THIS SECOND ADDENDUM, made and entered into effective this 23rd day of
January, 2003 to that Lease dated January 7, 2002, is made by and between
EASTSIDE PROPERTIES, LLC (hereinafter called "Landlord"), and COLORADO
INC., subsequently assigned to HEI, INC.
, a Minnesota
called "Tenant"), on December __, 2002.
The parties hereto agree to modify said Lease, effective January 23, 2003,
1. Paragraph 3 is modified to read as follows:
TERM. The term of this Lease shall be for fifteen (15) years and ten
(10) months. The Term shall commence on the 1st day of July, 2002 ("Commencement
Date") and terminate on the 30th day of April, 2018.
2. Paragraph 4 is modified as follows:
POSSESSION. This Paragraph is modified solely to provide that Tenant
shall take Possession on the date that Colorado
Medtech, Inc. assigns the Lease
to Tenant, Tenant signs and accepts said Assignment of Lease, and Landlord has
executed Landlord's Consent to Assignment, a copy of which shall be attached
hereto as Exhibit "A".
3. Paragraph 5a will be modified to read as follows:
a. Tenant agrees to pay to Landlord as basic rental, without prior
notice or demand, the sum of SIXTY-FOUR THOUSAND THIRTY-NINE AND NO/100 Dollars
($64,039.00) on or before the first day of the first full calendar month and a
like sum on or before the first day of each and every successive calendar month
through April 2003, and commencing May 1, 2003 the sum of ONE HUNDRED TWELVE
THOUSAND EIGHT HUNDRED NINETY-ONE AND NO/100 Dollars ($112,891.00), and on or
before the first day of each and every successive calendar month thereafter
during the Term hereof ("Base Rent"), except that the first month's Base Rent
shall be paid upon the execution hereof. Rent for any period during the Term
hereof which is for less than one (1) month shall be a prorated portion of the
monthly installment herein, based upon the number of days such Rent is due.
Said Rent shall be paid to Landlord, without deduction or offset except as set
forth herein, in lawful money of the United States of America, which shall be
legal tender at the time of payment at 3434 47th Street, Suite 220, Boulder,
80301, or to such other person or at such other place as Landlord may
from time to time designate in writing. In addition to payment of Base Rent,
subject to adjustment as set forth in Paragraph 32a below, Tenant shall pay to
Landlord the Occupancy Improvement Rent monthly in the amount of TEN THOUSAND
FIVE HUNDRED SEVENTY-TWO AND NO/100 Dollars ($10,572.00) on or before the first
day of each and every successive calendar month through April 2003, and
commencing May 1, 2003 the sum of TEN THOUSAND TWO HUNDRED NINETY-NINE AND
56/100 Dollars ($10,299.56), and on or before the first day of each and every
successive calendar month thereafter during the Term hereof.
4. Paragraph 5b is modified by the addition of the following
(10) "Lease Year" shall be the period from July 1 to June 30 of each
year of this Lease.
5. Paragraph 6 is modified to read as follows;
a. Tenant has deposited with Landlord, upon the execution of this
Addendum, an additional ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 Dollars
($1,500,000.00), making a total Security Deposit of ONE MILLION FIVE HUNDRED
EIGHTY THOUSAND AND NO/100 Dollars ($1,580,000.00). Said sum shall be held by
Landlord, as provided in this Paragraph, as security for the faithful
performance by Tenant of all the terms, covenants, and conditions of this Lease
to be kept and performed by Tenant during the term hereof. If Tenant defaults
with respect to any provision of this Lease, including, but not limited to the
provisions relating to the payment of rent, Landlord may (but shall not be
required to) use, apply or retain all or any part of this Security Deposit for
the payment of any rent or any other sum in default, or for the payment of any
amount which Landlord may spend or become obligated to spend by reason of
Tenant's default, or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default. If any portion of said
deposit is so used or applied, Tenant shall within five (5) days after written
demand therefor, deposit cash with Landlord in an amount sufficient to restore
the Security Deposit to its original amount and Tenant's failure to do so shall
be a material breach of this Lease. Landlord shall not be required to keep this
Security Deposit separate from its general funds, and Tenant shall not be
entitled to interest on such deposit. If Tenant shall fully and faithfully
perform every provision of this Lease to be performed by it, the Security
Deposit or any balance thereof shall be returned to Tenant (or at Landlord's
option, to the last assignee of Tenant's interest hereunder) at the expiration
of the Lease term. In the event of termination of Landlord's interest in this
Lease, Landlord shall transfer said deposit to Landlord's successor in interest.
