hereinafter set forth, Landlord does hereby demise and lease to Tenant (for the Term hereinafter stipulated) the premises (hereinafter called the “Demised Premises”) being that portion of a building shown on the site plan attached here to and made a part hereof as Exhibit “A” (the “Site Plan”). The Demised Premises is in the City, County, and State named in Item Two (2) of the Data Sheet, and the real property upon which it is located is legally described in Exhibit “A-1” attached hereto and made a part hereof (the “Property”). Subject to all terms and conditions of this Lease, Tenant shall have the non-exclusive right to use all easements, rights and privileges appurtenant thereto including the right to use the parking areas, driveways, and roads within the Property, and means of ingress and egress thereto. All parking areas, driveways, roads, sidewalks, private utilities and other areas and facilities within or servicing the Property for the common use of the tenants of the Building (as defined hereinafter) and their respective employees and invitees are referred to herein as the “Common Areas.” B. Building: The building on the Property (the “Building”) is generally shown on the Site Plan. The Demised Premises shall consist of an area, within the Building of approximately the square footage in Item Three (3) (a) of the Data Sheet. The street address of the Demised Premises is defined in Item Four (4) of the Data Sheet. ARTICLE 1 TERM, USE AND PERMITTED ENCUMBRANCES A. Commencement Date and Primary Term: The number of Lease Years for the Demised Premises for the Primary Term is the number entered in Item Five (5) on the Data Sheet. The Primary Term (herein so called) of this Lease shall begin on the date (the “Commencement Date”) of mutual execution of this Lease and shall end at midnight on the last day of the last Lease Year following the Commencement Date. For purposes of this Lease, a “Lease Year” shall be defined as that twelve (12) month period during the Primary Term or any Renewal Term (as hereinafter defined) commencing on the first day of the calendar month next following the Commencement Date (as such term is defined in Article 3 hereof) or the annual anniversary thereof, as may be applicable; provided, however, that the first Lease Year shall include that period of time from the Commencement Date up to the last day of the calendar month in which the Commencement Date falls. For purposes of this Lease, a “Lease Month” shall be defined as those successive calendar month periods beginning with the Commencement Date and continuing through the Primary Term or any Renewal Term (as hereinafter defined) of this Lease; provided, however, if the Commencement Date is a day other than the first day of a calendar month, then the first Lease Month shall include that period of time from the Commencement Date up to the first day of the next calendar month. Within ten (10) days after the Commencement Date of the Primary Term is ascertainable, Landlord shall prepare and Landlord and Tenant shall execute a supplemental agreement in the form attached hereto as Exhibit “G” specifying the actual date for the expiration of the Primary Term and other matters set forth therein. The Primary Term and any Renewal Terms (hereinafter defined) are sometimes collectively referred to herein as the “Term.” 229679 194416v3 4 B. Term Options: Provided Tenant is not in default of any term, condition or covenant contained in this Lease at the time of the exercise of an option to renew the Primary Term or beyond any default curing period; then Tenant shall have the option of renewing this Lease for the number of renewal terms and number of Lease Years in each renewal term as shown on Item Six (6) on the Lease Data Sheet (hereinafter, collectively referred to as “Renewal Terms,” or individually as “Renewal Term”) with the same terms and conditions as provided herein except that Base Annual Rent shall be adjusted as set forth in Item Eleven (11) on the Lease Data Sheet. Notice of the exercise of such option shall be given by Tenant to Landlord in writing not later than three hundred-sixty (360) days prior to expiration of the Primary Term or the previous Renewal Term, as the case may be. Landlord shall provide Tenant written notice 90 days prior to the date that Tenant must exercise the option to renew and Tenant’s deadline for providing notice to extend shall be extended day for day in the event Landlord provides such notice late. Exercise of the previous Renewal Term is a condition to exercise of subsequent renewals. C. Tenant’s Use: The Demised Premises shall be used and occupied for (a) the operation of a municipal liquor store (the “Primary Use”) or other retail/office use permitted under applicable zoning ordinances, and (b) subject to Landlord’s prior written consent, which may be withheld in Landlord’s sole and absolute discretion, for any other lawful use that does not violate any easements, covenants, use restrictions and other agreements of record affecting the Demised Premises or the Property, and that does not conflict with any then existing use of another tenant of the Building or any exclusive rights granted to any other tenant of the Building. Tenant shall be permitted, upon advance notice to Landlord and upon Landlord’s consent, not to be unreasonably withheld, conditioned or delayed, to hold occasional outdoor events/fundraisers on the Property, including use of portions of the parking areas. Tenant shall in no event use the Demised Premises or any portion thereof in such a manner as to violate any applicable law, rule, ordinance or regulation of any governmental body or of any reasonable rules and regulations imposed by Landlord. The current rules and regulations of Landlord, which may be revised from time to time, are attached hereto as Exhibit F. Landlord agrees that, so long as Tenant is using the Demised Premises for the Primary Use, Landlord will not lease space within the Property to tenants whose primary use consists of any of the uses described on Exhibit “D” attached hereto. D. Easements, Use Restrictions and Other Recorded Agreements. Notwithstanding anything to the contrary contained in this Lease, Tenant covenants and agrees, at its sole cost and expense, to abide by the provisions of all existing and future matters of record affecting the Demised Premises or the Property, including, without limitation any easements, covenants, use restrictions and other agreements recorded against the Property. ARTICLE 2 EXHIBITS AND ORIGINAL CONSTRUCTION 229679 194416v3 5 A. The exhibits listed below and attached to this Lease are incorporated herein by reference: EXHIBIT “A” - Site Plan of Demised Premises EXHIBIT “A-1” - Legal Description of the Property EXHIBIT “B” - Landlord’s Sign Criteria EXHIBIT “C” - Description and Phasing Plan of Landlord’s Work EXHIBIT “D” - Prohibited Uses EXHIBIT “E” - Reserved EXHIBIT “F” - Rules and Regulations EXHIBIT “G” - Term Confirmation Agreement B. Landlord Construction: The parties acknowledge that the Building, less those portions shown as “proposed retail” on Exhibit A, is existing and is currently occupied by Tenant conducting the Primary Use, and that Landlord acquired the Building and the Property from Tenant. Tenant acknowledges that the Demised Premises is delivered and accepted in its “AS IS” condition. Landlord will use reasonable efforts to substantially complete construction of Landlord’s Work no later than the Completion Date set forth in Item Eight (8) of the Lease Data Sheet. “Landlord’s Work” shall mean the construction by Landlord, at its sole cost and expense, of those improvements, alterations and additions set forth on Exhibit “C” in accordance with the Phasing Plan identified in Exhibit “C”. Tenant acknowledges that Landlord shall be entitled to construct the Building additions identified on Exhibit “A” as “Proposed Retail”, provided only that such work, and Landlord’s Work, shall be coordinated and conducted in such manner that the Demised Premises may remain open for business without interruption and that disruption of the operation thereof shall be kept to a commercially reasonable minimum. At all times during Landlord’s Work, access to a minimum of twenty-five parking stalls and the loading dock serving the Demised Premises shall be maintained, provided that, upon coordination with Tenant over exact timing, loading dock access shall be restricted for up to two (2) days while asphalt is installed, and heavy truck access shall be restricted while the asphalt cures/sets. C. Quality of Landlord’s Work: Landlord agrees (unless otherwise provided in Exhibit “C”) to perform Landlord’s Work in a good and workmanlike manner substantially in accordance with Exhibit “C”. D. Tenant’s Work: All work on the Demised Premises, if any, other than that described on Exhibit “C,” is to be done by Tenant, at Tenant’s expense (hereinafter called “Tenant’s Work”). Tenant shall be permitted to install underground fiber optic cable to serve the Demised Premises in a location reasonably agreed between Landlord and Tenant. ARTICLE 3 RENT 229679 194416v3 6 A. Date Rent Begins: All Base Rent and Additional Rent (as defined herein) shall begin to accrue on the Commencement Date. Tenant’s obligation to pay its Proportionate Share of Real Estate Taxes, costs for insurance and all other costs, expenses and liabilities of Tenant hereunder other than Base Annual Rent are herein collectively referred to as “Additional Rent”, and Base Annual Rent and Additional rent are herein referred to collectively, as “Rent”. B. Base Rent Amount: Tenant does hereby covenant and agree to pay to Landlord, for the use and occupancy of the Demised Premises, at the times and in the manner hereinafter provided, the per square foot rate for the Term found on Item Eleven (11) of the Lease Data Sheet, multiplied by the Square Footage of the Demised Premises as determined in accordance with Item Three (3) of the Lease Data Sheet (the “Base Annual Rent”). One-twelfth (1/12th) of Base Annual Rent (Monthly Base Rent), is to be paid in U.S. dollars, in advance, without notice or invoice from Landlord, on the first day of each and every month during the Term hereof, commencing upon the Commencement Date and ending upon the termination date of this Lease, provided, however, that if the Commencement Date occurs on a day other than the first day of a month, then the Monthly Base Rent for the period from the Commencement Date until the first day of the month next following shall be prorated accordingly. C. When Payments Are Due: All payments of Base Rent and Additional Rent shall be paid or mailed to the address found on Item Twelve (12) of the Data Sheet or to such other payee or address as Landlord may designate in writing to Tenant. The Base Rent for any Renewal Term shall be subject to adjustment as set forth in Item Eleven (11) on the Data Sheet. If any Rent is unpaid more than five days after it is due, in addition to all other remedies set forth herein or available pursuant to Minnesota law, Landlord may charge to Tenant an administrative fee of $250.00 per occurrence plus interest on the unpaid amount from the due date until paid, at 4% over the prime rate set forth in the Wall Street Journal or the maximum permitted by law, whichever is less. ARTICLE 4 TAXES In addition to the Base Annual Rent provided for in Article 3 hereof, Tenant agrees to pay the following charges and expenses, as Additional Rent, as follows: A. Real Estate Taxes: Tenant shall be responsible for its Proportionate Share of all real property taxes and installments of general and special assessments and all other taxes, assessments or charges charged or assessed against the Property, including any tax or excise on rents or any personal property or inventory of Tenant, sales or use taxes, and all applicable license fees related to the Demised Premises or Tenant’s use (excluding any taxes on Landlord’s income derived from the Demised Premises) (hereinafter, collectively “Real Estate Taxes”), with respect to the Property for each calendar year or portion thereof during the Term commencing on the Commencement Date. Said Real Estate Taxes are to be prorated on a 365- day basis for any partial year. “Real Estate Taxes” shall not include any inheritance, estate, succession, transfer, gift, franchise, corporation, income or profit tax or capital levy that is or may be imposed upon Landlord, unless any such tax or levy is made or enacted in lieu of ad valorem real estate taxes. 