-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WLeXoaVFoQNqw4iqjBwAgEdDMlSsuhcBLniG0qeA064uekcXs+I2tHGHSsFl2yVK p0CpocNwDKVYLXOj6dThow== 0001045969-99-000847.txt : 19991115 0001045969-99-000847.hdr.sgml : 19991115 ACCESSION NUMBER: 0001045969-99-000847 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WAM NET INC CENTRAL INDEX KEY: 0001060274 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-53841 FILM NUMBER: 99750824 BUSINESS ADDRESS: STREET 1: 6100 W 110TH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55438 BUSINESS PHONE: 6128865100 MAIL ADDRESS: STREET 1: 6100 W 110TH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55438 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to ____________ Commission file number: 333-53841 WAM!NET Inc. (Exact name of registrant as specified in its charter) Minnesota 41-1795247 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 655 Lone Oak Drive Eagan, Minnesota 55121 (Address of principal executive offices) (Zip Code) (651) 256-5100 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of October 31, 1999 there were 9,297,427 shares of the Corporation's Common Stock, par value $.01 per share, outstanding. Total number of pages in this report: 21 WAM!NET Inc. INDEX TO FORM 10-Q
Part I--Financial Information Page No. --- Item 1--Financial Statements Consolidated Balance Sheets as of September 30, 1999 (unaudited) and December 31, 1998............................................................. 3 Consolidated Statements of Operations for the three and nine months in the periods ended September 30, 1999 and 1998 (unaudited)..................................... 5 Consolidated Statements of Cash Flows for the nine months in the periods ended September 30, 1999 and 1998 (unaudited)........................................... 6 Notes to Consolidated Financial Statements (unaudited).............................. 8 Item 2--Management's Discussion and Analysis of Financial Condition and Results of Operations......................................................... 9 Item 3--Quantitative and Qualitative Disclosures About Market Risk......................... 16 Part II--Other Information Item 2--Changes in Securities and Use of Proceeds.......................................... 17 Item 6--Exhibits and Reports on Form 8-K................................................... 17 Signature -- ................................................................................... 18 Exhibit Index-- ................................................................................... 19
-2- Part I--FINANCIAL INFORMATION Item 1--Financial Information WAM!NET Inc. Consolidated Balance Sheets (dollars in thousands, except share data)
September 30, December 31, 1999 1998 ------------- ---------- (Unaudited) Assets Current assets: Cash and cash equivalents .......................................... $ 31,919 $ 6,272 Accounts receivable, net of allowance of $880 and $430, respectively 5,138 3,466 Inventory .......................................................... 1,572 1,534 Prepaid expenses and other current assets .......................... 3,983 3,187 -------- -------- Total current assets .......................................... 42,612 14,459 Property and equipment: Building and land .................................................. 39,742 605 Network equipment .................................................. 66,613 50,907 Other support equipment ............................................ 21,714 18,046 Furniture and fixtures ............................................. 4,403 2,802 Leasehold improvements ............................................. 4,634 6,506 -------- -------- 137,106 78,866 Accumulated depreciation ........................................... 33,374 16,399 -------- -------- 103,732 62,467 Goodwill, net of accumulated amortization of $10,266 and $5,308, respectively ................................................... 22,714 27,734 Deferred financing charges, net of accumulated amortization of $9,637 and $5,959, respectively ................................ 19,549 20,183 Other assets ....................................................... 628 616 -------- -------- Total assets .................................................. $189,235 $125,459 ======== ========
-3- WAM!NET Inc. Consolidated Balance Sheets (continued) (dollars in thousands, except share data)
September 30, December 31, 1999 1998 ----------- ---------- (Unaudited) Liabilities and shareholders' deficit Current liabilities: Accounts payable ............................................. $ 17,710 $ 17,098 Accrued salaries and wages ................................... 3,580 4,801 Accrued expenses ............................................. 6,376 3,176 Current portion of equipment financing ....................... 8,023 5,324 --------- --------- Total current liabilities ............................... 35,689 30,399 Long-term debt: Subordinated notes payable ................................... 28,779 27,403 Notes payable ................................................ 38,000 -- Line of credit ............................................... 27,708 24,000 Equipment financing .......................................... 14,490 13,536 13.25% Senior Discounted Notes ............................... 152,987 138,975 Redeemable Preferred Stock, Class A, $10.00 par value: Authorized shares--115,206 Issued and outstanding shares--115,206 and 100,000 at September 30, 1999 and December 31, 1998 ............. 1,152 1,000 Shareholders' deficit: Convertible Preferred Stock, Class B, $.01 par value: Authorized, issued and outstanding--5,710,425 and 0 ..... 57 -- Convertible Preferred Stock, Class C, $.01 par value: Authorized, issued and outstanding--878,527 and 0 ....... 9 -- Convertible Preferred Stock, Class D $.01 par value: Authorized, issued and outstanding--2,196,317 and 0 ..... 22 -- Undesignated shares, $.01 par value--1,099,525 Common Stock, $.01 par value: Authorized shares--490,000,000 Issued and outstanding shares--9,297,427 and 9,288,194 at September 30, 1999 and December 31, 1998 ............. 93 93 Additional paid-in capital ................................... 156,600 54,302 Accumulated deficit .......................................... (265,870) (164,387) Other accumulated comprehensive income (loss) ................ (481) 138 --------- --------- Total shareholders' deficit .................................. (109,570) (109,854) --------- --------- Total liabilities and shareholders' deficit .................. $ 189,235 $ 125,459 ========= =========
See accompanying notes. -4- WAM!NET Inc. Consolidated Statements of Operations (dollars in thousands, except share and per share data)
Three months ended Nine months ended September 30, September 30, ------------- ------------- 1999 1998 1999 1998 ----------- ----------- ----------- ----------- (Unaudited) Revenues: Net service revenue .................................... $ 4,787 $ 1,782 $ 11,861 $ 4,256 Software and hardware sales ............................ 2,029 3,739 5,622 8,480 ----------- ----------- ----------- ----------- Total revenue .......................................... 6,816 5,521 17,483 12,736 Operating expenses: Network communications ................................. 6,766 4,602 19,489 11,502 Cost of software and hardware .......................... 823 1,155 2,220 2,631 Network operations and development ..................... 6,448 11,628 17,222 23,994 Selling, general and administrative .................... 9,581 9,956 30,952 33,058 Depreciation and amortization .......................... 8,851 5,328 24,908 11,353 ----------- ----------- ----------- ----------- 32,469 32,669 94,791 82,538 ----------- ----------- ----------- ----------- Loss from operations ................................... (25,653) (27,148) (77,308) (69,802) Other income (expense): Interest income ................................... 90 464 520 1,612 Interest (expense) ................................ (7,987) (6,293) (25,479) (15,787) Other income ...................................... 508 718 783 783 ----------- ----------- ----------- ----------- Net loss ............................................... $ (33,042) $ (32,259) $ (101,484) $ (83,194) Less preferred dividends ............................... (1,800) (18) (4,105) (52) ----------- ----------- ----------- ----------- Net loss applicable to common stock .................... $ (34,842) $ (32,277) $ (105,589) $ (83,246) =========== ----------- =========== ----------- Net loss applicable per common share - basic and diluted $ (3.75) $ (3.74) $ (11.36) $ (9.65) =========== =========== =========== =========== Weighted average number of common shares outstanding ... 9,296,339 8,627,889 9,296,339 8,627,889 =========== =========== =========== ===========
See accompanying notes. -5- WAM!NET Inc. Consolidated Statements of Cash Flows (dollars in thousands)
Nine months ended September 30, ---------------------- 1999 1998 --------- --------- (Unaudited) Operating activities Net loss .................................................................. $(101,484) $ (83,194) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization ........................................ 24,908 11,544 Noncash interest expense, including related warrants values .......... 21,864 12,719 Loss on disposal of property and equipment ........................... 1,354 69 Value of stock options issued to employees and consultants ........... 145 12,492 Changes in operating assets and liabilities: Accounts receivable ............................................. (1,671) 329 Prepaid expenses and other assets ............................... (806) (3,380) Accounts payable ................................................ 612 8,427 Accrued expenses ................................................ 646 3,846 Income Taxes .................................................... -- (1,360) --------- --------- Net cash used in operating activities ..................................... (54,432) (38,508) Investing activities Purchases of property and equipment ....................................... (22,609) (38,598) Purchase of 4-Sight and Freemail (net of cash acquired) ................... (250) (16,350) --------- --------- Net cash used in investing activities ..................................... (22,859) (54,948) Financing activities Proceeds from exercise of stock options ................................... 5 11 Net proceeds from sale of convertible preferred stock ..................... 59,498 -- Proceeds from 13.25% Senior Discount Notes ................................ -- 120,626 Proceeds from line of credit .............................................. 13,397 5,203 Payments on line of credit ................................................ (10,000) (24,003) Net proceeds from notes payable ........................................... 36,765 -- Proceeds from equipment financing ......................................... 8,347 14,274 Payments on equipment financing ........................................... (4,756) (3,465) Capitalized financing costs ............................................... -- (2,098) --------- --------- Net cash provided by financing activities ................................. 103,256 110,548 Effect of foreign currencies on cash ...................................... (318) 260 --------- --------- Increase (decrease) in cash and cash equivalents .......................... 25,647 17,352 Cash and cash equivalents at beginning of period .......................... 6,272 274 --------- --------- Cash and cash equivalents at end of period ................................ $ 31,919 $ 17,626 ========= =========
See accompanying notes. -6- WAM!NET Inc. Consolidated Statements of Cash Flows (continued) (dollars in thousands)
Nine months ended September 30, ----------------- 1999 1998 ------- ------- (Unaudited) Supplemental schedule of noncash financing activities Conversion of accrued dividends to preferred stock .................. 152 -- Issuance of convertible preferred stock in exchange for land, building and furniture & fixtures ................................. 40,000 -- Warrant valuation reclassed to deferred charges from line of credit . -- 4,104 Value of interest cost assigned to warrants ......................... 4,297 -- Accumulated and unpaid dividends .................................... 47 52 Issuance of common stock relating to acquisition .................... -- 20,000 Conversion of convertible subordinated debenture for common stock ... -- 25 Supplemental schedule of cash flow information Cash paid for interest .............................................. $ 3,230 $ 1,654