b. Landlord shall return to Tenant ONE MILLION FOUR HUNDRED THIRTY
THOUSAND AND NO/100 Dollars, reducing the Security Deposit to ONE HUNDRED FIFTY
THOUSAND AND NO/100 Dollars, according to the terms of the Agreement Regarding
Additional Security Deposit between Eastside Properties, LLC and HEI, Inc.
dated January 23, 2003.
6. Paragraph 35 is modified to read as follows:
OPTIONS TO PURCHASE
a. As an inducement to Tenant to enter into this Second Addendum,
Landlord hereby gives and grants to Tenant the exclusive right, privilege and
option (hereinafter referred to as the "Option") to purchase the Property from
Landlord, together with all easements,
hereditaments, improvements constructed thereon, and appurtenances thereto,
upon and subject to the terms, covenants and conditions hereinafter set forth
after Bank One Colorado
does not have a security interest in the Property
(unless Bank One's security interest is satisfied as part of such purchase).
This Option is not assignable by Tenant, and shall terminate upon any
assignment by Tenant, except if such assignment is to the parent of Tenant, to
Tenant's affiliate or is related to a merger or acquisition of Tenant. Landlord
acknowledges that the Option is an integral and material term of this Lease,
but for which Tenant would not have entered into this Lease.
b. (1) The Option may be exercised if no uncured default described in
Paragraphs 23 and 32 of this Lease exists. The Option shall be exercised by
Tenant serving upon Landlord written notice (hereinafter referred to as the
"Exercise Notice") of Tenant's election to exercise the Option in accordance
with the terms and conditions hereof.
(2) Upon service of the Exercise Notice, Landlord shall be obligated to
convey the Property to Tenant and Tenant shall be obligated to pay the Purchase
Price (as defined herein) in accordance with the terms and provisions hereof.
c. The purchase price for the Property (hereinafter referred to as the
"Purchase Price") shall be ninety-eight percent (98%) of the fair market value
of the Property to be determined as follows: (i) by written agreement of the
parties reached within thirty (30) days after the date of the Exercise Notice;
or (ii) if the parties are unable to so agree within said thirty (30) day
period, then by appraisal to be conducted in accordance with the provisions set
forth below. Notwithstanding anything to the contrary herein, in no event shall
the Purchase Price be less than the sum of $3,000,000, plus the amount of the
unamortized Occupancy Improvement Rent, plus the portion of any unpaid balance
of a promissory note secured by a First Deed of Trust against the Property, if
any, which Landlord can verify the proceeds of which were not utilized to return
any capital to Landlord or any of its members (the "Minimum Purchase Price").
The Minimum Purchase Price herein shall be personal to Eastside Properties, LLC
and in the event the Property is sold, such Minimum Purchase Price shall
Within ten (10) days after the expiration of the thirty (30) day
period referred to above, the Tenant shall appoint a disinterested person with
at least ten years professional experience as a M.A.I. real estate appraiser in
the Boulder, Colorado
, area. Within ten (10) days thereafter, Landlord shall by
written notice to the Tenant appoint a second disinterested person with at least
ten years professional experience as a M.A.I. real estate appraiser in the
, area. The appraisers thus appointed shall appoint a third
disinterested person with at least ten years professional experience as a M.A.I.