229679 194416v3 7 B. Taxes Due: Tenant’s Proportionate Share of all Real Estate Taxes shall be paid in monthly payments each in an amount equal to one-twelfth (1/12th) of the annual Real Estate Taxes based on Landlord’s reasonable estimate thereof provided within sixty (60) days of the commencement of each Lease Year, which amount shall be paid together with Monthly Base Rent. A copy of the tax bill or assessment bill submitted by Landlord to Tenant shall at all time be sufficient evidence of the amount of Real Estate Taxes levied or assessed against the Property to which such bill relates. Tenant’s annual estimated payments of its Proportionate Share of Real Estate Taxes shall be reconciled after the expiration of each calendar year during the Term in accordance with the provisions of Article 7.D hereof. C. Tenant’s Appeal of Taxes: Provided Tenant has received Landlord’s prior written consent, which shall not be unreasonably withheld (the failure of less than all tenants of the Property to agree to such appeal shall be considered one, but not the exclusive, reasonable basis for refusing consent), Tenant may contest any Real Estate Taxes against the Demised Premises and attempt to obtain a reduction in the assessed valuation for the purpose of reducing any such tax assessment. Upon the request of Tenant, but without expense or liability to Landlord, Landlord shall cooperate with Tenant and execute any document which may be reasonably necessary and proper for any proceeding. In the event Landlord desires to contest any Real Estate Taxes, Tenant agrees to cooperate with Landlord and execute any document which may be reasonably necessary and proper for any proceeding at no cost to Tenant. If a tax reduction is obtained (or a tax increase is imposed as a result of such proceeding), there shall be a subsequent proportionate reduction (or increase, as the case may be) in Tenant’s total Real Estate Taxes for such year, and any excess payments by Tenant shall be refunded by Landlord (or any under payments by Tenant shall be paid by Tenant to Landlord, as the case may be), without interest, when all refunds to which Landlord is entitled from the taxing authority with respect to such year have been received by Landlord (or where such increase is imposed upon Landlord), and after Landlord has deducted from such refund Landlord’s reasonable expenses with respect to said appeal to the extent not already recovered as Maintenance Expenses. ARTICLE 5 SUBORDINATION, FORECLOSURE, NON-DISTURBANCE AND ATTORNMENT Tenant’s rights hereunder are all expressly subordinate, junior and inferior to the lien of any mortgage or deed of trust currently or in the future in effect against real estate and/or buildings of which the Demised Premises are a part. In the event of a foreclosure or other acquisition of all or any portion of the Property either pursuant to any such mortgage instrument or in lieu thereof, or the appointment of a receiver by a court of law, Tenant shall, upon request of such foreclosing or acquiring party (the “New Owner”), nonetheless attorn to and respect such New Owner as the then owner of the Property and thereby entitled to all rights of Landlord pursuant to this Lease, including, without limitation, the right to all rental payments. In addition, upon written request of Landlord, or any mortgagee or beneficiary of Landlord, Tenant will in writing, subordinate its right hereunder to the interest of any ground lessor of the Property and to the lien of any mortgage or deed of trust or ground lease (individually a “Mortgage”) now or hereafter in force against the Property and to all advances made or hereafter to be made upon the security thereof; provided, however, the subordination of Tenant’s rights hereunder is 229679 194416v3 8 conditioned upon the ground lessor, beneficiary or the mortgagee named in said Mortgage agreeing that Tenant’s peaceable possession of the Demised Premises and its rights under this Lease will not be disturbed so long as Tenant is not in default under the term of this Lease beyond any applicable notice and cure periods. Tenant acknowledges that future lenders may have different requirements as to matters of a Non-Disturbance and Attornment Agreement and Tenant agrees to accept a commercially reasonable form of such agreement and to negotiate in good faith with each such future lender to mutually agree on the form on the Non-Disturbance and Attornment Agreement provided only that any matters requested by such future lender do not materially impair Tenant’s rights under this Lease. Landlord shall reimburse Tenant for its reasonable attorneys’ fees in complying with the requirements of this Article. ARTICLE 6 COMPLIANCE WITH CODES A. Tenant Requirements. Tenant shall at its sole cost and expense keep the Demised Premises (and the Property until such time as Landlord commences construction of the Proposed Retail) in compliance with all applicable codes and regulations of governmental authorities, whether now existing or hereafter adopted or enforced. B. Landlord Requirements. From and after such time as Landlord commences construction of the Proposed Retail, Landlord shall at its sole cost and expense keep the Property, other than the Demised Premises, in compliance with all applicable codes and regulations of governmental authorities, whether now existing or hereafter adopted or enforced. ARTICLE 7 REPAIRS AND MAINTENANCE A. Landlord’s Repairs and Maintenance Responsibilities: Landlord covenants and agrees that it shall maintain, repair and replace, or cause to be maintained, repaired and replaced, subject to reimbursement by Tenant as provided herein, the roof, foundation, structural supports (and other structural portions), exterior walls and exterior painting of the Building, plumbing and electrical systems to the point of entry to the Demised Premises and the sewer lines serving the Demised Premises, all other mechanical, fire protection, security and other building systems serving the whole Building and not exclusively the Demised Premises, and Common Areas in good order and repair, in an attractive and first class manner, and in compliance with all existing and future matters of record affecting the Demised Premises or the Property, including, without limitation any easements, covenants, use restrictions and other agreements recorded against the Property. Landlord’s Maintenance Responsibilities shall include annual inspections of the fire suppression and alarm system for the Demised Premises. B. Tenant’s Proportionate Share of Maintenance Costs; Responsibilities: Tenant shall reimburse Landlord, in the manner provided herein, for Tenant’s Proportionate Share of costs incurred by Landlord for operation, maintenance and repair and replacement of the Building and the Common Areas (excluding replacement of the Building) and supervision thereof (“Maintenance Costs”), including, without limitation, a management fee equal to the market rate which would from time to time be charged in the Minneapolis/St. Paul metropolitan 229679 194416v3 9 area by unaffiliated third party property managers of first class retail projects of similar size; costs of repairing and repaving the parking area and sidewalk; repainting and restriping the parking areas; cleaning, sweeping and other janitorial services; the HVAC system (except to the extent of negligence by Tenant or its employees or contractors; and replacement costs for Tenant’s HVAC system shall be paid by Tenant only, in monthly installments amortized over the useful life of the replaced equipment); trash removal; insurance to be maintained by Landlord pursuant to the terms hereof and “loss of rents” insurance with respect to the Building; sanitation (except as provided in Article 7.C hereof); snow and ice removal; maintenance, repair and replacement of refuse receptacles; maintenance, repair and replacement of existing lawn and landscaping; maintenance, repair and replacement of directional signs and other markers; maintenance, repair and replacement of lighting and other utility lines and facilities located outside of the Demised Premises; costs for utilities provided to the Common Areas; any costs incurred to bring the Demised Premises into compliance with changes in law, regulations, codes or other governmental requirements enacted, adopted or imposed after the Commencement Date; maintenance, repair and replacement of the roof and other structural elements of the building; repair and replacement of glass (except to the extent the responsibility of a tenant under its lease); costs of protesting real estate taxes or other governmental charges; and other costs due and payable pursuant to all existing and future matters of record affecting the Demised Premises or the Property, including, without limitation any easements, covenants, use restrictions and other agreements recorded against the Property. “Capital Expenditures” means those expenditures which, in accordance with generally accepted accounting principles, are not fully chargeable to current expense in the year the expenditure is incurred. Maintenance Costs shall include any Capital Expenditures, provided that Maintenance Costs for Capital Expenditures shall be amortized over the useful life of the improvement in question. Maintenance Costs shall not include: a. Costs of utilities for other tenants of the building; b. Ground rents or principal or interest payments on the loans secured by mortgages of the Property or any part thereof; c. Depreciation or amortization of any improvements, or costs recovered by Landlord pursuant to its insurance policies; d. Leasing commissions, attorneys’ fees, costs, disbursements and other expenses incurred in connection with negotiations or disputes with tenants or leasing, renovating or improving space for tenants or other occupants or prospective tenants or other occupants; e. Costs, including permits, licenses and inspection fees, incurred in renovating or otherwise improving, decorating, painting or redecorating space for other tenants or occupants; f. Costs for services sold to tenants or other occupants for which Landlord is entitled to reimbursement as an additional charge or rental over and above the basic rent and escalations payable under such tenant’s or occupant’s lease or occupancy agreement; g. Rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment ordinarily considered of a capital nature except on an emergency or temporary basis; 229679 194416v3 10 h. Costs incurred in connection with or directly related to the acquisition and/or initial construction (as distinguished from operation and maintenance) of the Demised Premises, the Property or any expansion thereof; i. Costs actually reimbursed by third parties (Landlord shall credit Tenant its Proportionate Share of any refund or recovery made with respect to any Maintenance Cost previously paid by Tenant); j. Costs incurred due to violation by Landlord of this Lease or a breach by another tenant of the tenant’s lease of the Property; k. Repairs and other work occasioned by fire, windstorm or other casualty paid by insurance or condemnation proceeds; l. Costs of correcting any code or statutory violations existing prior to the Commencement Date; m. Penalties and other costs resulting from the Landlord’s violation of any governmental requirement, excluding any such penalties or costs resulting from the Tenant’s actions; n. Costs incurred in connection with the sale, financing, refinancing, mortgaging, or other change of ownership of the Property. o. Costs of repairs due to Landlord negligence; p. Salaries and wages and other benefits paid to or on behalf of employees above the level of manager of the Property; q. Charitable or political contributions; r. Costs of capital improvements, except for such costs including interest thereon, as reasonably determined and amortized by Landlord, where (a) on the purposes of such capital improvements was to reduce Operating Expenses, or (b) such capital improvement was required due to any rule, regulation, ordinance or statute of any applicable governmental body; or s. Payments to affiliates to Landlord for goods and/or services in excess of what would be paid to non-affiliated parties for such goods and/or services in an arm’s length transaction. C. Payment of Tenant’s Proportionate Share: Effective upon the Commencement Date, Tenant shall pay to Landlord on the first day of each month during the Term, Tenant’s Proportionate Share of the Maintenance Costs based upon Landlord’s estimates, subject to readjustment as hereinafter provided. If the Commencement Date occurs on a day other than the first day of a month, Tenant’s Proportionate Share of Maintenance Costs for such partial month shall be payable on the earlier of ten days after billing therefore by Landlord or the first day of the next month. Notwithstanding anything herein to the contrary, to the extent that any tenant of the Property or a portion thereof, with the consent of Landlord, contracts separately for any of the services included within Maintenance Costs (e.g, trash removal) such that the cost for the service as provided to such tenant is paid directly by such tenant and not by Landlord, the square footage of such tenant’s demised premises shall be excluded from the square footage of the Building for purposes of calculating Tenant’s Proportionate Share of the cost of such service which is included within Maintenance Costs. The entire square footage of the Building (excluding any interior common area (e.g., maintenance room)) shall be included for purposes of calculating Tenant’s Proportionate Share of the balance of the Maintenance Costs. To the extent 229679 194416v3 11 that Tenant, with the consent of Landlord, contracts separately for any of the services included within Maintenance Costs (e.g, trash removal) such that the cost for the service as provided to Tenant is paid directly by Tenant and not by Landlord, Tenant’s Proportionate Share of Maintenance Costs shall not include any costs for the provision of such service to other tenants. If Tenant’s utilization of trash or recycling services exceeds the average utilization of trash or recycling services for strip retail tenants in general (as determined in Landlord’s reasonable discretion) or if Tenant requests a higher level of or special trash or recycling service, Landlord may in its reasonable discretion make a determination of costs attributable to such excess or special usage and charge Tenant for the costs of such excess or special usage as an additional Maintenance Cost payable solely by Tenant. D. Reconciliation: Within one hundred twenty (120) days following the end of each calendar year, Landlord shall furnish Tenant with a