See accompanying notes. -7- WAM!NET INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Consolidated Financial Statements The accompanying consolidated financial statements have been prepared by WAM!NET Inc. ("We," "us," "our") without audit and reflect all adjustments (consisting only of normal and recurring adjustments and accruals) which are, in the opinion of management, necessary to present a fair statement of the results for the interim periods presented. The statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of regulation S-X, but omit certain information and footnote disclosures necessary to present the statements in accordance with generally accepted accounting principles. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full fiscal year. These financial statements should be read in conjunction with our audited Consolidated Financial Statements for the year ended December 31, 1998. The December 31, 1998 balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. Certain amounts for the prior year have been reclassified to conform to current year presentation. 2. Consolidation The consolidated financial statements include our accounts and our wholly-owned subsidiaries: FreeMail, Inc., NetCo Communications of Canada, Inc., WAM!NET Japan KK and WAM!NET U.K. Limited (formerly 4-Sight Limited). All intercompany transactions have been eliminated. 3. Preferred Stock In January 1999, we issued the 1999 MCI WorldCom Convertible Note and in January 1999 and March 1999, we borrowed $10.0 million and $15.0 million, respectively. The 1999 MCI WorldCom Convertible Note was converted into 2,196,317 shares of our Class D Convertible Preferred Stock, par value $.01 per share (the "Class D Preferred Stock"), immediately prior to the closing of the Silicon Graphics, Inc. investment discussed below ("SGI Investment"). In connection with the MCI WorldCom Convertible Note, we issued warrants to MCI WorldCom to purchase a total of 350,000 shares of Common Stock. The warrants have an exercise price of $.01 and are exercisable from April 30, 1999 until April 30, 2004. In March 1999, we entered into the SGI Investment, providing for the purchase by SGI of 5,710,425 shares of our Class B Convertible Preferred Stock, par value $.01 per share (the "Class B Preferred Stock"), and 878,527 shares of our Class C Convertible Preferred Stock, par value $.01 per share (the "Class C Preferred Stock"). The holders of a majority of the Class B Preferred Stock have the right to designate one member of our Board of Directors. The aggregate consideration received by us for the Class B Preferred Stock and the Class C Preferred Stock was $75 million, of which $35 million was paid in cash and $40 million was paid by transfer to us of a corporate campus facility. The Class B Preferred Stock and the Class C Preferred Stock will be convertible on a one-to-one basis into Common Stock (subject to anti-dilution adjustments) and will have the right to vote with the Common Stock, on an as-converted basis, as a single class. The Class B Preferred Stock and Class C Preferred Stock are convertible immediately following the issuance date and 18 months following the issuance date, respectively. The shares of convertible Common Stock into which the Class B Preferred Stock and the Class C Preferred Stock are subject to certain registration rights. -8- Sale Leaseback On September 30, 1999, we entered into a Purchase and Sale Agreement and Escrow Instructions together with a Net Lease Agreement or Memorandum of Lease (collectively, "The Sale/Lease Back Agreement") with CCPRE-Eagan, LLC, ("CCPRE") a Delaware Limited Liability Company, and an affiliate of Chase Bank, New York. Pursuant to the Sale/Lease Back Agreement, we conveyed our corporate headquarters facility, including land, building and personal property to CCPRE for a total purchase price of $38 million. Under the Sale/Lease Back Agreement, we agreed to lease the facility from CCPRE for a term of 20 years with three five-year options at a minimum monthly rent increasing from $481,000 per month during the first year of the initial term to $959,000 per month during the last year of the initial term. We also agreed to pay all taxes, assessments, utilities and other governmental charges. Under the Sale/Lease Back Agreement, we may repurchase the corporate headquarters facility on the 24th or 36th month anniversary of the agreement. The Sale/Lease Back Agreement entitles CCPRE to require us to repurchase our corporate headquarters facility at any time following the 36th month anniversary of the Agreement for the sum $41.8 million, less the amount of certain payments made under the lease. As additional consideration for the Sale/Lease Back Agreement, we issued Chase Capital Partners ten-year warrants to purchase 325,000 shares of common stock at an initial exercise price of $12.00 per share. The initial exercise price is subject to antidilution adjustments. The warrant agreement entitles the holder to require us to repurchase shares issued upon exercise of the warrant if we elect to repurchase our corporate headquarters facility prior to an initial public offering of our common stock, at a per share purchase price equal to 92% of fair market value determined by appraisal. In connection with the warrant agreement, Chase Capital Partners entered into agreements with MCI WorldCom and SGI entitling the holder of the warrants to include a portion of the warrants, or shares issuable upon exercise, in any transaction occurring prior to our initial public offering in which either MCI WorldCom or SGI sold 10% or more of its ownership of our securities. Item 2--Management's Discussion and Analysis of Financial Condition and Results of Operations MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis is based on the historical results of WAM!NET Inc. ("We," "us" "our") and should be read in conjunction with our Financial Statements included herein. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Overview We offer a suite of electronic data delivery services including our Direct Service, On-Ramp Service and Internet Gateway Services. Our initial focus through 1998 was our Direct Service. This is our fastest, most secure and most reliable transport service, that includes installation of equipment on our customer's premises and provision of telephone service connecting the equipment to our network. This service provides direct, guaranteed and managed access and transport over our private network. Customers choose from a variety of capacities, speeds and throughput levels to meet their requirements. We released our On-Ramp Service in Europe during the first quarter of 1999 and in North America during the second quarter of 1999. Our On-Ramp service allows customers to connect to our network using software we provide, an ISDN card, which we also offer, and a dial-up ISDN or similar telephone service which our customer obtains. We introduced our Internet Gateway Service to our Direct Service customers in the third quarter of 1999. Internet Gateway service allows connection to our network over the Internet. Both On-Ramp and Internet Gateway services are targeted to facilitate growth in the number and size of workflow groups by permitting connectivity at lower costs commensurate with lower capacity needs for smaller users who are often key participants in workflow. At September 30, 1999, we had over 5,000 subscribers using our data delivery services. -9- Revenues. Service revenue. Our service revenue is directly related to customer traffic through our global private network which is related to the number of, and degree of utilization by, workflow groups who connect among themselves through our network. Our service revenue is derived primarily from annual or multi-year service contracts, many of which have automatic renewal or extension provisions. These contracts generally include a minimum monthly fee and additional charges for usage that exceeds an included monthly minimum. We currently offer our services at scaled minimum usage fees, which typically range for Direct Service from $650 per month to $4,000 per month, and for On-Ramp Service from $45 per month to $360 per month. Our Internet Gateway is priced primarily on a per-megabyte basis. We begin to earn service revenue from Direct Service customers following installation of equipment and service at a customer's premises, which typically lags contract signing by 60 to 90 days. We begin to earn service revenue from our other services upon contract signing and/or usage. We began to record revenue from our On-Ramp Service in March 1999, and began to record revenue from Internet Gateway Service in September of 1999. We expect to introduce our initial WAM!BASE(R) data storage services during the first quarter of 2000. Software and hardware sales. Revenue from software and hardware sales resulted primarily from the sale of 4-Sight ISDN Manager(TM) software and ISDN cards. In addition, our On-Ramp Service customers may choose to make a single upfront payment and purchase software instead of paying monthly service fees under contracts for the use of our On-Ramp software. In both cases these purchases appear as software and hardware sales in our revenue. We expect revenue from software and hardware sales to decline upon completion of the long-term contracts for 4-Sight ISDN Manager(TM) and ISDN cards. No single customer accounted for more than 5% of our revenues for the nine month period ended September 30, 1999 on a consolidated basis. Operating Expenses. Network communications. Network communications expense represents the largest direct cost associated with providing our Direct Service. Network communications expense includes both the costs of the high bandwidth, backbone carrier services interconnecting our global infrastructure of network operation and data storage centers and distribution hubs as well as the costs of local loop telephone circuits connecting our network access devices from a customer's premises to the nearest distribution hub. Local telephone circuit connections provided by local exchange carriers account for the substantial majority of these charges, with significant differences between urban and rural connection costs. National and international carrier service, accounts for the balance of these charges. Network communication expense is generally a fixed monthly cost per circuit. We expect that network communications expense will increase as our network expands; however, we expect that the cost of these expenses as a percentage of revenue will decline with increasing utilization of our network. We also believe that growing competition among telephony and communications providers may reduce the cost of local telephone circuit and backbone connections. We actively seek to obtain and deploy technologies that will reduce the costs of local telephone circuit connections, such as wireless technologies, remote dial-up capabilities and DSL. We also intend to use our network management tools to optimize the use of existing and planned network capacity as volume increases and traffic patterns begin to emerge. We continue to incur substantial network communication expense as we deploy our network and related services and applications globally; however, we expect the network communications expense as a percentage of revenue to decline. Software and hardware. Software and hardware expense reflects the costs of software and hardware sold. Network operations and development. Network operations and development expense represents costs directly associated with developing, maintaining, managing and servicing our global private network and expanding our service offerings. These costs include direct labor, vendor service fees, point-of-presence charges and research and development charges, which are often incurred in advance of receiving revenue. Our currently installed -10- network operation centers account for the substantial majority of these direct labor and operating costs. Most of the costs associated with the development of new services and applications, such as WAM!BASE(R), WAM!PROOF(R), On-Ramp and Internet Gateway, are accounted for as network operations expenses and are incurred in advance of receiving revenue. We expect that network operations costs will increase as our network expands; however, the cost of network operations as a percentage of revenue is expected to decline. Selling, general and administrative. Our selling expense consists primarily of the salaries and commissions of our direct sales force and our global marketing groups, commissions for channel partners, and the costs of ongoing marketing activities such as promotions and channel development. Our sales and marketing efforts through the end of 1998 were primarily intended to create awareness of our services, stimulate trial use and induce integration into customer workflow. With the growth of our installed customer base, we began in 1999 integrating our services into our customers' workflow and expanding the size and number of workflow groups with our more affordable On-Ramp and Internet Gateway connectivity options. We expect to continue to incur significant sales and marketing expenses in order to obtain increased penetration in our markets and to generate increased traffic among existing customers. Our general and administrative expense includes administrative salaries, related overhead and professional service fees. These costs reflect expenditures related to the rapid growth and expansion of our administrative infrastructure necessary to manage our globally expanding operations, and professional service fees for financing activities, contract negotiations and acquisitions. We continue to incur