real estate appraiser in Boulder, Colorado
, area, and each of such three
appraisers shall promptly, and no event longer than thirty (30) days, and
independently make a determination of the fair market value of the Property,
after which the ultimate fair market value of the Property shall be determined
by calculating the average of the two (2) closest appraisals. If, within five
(5) days after the appointment of the second appraiser, the two appraisers
appointed by the parties shall be unable to agree upon the appointment of a
third appraiser, they shall give written notice of such failure to agree to the
parties, and, if the parties fail to agree upon the selection of such third
appraiser within five (5) days after the appraisers appointed by the parties
have given such notice, then within five (5) days thereafter either of the
parties upon written notice to the other party may apply for such appointment to
the local Judicial Arbiters Group. The Landlord and Tenant each shall be
entitled to present evidence and argument to the appraisers. The determination
of the fair market value of the Property pursuant to the terms of this Paragraph
shall be conclusive upon the parties. The appraisers shall give written notice
to the parties stating their determination, and shall furnish to each party a
copy of such determination signed by them. In the event of the failure, refusal,
or inability of any appraiser to act, a new appraiser qualified as provided
above shall be appointed in his stead, which appointment shall be made in the
same manner as hereinabove provided for the appointment of the appraiser so
failing, refusing, or unable to act. The expenses of each appraisal conducted in
accordance with the provisions of this paragraph shall be borne by the Tenant.
Anything to the contrary notwithstanding, Tenant shall have the right to rescind
the exercise of its Option by written notice to Landlord within ten (10) days
after receipt of written notice of the arbitrators' determination of the
Purchase Price, in which event Tenant shall pay, in addition to the costs of the
appraisers, any reasonable costs actually incurred by Landlord pursuant to an
arbitration with respect thereto.
The term "fair market value" shall mean the price, expressed in terms
of cash, which the Property would bring if exposed upon an open and competitive
market for a reasonable length of time under all conditions requisite to a fair
sale, with the purchaser being willing but under no compulsion to buy and not in
possession and the seller being willing but under no compulsion to sell, with
both parties having full knowledge as to all the uses to which the Property
might be put and considered the highest and best use of the Property with the
Lease in place.
d. Landlord shall convey the Property by means of a special warranty deed
(hereinafter referred to as the "Deed") subject, however, to the following
liens and encumbrances (the "Permitted Encumbrances"):
(1) Restrictions, conditions, reservations, easements and limitations
of record and any additional restrictions, conditions, reservations, easements,
liens and encumbrances which are placed of record by any action or failure to
act by Tenant resulting in consensual or non-consensual encumbrances against the
(2) Real estate taxes and assessments, both general and special;
(3) Zoning and building ordinances, if any;
(4) Any liens and encumbrances, or other matters of record, created or
caused by Tenant; and
(5) Such other matters as Tenant may approve in its sole and absolute
All funds and documents required hereunder shall be deposited in escrow with
the Escrow Agent (as hereinafter defined) prior to the Closing Date.
e. The obligation of Tenant to consummate the purchase of the
Property shall be subject to Tenant's ability at closing to obtain an owner's
fee policy of title insurance (hereinafter referred to as the "Title Policy")
issued by a title company selected by Tenant and as to whom Landlord has no
reasonable objection (the "Title Company") in the amount of the Purchase Price
(provided, however, that Landlord shall not be required to update any survey or
provide a new survey for the Property nor shall Landlord be responsible for
removal of any mechanic's liens, except to the extent that any work or services
performed with respect to the Property has been made by or at the specific
request of Landlord), showing title to be good in Tenant subject only to the
Permitted Encumbrances. Tenant shall pay for the cost of the Title Policy.
Tenant shall order a commitment for the Title Policy from the Title Company
within ten (10) business days after Tenant's delivery to Landlord of the
Exercise Notice, and shall direct the Title Company to deliver a copy thereof to
Landlord, together with copies of all items shown as requirements or exceptions.