statement, certified as correct by Landlord’s managing agent, showing the total Maintenance Costs and Real Estate Taxes for the calendar year just expired, the amount of Tenant’s Proportionate Share of such Maintenance Costs and Real Estate Taxes and payments made by Tenant during such calendar year under this Lease. Landlord’s failure to provide such statement within the one hundred twenty (120) day time period shall not relieve Tenant of the obligation to pay any shortfall in Maintenance Costs and Real Estate Taxes upon receipt of the statement. If Tenant’s Proportionate Share of such Maintenance Costs and Real Estate Taxes for such calendar year exceeds Tenant’s payments as shown on such statement, then Tenant shall within thirty (30) days of the date of such statement pay the difference to Landlord. If Tenant fails to pay such shortfall when due, Tenant shall in addition pay an administrative fee of $250.00 for each month or partial month that such payment is late, together with interest on such late payment from the due date at the rate provided in Article 3.D hereof, provided that this provision for payment of interest and an administrative fee shall not preclude Landlord from declaring a default under this Lease for Tenant’s failure to pay. If the statement indicates an overpayment by Tenant, then Tenant shall be entitled to credit such excess against payments of Base Rent or other charges next becoming due under this Lease or, in the case of the final Lease Year of the Term, to a refund within thirty (30) days of the date of such statement. E. Inspection: Tenant shall have the right (upon ten (10) days advance, written notice by Tenant to Landlord) to inspect the books and records of Landlord with respect to any costs or item which is passed through to Tenant and/or to challenge Maintenance Costs for the two calendar years immediately preceding such inspection or challenge. Landlord shall cooperate with Tenant in providing Tenant reasonable access to its books and records for the Property during normal business hours for this purpose. If the results of the inspection show an overcharge to Tenant of more than ten percent (10%) of the actual amount owed by Tenant and that such overcharge was a malicious or intentional act of Landlord, then Landlord shall pay the reasonable costs of such audit. Landlord shall credit or refund to Tenant any overcharge of such items as discovered by the audit within thirty (30) days of completion of such audit. In the event such audit discloses an undercharge of such items as billed to Tenant, Tenant shall pay Landlord the amount of such undercharge within thirty (30) days of completion of such audit. Notwithstanding the foregoing, any calculation of overcharging or undercharging shall be based upon a comparison of actual amounts paid as shown in the annual statement and estimated amounts from the beginning of such year after refund, if any. 229679 194416v3 12 F. Tenant’s Maintenance. Except for those items required to be repaired and maintained by Landlord, Tenant covenants and agrees that it shall, at its sole cost and expense, maintain or cause to be maintained the Demised Premises, including, without limitation, mechanical systems (electrical, HVAC, plumbing, etc.), interior utility lines, window glass, doors, and Tenant’s signage in good order and repair and in a safe and secure condition. Tenant shall pay to Landlord the costs of any repairs or maintenance to common areas or utility lines caused by acts of Tenant. G. HVAC System. Tenant acknowledges that the Demised Premises shall be served by an HVAC system dedicated exclusively to the Demised Premises. Landlord shall maintain and administer an HVAC preventative maintenance contract during the term of this Lease and any renewals or extensions thereof, which contract will require inspection twice annually, once at the beginning of the heating season and once at the beginning of the cooling season, said inspection to include, if necessary or desirable, cleaning, lubrication, filter replacement and such other terms as Landlord may in its sole discretion determine. Tenant shall pay to Landlord on a monthly basis and together with Tenant’s proportionate share of Maintenance Costs the estimated monthly costs incurred by Landlord in connection with such HVAC preventative maintenance contract and in connection with enforcing any HVAC warrantees on Tenant’s behalf. ARTICLE 8 ENVIRONMENTAL MATTERS Landlord represents that, to Landlord’s knowledge, without inquiry and based solely on environmental report(s) obtained by Landlord in connection with its acquisition of the Property, no leak, spill, discharge, emission or disposal of hazardous or toxic substances has occurred on the Property and that the soil, groundwater, soil vapor on or under the Property is free of toxic or hazardous substances as of the date hereof, except as may be disclosed in such report. Upon request of Tenant, Landlord will provide Tenant a copy of such report(s). Tenant covenants and warrants that it shall not use the Property for the production, sale or storage of any toxic or hazardous substances, shall not dispose of any hazardous substances in or on the Property, provided that Tenant shall be permitted to use and store hazardous substances used in the normal and customary conduct of Tenant’s business, in no greater than normal and customary amounts, further provided that Tenant shall comply with all applicable laws, rules, regulations and ordinances with regard to such storage, use and handling of such hazardous substances. Tenant agrees to indemnify, defend and hold Landlord and its officers, employees and agents harmless from any claims, judgments, damages, fines, penalties, costs, liabilities (including sums paid in settlement of claims) or loss including reasonable attorneys’ fees, consultants’ fees and experts’ fees which arise during or after the Primary Term or any Renewal Term in connection with the presence of toxic or hazardous substances in the soil, ground water or soil vapor on or under the Property resulting from any negligence, willful misconduct or violation of this Lease or applicable laws and/or regulations by Tenant, its officers, employees, invitees or agents. In the event that any third party or any unit of government brings any action or asserts any claim against the Tenant arising from or related to the above referenced 229679 194416v3 13 environmental matters, the Tenant shall immediately notify the Landlord in writing of the action or claim. ARTICLE 9 ALTERATIONS Tenant shall not make any (1) exterior or structural alterations (including, without limitation, roof penetrations or installation of equipment or other improvements on the roof or any other alterations which would impair any warranties, e.g., roof warranty, related to the Demised Premises or the Building), or (2) any non-structural interior alterations costing in excess of $25,000.00 in the aggregate in any calendar year, in any portion of the Demised Premises without, in each instance, first obtaining the written consent of Landlord which shall not be unreasonably withheld, delayed or conditioned, provided Tenant furnishes to Landlord such plans, specifications, cost estimates and other information as Landlord may reasonably request, and subject to the terms and conditions of any Mortgage. Tenant shall be permitted to make interior, nonstructural alterations, additions and improvements costing less than $25,000.00 in the aggregate in any calendar year, provided that Tenant complies with all applicable governmental laws, ordinances and regulations and any easements, covenants, use restrictions or other agreements of record affecting the Demised Premises or the Property, and further provided that Tenant shall provide Landlord notice at least seven (7) days in advance of commencement of such alterations, additions or improvement and copies of plans and specifications thereof and the names, addresses and telephone numbers of all contractors, subcontractors and suppliers performing any such work. Tenant agrees to take and to cause its contractors and subcontractors to take necessary precautions to ensure that such contractors and subcontractors do not trigger alarms while performing work in or about the Demised Premises. In the event that any contractors or subcontractors of Tenant trigger alarms while performing work in or about the Demised Premises, Tenant shall pay to Landlord an amount equal to $250.00 per incident to compensate Landlord, plus any charge imposed by any governmental entity for responding to such alarm. ARTICLE 10 FIXTURES AND PERSONAL PROPERTY Any trade fixtures, business equipment, inventory, trademarked items, signs, counters or shelving or showcases that can be removed by unbolting or unscrewing, track lighting that can be removed by unbolting or unscrewing, and other removable personal property installed in or on the Demised Premises by Tenant at its expense (“Tenant’s Property”), shall remain the property of the Tenant, unless abandoned after expiration or earlier termination of this Lease or of Tenant’s right to possession of the Demised Premises. Tenant shall, prior to expiration of the Term or any Renewal Term (provided a subsequent renewal right of Tenant has not been exercised) and within ten (10) days of any earlier expiration or termination of this Lease or of Tenant’s right to possession of the Demised Premises, (and may at any time or from time to time during the Term or any Renewal Term), remove Tenant’s Property, provided, however, that Tenant shall not be obligated to remove any so-called “permanent improvements” or any fixtures, counters, showcases, shelving or lighting that cannot be removed by unbolting or unscrewing the same. Tenant at its expense shall immediately repair any damage occasioned by 229679 194416v3 14 the removal of Tenant’s Property (including, without limitation, filling with proper caulk any holes in the Building facade in connection with Tenant’s signage) and upon expiration or earlier termination of this Lease, shall leave the Demised Premises in a neat and clean condition, free of debris, normal wear and tear and damage by fire or other casualty if the same gives rise to the early termination of the Lease excepted. If any or all of the Tenant’s Property is not removed within the time periods herein provided, such Property shall be deemed abandoned and may be sold, destroyed or discarded in Landlord’s discretion. Tenant hereby waives any obligation that Landlord may have to conduct a sheriff sale or similar type sales with respect to any of the Tenant’s Property remaining in the Demised Premises after the time periods set forth herein ARTICLE 11 SIGNAGE Tenant agrees that its signage shall at all times be in compliance with applicable governmental regulations and ordinances and with Landlord’s sign criteria attached hereto as Exhibit “B,” and all existing and future matters of record affecting the Demised Premises or the Property, including, without limitation any easements, covenants, use restrictions and other agreements recorded against the Property. Additionally, so long as the same complies with all applicable laws and regulations and with all existing and future matters of record affecting the Demised Premises or the Property, including, without limitation any easements, covenants, use restrictions and other agreements recorded against the Property, Tenant shall have the right to erect temporary signage or other promotional items that advertise Tenant’s grand opening and other significant promotional events. Tenant shall also be permitted to mount a vinyl graphic on the sign panel (artwork and the vinyl graphic, and mounting of the same, to be at Tenant’s sole cost and expense) on the free- standing sign to be constructed by Landlord at Landlord’s sole cost and expense, as part of Landlord’s Work, such panel size and location to be as set forth on Exhibit “B-1” hereto. Tenant shall at its sole cost and expense maintain such panel in good condition and repair and shall be responsible for its proportionate share (based on panel square footage) of electric costs for illuminating such sign and for maintenance of such sign. In the event that Tenant fails to mount a sign panel on the pylon sign within six (6) months after the date of completion of construction of such sign, Tenant’s right to install a sign panel on the sign shall expire and be deemed waived and released. Landlord will cooperate with Tenant in filing any required signage application, permit and/or variance for said signage or with respect to the Demised Premises generally, provided the Landlord shall not be obligated to incur any out of pocket expense in connection with the same. ARTICLE 12 LIENS Tenant shall not permit to be created or to remain undischarged any lien, encumbrance or charge arising in whole or in part out of any work or work claim of any contractor, mechanic, laborer of Tenant or material supplied by a vendor to Tenant which might be, or become, a lien or encumbrance or charge upon the Property. If any lien or notice of lien on account of an 229679 194416v3 15 alleged debt of Tenant by a party engaged by Tenant or Tenant’s contractor to work on the Demised Premises shall be filed against the Property, Tenant shall, within thirty (30) days after notice of the filing thereof, or such longer period approved by Landlord, or any shorter period as may be required by the terms of any Mortgage, cause the same to be discharged of record by payment, deposit, bond or other security given. Tenant shall provide Landlord with lien waivers from all suppliers of