general and administrative expenses as we continue to deploy our network and related services and applications globally; however, we expect the cost of general and administrative expenses as a percentage of revenue to decline. Depreciation and amortization. We retain ownership of the customer premise equipment and most of the hardware and software necessary for our customers to use our services on a turn-key basis. Depreciation and amortization expense includes depreciation of this hardware and software as well as the equipment located in our distribution hubs and network operation and data storage centers. We also amortize certain costs relating to the acquisitions of 4-Sight and Freemail, which we acquired using the purchase method of accounting. We anticipate additional capital investments in our network infrastructure commensurate with customer demand and market opportunity. As a result, we anticipate that depreciation and amortization expense will continue to increase in future periods as we continue to purchase equipment and expand operations; however, we expect depreciation and amortization expense as a percentage of revenue to decline. Results of Operations Three and Nine Month Periods Ended September 30, 1999 Compared with Three and Nine Month Period Ended September 30, 1998 Revenues. Net Service revenue. Net Service revenue for the three month period ended September 30, 1999 was $4.8 million, compared to $1.8 million for the three month period ended September 30, 1998, an increase of $3.0 million, or 166.7%. Net Service revenue for the nine month period ended September 30, 1999 was $11.9 million, compared to $4.3 million for the nine month period ended September 30, 1998, an increase of $7.6 million, or 176.7%. This increase in revenue during each current period was primarily due to growth in the number of customers purchasing Direct Services and On-Ramp Services, increased utilization by customers, and price increases in monthly fees. Software and hardware sales. Revenues from software and hardware sales for the three month period ended September 30, 1999 were $2.0 million, compared to $3.7 million for the three month period ended September 30, 1998 a decrease of $1.7 million or 45.9%. Revenues from software and hardware sales for the nine month period ended September 30, 1999 were $5.6 million, compared to $8.5 million for the nine month period ended September 30, 1998, a decrease of $2.9 million, or 34.1%. The decrease in each current period is due to our -11- migration from sales of 4-Sight software and hardware as stand-alone products to sales of service contracts, partially offset by software purchases associated with On-Ramp Service agreements. Total Revenue. Total revenue for the three month period ended September 30, 1999 was $6.8 million, compared to $5.5 million for the three month period ended September 30, 1998, an increase of $1.3 million, or 23.6%. Total revenue for the nine month period ended September 30, 1999 was $17.5 million, compared to $12.8 million for the nine month period ended September 30, 1998, an increase of $4.7 million, or 36.7%. Increased service revenue during each period was partially offset by decreases in hardware and software sales, as described above. Operating Expenses. Network communications. Network communications expense for the three month period ended September 30, 1999 was $6.8 million, compared to $4.6 million for the three month period ended September 30, 1998, an increase of $2.2 million, or 47.8%. Network communications expenses for the nine month period ended September 30, 1999 were $19.5 million, compared to $11.5 million for the nine month period ended September 30, 1998, an increase of $8.0 million, or 69.6%. The increase in each current period resulted from increased costs for local loop connections related to growth in the number of our Direct Service customers, and from expenses on network coverage through installation of additional hubs for domestic and foreign network operations. The average monthly communications expense per Direct Service customer installation decreased overall 13.5% during each of the current periods. This trend reflects more efficient use of our backbone as we add more Direct Service customers to our network, a beneficial shift in the geographic mix of our customers, and generally declining costs of backbone capacity and North American local loop connections. These trends were partially offset by growth in our Direct Service customer base in Europe, where local loop costs are generally higher than in North America. Software and hardware. The cost of software and hardware for the three month period ended September 30, 1999 was $0.8 million, compared to $1.2 million for the three month period ended September 30, 1998, a decrease of $0.4 million, or 33.3%. The cost of software and hardware for the nine month period ended September 30, 1999, was $2.2 million, compared to $2.6 million for the nine month period ended September 30, 1998, a decrease of $0.4 million, or 15.4%. This decrease reflects the decline in software and hardware sales as described above. Network operations and development. Network operations and development expense for the three month period ended September 30, 1999 was $6.4 million, compared to $11.6 million for the three month period ended September 30, 1998, a decrease of $5.2 million, or 44.8%. Network operations and development expense for the nine month period ended September 30, 1999 was $17.2 million, compared to $24.0 million for the nine month period ended September 30, 1998, a decrease of $6.8 million, or 28.3%. The decrease in each current period was primarily due to completion of On-Ramp development and the termination of associated development costs, partially offset by costs incurred for establishing our network operations center in Belgium and deploying our network in Europe. This category of expense also includes one-time costs related to the acquisition of 4-Sight in March 1998, and costs for development of On-Ramp, Internet Gateway and WAM!BASE which were incurred during 1998 and 1999. We anticipate a lower level of development costs for continuing Internet Gateway and WAM!BASE development in future periods. Selling, general and administrative. Selling, general and administrative expense for the three month period ended September 30, 1999 was $9.6 million, compared to $10.0 million for the three month period ended September 30, 1998, a decrease of $0.4 million, or 4.0%. Selling, general and administrative expense for the nine month period ended September 30, 1999 was $31.0 million, compared to $33.1 million for the nine month period ended September 30, 1998, a decrease of $2.1 million, or 6.3%. This decrease is due to a one-time $11.5 million non-cash compensation charge relating to the vesting of option contracts held by certain of our officers that occurred in the period ended September 30, 1998, partially offset by costs incurred following the acquisition of 4-Sight in March, 1998 and by increases in other selling, general and administrative expenses associated with expanded operations during the current nine month period. After adjusting for the one-time charge during 1998, -12- recurring selling, general and administrative expense during the nine month period ended September 30, 1999 increased $9.4 million, or 43.5% over the comparable adjusted amount for the nine month period ended September 30, 1998. The increase was primarily due to (i) expansion of our European sales force, partially offset by reductions and realignments in our North American sales force, (ii) increased marketing expense for trade show attendance associated with new service promotions and (iii) increased costs associated with the restructuring of our executive and administrative management team to support our new sales and marketing focus. Management expects selling, general and administrative expense will continue to decline as a percentage of revenue. Depreciation and amortization. Depreciation and amortization for the three month period ended September 30, 1999 was $8.9 million, compared to $5.3 million for the three month period ended September 30, 1998, an increase of $3.6 million, or 67.9%. Depreciation and amortization for the nine month period ended September 30, 1999 was $24.9 million, compared to $11.4 million for the nine month period ended September 30, 1998, an increase of $13.5 million, or 118.4%. This increase in each current period is primarily due to depreciation of additional network and related equipment purchased for network expansion during 1998 and 1999. Interest income. Interest income for the three month period ended September 30, 1999 was $0.1 million, compared to $0.5 million for the three month period ended September 30, 1998, a decrease of $0.4 million, or 80.0%. Interest income for the nine month period ended September 30, 1999 was $0.5 million, compared to $1.6 million for the nine month period ended September 30, 1998, a decrease of $1.1 million, or 68.8%. The decrease in interest income in each current period was primarily due to the decrease in our average monthly balance of cash and cash equivalents during the period. Interest expense. Interest expense for the three month period ended September 30, 1999 was $8.0 million, compared to $6.3 million for the three month period ended September 30, 1998, an increase of $1.7 million, or 27.0%. Interest expense for the nine month period ended September 30, 1999 was $25.5 million, compared to $15.8 million for the nine month period ended September 30, 1998, an increase of $9.7 million, or 61.4%. The increase was primarily due to (i) the increase in long-term unsecured debt we incurred during 1998 to fund our operations and to acquire 4-Sight, consisting primarily of our 13.25% senior discounted notes due 2005 (the "1998 Notes") in the accreted principal amount of $153.0 million at September 30, 1999, and (ii) the increase in equipment financing. In the nine month period ended September 30, 1999 we also incurred interest expense (i) in the amount of $2.8 million in connection with the 13.25% subordinated unsecured convertible note, which converted into equity in March 1999, and (ii) in the amount of $6.5 million representing financing costs including the current portion of the attributed cost incurred for the issuance of warrants in connection with certain financing transactions, including our 13.25% senior discount notes. Other income. Other income for the three month period ended September 30, 1999 was $0.5 million, compared to $0.7 million for the three month period ended September 30, 1998, a decrease of $0.2 million, or 28.6%. %. Other income for the nine month period ended September 30, 1999 was $0.8 million, compared to $0.8 million for the nine month period ended September 30, 1998. The 1999 other income primarily reflects receipt of rental income received from SGI in connection with our lease to SGI in June, 1999 of a portion of the corporate campus facility in Eagan which we purchased from SGI in March, 1999. This income was partially offset by our continuing rental obligations for vacated facilities. Net loss. Our net loss of $33.0 million for the three month period ended September 30, 1999 increased $0.7 million, or 2.2%, compared to a net loss of $32.3 million for the three month period ended September 30, 1998. Our net loss of $101.5 million for the nine month period ended September 30, 1999, increased $18.3 million, or 22.0%, compared to a net loss of approximately $83.2 million for the nine month period ended September 30, 1998. This increase is related to expenses associated with the continuing operation, deployment and marketing of our network and network services, for the expansion of European operations, for increased depreciation and amortization over a larger equipment base and for increased interest expense. -13- Liquidity and Capital Resources Since inception, we have incurred net losses and experienced negative cash flow. We expect to continue to operate at a net loss and experience negative cash flow for the foreseeable future. Our ability to achieve profitability and positive cash flow from operations will depend on our ability to grow our revenue substantially and achieve other operating efficiencies. For the nine month period ended September 30, 1999, we used $54.4 million of net cash in operating activities primarily for operating expenses, including network communications, salaries, travel, consulting and legal expense. During that period we used $22.6 million of net cash in investing activities primarily for the expansion of our network and storage infrastructure. Since January 1, 1999, we have obtained $103.3 million of net cash proceeds from financing activities, consisting of $36.8 million from the sale leaseback of our building and land, $59.5 million from the issuance of short-term debt and preferred stock to MCI WorldCom and SGI, and $7.0 million from other net borrowings under credit facilities and equipment financing arrangements. The increase of $39.0 million in our building and land assets during the period result from our acquisition of the SGI corporate campus facility in March 1999 in