Tenant shall have a period of thirty (30) days after receipt of the Commitment
in which to notify Landlord of any exceptions to title to which Tenant objects
(hereinafter referred to as the "Title Defects"). Landlord shall pay and
discharge on the Closing Date any Title Defects which are in the nature of liens
or mortgages against the Property, including any Deed of Trust granted by
Landlord that may be paid and released, but excluding any Deed of Trust that by
its terms cannot be pre-paid without penalty. No exceptions to title permitted
under subparagraph (d) above shall be deemed to be Title Defects.
f. Upon receipt by Landlord of Tenant's notification of Title
Defects, Landlord shall have thirty (30) days in which to cure said Title
Defects without diminishing or relieving Tenant of its obligations hereunder.
Should Landlord be unwilling or fail to cure said Title Defects within the
period provided above, Tenant shall, as its sole remedy, have the option to (i)
accept the Property subject to the Title Defects without reduction in Purchase
Price, except however, the Purchase Price shall be reduced by any Deed of Trust
granted by Landlord which is not released at Closing, or (ii) declare this
Property Option null and void, except for the cost of escrow incurred to that
date (which cost shall be borne by Tenant), and thereafter both parties shall be
relieved of any further liability under the Option, but the Lease shall continue
in full force and effect. Tenant shall notify Landlord of its election within
five (5) days after receipt of notice by Landlord of its failure to cure the
g. Title Company shall act as Escrow Agent. A copy of this Lease
shall be delivered to, and shall constitute instructions to, the Escrow Agent.
The Escrow Agent may attach its "standard conditions of acceptance", provided,
however, if there is a conflict between the provisions of this Lease and the
provisions of said standard conditions, the provisions of this Lease shall
h. Real estate taxes and assessments, both general and special, and
all charges for utilities, shall not be prorated but shall be assumed by Tenant.
Rent, including Base Rent and Operating Expenses, except those assumed by
Tenant, shall be prorated to the Closing Date, in accordance with the provisions
of Paragraph 7 hereof.
i. (1) On the Closing Date, at such time as the Escrow Agent has in
possession all funds representing the Purchase Price, the Deed and all other
documents required from Landlord and/or Tenant, it shall pay off any Deed of
Trust granted by Landlord that may be prepaid, file the Deed for record,
transferring title to the Tenant, issue the Title Policy to the Tenant as
hereinabove provided and, simultaneously, pay to Landlord the Purchase Price,
less any deductions provided for herein.
(2) The Escrow Agent shall deliver to the Tenant the Deed,
the Title Policy and all funds remaining to the credit of Tenant (including
without limitation all security deposits, tax escrows and insurance escrows, if
any) after charging Tenant and deducting from such funds: (A) any amounts due
Landlord by reason of pro-rations hereunder; (B) one-half (1/2) of the escrow
fee; and (C) any intangible tax, documentary stamps, cost of recording and
other costs incidental to the making or recording of a mortgage to be placed on
the Property; and the cost of the Lender's Title Policy. On the Closing Date,
Tenant shall deposit with an Escrow Agent funds which are sufficient to pay the
(3) The Escrow Agent shall deliver to Landlord the funds
in its possession to the credit of Landlord after charging the Landlord and
deducting from such funds: (A) any amounts due Tenant by reason of any
pro-rations hereunder and (B) one-half (1/2) of the escrow fee.
(4) All necessary instruments, documents and funds shall
be deposited in escrow with the Escrow Agent no later than the day prior to the
Closing Date. Unless the parties hereto otherwise agree in writing or unless
extended pursuant to the terms hereof, the date for the closing of the purchase
of the Property (the "Closing Date") shall be thirty (30) days from the date of
establishment of the Purchase Price in accordance with subparagraph (c) of this
(5) It is understood and agreed that in the event that,
for any reason, there shall fail to be a closing pursuant to the terms of the
Option, then the balance of this Lease, exclusive of this Paragraph, shall
continue in full force and effect as if said paragraph were not a part hereof.