labor or materials for all work done in connection with the Demised Premises promptly upon completion of such work. ARTICLE 13 COMPLIANCE WITH INSURANCE REQUIREMENTS AND PERMITTED ENCUMBRANCES; NUISANCE; WASTE Tenant agrees not to (i) permit any practice unlawful under state or federal laws or regulations to be carried on or committed on the Demised Premises; (ii) make use of or allow the Demised Premises to be used for any purpose that might invalidate or increase the rate of insurance therefor; (iii) keep or use or permit to be kept or used on the Demised Premises any flammable fluids, gases (excluding natural gas provided to the Demised Premises by a public utility), or explosives without the prior written permission of Landlord except for normal cleaning products in normal amounts; (iv) use the Demised Premises for any purpose whatsoever which might create a nuisance; (v) deface or injure the Demised Premises; (vi) overload the floor of the Building; (vii) commit or suffer any waste; or (viii) install any electrical equipment that over loads lines, or (ix) cause a default under any easements, covenants, use restrictions or other agreements of record affecting the Demised Premises or the Property. ARTICLE 14 SERVICES A. Landlord Provides Utilities: Utilities to the Demised Premises shall be separately metered. Landlord shall not be liable to Tenant in damages or otherwise if the said utilities or services are interrupted or terminated because of necessary repairs, installations, or improvements, or any cause beyond the Landlord’s reasonable control, provided, however, Landlord shall use reasonable efforts to assist Tenant to cause such utilities or services to be reestablished as soon as possible, at no cost to Landlord. No such interruption or termination shall relieve Tenant of the performance of any of its obligations hereunder. B. Tenant’s Responsibility to Pay: Tenant shall be solely responsible for and promptly pay all charges for the use and consumption of sewer, gas, electricity, water, phone and all other utility services used within the Demised Premises commencing with the Commencement Date. Tenant shall not install any equipment which can exceed the capacity of any utility facilities serving the Building and if any equipment installed by Tenant requires additional utility facilities the same shall be installed at Tenant’s expense in compliance with all code requirements and plans and specifications which must be approved in advance in writing by Landlord. ARTICLE 15 TENANT’S CONDUCT OF BUSINESS 229679 194416v3 16 Tenant shall continuously operate the Demised Premises in accordance with Article 1.C during the entire Term of this Lease (including any renewal terms, if any), subject only to temporary closures not to exceed ninety (90) days due to remodeling or permitted alterations to the Demised Premises, temporary closures until completion of restoration of any damage to the Demised Premises as provided in Article 16 hereof and for the period of any Permitted Delays. ARTICLE 16 DAMAGE TO DEMISED PREMISES In the event the Demised Premises is hereafter damaged or destroyed or rendered partially untenantable for Tenant’s use, by fire or other casualty covered by the insurance to be maintained by either Landlord or Tenant pursuant to Article 17, Landlord shall (subject to the terms of any Mortgage, Permitted Delays set forth in Article 36 and receipt of insurance proceeds), within sixty (60) days after such casualty commence repair of the Demised Premises and within one hundred-eighty (180) days after commencement of such repair restore the Demised Premises to substantially the same condition in which it was immediately prior to the occurrence of the casualty to the extent and availability of insurance proceeds, except as otherwise provided in this Article and, provided that in no event shall Landlord be required to repair or replace Tenant’s Property, Tenant’s Work or alterations made by Tenant. However, in the event that fifty percent (50%) or more of the Demised Premises, is destroyed or rendered untenantable by fire or other casualty during the last year of the Primary Term or any Renewal Term of this Lease, (based upon the cost to replace the Demised Premises as compared with its market value immediately prior to such fire or other casualty as shown by certificate of Landlord’s architect), then Landlord or Tenant shall have right to terminate this Lease effective as of the date of the casualty, by giving one to the other within thirty (30) days of such casualty, written notice of termination. If said notice of termination is given within this thirty (30) day period, this Lease shall terminate from the date of such casualty, and Landlord shall promptly repay to Tenant any Rent paid in advance which has not been earned as of the date of such casualty. If said notice is not given and Landlord is required or elects to repair or rebuild the Demised Premises as herein provided, then Tenant shall repair and replace Tenant’s Property and Tenant’s Work to at least their condition prior to the damage or destruction, and Rent shall abate proportionately to the extent the Demised Premises are unusable commencing with the date of such casualty and continuing until the substantial completion by Landlord of its restoration obligations. ARTICLE 17 INSURANCE A. Landlord’s Liability Insurance. Landlord agrees to carry, or cause to be carried, during the term hereof Commercial General Liability Insurance (hereinafter, “Landlord’s Liability Insurance”) with an insurance company who carries a financing rating of not less than “X/A” as designated in the most current Best’s Insurance Reports on the Common Areas and Building, providing coverage of not less than Two Million Dollars ($2,000,000.00) each occurrence and Two Million Dollars ($2,000,000.00) general aggregate, combined Bodily Injury and Property Damage Liability. The parties agree that the minimum dollar amount of coverage 229679 194416v3 17 may be adjusted from time to time as commercially reasonable or as required by a lender taking a lien on the Project. Landlord, upon written request by Tenant, shall promptly deliver to Tenant a certificate of Landlord’s Liability Insurance. Such Landlord’s Liability Insurance shall require Landlord’s insurance carrier to notify Tenant at least thirty (30) days in advance of the cancellation of Landlord’s Liability Insurance. B. Landlord’s Property and Rent Loss Insurance. Landlord also agrees to carry, during the Term hereof, all risk property insurance (hereinafter, “Landlord’s Property Insurance”) covering fire and extended coverage, vandalism and malicious mischief, flood insurance (if required by Landlord’s lender), sprinkler leakage and all other perils of direct physical loss or damage insuring the improvements and betterments located in or on the Property, including the Demised Premises and all appurtenances thereto (excluding Tenant’s Property) for the full replacement value thereof, such value as adjusted from time to time due to market conditions and/or lender requirements. Landlord may carry rent loss insurance in an amount to cover rent for a period not exceeding twelve (12) months (“Landlord’s Rent Loss Insurance”). Landlord, upon request, shall furnish Tenant a certificate of such Landlord’s Property Insurance and Landlord’s Rent Loss Insurance. C. Reimbursement. Commencing on the Commencement Date of this Lease, Tenant agrees to reimburse to Landlord, Tenant’s Proportionate Share of Landlord’s annual total costs for the premiums for Landlord’s Liability Insurance, Landlord’s Property Insurance and Landlord’s Rent Loss Insurance (hereinafter, collectively referred to as “insurance”), as part of Tenant’s obligation to pay Tenant’s Proportionate Share of Maintenance Costs. D. Tenant’s Liability Insurance. Tenant agrees to carry Commercial General Liability insurance (on a “claims made” basis) on the Demised Premises during the Term hereof naming Landlord and Landlord’s designated management company as additional insureds (by an endorsement reasonably acceptable to Landlord) and naming any mortgagees of the Property as “mortgagees” thereunder, with the League of Minnesota Cities Insurance Trust (if Tenant assigns the Lease to a non-municipality, the insurer must be an insurance company who carries a financing rating of not less than “X/A” as designated in the most current Best’s Insurance Reports) on the Common Areas and Building (so long as Tenant is the “tenant” under this Lease, the League of Minnesota Cities Insurance Trust shall provide such insurance) giving Landlord and Tenant a minimum of thirty (30) days written notice by the insurance company prior to cancellation, termination or change in such insurance. Such insurance shall be for limits of not less than Two Million Dollars ($2,000,000.00) each occurrence and Two Million Dollars ($2,000,000.00) general aggregate (on a “per location” basis), combined Bodily Injury and Property Damage Liability or such higher limits as may be required by any existing and future matters of record affecting the Demised Premises or the Property, including, without limitation any easements, covenants, use restrictions and other agreements recorded against the Property. Said insurance must be endorsed to be primary to all insurance available to Landlord, with Landlord’s insurance being secondary and non-contributing, shall contain no non-standard, special or unusual exclusions or restrictive endorsements and shall include a deductible in an amount reasonably acceptable to Landlord (so long as Tenant is the “tenant” under this Lease, $50,000.00 deductible is acceptable to Landlord). Tenant shall provide Landlord certificates, or at Landlord’s option certified copies of the policies, evidencing that Tenant’s Commercial 229679 194416v3 18 General Liability Insurance is in full force and effect. During the Term, Landlord may request a reasonable increase in the amount of the aforesaid limit if such increase is in keeping with the standard limit maintained by businesses comparable to Tenant. Tenant may maintain the required liability and property insurance (described below) in the form of a blanket policy covering other locations of Tenant in addition to the Demised Premises; provided, however, that Tenant shall provide Landlord with a certificate (in a form reasonably acceptable to Landlord, using the form ACORD 25) of insurance for such coverages specifically naming the location of the Demised Premises and naming Landlord as required in this Article 17, the limits of which coverages applicable to the Demised Premises are to be in the amounts set forth in this Article 17. E. Tenant’s Property Insurance. Tenant further agrees to carry all risk property insurance (hereinafter, “Tenants Property Insurance”) covering, fire and extended coverage, vandalism and malicious mischief, sprinkler leakage and all other perils of direct physical loss or damage for the full replacement value, all of Tenant’s Property and Tenant’s Work, excluding structural improvements or fixtures, located on or within the Demised Premises and window glass for the Demised Premises. Tenant shall provide Landlord certificates evidencing that Tenant’s Property Insurance is in full force and effect. Landlord agrees that it shall not have any right, title or interest in and to Tenant’s Property Insurance, or any proceeds therefrom. F. Mutual Release. Landlord and Tenant and all parties claiming under them mutually release and discharge each other from all claims and liabilities arising from or caused by any casualty or hazard, covered or required hereunder to be covered in whole or in part by insurance on the Demised Premises or the Building or in connection with property on or activities conducted on the Demised Premises or the Building, and waive any right of subrogation which might otherwise exist in or accrue to any person on account thereof. All insurance coverage required to be maintained by a party under this Agreement shall provide a waiver of subrogation in favor of the other party ARTICLE 18 INDEMNIFICATION A. Tenant Indemnifies Landlord: Tenant hereby indemnifies and holds Landlord harmless from and against any and all claims, demands, liabilities, and expenses, including attorney’s fees, arising from Tenant’s use of the Demised Premises or Common Areas or from any act permitted, or any omission to act, in or about the Demised Premises by Tenant or its agents, employees, invitees, customers or contractors, or from any breach or default by Tenant of this Lease, except to the extent caused by the negligence or willful misconduct of Landlord or Landlord’s agents, employees or contractors. In the event any action or proceeding shall be brought against Landlord by reason of any such claim, Tenant shall defend the same at Tenant’s expense by counsel reasonably satisfactory to Landlord. Notwithstanding the above, Landlord and Tenant shall release each other from all claims to the extent covered or required hereunder to be covered by insurance. B. Landlord Indemnifies Tenant: Landlord hereby indemnifies and holds Tenant 229679 194416v3 19 harmless from and against any and all claims, demands, liabilities, and expenses, including attorney’s fees, arising from Landlord’s obligations with respect to of the Demised Premises, the Building or Common Areas or from any act negligently permitted, or any negligent omission to act or willful misconduct, in or about the Demised Premises by Landlord or its agents, employees, or contractors, or from any breach or default by Landlord of this Lease, except to the extent caused by the