exchange for the issuance of our preferred stock. Changes in other asset and liability balances during the recent nine month period related to timing of expense recognition. On January 13, 1999, we issued the 1999 MCI WorldCom convertible note in the principal amount of $25.0 million due August 28, 1999. Under the 1999 MCI WorldCom convertible note we borrowed $10.0 million on January 13, 1999 and $15.0 million on March 4, 1999. Also, on that date, we consummated the SGI investment pursuant to which SGI purchased 5,710,425 shares of Class B convertible preferred stock and 878,527 shares of our Class C convertible preferred stock for aggregate net cash proceeds of $35.0 million and $40.0 million by way of transfer to us of SGI's corporate campus facility in Eagan, Minnesota. Immediately prior to the closing of our transaction with SGI, the 1999 MCI WorldCom convertible note was converted into 2,196,317 shares of Class D convertible preferred stock. In connection with the issuance of the 1999 MCI WorldCom convertible note, we also issued warrants to MCI WorldCom to purchase 150,000 and 200,000 shares of common stock at an exercise price of $.01 per share after April 30, 1999 and exercisable until April 30, 2004. Effective June 1, 1999 we amended our 1997 agreement for the acquisition of Freemail to change the amount and rate of payment of contingent consideration due to the former Freemail shareholders. We have decreased the amount payable from $3.0 million cash to $2.0 million, payable $1.0 million in cash and $1.0 million in shares of our common stock at fair market value. The rate of payment has also been changed from 5% of revenue from a selected class of customers to 5% of our total collected revenue, calculated quarterly. In accordance with this amendment, the first payment was made by October 30, 1999, for the quarter ended September 30, 1999. On July 16, 1999, we entered into a $20.0 million, two year credit facility with Foothill Capital Corporation. The credit facility contains a $10.0 million term loan which was repaid from the proceeds of the sale/License Agreement with CCPRE Eagan, LLC. The remainder of the facility is a revolving credit facility under which Foothill will lend us up to an additional $10.0 million based upon a borrowing base consisting of our recurring billings and collections from its U.S. customers. Amounts outstanding under the credit facility incur interest at the Wells Fargo Bank reference rate plus 1.75% (currently 9.75% per year). The credit facility is secured by a lien on certain unencumbered and lienable assets. The credit facility requires us to obtain certain minimum gross margins, specified levels of network access device installations and minimum EBITDA for the quarter ending September 30, 1999, and for each quarter thereafter until maturity. It also provides for annual limits on the amount of our capital expenditures. Foothill has agreed under certain circumstances to subordinate or release its lien on equipment to permit us to obtain equipment financing from third parties. The credit facility is automatically renewable at maturity until cancelled in accordance with its terms. We have currently borrowed approximately $4.0 million under the credit facility. On September 30, 1999, we entered into a Purchase and Sale Agreement and Escrow Instructions together with a Net Lease Agreement or Memorandum of Lease (collectively, "The Sale/Lease Back Agreement") with CCPRE-Eagan, -14- LLC, ("CCPRE") a Delaware Limited Liability Company, and an affiliate of Chase Bank, New York. Pursuant to the Sale/Lease Back Agreement, we conveyed our corporate headquarters facility, including land, building and personal property to CCPRE for a total purchase price of $38 million. Under the Sale/Lease Back Agreement, we agreed to lease the facility from CCPRE for a term of 20 years with three five-year options at a minimum monthly rent increasing from $481,000 per month during the first year of the term to $959,000 per month during the last year of the initial term. We also agreed to pay all taxes, assessments, utilities and other governmental charges. Under the Sale/Lease Back Agreement, we may repurchase the corporate headquarters facility on the 24th or 36th month anniversary of the agreement. The Sale/Lease Back Agreement entitles CCPRE to require us to repurchase our corporate headquarters facility at any time following the 36th month anniversary of the Agreement for the sum $41.8 million, less the amount of certain payments made under the lease. As additional consideration for the Sale/Lease Back Agreement, we issued Chase Capital Partners ten-year warrants to purchase 325,000 shares of common stock at an initial exercise price of $12.00 per share. The initial exercise price is subject to antidilution adjustments. The warrant agreement entitles the holder to require us to repurchase shares issued upon exercise of the warrant if we elect to repurchase our corporate headquarters facility prior to an initial public offering of our common stock, at a per share purchase price equal to 92% of fair market value determined by appraisal. In connection with the warrant agreement, Chase Capital Partners entered into agreements with MCI WorldCom and SGI entitling the holder of the warrants to include a portion of the warrants, or shares issuable upon exercise, in any transaction occurring prior to our initial public offering in which either MCI WorldCom or SGI sold 10% or more of its ownership of our securities. Our ability to continue to fund our operating losses as we expand our business depends on our ability to obtain additional sources of financing. We expect that our available operating capital as of October 31, 1999, as evidenced by cash, cash equivalent investments, and availability under existing credit facilities, together with borrowings under facilities from financial institutions with whom we are currently negotiating, will be sufficient to fund our operating losses, capital expenditures, lease payments and working capital requirements for the remainder of our current fiscal year. We are seeking additional financing through long- and short-term financing from banks, financial institutions, and vendors and the issuance of our equity securities. If additional sources of funding cannot be obtained during the course of our fiscal year ending December 31, 1999, due to a constraint of available operating capital, we will be required to significantly slow our global market penetration, network growth and product development. In addition, should we be unable to generate cash from operating or investing activities to fund our operations and network growth during 1999, management expects that it would implement plans to reduce cash expenditures. The reduction of cash expenditures would have a material adverse effect on our global revenue and network expansion plans. We believe that the most evident and clearly measurable impact resulting from these reductions would be a significant decrease of installed network customers for the year ending December 31, 1999. A material reduction in the base of installed customers would slow the growth of our recurring revenue stream, which is dependent upon customer utilization of our excess network capacity. Reductions in network utilization would directly impact our network revenue and could ultimately defer overall profitability of our service and products. Another possible impact of the above outlined expenditure reductions would be potentially material delays in software product development, the impact of which could further erode customer retention and network utilization. Year 2000 Compliance The Year 2000 issue is the result of computer-controlled systems using two digits rather than four to define the applicable year. For example, computer programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. As for many other companies, this year 2000 computer issue poses a potential risk for us as a user of information systems in the operation of our business, as a provider of managed, high-speed, digital data delivery network service and the related computer technology and software to customers, and as a customer of other organizations whose operations may be affected by year 2000 compliance issues. Our State of Readiness. We have completed an assessment of our core business information systems, many of which are provided by outside suppliers, for year 2000 readiness and are extending that review to include a variety -15- of other information systems and related business processes used in our operations. We have implemented necessary changes to critical systems, and successfully tested them. We are also assessing the possible effect on our operations of the year 2000 readiness of critical suppliers of products and services. These include not just suppliers of components but also our outsourcing partners in manufacturing as well as suppliers of basic utilities. Our reliance on key suppliers, and therefore on the proper functioning of their information systems and software, is increasing, and there can be no assurance that another company's failure to address year 2000 issues could not have a material adverse effect on our business, financial condition and results of operation. Although our assessment is ongoing, we currently believe that resolving these matters will not have a material adverse effect on our business, financial condition and results of operations. Costs. We have not incurred material historical costs for year 2000 awareness, inventory assessment, analysis, conversion, testing or contingency planning. We believe that we are unlikely to experience a material adverse impact on our business, financial condition or results of operations due to year 2000 compliance issues. Potential Risks. We could face substantial claims by customers or loss of revenue due to service interruptions, inability to fulfill contractual obligations or to bill customers accurately and on a timely basis, and increased expenses associated with litigation, stabilization of operations following critical system failures and the execution of contingency plans. We could also experience an inability by customers and others to pay, on a timely basis or at all, obligations owed to us. Under these circumstances, the adverse effects would be material, although not quantifiable at this time. Further, the cumulative effect of these failures could have a substantial adverse effect on the economy, domestically and internationally. The adverse effects of a domestic or global recession or depression also could be material, although not quantifiable at this time. We will continue to monitor business conditions to assess and quantify material adverse effects, if any, that may result from the year 2000 problem. Item 3--Quantitative and Qualitative Disclosures About Market Risk Foreign Currency Exchange Rates. For the nine month period ending September 30 ,1999, our revenues originating outside the U.S. were 36% of total revenues. Currently, we do not employ currency hedging strategies to reduce the risks associated with the fluctuation of foreign currency exchange rates. All of our contracts are denominated in U.S. dollars except for those contracts entered into by our foreign subsidiaries which are denominated in local currency. We are unable to determine what effect, if any, the adoption and use of the Euro will have in the future on our business, operating results, liquidity and financial condition. Our international business is subject to risks typical of an international business, including, but not limited to: differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. Accordingly, our future results could be materially adversely impacted by changes in these or other factors. Interest Rates. We invest cash in a variety of financial instruments, including bank time deposits and fixed rate obligations of governmental entities and agencies. These investments are denominated in U.S. dollars. Cash balances in foreign currencies overseas are operating balances and are invested in short-term time deposits of the local operating bank. Investments in fixed rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates, or we may suffer losses in principal if forced to sell securities which have seen a decline in market value due to changes in interest rates. Our investment securities are held for purposes other than trading. We are exposed to market risk from changes in the interest rates on certain of our outstanding debt. The outstanding loan balance under the revolving credit facility bears interest at a variable rate based on prevailing short-term interest rates in the U.S. and Europe. Based on the average outstanding bank debt for the year ended December 31, 1998, a 100 basis point change in interest rates would not change interest expense by a material amount. For fixed rate debt such as our 13.25% senior discount notes, interest rate changes affect its fair market value, but do not impact earnings or cash flows. -16- Part II--OTHER INFORMATION Item 2--Changes in Securities and Use of Proceeds (c) The information required by this Item 2 of Part II has been previously reported in Item 2 of Part I of this Form 10-Q, and is incorporated herein by reference. For a complete discussion of the transactions involving recent sales of unregistered securities of the Company please see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." The sale and purchase of the 1999 MCI WorldCom Note and the conversion thereof into the Class D Preferred Stock and the sale and purchase of the Class B Preferred Stock, the Class C Preferred Stock and the 1999 MCI WorldCom Warrants were exempt from the registration requirements of Section 5 of the Securities Act of 1933 (the "Securities Act") pursuant to the provisions of Section 4(2) of the Securities Act. The issuance of warrants to Chase Capital Partners in connection with the Sale/Lease Back agreement was exempt from the registration requirements of Section 5 of the Securities Act of 1933 (the "Securities Act") pursuant to the provisions of Section 4(2) of the Securities Act. Item 6--Exhibits and Reports on Form 8-K (a) Exhibits See Exhibit Index (b) Reports on Form 8-K On October 8, 1999, we filed a Report on Form 8-K relating to the transaction with Chase Capital Partners and CCPRE-Eagan, LLC, and also reporting the resignation of certain directors. -17- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed by the undersigned thereunto duly authorized. WAM!NET Inc. Date: November 5 , 1999 By: /s/ Terri F. Zimmerman ----------------------------- Terri F. Zimmerman Chief Financial Officer -18- EXHIBIT INDEX Item Number Description - ------ ----------- 2.1 (1) Agreement for the Sale and Purchase of the entire issued share capital of WAM!NET U.K. Limited dated February 11, 1998, among the Company, WAM!NET (UK) Limited and the Selling Shareholders listed therein. 