(6) If Tenant fails to exercise the option to purchase the
Property, or if Tenant is not entitled to exercise the option as set forth
above, or this Lease has expired or has been terminated and is not then in full
force and effect, the attempted exercise of Option shall be void and of no
effect. If on the Closing Date, there is a default by Tenant of which Tenant
has received notice as provided herein and which remains uncured after the
applicable cure period set forth therein, or the Lease has been terminated and
is not then in full force and effect, at the Landlord's option, Tenant shall
have no right to purchase the Property and the exercise of the Option shall be
deemed void and of no effect.
j. Notwithstanding anything to the contrary herein, the
purchase and sale of the Property shall be subject to the consent of any
lender, which is the beneficiary of a Deed of Trust which may not be prepaid,
granted by Landlord. Tenant shall pay all fees and costs required by Lender for
Tenant to assume the loan secured by said Deed of Trust.
7. Paragraph 32a is modified to read as follows:
a. Landlord has constructed Tenant Improvements to the original
103,150 square portion of the Building, of which the Premises are a part, at a
total cost of $983,153.43. Landlord's allowance for Tenant improvements was
$800,000.00. The excess cost of $183,153.43 is amortized over the term of the
Lease as Occupancy Improvement Rent as shown in Paragraph 5a.
Landlord shall construct certain build-out improvements to the
48,852 square foot addition to the Building, including construction of suspended
ceilings; exterior and partitioning walls; installation of carpeting; painting;
installation of fire sprinkling system; HVAC, and lighting systems; and other
improvements as agreed upon in accordance with plans and specifications
("Plans") to be approved by Landlord and Tenant, and attached hereto as Exhibit
E (hereinafter collectively referred to as the "Tenant Improvements"). Tenant
Improvements shall be completed pursuant to the provisions of the Work Letter
attached to this Addendum as Exhibit B.
Landlord's Contribution (as defined in the Work Letter) for
Tenant Improvements is $1,221,300.00 unless Landlord's lender is willing to
increase the amount of its development loan to pay for additional Tenant
Improvement costs. Any additional Tenant Improvement costs funded by Landlord's
lender shall be amortized over the remaining term of the Lease at 10% per
8. Paragraph 32 is modified by adding the following subparagraphs:
c. Landlord and Tenant agree that Chrisman Construction, Inc. shall
be the general contractor for the construction of Tenant Improvements in the
building, including the addition. Chrisman Construction is a construction
management company and will obtain not less than two bids from reputable
subcontractors for subcontracted work, if requested to do so by Tenant.
d. Tenant understands that Tenant Improvements for the addition
must be completed and paid for by October 24, 2003, if Landlord will be
required to pay for said Improvement as provided in Paragraph 7 of the First
Addendum, unless Landlord notifies Tenant, in writing, that that deadline of
October 24, 2003 has been extended by Landlord's bank, or that Landlord will
finance the improvements without regard to existing construction loan proceeds
being available to pay for said Improvements.
e. Tenant has agreed to move its corporate headquarters to Boulder,
, and will do so on or before June 30, 2003, and will occupy the
Premises from and after the purchase of the assets of the Colorado
f. Landlord agrees to waive the Consumer Price Index increases for
the five-year period for Lease Years 2005-2009. The Consumer Price Index
increases will resume for the 2010 Lease Year and will continue each and every
successive Lease Year thereafter during the
remaining Term of the Lease.
9. Paragraph 36 is modified to read as follows:
CONTINGENCIES. Tenant acknowledges that all of the contingencies have
been met therefore this Paragraph is deleted.
10. Other than as modified herein, all terms and conditions of the Lease
shall remain unchanged.
IN WITNESS WHEREOF, the undersigned have executed this document as of the date
EASTSIDE PROPERTIES, LLC HEI, INC.
By: /s/ Steven P. Chrisman By:
Steven P. Chrisman --------------------
5777 Central Avenue, #110 6385 Old Shady Oak Road, #280
Boulder, CO 80301 Eden Prairie, MN 55344-7736
Tax I.D. 75-2983952 Tax I.D. ------------