negligence or willful misconduct of Tenant or Tenant’s agents, invitees, employees or contractors. In the event any action or proceeding shall be brought against Tenant by reason of any such claim, Landlord shall defend the same at Landlord’s expense by counsel reasonably satisfactory to Tenant. Notwithstanding the above, Landlord and Tenant shall release each other from all claims to the extent covered or required hereunder to be covered by insurance. ARTICLE 19 ASSIGNMENT, SUBLETTING AND OWNERSHIP Tenant shall not assign, sublease or in any manner transfer this lease or any estate or interest therein, or sublet the Demised Premises or any part thereof, or grant any license, concession or any other right of occupancy of any portion of the Demised Premises without the prior written consent of the Landlord, which shall not be unreasonably withheld, delayed or conditioned and shall be provided to Tenant within 30 days of Tenant’s delivery of a request for assignment or sublease or be deemed approved, provided Tenant has provided a term sheet and the following information for the assignee or sublessee: net worth, reputation, felony convictions, experience and proposed use. Landlord agrees that it will not withhold consent in a unreasonable and arbitrary manner, however, in determining whether or not to grant its consent, Landlord shall be entitled to take into consideration factors such as any default by Tenant or event which with notice or the passage of time would be a default, the reputation, net worth, business plan, business experience, and similar information regarding the proposed transferee and tenant mix at the Property and other business considerations. In addition, Landlord shall also be entitled to charge Tenant a reasonable fee for processing Tenant’s request. Consent by Landlord to one or more assignments or sublettings shall not operate as a waiver of Landlord’s rights as to any subsequent assignment and sublettings. Any assignee or sublessee of an interest in and to this Lease shall be deemed, by acceptance of such assignment or sublease or by taking actual and constructive possession of the Demised Premises, to have assumed all of the obligations set forth in or arising under this Lease. Such assumption shall be in effect as of the earlier of the date of such assignment or sublease or the date on which the assignee or sublessee obtains possession of the Demised Premises. Notwithstanding any assignment or subletting (including any assignment or subletting under the provisions of this Article) Tenant shall at all times remain fully responsible and liable for the payment of the rent herein specified and for compliance with all of its other obligations under this Lease (even if future assignments and sublettings occur subsequent to the assignment or subletting by Tenant, and regardless or whether or not Tenant’s approval has been obtained for such future assignments and sublettings). Landlord shall provide written notice to Tenant of any defaults by an assignee or sublessee in accordance with the notice provision under this Lease and any time periods provided under this Lease shall be extended by 60 days (or such shorter 229679 194416v3 20 period of time as may be reasonable and as is set forth in the default notice with the reason therefore to the extent the default is adversely affecting the other tenants of the Property) to allow Tenant an opportunity to cure, obtain compliance by the assignee or sublessee or to retake possession. Failure of Landlord to provide notice shall terminate Tenant’s liability under this Article. Moreover, in the event that the rental due and payable by a sublessee (or a combination of the rental payable under such sublease plus any bonus or other consideration therefore or incident thereto) exceeds the rental payable under this Lease, or if with respect to a permitted assignment, permitted license or other transfer by Tenant permitted by Landlord, the consideration actually paid to Tenant by the assignee, licensee or other transferee (less any reasonable out-of-pocket costs actually incurred by Tenant in connection with such transfer, including, but not limited to: commissions, professional fees, build out, free rent, costs of carrying the space vacant during a reasonable period, transfer taxes and the unamortized portion balance of the Tenant’s original improvements to the space) exceeds the rental payable under this Lease, then Tenant shall pay fifty (50%) percent of such excess to Landlord within ten (10) days following receipt thereof by Tenant from such sublessee, assignee, licensee or other transferee, as the case may be. Finally, in the event of an assignment or subletting, it is understood and agreed that all rentals paid to Tenant by any assignee or sublessee shall be received by Tenant in trust for Landlord, to be forwarded immediately to Landlord without offset or reduction of any kind, and upon election by Landlord such rentals shall be paid directly to Landlord (to be applied as a credit and offset to Tenant’s rental obligation). Alternatively, Landlord may, in the event Tenant requests consent to an assignment or sublease, elect to terminate this Lease as to the portion of the Demised Premises for which Tenant proposes a sublease or to terminate this Lease in its entirety in the event Tenant proposes a full assignment, effective as of the date Tenant proposes the sublease or assignment to take place, and enter into a new lease with the proposed assignee or sublessee, provide that any such termination may be conditioned upon an acceptable lease being entered into between Landlord and the proposed assignee/sublessee. Tenant shall have the right from time to time during the Term and without Landlord’s further approval, to grant (but record in the real property records only after the review and reasonable approval by Landlord of form of the document(s) to be recorded) a mortgage or other security interest in Tenant’s interest in this Lease and all of Tenant’s trade fixtures, equipment, and other movable personal property to Tenant’s lenders in connection with Tenant’s financing arrangements. Landlord agrees to execute such confirmation, certificate or other documents (except amendments to this Lease or documents altering the terms hereof, unless Landlord hereafter consents) as Tenant’s lenders may reasonably request in connection with any such financing, which documents shall include such assurances as Landlord may reasonably request. In the event of the transfer and assignment by Landlord of its interest in this Lease and in the Property or Demised Premises to a person expressly assuming Landlord’s obligations under this Lease, Landlord shall thereby be released from any further obligations hereunder, and Tenant agrees to look solely to such successor in interest of the Landlord for performance of such obligations. Any security given by Tenant to secure performance of Tenant’s obligations hereunder may be assigned and transferred by Landlord to such successor in interest and Landlord shall thereby be discharged of any further obligation relating thereto. ARTICLE 20 229679 194416v3 21 ACCESS TO PREMISES Upon reasonable prior notice, but in no event less than twenty-four (24) hours (except in the case of an emergency), Landlord may enter the Demised Premises during Tenant’s business hours for purposes of inspection, to show the Demised Premises to prospective purchasers and lenders, to perform maintenance and repair obligations imposed upon Landlord by this Lease or to show the Demised Premises to prospective tenants during the last six (6) months of the Term. During the last six (6) months of the Term, Landlord shall also have the right to place signage in the Demised Premises advertising the Demised Premises as being available for lease. Landlord agrees to use its best efforts to keep such entries to a minimum and, further, during any such entry, Landlord shall use its best efforts not to disturb or inconvenience Tenant in the conduct of Tenant’s business in the Demised Premises. ARTICLE 21 DEFAULTS BY TENANT A. Definition of Defaults: The occurrence of any of the following shall constitute a material default and breach of this Lease by Tenant: (i) Any failure by Tenant to pay Rent or make any other payment required to be made by Tenant hereunder within five (5) days from the date such payment is due. (ii) A failure by Tenant to observe and perform any other material provision of this Lease to be observed or performed by the Tenant, where such failure continues for thirty (30) days after written notice thereof by Landlord to Tenant, except that this thirty (30) day period shall be extended for a reasonable period of time not to exceed sixty (60) days if the alleged default is not reasonably capable of cure within said thirty (30) day period and Tenant proceeds to diligently cure the default. (iii) The making by Tenant or any guarantor of this Lease of any general assignment for the benefit of creditors, the filing by or against Tenant or any guarantor of this Lease of a voluntary or involuntary petition in bankruptcy or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant or any guarantor of this Lease, the same is dismissed within sixty (60) days) the appointment of a trustee or receiver to take possession of the Demised Premises or all of Tenant’s property located therein that is not restored to Tenant within sixty (60) days, or the attachment, execution or other judicial seizure that is not discharged within sixty (60) days. (iv) Tenant abandons the Demised Premises. (v) Tenant or any guarantor of this Lease is declared insolvent. (vi) Tenant assigns or sublets this lease in violation of the terms herein. (vii) If Tenant or any guarantor of this Lease is an entity, Tenant’s or such guarantor’s legal existence ceases. 229679 194416v3 22 (viii) If Tenant or any guarantor of this Lease is a natural person, Tenant or such guarantor dies or is declared incompetent. (ix) The bankruptcy or insolvency of any guarantor of Tenant’s obligations under this Lease. B. Landlord’s Remedies: In the event of any such default, then Landlord shall be entitled to exercise any one or more of the following remedies, in addition to any other remedies available to Landlord at law or in equity: (i) Terminate this Lease by giving written notice of termination to Tenant, in which event Tenant shall immediately surrender the Demised Premises to Landlord. If Tenant fails to so surrender the Demised Premises, then Landlord may, without prejudice to any other remedy it has for possession of the Demised Premises or arrearages in Rent or other damages, re-enter and take possession of the Demised Premises and expel or remove Tenant and any other person occupying the Demised Premises or any part thereof, in accordance with applicable law without being liable for prosecution or any claim of damages therefor, and Tenant agrees to pay to Landlord on demand the amount of all accrued financial liabilities of Tenant hereunder through the date of surrender of the Demised Premises only, plus all costs and expenses of Landlord including reasonable attorneys’ fees incurred in obtaining possession of the Demised Premises; or (ii) Without terminating the Lease, Landlord may re-enter and take possession of the Demised Premises and expel or remove Tenant and any other person occupying the Demised Premises in accordance with applicable law without liability for prosecution of any claim or damages therefor, and relet the Demised Premises and apply any rent received to the account of Tenant. Subject to applicable Minnesota law, no reletting by Landlord is considered to be for Landlord’s own account unless Landlord has notified Tenant in writing that this Lease has been terminated; or (iii) Enter upon the Demised Premises by process of law without being liable for prosecution or any claim for damages therefor, and do whatever Tenant is obligated to do under the terms of this Lease, and Tenant agrees to reimburse Landlord on demand for any reasonable expenses which Landlord may incur in effecting compliance with Tenant’s obligations under this Lease. (iv) No termination of this Lease and no Repossession of the Demised Premises shall relieve Tenant of its liabilities and obligations under this Lease, all of which shall survive any such termination or Repossession. In the event of any such termination or Repossession, whether or not the Demised Premises shall have been relet, Tenant shall pay to Landlord the Rent and other sums and charges to be paid by Tenant up to the time of such termination or Repossession, and thereafter Tenant, until the end of what would have been the Term in the absence of such termination or Repossession, Tenant shall pay to Landlord, as and for liquidated and agreed current damages for Tenant’s default, the equivalent of the amount of the Rent and such other sums and charges which would be payable under this Lease by Tenant if this Lease 229679 194416v3 23 were still in effect or if the Demised Premises had not been relet, as the case may be, less the net proceeds, if any, of any reletting effected pursuant to the provisions of Subsection (ii) above after deducting from said proceeds all of Landlord’s reasonable expenses in connection with such reletting, including, without limitation, all reasonable and customary repossession costs, brokerage and management commissions, operating expenses, legal expenses, attorneys’ fees, alteration costs, and expenses of preparation for such reletting. Tenant shall pay such current damages to Landlord monthly on the days on which the Rent would have been payable