2.2 (1) Agreement and Plan of Reorganization dated December 17, 1997 by and among NetCo Communications Corporation, NetCo Acquiring Corporation, FreeMail, Inc. and the shareholders listed therein. 2.3 (4) June 1, 1999 Amendment to the Agreement and Plan of Reorganization dated December 17, 1997 by and among WAM!NET Inc. (formerly NetCo Communications Corporation), NetCo Acquiring Corporation, FreeMail, Inc. and the shareholders listed therein. 3.1 (1) Amended and Restated Articles of Incorporation of the Company. 3.2 (1) By-Laws of the Company. 4.1 (1) Indenture dated as of March 5, 1998, between the Company, as Issuer, and First Trust National Association, as Trustee. 4.2a (1) Certificate for the Rule 144A Original Notes ($200,000,000). 4.2b (1) Certificate for the Rule 144A Original Notes ($8,030,000). 4.3 (1) Certificate for the Regulation S Original Notes. 4.4 (1) Certificate for the Rule 144A Warrants. 4.5 (1) Certificate for the Regulation S Warrants. 4.6a (1) Rule 144A Unit Certificate. (200,000 Units) 4.6b (1) Rule 144A Unit Certificate. (8,030 Units) 4.7 (1) Certificate for the Regulation S Units. 4.8 (1) Form of Certificate for the Exchange Notes (incorporated herein by reference and included in Exhibit 4.1 to the Company's Registration Statement on Form S-4 filed with Securities and Exchange Commission on May 28, 1998). 4.9 (1) Common Stock Certificate. 4.10 (1) Registration Rights Agreement, dated March 5, 1998, among the Company and Merrill Lynch Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation and First Chicago Capital Markets, Inc. 4.11 (1) Common Stock Registration Rights Agreement, dated as of March 5, 1998, among the Company, WorldCom Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston Corporation and First Chicago Capital Markets, Inc. 4.12 (1) Warrant Agreement, dated as of March 5, 1998, by and between the Company and First Trust National Association, as Warrant Agent, to purchase common stock of the Company. 4.13 (2) Certificate Representing 100,000 Shares of Class A Preferred Stock of the Company issued to WorldCom Inc. on December 16, 1996 (Incorporated herein by reference to exhibit 10.5 of the Company's Registration Statement on Form S-4 (File No. 333-53841) filed with the Securities and Exchange Commission on May 28, 1998). 4.14 (2) Warrants to purchase 4,157,500 Shares of Common Stock of the Company exercisable on or before December 31, 2000, issued to WorldCom Inc. on December 16, 1996 (Incorporated herein by reference to exhibit 10.6 of the Company's Registration Statement on Form S-4 (File No. 333-53841) filed with the Securities and Exchange Commission on May 28, 1998). 4.15 (2) Certificate for 13.25% Subordinated Unsecured Convertible Note due August 28, 2005 ($25,000,000 Note) issued to MCI WorldCom, Inc. on January 13, 1999. 4.16 (2) Certificate for 1,679,234 Class A Warrants and 2,840,967 Class B Warrants to purchase Common Stock of the Company, issued to WorldCom Inc. on September 26, 1997 (Incorporated herein by reference to exhibit 10.9 of the Company's Registration Statement on Form S-4 (File No. 333-53841) filed with the Securities and Exchange Commission on May 28, 1998). -19- 4.17 (2) Subordinate Unsecured Convertible Note and Warrant Purchase Agreement between the Company and MCI WorldCom, Inc. dated January 13, 1999. 4.18 (2) Preferred Stock Purchase Agreement by and between the Company and Silicon Graphics, Inc. dated as of March 3, 1999. 4.19 (2) Certificate for 150,000 Warrants to purchase shares of Common Stock for the purchase price of $.01 per share dated January 13, 1999. 4.20 (2) Certificate of Designation of Rights and Preferences of Class A Preferred Stock of the Company filed with the Secretary of State of the State of Minnesota on March 4, 1999, as corrected and filed with the Secretary of State of this State of Minnesota on March 5, 1999. 4.21 (2) Certificate of Designation of Rights and Preferences of Class B Convertible Preferred Stock of the Company filed with the Secretary of State of the State of Minnesota on March 4, 1999. 4.22 (2) Certificate of Designation of Rights and Preferences of Class C Convertible Preferred Stock of the Company filed with the Secretary of State of the State of Minnesota on March 4, 1999. 4.23 (2) Certificate of Designation of Rights and Preferences of Class D Convertible Preferred Stock of the Company filed with the Secretary of State of the State of Minnesota on March 4, 1999. 4.24 (2) Certificate representing 115,206 shares of Class A Preferred Stock of the Company issued to MCI WorldCom. Inc. on March 4, 1999. 4.25 (2) Certificate representing 5,710,425 shares of Class B Convertible Preferred Stock of the Company issued to Silicon Graphics, Inc. on March 4, 1999. 4.26 (2) Certificate representing 878,527 shares of Class C Convertible Preferred Stock of the Company issued to Silicon Graphics, Inc. on March 4, 1999. 4.27 (2) Certificate representing 2,196,317 shares of Class D Convertible Preferred Stock of the Company issued to MCI WorldCom. Inc. on March 4, 1999. 4.28 (2) Stockholders Agreement by and among the Company, Silicon Graphics, Inc. and MCI WorldCom, Inc. dated as of March 4, 1999. 4.29 (2) Class A Preferred Stock Exchange Agreement by and between the Company and MCI WorldCom, Inc. dated as of March 4, 1999. 4.30 (2) Class D Preferred Stock Conversion Agreement by and between the Company and MCI WorldCom, Inc. dated as of March 4, 1999. 10.1 (1) Credit Agreement among the Company, the Lending Institutions party thereto, as Lenders, The First National Bank of Chicago, as Agent, dated as of September 26, 1997. 10.2 (1) Ten Percent Convertible Note Purchase Agreement between the Company and WorldCom Inc. dated September 12, 1996 ($5,000,000 Note). 10.3 (1) Preferred Stock, Subordinated Note and Warrant Purchase Agreement between the Company and WorldCom Inc. dated November 14, 1996. 10.4 (1) $28,500,000 Seven Percent Subordinated Note due December 31, 2003, payable to WorldCom Inc. 10.5 Intentionally omitted. 10.6 Intentionally omitted. 10.7 (1) Right of Refusal Agreement Among WorldCom Inc., Edward Driscoll III and Allen L. Witters dated December 16, 1996. 10.8 (1) Guaranty Agreement dated September 26, 1997, by and between the Company and WorldCom Inc. 10.9 Intentionally omitted. 10.10 (1) Sublease dated September 24, 1997 between the Company and 1250895 Ontario Limited, relating to the property located at 6100 110th Street West, Bloomington, Minnesota. 10.11 (1) Service Provision Agreement dated as of July 18, 1997, by and between the Company and Time Inc. 10.12 (1) Standby Agreement dated as of July 19, 1997 by and between WorldCom Inc. and Time Inc. 10.13 (1) Employment Agreement dated as of November 14, 1996, by and between the Company and Edward J. Driscoll III. 10.14 (1) Employment Agreement dated as of November 14, 1996, by and between the Company and Allen Witters. 10.15 (1) Employment Agreement dated as of April 16, 1996, by and between the Company and James R. Clancy. -20- 10.16 (1) Employment Agreement dated as of May 10, 1995, as amended, by and between the Company and Mark Marlow. 10.17 (1) Agreement dated February 11, 1998 between the Company and WorldCom, Inc. modifying certain terms of the (i) 10% Convertible Subordinated Note, due September 30, 1999, (ii) 7% Subordinated Note, due December 31, 2003, and (iii) 100,000 shares of Series A Preferred Stock, all of which are held by MCI WorldCom, Inc. (incorporated herein by reference to exhibit No. 4.17 to the Company's Registration Statement on Form S-4 (File No. 333-53841) filed with the Securities and Exchange Commission on May 28, 1998) 10.18 (1) 1994 Stock Option Plan 10.19 (1) Amended and Restated 1994 Stock Option Plan 10.20 (1) 1998 Combined Stock Option Plan. 10.21 (1) Agreement dated June 5, 1997 between the Company and WorldCom, Inc. regarding data services provided by WorldCom, Inc. to the Company. 10.22 (3) Preferred Provider Agreement by and between the Company and Silicon Graphics, Inc., dated as of March 4, 1999 (portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed with the Securities Commission under separate cover). 10.23 (2) Sale and Purchase Agreement by and between Silicon Graphics, Inc., on behalf of itself and its wholly-owned subsidiary, Cray Research, L.L.C., and the Company dated as of March 4, 1999. 10.24 (2) Lease by and between the Company and Silicon Graphics, Inc. on behalf of itself and its wholly-owned subsidiary, Cray Research, L.L.C., with respect to the Company's corporate campus facility located in Eagan, Minnesota dated as of March 4, 1999. 10.25 (2) Employment Agreement dated January 1, 1998 by and between John R. Kauffman and the Company. 10.26 (2) Employment Agreement dated November 3, 1997 by and between David T. Ottinger and the Company. 10.27 (4) Loan and Security Agreement dated July 16, 1999, by and between Foothill Capital Corporation and the Company. 10.28 * Purchase and Sale Agreement and Escrow Instructions dated September 30, 1999, between the Company and CCPRE-Eagan, LLC. 10.29 * Amendment Number One to Purchase and Sale Agreement and escrow Instructions dated September 30, 1999, between the Company and CCPRE-Eagan, LLC. 10.30 * Net Lease dated September 30, 1999 between the Company and CCPRE-Eagan, LLC 27.1 * Financial Data Schedule. - ---------------- (1) Incorporated herein by reference to the Company's Registration Statement on Form S-4 (File No. 333-53841), filed with the SEC on May 28, 1998. (2) Incorporated herein by reference to the Company's Annual Report on Form 10-K, filed with the SEC on March 31, 1999. (3) Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q filed with the SEC on May 17, 1999. (4) Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q filed with the SEC on August 4, 1999. * Filed herein. -21- EX-10.28 2 PURCHASE & SALE AGREEMENT AND ESCROW INSTRUCTIONS Exhibit 10.28 ================================================================================ PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS BETWEEN WAM!NET INC. AND CCPRE-EAGAN, LLC ================================================================================ THIS PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (this "Agreement") --------- is dated as of September __, 1999, and entered into between WAM!NET INC., a Minnesota corporation ("Seller"), and CCPRE-EAGAN, LLC, a Delaware limited ------ liability company ("Purchaser"). --------- PRELIMINARY STATEMENT For and in consideration of the mutual promises and undertakings contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser hereby covenant and agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions. ----------- For the purpose of this Agreement, the following terms shall have the respective meanings indicated: "Additional Deposit" - as defined in Section 3.2(b). ------------------ -------------- "Building" - the office/data center building located on the Operating -------- Parcel, which building consists of approximately 480,724 net rentable square feet. "Casualty" - as defined in Section 13.1. -------- ------------ "Casualty Notice" - as defined in Section 13.1. --------------- ------------ "Casualty Termination Notice" - as defined in Section 13.1. --------------------------- ------------ "Closing" - as defined in Section 8.1. ------- ----------- "Closing Date" - as defined in Section 8.1. ------------ ----------- "Closing Statement" - the closing statement required under the ----------------- provisions of Article 9. --------- "Code" - as defined in Section 8.2(a)(xii). ---- ------------------- "Condemnation Notice" - as defined in Section 13.2. ------------------- ------------ "Construction Drawings" - all drawings in Seller's possession or --------------------- control used in preparing the Plans and Specifications. "Contracts" - the contracts entered into by Seller or, if in Seller's --------- possession, any predecessor in interest for the operation of the Property more particularly described in Schedule A-1 attached hereto. ------------ 1. "Deed" - as defined in Section 8.2(a)(i). ---- ----------------- "Development Agreements" - those agreements relating to the ---------------------- development of the Operating Parcel and the potential development of the Vacant Parcel into a 500,000 square foot (+/-) office/data center which agreements are listed in Exhibit I attached hereto. --------- "Due Diligence Approval Date" - the date on which Purchaser has --------------------------- approved all inspections, reports and other due diligence with respect to the Property which in no event shall be later than the end of the Inspection Period. "Encumbrances" - mortgages, security interests, pledges, claims, ------------ charges, judgments, easements, rights of way, squatter's rights, restrictions, encroachments, leases, occupancies, tenancies, covenants, conditions, options, preemptive purchase rights or any other encumbrances whatsoever. "Environmental Requirements" - collectively, the Resource Conservation -------------------------- and Recovery Act (also known as the Solid Waste Disposal Act), the Comprehensive Environmental Response, Compensation and Liability Act, the Superfund Amendments and Reauthorization Act, the Toxic Substances Control Act, the Hazardous Materials Transportation Uniform Safety Act, the Clean Air Act, the Clean Water Act, the Emergency Planning and Community Right-to-Know Act, the Hazard Communication Standard, 29 CFR 1910.1200 and other similar Legal Requirements, all as amended to date, and all orders, contractual obligations and common laws, in each case relating to particulate emissions, pollution, Hazardous Substance and effluent discharges, the protection of the environment or the health and safety of workers or the general public. "Environmental Survey" - Report dated August 25, 1999 by IVI -------------------- Environmental, Inc., IVI Project No. E9084530. "Escrow Agent" - Commonwealth Land Title Insurance Company, 255 Park ------------ Square Court, 400 Sibley Street, St. Paul, Minnesota 55101; however, prior to making the Initial Deposit, Purchaser shall have the option of using New York Land Services ("NYLS") as the Escrow Agent if Purchaser provides to Seller an agreement acceptable to Seller in Seller's reasonable discretion from Commonwealth Land Title Insurance Company guaranteeing NYLS' performance and obligations as Escrow Agent. The address of NYLS is as follows: 630 Third Avenue - 5th Floor New York, NY 10017 Phone: (212) 490-2277 Fax: (212) 490 8012 "Excluded Contracts" - those contracts listed on Schedule A-2 attached ------------------ ------------ hereto. "Excluded Permits" - the non-transferable Permits in connection with ---------------- the operation of the Property, all as listed on Schedule B attached hereto. ---------- 2. "Financial Statements" - the following financial information: (a) -------------------- monthly operating statements for the current calendar year and statements of income and expense for the calendar years 1997 and 1998 prepared by Seller and (b) a copy of the budget for the Property for the current fiscal year. "Governmental Approvals" - as defined in Article 11(d). ---------------------- ------------- "Governmental Authority" - any court or Federal, State, municipal or ---------------------- other governmental authority, department, commission, board, agency or instrumentality, or any employee or agent thereof (whether legislative, executive or judicial). "Hazardous Substances" - as defined in Section 5.1(p). -------------------- "Improvements" - the buildings, structures (surface and subsurface) ------------ and other improvements, including, without limitation, such fixtures as shall constitute real property, located on the Land. "Initial Deposit" - as defined in Section 3.2(a). --------------- -------------- "Inspection Period" - as defined in Article 4. ----------------- --------- "Land" - collectively, the Operating Parcel and the Vacant Parcel. ---- "Legal Requirements" - as defined in Section 5.1(m). ------------------ -------------- "Master Lease" - the lease relating to the Real Property to be entered ------------ into between Purchaser, as landlord, and Seller, as tenant, which lease shall contain the terms and provisions set forth on Exhibit G attached hereto and such --------- other terms and provisions as are mutually agreed to by Purchaser and Seller. "New Title Objections" - as defined in Section 7.1(b). -------------------- -------------- "Notices" - as defined in Article 15. ------- ---------- "Operating Parcel" - that estate, tract or parcel of land being more ---------------- particularly described on Exhibit A-1 attached hereto and incorporated herein by ----------- reference and appurtenant easements thereto, together with all of Seller's right, title and interest in and to all easements, rights of way, strips and gores of land, tenements, hereditaments and appurtenances, reversions, remainders, privileges, licenses and other rights and benefits belonging to, running with or in any way relating thereto, and together with all right, title and interest of Seller in and to any land lying in the bed of any street, road or highway, open or proposed, in front of, abutting or adjoining the Operating Parcel. "Permits" - all licenses, franchises and permits held by Seller and ------- used in or relating to the ownership, occupancy or operation of any part of the Property including, but not limited to, parking. 3. "Permitted Encumbrances" - as defined in Section 5.1(f). ---------------------- -------------- "Personal Property" - the tangible personal property of Seller located ----------------- on and used in connection with the management of the Land and/or the Improvements, including, but not limited to, the property listed on Schedule C ---------- attached hereto, but excluding, without limitation, the computer equipment and other equipment and other personal property used in the operation of the business of Seller and/or any other occupant of the Property or any part thereof. "Plans and Specifications" - all of the "as built" plans and ------------------------ specifications utilized in the construction of the Improvements (including driveways, walkways, landscaping and mechanical and electrical systems) in Seller's possession or control. "Property" - the following property: -------- (a) the Land; (b) the Improvements; (c) the Personal Property; (d) all right title and interest of Seller to all indemnifications from Cray Research, LLC, a Delaware limited liability company and Silicon Graphics, Inc., a Delaware corporation, under its Sale and Purchase Agreement dated March 3, 1999 (the "SGI Purchase Agreement"), regarding the Real Property (among other things), if and to the extent such indemnifications are assignable; (e) all right, title and interest of Seller (to the extent assignable) under the Contracts, Warranties and Permits; and (f) the Records and Plans. "Purchase Price" - as defined in Section 3.1. -------------- ----------- "Records and Plans" - all non-proprietary books, records and documents ----------------- maintained by Seller, or compiled by or at the request of Seller, and in the possession or control of Seller specifically relating to the development, management, occupancy, maintenance or leasing of the Property, including, without limitation, (i) the Financial Statements, (ii) the Construction Drawings, (iii) the Plans and Specifications and (iv) the Development Agreements. For purposes hereof, "non-proprietary" shall be deemed to mean books, records and documents that do not relate to the internal operation or management of Seller, as distinguished from the Property. "Real Property" - the Land and the Improvements. ------------- "Security Deposit" as defined in Section 5.1(g). ---------------- -------------- 4. "SGI Lease" - the lease dated as of March 4, 1999, between Seller, as --------- landlord, and Silicon Graphics, Inc., as tenant, relating to the Operating Parcel. "Survey"- the survey dated as of February 19, 1999 and revised as of ------ March 2, 1999 and July 9, 1999, prepared by BRW. "Tenant" - Silicon Graphics, Inc. ------ "Title Commitment" - as defined in Section 7.1(a). ---------------- -------------- "Title Company" - the title company selected by Purchaser to issue the ------------- Title Commitment. "Title Endorsements" - those endorsements set forth in Exhibit J ------------------ --------- attached hereto to be issued by the Title Company. "Title Objections" - as defined in Section 7.1(a). ---------------- -------------- "Vacant Parcel" - that estate, tract or parcel of land being more ------------- particularly described on Exhibit A-2 attached hereto and incorporated herein by ----------- reference and appurtenant easements thereto, together with all of Seller's right, title and interest in and to all easements, rights of way, strips and gores of land, tenements, hereditaments and appurtenances, water and mineral rights, reversions, remainders, privileges, licenses and other rights and benefits belonging to, running with or in any way relating thereto, and together with all right, title and interest of Seller in and to any land lying in the bed of any street, road or highway, open or proposed, in front of, abutting or adjoining the Land. "Violations" - as defined in Section 7.2(a). ---------- -------------- "Warranties" - the warranties for the benefit of Seller described in ---------- Schedule D attached hereto. - ---------- "Warrant Agreement" - the agreement pursuant to which Seller shall ----------------- issue 325,000 warrants in Seller to Purchaser, which agreement shall contain the terms and provisions set forth on Exhibit H attached hereto and such other terms --------- and provisions as are agreed to by Seller and Purchaser. "Warrants" - the warrants issued to Seller pursuant to the Warrant -------- Agreement. 1.2 References. ---------- Except as otherwise specifically indicated, all references to Article and Section numbers refer to Articles and Sections of this Agreement, and all references to Schedules and Exhibits refer to the Schedules and Exhibits attached hereto. The words "herein," "hereof," "hereunder," "hereinafter," and words of similar import refer to this Agreement as a whole and not to any particular Article or Section hereof. Captions used herein are for convenience only and shall not be used to construe the meaning of any part of this Agreement. 5. ARTICLE II SALE AND PURCHASE 2.1 Sale and Purchase. ----------------- Purchaser shall purchase the Property from Seller, and Seller shall sell, convey, transfer and assign the Property to Purchaser, subject to and in accordance with the terms and conditions of this Agreement. 2.2 Liabilities Not Being Assumed. ----------------------------- EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, PURCHASER IS NOT ASSUMING ANY LIABILITIES OR OBLIGATIONS (FIXED OR CONTINGENT, KNOWN OR UNKNOWN, MATURED OR UNMATURED) OF SELLER WHETHER OR NOT ARISING OUT OF OR RELATING TO THE PROPERTY OR ANY OTHER BUSINESS OF SELLER, ALL OF WHICH LIABILITIES AND OBLIGATIONS SHALL AT AND AFTER THE CLOSING REMAIN THE EXCLUSIVE RESPONSIBILITY OF SELLER. ARTICLE III PURCHASE PRICE AND DOWN PAYMENTS 3.1 Purchase Price. -------------- The purchase price for the Property shall be an amount equal to Thirty- Eight Million and 00/100 Dollars ($38,000,000.00) (the "Purchase Price") to be -------------- allocated among the following categories of Property: (a) the Land; (b) the Improvements; and (c) the Personal Property. The allocations shall be agreed upon between Seller and Purchaser on or before the Closing. The balance of the Purchase Price (other than the Initial and Additional Deposits) shall be payable at the Closing. 