under this Lease if this Lease were still in effect, and Landlord shall be entitled to recover the same from Tenant on each such day. Landlord is required to make reasonable efforts to mitigate damages and to relet the Demised Premises. (v) Notwithstanding the foregoing, Landlord may at any time after default, whether before or after exercising any of the foregoing actions, elect to accelerate Rent, in which event Landlord shall be entitled to recover from Tenant, and Tenant shall pay to Landlord on demand, as and for liquidated and agreed final damages for Tenant’s default, an amount equal to the then present value of the Rent and other sums or charges reserved or payable under this Lease (such other sums or charges shall be calculated on the basis of one hundred percent (100%) of such sums or charges payable in the Lease Year preceding Landlord’s exercise of this remedy) from the day of such termination or Repossession for what would be the then unexpired term if the same had remained in effect, said present value to be arrived at on the basis of a discount rate of eight percent (8%) per annum. (vi) In addition to all other remedies of Landlord (including the right to seek specific performance), Landlord shall be entitled to reimbursement upon demand of all reasonable attorneys’ fees incurred by Landlord in connection with any default. (vii) Landlord may restrain or enjoin any breach or threatened breach of any covenant, duty or obligation of Tenant herein contained without the necessity of proving inadequacy of any legal remedy or irreparable harm. The remedies of Landlord hereunder shall be deemed cumulative and not exclusive of each other. (viii) It is acknowledged and agreed that Landlord’s acceptance of any partial payment of Rent hereunder shall not constitute a waiver a default for failure to pay all sums due hereunder nor shall such acceptance preclude Landlord’s enforcement of any of Landlord’s Remedies hereunder for such default. C. No Election Upon Repossession: If Landlord obtains possession of the Demised Premises as a result of the Tenant’s abandonment of same or by a decree from a court of competent jurisdiction, this shall not be construed as an election to terminate this Lease unless Landlord provides Tenant with a written notice of this election, except as may be provided under applicable Minnesota law. Landlord’s election (in its sole discretion) to exercise one or more of the Landlord’s Remedies shall not be a waiver of a limitation on the Landlord’s right to exercise any of the other Landlord’s Remedies. D. Joint and Several Liability: To the extent that Tenant consists of more than one person or entity, such persons or entities shall be jointly and severally liable for each and every 229679 194416v3 24 obligation of Tenant hereunder. ARTICLE 22 DEFAULTS BY LANDLORD If Landlord should be in default in the performance of any of its obligations under this Lease, which default continues for a period of more than thirty (30) days after receipt of written notice from Tenant specifying such default, or if such default is of a nature to require more than thirty (30) days for remedy and continues beyond the time reasonably necessary to cure (and Landlord has not undertaken procedures to cure the default within such thirty (30) day period and diligently pursued such efforts to complete such cure), Tenant may seek specific performance of this Lease. Tenant may, after the expiration of such thirty (30) day period or in the event of an emergency after notice to Landlord of the existence of such emergency, cure such default at Tenant’s own expense and commence a binding arbitration proceeding, venued in the Minneapolis/St. Paul metropolitan area, conducted in accordance with the American Arbitration Association rules seeking a determination that Landlord was in default and in the event of such determination, Tenant may offset the amount incurred to cure such default against the next succeeding payment(s) of Rent due hereunder. ARTICLE 23 SURRENDER OF PREMISES Tenant shall, upon the expiration of the Term granted herein, or any earlier termination of this Lease for any cause, surrender to Landlord the Demised Premises, including, without limitation, all building apparatus and equipment then upon the Demised Premises, and all alterations, improvements and other additions which may be made or installed by either party to, in, upon or about the Demised Premises, other than Tenant’s Property that remains the property of Tenant as provided in Article 10 hereof, without any damage, injury or disturbance thereto, or payment thereof. Additionally, Tenant shall remove its exterior signage from the Building. Landlord shall repair any damage to the Building caused by the signage or its removal to restore the Building to its original condition, and Landlord may deduct the cost of such repairs from Tenant’s security deposit, if any. If Tenant’s security deposit is insufficient to cover such repairs, Tenant shall reimburse Landlord for any deficiency. ARTICLE 24 EMINENT DOMAIN A. Right to Terminate: In the event that any portion of the Demised Premises shall be appropriated or taken under the power of eminent domain by any public or quasi-public authority, then at the election of either Landlord or Tenant, this Lease shall terminate and expire as of the date of such taking, and both Landlord and Tenant shall thereupon be released from any liability thereafter accruing hereunder. B. Parking: In the event that more than seventy-five percent (75%) of the parking spaces shown on the Site Plan is taken under the power of eminent domain by any public or quasi-public authority, then Tenant shall have the right to terminate this Lease as of the date of 229679 194416v3 25 the taking. Notice of any termination relating to such eminent domain proceeding must be made within sixty (60) days after receipt of written notice of such taking and shall be effective as of the date of taking. In the event of such termination, both Landlord and Tenant shall thereupon be released from any liability thereafter accruing hereunder. C. Tenant’s Right to Award: Whether or not this Lease is terminated, in no event shall Tenant be entitled to any award of damages for the value of the Property, the Building or Tenant’s leasehold estate therein. If this Lease is terminated as herein above provided, all items of Rent and other charges for the last month of Tenant’s occupancy shall be prorated and Landlord agrees to refund to Tenant any Rent, or other charges paid in advance. Notwithstanding anything to the contrary, in the event that any portion of the Demised Premises shall be appropriated or taken under the power of eminent domain by any public or quasi-public authority, the Landlord shall be entitled to all payments for any real property interest, leasehold advantage, just compensation and fair market value paid or required to be paid by the public or quasi-public authority. Tenant will execute all documents reasonably necessary to effectuate the payment to the Landlord of these sums. After Landlord is compensated for the above-described losses and damages, Tenant, at its sole cost and expenses, may seek an additional award of its loss of going concern, Tenant’s personal property and fixtures, unamortized costs of leasehold improvements paid for by the Tenant and relocation expenses, if any. It is further understood and agreed that neither the Tenant nor Landlord shall have any rights in any award made to the other by any condemnation authority notwithstanding the termination of the Lease as herein provided. D. Partial Taking: If Tenant elects not to so terminate this Lease, Tenant shall remain in that portion of the Demised Premises which shall not have been appropriated or taken as herein provided, and Landlord agrees, at Landlord’s cost and expense, to, as soon as reasonably possible and practical, restore the remaining portion of the Demised Premises to a complete architectural unit of like quality and character as existed prior to such appropriation or taking, and thereafter all Rent and payment obligations of Tenant shall be adjusted on an equitable basis, taking into account the relative value of the portion taken as compared to the portion remaining. For the purpose of this Article, a voluntary sale or conveyance in lieu of condemnation, but under threat of condemnation shall be deemed an appropriation or taking under the power of eminent domain. ARTICLE 25 ATTORNEY’S FEES In the event that at any time during the Term of this Lease either Landlord or Tenant shall institute any action or proceeding against the other relating to the provisions of this Lease, or any default hereunder, the unsuccessful party in such action or proceeding agrees to reimburse the successful party for the reasonable expenses of attorney’s fees and paralegal fees and disbursements incurred therein by the successful party. Such reimbursement shall include all reasonable legal expenses incurred prior to trial, at trial and at all levels of appeal and post judgment proceedings. LANDLORD AND TENANT WAIVE ANY AND ALL RIGHTS TO A JURY TRIAL ON THE ISSUE OF ATTORNEY’S FEES TO THE EXTENT PERMISSIBLE UNDER APPLICABLE LAW. 229679 194416v3 26 ARTICLE 26 NOTICES Notices and demands required, or permitted, to be sent to those listed hereunder shall be sent by certified mail, return receipt requested, postage prepaid, or by Federal Express or other reputable overnight courier service and shall be deemed to have been given upon the date the same is postmarked if sent by certified mail or the day deposited with Federal Express or such other reputable overnight courier service, but shall not be deemed received until one (1) business day following deposit with Federal Express or other reputable overnight courier service or three (3) days following deposit in the United States Mail if sent by certified mail addressed to the addresses shown in Items Fourteen (14) and Fifteen (15) of the Data Sheet, or at such other address requested in writing by either party upon thirty (30) days’ notice to the other party. ARTICLE 27 RESERVED ARTICLE 28 SUCCESSORS AND ASSIGNS Except as provided in Article 19, all covenants, promises, conditions, representations and agreements herein contained shall be binding upon, apply and inure to the parties hereto and their respective heirs, executors, administrators, successors and assigns. ARTICLE 29 WAIVER The failure of either Landlord or Tenant to insist upon strict performance by the other of any of the covenants, conditions, and agreements of this Lease shall not be deemed a waiver of any subsequent breach or default in any of the covenants, conditions and agreements of this Lease. No payment of rent by Tenant with knowledge of a default by landlord shall constitute a waiver of a default. No surrender of the Demised Premises by Tenant shall be affected by Landlord’s acceptance of Rent or by other means whatsoever unless the same is evidenced by Landlord’s written acceptance of the surrender. ARTICLE 30 HOLDING OVER If Tenant or any party claiming under Tenant remains in possession of the Demised Premises or any part thereof after any termination or expiration of this Lease, Landlord, in Landlord’s sole discretion, may treat such holdover as an automatic renewal of this Lease for a month to month tenancy subject to all the terms and conditions provided herein, except that Base Rent shall be increased to 200% of the amount of Base Rent payable during the period immediately prior to the termination or expiration. ARTICLE 31 INTERPRETATION 229679 194416v3 27 The parties here to agree that it is their intention hereby to create only the relationship of Landlord and Tenant, and no provision hereof, or act of either party hereunder, shall ever be construed as creating the relationship of principal and agent, or a partnership, or a joint venture or enterprise between the parties hereto. ARTICLE 32 COVENANT OF TITLE AND QUIET ENJOYMENT Landlord covenants that it has full right, power and authority to make this Lease, subject to the rights of beneficiaries of deeds of trust or mortgagees for which non-disturbance and attornment agreements have been executed, and that Tenant or any permitted assignee or sublessee of Tenant, upon the payment of the Rent and performance of the covenants hereunder within applicable notice and cure periods, shall and may peaceably and quietly have, hold and enjoy the Demised Premises and improvements thereon during the Term or any renewal or extension thereof, subject to the construction activities described in Article 2.B hereinbefore, and the provisions of all existing and future matters of record affecting the Demised Premises or the Property, including, without limitation any easements, covenants, use restrictions and other agreements recorded against the Property and subject to all laws, ordinances and regulations of governmental units having jurisdiction over Tenant or the Demised Premises. ARTICLE 33 ESTOPPEL At any time and from time to time either party, upon request of the other party, will execute, acknowledge and deliver an instrument, stating, if the same be true, that this Lease is a true and exact copy of this Lease between the parties hereto, that there are no amendments hereof (or stating what amendments there may be), that the same is then in full force and effect, that to the best of its knowledge there are no offsets, defenses or counterclaims with respect to the payment of Rent reserved hereunder or in the performance of the other terms, covenants and conditions hereof on the part of Tenant or Landlord, as the case may be, to