3.2 Downpayments. ------------ (a) Within three days after the execution of this Agreement, Purchaser shall deposit with the Escrow Agent an amount equal to Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) (the "Initial Deposit") as a --------------- downpayment against the Purchase Price and to secure the performance of Purchaser's obligations under this Agreement, which funds shall be held and invested by the Escrow Agent pursuant to the terms of this Agreement. Upon receipt of the Initial Deposit, the Escrow Agent shall immediately invest the Initial Deposit in a money 6. market account or a certificate of deposit, so long as such funds are deposited in a federally insured lending institution; provided, however, that the Escrow -------- ------- Agent shall invest the Initial Deposit only in such manner as will allow the Escrow Agent to regain control of the Initial Deposit within three (3) days after notice and demand. Prior to the termination of this Agreement, all interest accruing on the Initial Deposit will belong to the party entitled to the Initial Deposit. At the Closing, the Initial Deposit and any interest thereon shall be credited to the Purchase Price. (b) Within one (1) day after the Due Diligence Approval Date, Purchaser shall deposit an additional amount equal to One Million and 00/100 Dollars ($1,000,000.00) (the "Additional Deposit") with the Escrow Agent as an ------------------ additional downpayment against the Purchase Price and to further secure the performance of the Purchaser's obligations under this Agreement, which funds shall be held and invested by the Escrow Agent in accordance with the provisions of Section 3.2(a) above and interest accruing thereon shall belong to the party -------------- entitled to interest on the Initial Deposit. At the Closing, the Additional Deposit and any interest thereon shall be credited to the Purchase Price. (c) EXCEPT AS SET FORTH IN SECTION 3.2(d), BELOW, IF THIS AGREEMENT IS TERMINATED OR IF THE TRANSACTION CONTEMPLATED HEREBY DOES NOT CLOSE FOR ANY REASON OTHER THAN (a) SELLER'S WILLFUL DEFAULT OF A MATERIAL PROVISION HEREOF OR (b) A TERMINATION OF THIS AGREEMENT BY PURCHASER UNDER SECTION 7.4 OR UNDER ----------- ARTICLE 4 OR 13, THEN THE PARTIES AGREE THAT SELLER SHALL RETAIN THE AGGREGATE - --------- -- AMOUNT OF THE INITIAL DEPOSIT AND THE ADDITIONAL DEPOSIT (IF MADE) AND ANY INTEREST THEREON. SUCH AMOUNT IS TO BE RETAINED AS LIQUIDATED DAMAGES AND NOT AS A PENALTY, WHICH AMOUNT THE PARTIES AGREE IS A REASONABLE SUM CONSIDERING ALL OF THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE RELATIONSHIP OF THE SUM TO THE RANGE OF HARM TO SELLER THAT REASONABLY COULD BE ANTICIPATED, SELLER'S ANTICIPATED USE OF THE PROCEEDS OF SALE, AND THE FACT THAT IT WOULD BE EXTREMELY DIFFICULT AND IMPRACTICABLE TO FIX ACTUAL DAMAGES. SELLER'S SOLE REMEDY SHALL BE THE RETENTION OF THE INITIAL DEPOSIT AND THE ADDITIONAL DEPOSIT (IF MADE). (d) If Purchaser terminates this Agreement by not later than the Due Diligence Approval Date, then the Initial Deposit and any interest thereon shall be returned to Purchaser. ARTICLE IV INSPECTION BY PURCHASER (a) Commencing on the date of this Agreement, Purchaser shall have until August 29, 1999 (the "Inspection Period"), to physically inspect, and to ----------------- cause one or more inspectors, appraisers, engineers, lenders, employees or other contractors of Purchaser to physically inspect, the Real Property, which inspection shall be conducted without unreasonably 7. interfering with the management, operation, use or maintenance of any portion of the Property by Seller and its respective tenants, agents, contractors and employees. Purchaser shall make such inspections in good faith and with due diligence. All inspection fees, appraisal fees, engineering fees and other costs and expenses of any kind incurred by Purchaser relating to such inspections of the Real Property shall be the sole responsibility of Purchaser subject to the provisions of Section 17.26 hereof. Seller shall cooperate in all reasonable respects in permitting Purchaser to make and conduct such inspections and Seller shall have the right to have a representative present at the time of each such inspection. Purchaser shall notify the Seller (which notice may be telephonic) not less than two (2) business days in advance of scheduling any inspection of the Real Property. In making any inspection hereunder, Purchaser will treat, and Purchaser will cause its inspectors, appraisers, engineers, employees and contractors to treat, all information obtained by Purchaser or them pursuant to or as a result of any inspection of the Real Property made hereunder as strictly confidential and proprietary. Information provided or obtained from Seller shall continue to be deemed owned by Seller. Seller and Purchaser agree that, in the event of any alteration of the Real Property or portion thereof by Purchaser or any one or more of its inspectors, engineers, employees or contractors, Purchaser shall immediately restore any such Real Property to substantially the same condition as the same existed immediately prior to Purchaser's entry thereon. Purchaser agrees to indemnify, defend (with counsel acceptable to Seller), and hold Seller and its respective tenants, agents, contractors and employees harmless from and against any and all liens, claims, liabilities or damages (including, but not limited to, reasonable attorneys' fees) sustained by them which result from or arise out of any inspections of the Real Property made or conducted by Purchaser or its inspectors, appraisers, engineers, employees or contractors. Such indemnity and hold harmless agreement shall survive the Closing or any termination of this Agreement and shall not be merged therein. In the event Purchaser, in its sole and absolute discretion, decides not to proceed with the transaction contemplated by this Agreement, Purchaser may elect to terminate this Agreement by delivering written notice thereof to Seller no later than 5:00 p.m., Eastern Daylight Time, on or before August 29, 1999, whereupon, except as otherwise provided in this Article 4, the parties shall have no --------- further liabilities, rights or obligations under this Agreement, except as expressly provided in this Agreement, and the Initial Deposit and the Additional Deposit, together with interest thereon, shall be returned to Purchaser within three (3) business days after Seller's receipt of Purchaser's termination notice. (b) Seller agrees to make available to Purchaser and Purchaser's representatives, agents and designees, at any time during normal business hours, after reasonable notice from Purchaser, all books, records and files relating to the operation of the Property, including, but not limited to, all Books and Records, Contracts, Development Agreements, the SGI Lease and the Permits. Seller shall make available to Purchaser, and Purchaser shall be entitled to communicate directly with, any consultant or other persons engaged by Seller in connection with the operation of the Property. (c) At the Closing, Purchaser shall promptly provide to Seller true and complete copies of all surveys, plans, reports, assessments, investigations, inspections, tests, examinations and other due diligence materials obtained or prepared by, for or on behalf of Purchaser in connection with any part of the Property or this transaction ("Purchaser's Reports"). 8. ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER 5.1 Seller's Representations and Warranties. --------------------------------------- Seller hereby represents and warrants as follows: (a) Seller is a corporation, duly organized, validly existing and in good standing under the laws of the State of Minnesota. Seller has all requisite power and authority to own and operate the Property in the manner it is currently being operated. (b) Seller has all requisite power and authority to execute and deliver this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been, and the documents contemplated to be executed in connection herewith will be, duly and validly authorized by all necessary action on the part of Seller. This Agreement has been, and the documents contemplated to be executed in connection herewith will be, duly and validly executed and delivered by Seller and constitute, and when so executed and delivered will constitute, the legal, valid and binding obligation of Seller, enforceable in accordance with their terms, subject to the effect of bankruptcy, insolvency and similar laws affecting the rights of contracting parties generally. No action by any Governmental Authority is necessary to make this Agreement a valid instrument binding upon Seller in accordance with its terms. (c) The execution, delivery and performance of this Agreement and the other documents contemplated to be executed in connection herewith, the consummation of the transactions contemplated hereby and thereby and the compliance with the provisions hereof and thereof by Seller do not and will not: (i) conflict with or violate any provisions of the organizational documents of Seller; (ii) subject to obtaining the consents set forth on Schedule 5.1(d), --------------- result in the material breach of the terms of, constitute a material default under, materially conflict with, result in, or constitute grounds for, the termination or alteration of, or result in the acceleration of the performance required by the terms of, any Contract, Development Agreement, Permit or other instrument to which Seller is a party or by which Seller or its properties (including the Property) is bound or affected, or result in the creation of any Encumbrance, other than a Permitted Encumbrance, upon the Property; or (iii) violate, result in the breach of, or conflict with, any Legal Requirements applicable to Seller or the Property. (d) Except as set forth on Schedule 5.1(d), no material consent, --------------- waiver, authorization or approval from, or filing of any notice or report with, any Governmental Authority or other person or entity is necessary in connection with the execution, delivery or performance by Seller of this Agreement or the documents or transactions contemplated hereby. (e) Seller is not a "foreign person" within the meaning of Section 1445 of the Internal Revenue Code of 1986 (the "IRC"). The sale transaction --- herein contemplated is not subject to Section 897 of the IRC or to the withholding requirements of Section 1445 of the IRC. 9. (f) Seller has (x) good and marketable fee title to the Real Property, free and clear of all Encumbrances, other than those items listed on Schedule -------- 5.1(f) attached hereto (collectively, the "Permitted Encumbrances"), (y) - ------ ---------------------- unencumbered ownership of the Personal Property, free and clear of all Encumbrances other than the Permitted Encumbrances and (z) the unconditional right to sell the Property to the Purchaser. (g) There are no occupancy leases, lettings, license agreements or tenancies affecting the Real Property or any portion thereof except for (i) the SGI Lease and (ii) an oral agreement with the Minnesota High Tech Association, terminable at will, to occupy less than 1,000 square feet of office space in the building on the Real Property known as Building E, and there are no other written or oral promises, understandings, agreements or commitments between Seller or, to the best of Seller's knowledge, any predecessor of Seller and any tenant or other person or entity permitting the use or occupancy of the Real Property or any portion thereof. Except as set forth in the SGI Lease, Tenant has not received or is entitled to receive any abatement of rent, offset, free- rent, bonus or other incentive. Seller is not holding a security deposit (the "Security Deposit") as of the date of this Agreement. The SGI Lease is in full force and effect, and neither the Seller nor, to Seller's knowledge, Tenant is in default thereunder, and there are no outstanding written notices asserting any such default. To Seller's knowledge, there do not exist any outstanding or unsatisfied obligations for Seller to perform any tenant improvement work or other landlord work or to provide any other benefits, concessions or other incentives to Tenant. There have been no prepayments of rent more than one month in advance, and, except as set forth in the SGI Lease, there are no sums to be credited to Tenant by reason of any alterations, rental allowances, reductions in rent or for any free or reduced rental periods. There are no brokers or agents entitled to receive any of the rents payable under the SGI Lease or any commission, finder's fee or other fee or payment on account of the SGI Lease, or any modification, extension, renewal or expansion thereof. Seller has the full right to collaterally assign the SGI Lease to Purchaser at Closing. (h) Seller has not received notice from any insurance company, bonding company, tenant, governmental authority or other Person, of any defects or inadequacies in the Real Property, or any part thereof, which would adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond. (i) Seller has no knowledge of pending or proposed condemnation proceedings affecting the Real Property or any portion thereof. (j) The Real Property is comprised of one (1) or more parcels, each of which constitutes a separate tax lot and does not constitute a portion of any other tax lot not part of the Real Property. (k) To Seller's knowledge, there are no pending or proposed special or other assessments for public improvements or otherwise affecting the Real Property, and to Seller's knowledge there are no contemplated public improvements to the Real Property that may result in such special or other assessments. 