be performed, that as of such date no default has been declared hereunder by either party or if a default has been declared, such instrument shall specify same, and such other matters as may be reasonably requested. Such instrument will be completed by the other party and delivered to the requesting party within ten (10) days of receipt, or else the statements made in the proposed estoppel request shall be deemed to be correct. ARTICLE 34 RECORDING Neither Landlord nor Tenant shall record this Lease. At the request of either Landlord or Tenant, the parties shall join in the execution of a memorandum or so-called “short form” of this Lease for purposes of recordation. Any recording costs associated with the memorandum or short form of this Lease shall be borne by the party requesting recordation. ARTICLE 35 229679 194416v3 28 PARKING Tenant shall have the non-exclusive right to use all parking stalls on the Property, subject to reasonable exclusive or “short-term” parking rights which may be granted to other tenants of the Building. Tenant agrees to cooperate with Landlord in establishing an “employee parking” plan for the Property, including using its best efforts to locate employees’ vehicles as far from the primary entrances of all tenants of the Building as possible. ARTICLE 36 FORCE MAJEURE In the event that either party hereto shall be delayed or hindered in or prevented from the performance required hereunder by reason of strikes, lockouts, labor troubles, failure of power, riots, insurrection, war, acts of God, extreme weather conditions or other reason of like nature not the fault of the party delayed in performing work or doing acts (hereinafter, “Permitted Delay” or “Permitted Delays”), such party shall be excused for the period of time equivalent to the delay caused by such Permitted Delay. Notwithstanding the foregoing, any extension of time for a Permitted Delay shall be conditioned upon the party seeking an extension of time delivering written notice of such Permitted Delay to the other party within ten (10) days of the event causing the Permitted Delay, and the maximum period of time which Landlord or Tenant may delay any act or performance of work due to a Permitted Delay shall be sixty (60) days. ARTICLE 37 LIMITATIONS ON LANDLORD’S LIABILITY Notwithstanding anything to the contrary contained in this Lease, in the event of any default or breach by Landlord with respect to any of the terms, covenants and conditions of this Lease to be observed, honored or performed by Landlord, Tenant shall look solely to the estate and property of Landlord in the land and building owned by Landlord comprising the Demised Premises for the collection of any judgment (or any other judicial procedures requiring the payment of money by Landlord) and no other property or assets of Landlord shall be subject to levy, execution, or other procedures for satisfaction of Tenant’s remedies, except insurance proceeds, escrowed funds, condemnation awards and sales and refinancing proceeds. ARTICLE 38 CONSENT In all circumstances under this Lease where the prior consent of one party (the “consenting party”), whether it be Landlord or Tenant, is required before the other party (the “requesting party”) is authorized to take any particular type of action, such consent shall not be withheld in a wholly unreasonable and arbitrary manner except as may be otherwise specifically provided herein; however the requesting party agrees that its exclusive remedy if it believed that consent has been withheld improperly shall be to institute litigation either for a declaratory judgment of for a mandatory injunction requiring consent be given (with the requesting party waiving any claim for damages, or other remedy unless the consenting party refuses to comply with a court order of judgment requiring it to grant its consent). 229679 194416v3 29 ARTICLE 39 RESERVED ARTICLE 40 SEVERABILITY Any provision of this Lease which shall prove to be invalid, void or illegal shall in no way affect, impair or invalidate any other provisions hereof and such other provisions shall remain in full force and effect. ARTICLE 41 GOVERNING LAW AND VENUE This Lease shall be governed by and construed in accordance with the laws of the State of Minnesota. Any action concerning this Lease, the Demised Premises, the Building or the relationship of the Landlord and Tenant herein shall be venued in Minnesota State District Court in Dakota County, Minnesota. ARTICLE 42 BROKERS Landlord and Tenant acknowledge and agree that they have used no brokers in connection with this Lease and agree to indemnify and hold each other harmless from and against any and all liability and cost which either may suffer in connection with real estate brokers claiming by, through, or under the other party seeking any commission, fee or payment in connection with this Lease. ARTICLE 43 OBLIGATIONS WHICH SURVIVE EXPIRATION OF THE LEASE The following obligations of Landlord and Tenant shall survive the expiration or termination of this Lease: (a) any obligation herein permitted to be performed after the end of the termination of this Lease; (b) any obligation not reasonably susceptible of performance prior to the termination of this Lease; (c) any obligation to be performed pursuant hereto at or before the end of the Primary Term or any Renewal Term which is not so performed; and (d) any obligation of the Tenant to pay Holdover Rent as set forth herein. ARTICLE 44 RESERVED ARTICLE 45 TIME OF THE ESSENCE Time shall be of the essence in interpreting the provisions of this Lease. 229679 194416v3 30 ARTICLE 46 ENTIRE AGREEMENT This Lease contains all of the agreements of the parties here to with respect to matters covered or mentioned in this Lease and no prior agreement, letters, representations, warranties, promises, or understandings pertaining to any such matters shall be effective for any such purpose. This Lease may be amended or added to only by an agreement in writing signed by the parties hereto or their respective successors in interest. ARTICLE 47 PRELIMINARY NEGOTIATIONS Landlord and Tenant acknowledge that neither of them shall be bound by the representations, promises or preliminary negotiations with respect to the Demised Premises made by their respective employees or agents. It is their intention that neither party be legally bound in any way until this Lease has been fully executed by both Landlord and Tenant. ARTICLE 48 RESERVED ARTICLE 49 CONFIDENTIALITY Landlord and Tenant, on behalf of themselves and their respective agents, principal shareholders, partners, members, employees and representatives agree that the terms of this Lease shall be kept confidential and shall not be disclosed to any party other than Landlord’s lender(s), any prospective lender or purchaser of the Property, or as required by law without the other party’s written consent. ARTICLE 50 WAIVER OF JURY TRIAL RIGHT LANDLORD AND TENANT DO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THEIR RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, OR UNDER OR IN CONNECTION WITH THIS LEASE, OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ANY ACTIONS OF EITHER PARTY ARISING OUT OF OR RELATED IN ANY MANNER WITH THIS LEASE (INCLUDING WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS LEASE AND ANY CLAIMS OR DEFENSES ASSERTING THAT THIS LEASE WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH OF LANDLORD AND TENANT TO ENTER INTO AND ACCEPT THIS LEASE. IN WITNESS WHEREOF, the parties hereto have executed this Lease on the day and 229679 194416v3 31 year first mentioned, the corporate party or parties by its or their proper officers thereto duly authorized. TENANT: CITY OF LAKEVILLE By ____________________________ Douglas P. Anderson, Its Mayor And by ________________________ Charlene Friedges, Its City Clerk LANDLORD: [THE DRIESSEN GROUP], LLC By___________________________ Vincent J. Driessen, Manager 194416v3 32 EXHIBIT “A” Site Plan of the Demised Premises (Subject to change before Lease execution) 194416v3 33 EXHIBIT “A-1” Legal Description of the Property Lot 1, Block 1, Eugene Frederick Addition, Dakota County, Minnesota 194416v3 34 EXHIBIT “B” Landlord’s Sign Criteria I. General Requirements A. All wall signs shall conform to city ordinance as well as the criteria provided herein. B. All sign transformers and power supplies must be placed inside of raceway. All electrical connections and decals shall be concealed behind raceway or hidden inside a raceway – no exposed conduit. Manufacturer’s names, stamps and decals shall not be exposed. C. All letters must be mounted on a raceway as specified. D. No exposed neon or incandescent bulbs or flashing, blinking, rotating or moving signs or makers shall be permitted, E. No store front sign or other signing on the Premises shall be of a type wherein the signing is housed or contained within an illuminated or non- illuminated sign can or box mounted on the exterior of the sign area, unless expressly approved by the Landlord in writing at Landlord’s sole discretion. F. Small-scale signs stating store hours, which are neatly lettered on the glass of the storefront, shall be permitted subject to the Landlord’s approval. Any non-customer door for receiving merchandise may have the name of the Tenant in two inch (2") block letters. Address signs shall be composed of four-inch (4") high (maximum) Helvetica style white letters centered on the transom glass above the door. PROCEDURE FOR SIGN APPROVAL: All proposed signs shall be reviewed and approved by Landlord. The contact: Mid-America Real Estate Minnesota 5353 Wayzata Boulevard, Suite 650 Minneapolis, MN 55416 952-563-6600 952-563-6633 fax G. No sign shall be painted on the exterior of the walls, doors, windows or any other surface of the Demised Premises, nor erected, maintained or suffered to remain on the roof or parapet of the Premises. H. No sign shall be erected until written specifications and drawings of such 194416v3 35 sign are first approved in writing by Landlord. Such specifications and drawings shall show the size, construction, materials, colors, script, name of sign manufacturer and proposed location of such sign in conformity with the requirements stated herein and sha1l include a cross section drawing. I. Each party’s customary signature or logo, hallmark, insignia or other trade identification will be allowed within the guidelines set forth. J. All signs erected by Tenant pursuant to the provisions hereof shall be erected at Tenant’s own risk and expense (including final electrical connections and time clock or photocell), and shall be in accordance with applicable law, and shall concern only the business of the Tenant. Tenant shall secure and pay any necessary permits and fees. Tenant shall maintain said signs in a good state of repair and save the Landlord harmless from any loss, cost or damage as a result of the erection, maintenance, existence and removal of the same, and Tenant shall repair any damage which may have been caused by the erection, existence, maintenance or removal of such signs. Upon vacating the Premises, Tenant shall remove all such signs and repair all damage cause by such removal. The contractor, materials and methods for repair must be approved in writing by the Landlord in advance of the work. K. All electrical hook-ups shall be performed by a licensed electrician, approved by Landlord and installed in accordance with all governmental requirements. L. Any damage caused by signage installation or removal shall be repaired by the Landlord and charged to the Tenant. M. Public safety decals or artwork on glass in minimum sizes to comply with applicable code, subject to the approval of landlord, may be used, as required by building codes or other governmental regulations. N. Paper signs, stickers, banners or flags are prohibited. O. Window-painted signs shall be professionally done and approved in advance and in writing by Landlord. No window-painted sign shall be displayed for more than 60 days. II. Specific Requirements A. Type - Individually lighted channel letters with translucent front mounted on a raceway that matches the exact exterior wall color on which raceway is mounted. Raceway to be 1.5” (inches) deep and a maximum height of 7” (inches). Raceway must be must be constructed from aluminum and must be approved by Landlord prior to installation. 194416v3 36 B. Size - Subject to city ordinance and Landlord approval. Landlord will work with Tenant’s sign company to finalize the signage square footage allowed. C. Sign Placement The sign shall be placed on the exterior wall in an area approved by Landlord and not exceed available square feet. 1. Letters for Tenant’s signs, including upper and lower case letters, letter strokes, and punctuations, shall not exceed 36" in height. 2. Letter for two (2) lines of copy shall not exceed 36" in height. D. Base line and center line of sign to be located by Landlord’s Architect. E. Colors and Materials 1. Acrylic face colors must have pre-approval from Landlord with black trim caps and matte black returns. 2. LED’s in color to match acrylic face. 3. Sign letter shall be aluminum channel frame (minimum .050) with flat or molded plastic face and mounted with concealed fasteners. Channel returns shall be painted to matte black. All letters shall be illuminated with LED’s powered by normal factory transformers installed in the raceway. All letters shall be approved by Underwriter Laboratories and carry a seal of approval. 4. Upon sign installation, all penetrations made to the exterior of the building must be caulked with a polyurethane based product called Sonnelastic 150 or Sonneborn NP1. Any alternative products must be approved by Landlord. 5. Signs shall be attached to building with stainless steel bolts. 6. As part of Tenant’s electrical work, Tenant shall install a seven- day timing device to control the canopy sign so that hours of illumination can be controlled in accordance with the overall Building policy. F. Three (3) completed set of full size sign drawings with detailed dimensions must be submitted to the landlord for approval before fabrication. Tenant’s sign drawings must include the following: 194416v3 37 1. Provide a complete listing and verbal description of every sign to be erected on the Premises. 2. Provide elevation views of storefront showing all signs (drawn to accurate scale) with dimensions of heights of letters and length of signs. 3. Provide a cross section view through sign letter and sign panel showing location of sign relative to the storefront line, mounting height, and the dimensioned projection of the face of the letter from the face of the sign panel. Landlord shall not be responsible for the cost of re-fabrication of signs ordered or constructed that do not conform to the sign criteria and the local sign ordinances. This sign criteria may be amended from time to time by Landlord at Landlord’s sole discretion. 194416v3 38 EXHIBIT “B-1” Free-Standing Sign Depiction (Subject to change before Lease execution) 194416v3 39 EXHIBIT “C” Description of Landlord’s Work and Phasing Plan Landlord’s Work: • Mill and overlay parking lot • Expand and reconfigure parking and delivery areas for a minimum of 81 parking spaces on the northeast, east and south sides of Property as shown on Exhibit “A” • Extend six (6) foot-wide sidewalk along Kenrick Avenue from CR-46 to Building as shown on Exhibit “A” • Construct a trash enclosure to be shared by all occupants of the Building in the location shown on Exhibit “A” • Construct a free-standing sign on the southeast corner of the Property as shown on Exhibit “A” • At such time as Landlord constructs additional retail space on the northeast and southwest sides of the Building as shown on Exhibit “A”, Landlord shall at its cost (i) relocate the façade sign currently on the southwest side of the Building to the northwest side of the Building, and (ii) enclose the windows and door currently on the northeast side of the Building • Construct maintenance room for Building • Install fire suppression sprinkler system 194416v3 40 EXHIBIT “D” Prohibited Uses 1. adult book store or establishment which provides live adult entertainment or which sells, rents or exhibits pornographic or obscene materials. 2. pawn shop. 3. tattoo parlor. 4. gun sales. 5. tobacco/vape shop. 6. marijuana dispensary. 7. off-sale liquor. 194416v3 41 EXHIBIT “E” RESERVED 194416v3 42 EXHIBIT “F” RULES AND REGULATIONS This Exhibit F is hereby incorporated into, made a part of, and is subject to, that certain Lease attached herewith (“Lease”). SECTION F-1. Control of Common Areas. The sidewalks, halls, passages, exits, and entrances, of the Building shall not be obstructed by Tenant or used by it for any purpose other than for ingress to and egress from the Demised Premises. The halls, passages, exits, and entrances are for the use of the general public, and Landlord shall in all cases retain the right to control and prevent access thereto of all persons whose presence in the sole judgment of Landlord would be prejudicial to the safety, character, reputation and interests of the Building, except in areas that Landlord may designated as “Common Areas” from time to time. SECTION F-2. Windows. No awning, canopy or other projection of any kind over or around the windows or entrances of the Demised Premises shall be installed by Tenant, and such window coverings as are approved by Landlord shall be used in the Demised Premises. SECTION F-3. Cooking; Lodging. The Demised Premises shall not be used for lodging or sleeping, and unless ancillary to a restaurant or other food service use specifically authorized in the Lease, no cooking shall be done or permitted by Tenant on the Demised Premises, except that the preparation of coffee, tea, hot chocolate and similar items for Tenant and its employees shall be permitted. SECTION F-4. Janitorial Work. All janitorial work for the Demised Premises shall be paid for by Tenant. Any person or persons employed by Tenant to do janitorial work shall be subject to and under the control and direction of Landlord or Landlord’s agent while in the Building and the Demised Premises. SECTION F-5. Keys. Landlord will furnish Tenant with two (2) keys to the Demised Premises, free of charge. Tenant, upon termination of the Lease, shall deliver to Landlord all keys to doors in the Building and the Demised Premises. SECTION F-6. Hazardous Materials. Tenant shall not use or keep in the Demised Premises or in the Building any kerosene, gasoline or flammable or combustible fluid or materials or use any method of heating or air conditioning other than that supplied by Landlord. Tenant shall not use, keep or permit or suffer the Demised Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors and/or vibrations, or interfere in any way with other Tenants or those having business in the Building. SECTION F-7. Invasions, Mobs. In case of an invasion, mob, riot, public excitement or other circumstances rendering such action advisable in Landlord’s opinion, Landlord reserves the right to prevent access to the Building during the continuance of same by such action as Landlord may deem appropriate, including closing entrances to the Building. SECTION F-8. Security. Tenant shall see that the doors of the Demised Premises are closed 194416v3 43 and securely locked at such time as Tenant’s employees leave the Building. SECTION F-9. Plumbing. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they are constructed; no foreign substance of any kind whatsoever shall be deposited therein, and any damage resulting to same from Tenant’s misuse shall be paid for by Tenant. SECTION F-10. Concessionaires. Except with the prior consent of Landlord, Tenant shall not sell, or permit the sale from the Demised Premises of, or use or permit the use of sidewalk for the sale of newspapers, magazines, periodicals, or any other goods, merchandise or service, nor shall Tenant carry one, or permit or allow any employee or other person to carry one, business in or from the Demised Premises for the service or accommodation of occupants of any other portion of the Building, nor shall the Demised Premises be used for manufacturing of any kind, or for any business or activity other than that specifically provided for in the Lease. SECTION F-11. Antennas. Tenant shall not install any radio or television antenna; loudspeaker or other device on the roof or exterior walls of the Building. SECTION F-12. Trash. Tenant shall store all its trash and garbage in such location in the Building as may be designated from time to time by Landlord. No material shall be placed in the Building trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the City in which the Demised Premises are located without being in violation of any law or ordinance governing such disposal. Landlord shall direct the removal of all Tenant’s trash and garbage from the Demised Premises at Tenant’s expense. SECTION F-13. Loading and Unloading. All loading and unloading of merchandise, supplies, materials, garbage and refuse and delivery of same to the Demised Premises shall be made only through such entryways, at such times and according to such routes as Landlord shall designate. In its use of the loading areas, Tenant shall not obstruct or permit the obstruction of said loading areas, and at no time shall Tenant park vehicles therein except for loading and unloading. No deliveries shall be left unattended in the Common Areas. Tractor trailers shall not be stored in the parking lot. SECTION F-14. Soliciting. Canvassing, soliciting, peddling or distribution of handbills or any other written material in the Building is prohibited, and Tenant shall cooperate to prevent same. SECTION F-15. Vending Machines. Tenant shall not permit the use or the operation of any vending machines or pay telephones on the Demised Premises. SECTION F-16. Tenant Parking. Landlord reserves the right to designate the location and number of parking spaces to be reserved for Tenant and Tenant’s employees. SECTION F-17. Extermination. Landlord may direct the use of all pest extermination and scavenger contractors at such intervals as Landlord may require. SECTION F-18. Use of Building Name. Landlord reserves the right to select the name of the 194416v3 44 Building and the buildings therein and to make such change or changes of name as it may deem appropriate from time to time, and Tenant shall not refer to the Building and the buildings therein by the name other than: (i) the name as selected by Landlord (as same may be changed from time to time), and the street address, or (ii) the postal address, approved by the United States Post Office. Tenant shall not use the name of the Building and the buildings therein except to identify the location of its business. SECTION F-19. Displays. All articles and the arrangement, style, color and general appearance thereof, in the interior of the Demised Premises which shall be visible from the exterior thereof, including, without limitation, window displays, advertising matter, signs, merchandise and store fixtures, shall be maintained in keeping with the character and standards of the Building. SECTION F-20. Obnoxious Activities Not Permitted. Tenant will not without the written consent of Landlord or as otherwise provided for herein, maintain any merchandise or other articles in any vestibule or entry of the Demised Premises or outside of the Demised Premises; use or permit any loud speakers, phonographs, public address systems, flashing, moving and/or rotating lights, sound amplifiers, radio or broadcasts within the Demised Premises which are audible or visible outside the Demised Premises; cause or permit odors to emanate or be dispelled from the Demised Premises; except within the Demised Premises, solicit business or distribute advertising material within the Building, permit the parking of delivery vehicles so as to interfere with the use of any driveway, walk, parking area, or other Common Areas; or receive or ship articles of any kind except through service facilities designated by Landlord. SECTION F-21 . Waiver. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular Tenant or Tenants, but no such waiver by Landlord shall be construed as a waiver of these Rules and Regulations in favor of any other Tenant or Tenants, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all of the Tenants of the Building. SECTION F-22. Lease Prevails. These Rules and Regulations are in addition to, and shall not be construed in any way to modify, alter or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease of Demised Premises in the Building. If there is any irreconcilable conflict between the terms of the Lease and these Rules and Regulations, the terms of the Lease shall control. SECTION F-23. Amendments. Landlord reserves the right to amend these Rules and Regulations at any time, or to make such other reasonable rules and regulations as in its judgment may from time to time be needed for the safety, care and cleanliness of the Building, and for the preservation of good order therein. Such amendments or new rules and regulations shall be effective upon notice to Tenant. 194416v3 45 EXHIBIT “G” TERM CONFIRMATION AGREEMENT STORE NUMBER: ________ THIS AGREEMENT, made this day of , 20__, by and between ___________________________________ LLC (herein “Landlord”) and ____________________________, a ______________________________ (herein “Tenant”). W I T N E S S E T H: WHEREAS, Landlord and Tenant have entered into that certain Lease dated _________________ (“Lease”) for a municipal liquor store located in the City of Lakeville, County of Dakota, State of Minnesota; and WHEREAS, Landlord and Tenant wish to set forth their agreements as to the commencement of the Term of the Lease. NOW, THEREFORE, in consideration of the Demised Premises as described in the Lease and the covenants set forth therein, Landlord and Tenant agree as follows: (a) Landlord’s Work has been completed and Tenant has accepted the Demised Premises. (b) The Term of the Lease commenced on _____________, 20__. (c) The initial or base term of this Lease shall expire on _________________, 20__. (d) Tenant has _________ (__) options of _____ (__) years each which are to be exercised by the presentation of notice to Landlord by no later than (a) ________________, with respect to the First Option; (b) ________________, with respect to the Second Option; (c) ______________, with respect to the Third Option; and (d) ______________, with respect to the Fourth Option. (e) The Commencement Date under the Lease Agreement is _____________________, 2018. (f) The square footage of the Demised Premises is _______ square feet. (g) Monthly rents payable during the first Lease Year are as follows: (i) Base Rent: $______________ (ii) Taxes: ______________ (est.) (iii) Insurance: ______________ (est.) (iv) Maintenance Costs: ______________ (est.) 194416v3 46 TOTAL MONTHLY: $______________ IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. LANDLORD: TENANT: By___________________________ By:___________________________ Its___________________________ Douglas P. Anderson, Its Mayor And:___________________________ Charlene Friedges, Its City Clerk