10. (l) Seller has not commenced any proceedings which are pending for the reduction of the assessed valuation of the Real Property or any portion thereof. The Real Property is not subject to any real estate tax abatement or real estate tax exemption. (m) Seller has not received any notice which has not been cured that any Governmental Authority considers the construction or completion of the Real Property or the operation or use of the same to have violated any laws, ordinances, rules, regulations or orders (including, without limitation, those relating to zoning, building, fire, health and safety and environmental control and protection) of any Governmental Authority, bearing on the construction, operation or use of the Real Property or any part thereof by Seller in effect prior to the date of Closing (collectively, the "Legal Requirements"), or that ------------------ an investigation has been commenced or is contemplated respecting any such possible violation. (n) Except as set forth on Schedule 5.1(n), Seller has no knowledge, --------------- nor has Seller received any notice of any litigation, claim, action or proceeding, actual or threatened, by any organization, person, individual or Governmental Agency which would materially and adversely affect the use, occupancy or value of the Property or any part thereof or which otherwise relates to the Property. (o) Seller has not (i) made a general assignment for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by its creditors; (iii) suffered the appointment of a receiver to take possession of all or substantially all of its assets; (iv) suffered the attachment or other judicial seizure of all, or substantially all, of its assets; (v) admitted in writing its inability to pay its debts as they come due; or (vi) made an offer of settlement, extension or composition to its creditors generally. (p) To Seller's knowledge, except as otherwise set forth, referred to or disclosed in the Environmental Survey and/or on Schedule 5.1(p): (1) no --------------- toxic or hazardous substances or wastes, pollutants, or contaminants (including, without limitation, asbestos, urea formaldehyde, the group of organic compounds known as polychlorinated biphenyls, petroleum products including gasoline, fuel oil, crude oil, and various constituents of such products, and any hazardous substance (collectively "Hazardous Substances") as defined in any Environmental Requirements have been generated, treated, stored, released, or disposed of, or otherwise placed, deposited in, or located on the Real Property by Seller, or any party controlling, under common control of, or controlled by, Seller in violation of Environmental Requirements; (2) no activity has been undertaken on the Real Property by Seller, or any party controlling, under common control of, or controlled by, Seller; that would cause or contribute to (a) the Property becoming a treatment, storage, or disposal facility within the meaning of the Environmental Requirements, (b) a release or threatened release of toxic or hazardous wastes or substances, pollutants, or contaminants, from the Real Property within the Environmental Requirements, or (c) the discharge of pollutants or effluents into any water source or system, the dredging or filling of any waters, or the discharge into the air of any emissions that would require a permit under any Environmental Requirements; (3) no substances or conditions exist in or on the Real Property that may support a claim or cause of action under any Environmental Requirements; (4) no above-ground or underground tanks are located in or about the Real Property or have been located under, in, or about the Real Property and have subsequently been removed or filled; and 11. (5) to the extent storage tanks exist on or under the Real Property, such storage tanks have been duly registered with all appropriate regulatory and governmental bodies and otherwise are in compliance with applicable Environmental Requirements. (q) To Seller's knowledge, true, complete and correct copies of all instruments (including all amendments) set forth or described in the Schedules and Exhibits to this Agreement have been delivered or made available to Purchaser; however, to the extent such instruments were provided to Seller by SGI or any other third party, the foregoing representation by Seller regarding the copies being true, complete and correct is limited to the best of Seller's knowledge. With respect to such instruments, to Seller's knowledge: (i) Seller has substantially complied with all material provisions of such instruments and, to the best of Seller's knowledge, no party thereto is in material default under them; (ii) to the best of Seller's knowledge, all such instruments are in full force and effect and Seller does not know of any condition that exists or event that has occurred which constitutes, or which, with the passage of time or the giving of notice, or both, would constitute, a material default thereunder or would excuse performance by any party thereto; and (iii) Seller is not in default in the payment of the monetary obligations of Seller under such instruments. (r) Except for this Agreement, the SGI Lease, and applicable Permitted Encumbrances, Seller has not entered into any other agreement, commitment, option, right of first refusal or any other agreement, whether oral or written, with respect to the purchase, assignment or transfer of all or any portion of the Property which is currently in effect. (s) Seller has not granted to any person any right or option to acquire all or any portion of the Property or any life estate in or with respect to any part of the Property, and Seller has no knowledge that any person holds or have been granted any right or option to acquire all or any portion of the Property or any interest therein. (t) To Seller's knowledge, no default or breach exists under any of the covenants, conditions, restrictions, rights of way or easements, if any, affecting all or any portion of the Property which are to be performed or complied with by the owner of the Property. (u) To Seller's knowledge, all Contracts of the Seller are in full force and effect. To Seller's knowledge, there are no Contracts necessary for the operation of the Property other than those set forth in Schedule A-1 hereto. ------------ (v) To Seller's knowledge, there are no unrecorded contracts, leases, private restrictions or agreements with any public authority that do not appear in the Title Commitment and that will adversely affect the present or future uses that may be made of the Real Property. (w) To Seller's knowledge, except as otherwise set forth, referred to or disclosed in the SGI Purchase Agreement, there are no existing violations of Title III of the American With Disabilities Act of 1990 (the "ADA") and the ADA Accessibility Guidelines for Buildings and Facilities (the "Guidelines") at the Real Property. (x) Attached hereto as Exhibit K is a copy of Financial Statements. --------- 12. (y) To Seller's knowledge, (i) there are no wells on the Real Property and (ii) sewage generated at the Real Property goes to a facility permitted by the Minnesota Pollution Control Agency. Seller does not know whether there is an abandoned individual sewage treatment system on the Real Property. As used in this Agreement, "to Seller's knowledge," "to the best of Seller's knowledge," and similar statements shall mean only the actual, knowledge and of Mark Marlow, in his capacity as Director of Finance of Seller, without inquiry or investigation. 5.2 Survival. -------- The foregoing representations and warranties shall survive the Closing until February 15, 2000. If written notice of a claim has been given prior the expiration of the applicable representations and warranties, then (i) the relevant representations and warranties shall survive as to such claim until the claim has been finally resolved, and (ii) Seller shall indemnify Purchaser, its successors and assigns against, and hold Purchaser harmless from, any expenses or damages, including reasonable attorneys' fees, incurred by Purchaser and caused by the breach of any of the above representations and warranties. In no event, however, shall Seller have any liability to Purchaser for incidental, consequential, special or punitive damages arising from the breach of any such representations and warranties. Notwithstanding the foregoing, in the event of a breach of the representation and warranty made in Section 5.1(f), Purchaser's rights and remedies shall be limited to the rights and remedies provided in Article 7 of this Agreement, except to the extent such breach relates to actual fee ownership of the Property. 5.3 As Is. ----- except as otherwise expressly set forth in this Agreement and in the other documents and instruments executed in connection herewith, and unless this Agreement is terminated pursuant to the terms and provisions hereof, purchaser shall take title to the Property "as is" and "with all faults" in its present physical condition, subject to reasonable use and normal depreciation between the date hereof and the Closing Date. purchaser agrees that it has obtained or shall obtain, at Purchaser's sole cost and expense, all such Purchaser's Reports it desires or otherwise deems appropriate regarding the Property. Except as explicitly set forth in this Agreement, such sale shall be without representation or warranty of any kind, express or implied, and Seller, for Seller, Seller's agents, attorneys, representatives, successors and assigns, hereby disclaims and renounces any other representation or warranty. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER 6.1 Purchaser's Representations and Warranties. ------------------------------------------ Purchaser hereby represents and warrants as follows: 13. (a) Purchaser is a limited liability company, duly organized, validly existing under the laws of the State of Delaware and in good standing. Purchaser has full power and authority to enter into this Agreement and to do all other acts required hereunder. (b) Purchaser has all requisite power and authority to execute and deliver this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been, and the documents contemplated hereby will be, duly executed and delivered by Purchaser and constitute, and when so executed and delivered will constitute, the legal, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their terms, subject to the effect of bankruptcy, insolvency and similar laws affecting the rights of contracting parties generally. This Agreement has been, and the documents contemplated to be executed in connection herewith will be, duly and validly authorized by all necessary action on the part of Purchaser. No action by any Governmental Authority is necessary to make this Agreement a valid instrument binding upon Purchaser in accordance with its terms. (c) No consent, approval, order or authorization of any governmental authority on the part of Purchaser is required in connection with the execution and delivery of this Agreement and closing and consummation of the transaction herein contemplated. (d) The execution, delivery and performance of this Agreement and the other documents contemplated to be executed in connection herewith, the consummation of the transactions contemplated hereby and thereby and the compliance with the provisions hereof and thereof by Purchaser do not and will not: (i) conflict with or violate any provisions of the organizational documents of Purchaser; (ii) result in the material breach of the terms of, constitute a material default under, materially conflict with, result in, or constitute grounds for, the termination or alteration of, or result in the acceleration of the performance required by the terms of, any agreement or other instrument to which Purchaser is a party or by which Purchaser or its properties is bound or affected; or (iii) violate, result in the breach of, or conflict with, any Legal Requirements applicable to Purchaser. 6.2 Survival. -------- THE FOREGOING REPRESENTATIONS AND WARRANTIES SHALL SURVIVE THE CLOSING UNTIL THE FIRST ANNIVERSARY THEREOF. IF WRITTEN NOTICE OF A CLAIM HAS BEEN GIVEN PRIOR TO THE EXPIRATION OF THE APPLICABLE REPRESENTATIONS AND WARRANTIES, THEN (I) THE RELEVANT REPRESENTATIONS AND WARRANTIES SHALL SURVIVE AS TO SUCH CLAIM UNTIL THE CLAIM HAS BEEN FINALLY RESOLVED, AND (II) PURCHASER SHALL INDEMNIFY SELLER, ITS SUCCESSORS AND ASSIGNS AGAINST, AND HOLD SELLER HARMLESS FROM, ANY EXPENSES OR DAMAGES, INCLUDING REASONABLE ATTORNEYS' FEES, INCURRED BY SELLER AND CAUSED BY THE BREACH OF ANY OF THE ABOVE REPRESENTATIONS AND WARRANTIES. IN NO EVENT, HOWEVER, SHALL PURCHASER HAVE ANY LIABILITY TO SELLER FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES 14. ARISING FROM THE BREACH OF ANY SUCH REPRESENTATIONS AND WARRANTIES. ARTICLE VII TITLE AND SURVEY MATTERS 7.1 Objections to Title. ------------------- (a) Purchaser shall, within ten (10) days after the date hereof, order a commitment for title insurance with respect to the Real Property (the "Title ----- Commitment"). No later than the end of the Inspection Period, Purchaser shall - ---------- notify Seller as to any defect in marketability of title which appears in the Title Commitment (or any update thereof) received by Purchaser and which is not a Permitted Encumbrance (collectively, the "Title Objections"). The failure of ---------------- Purchaser to notify Seller of any Title Objections prior to the expiration of the Inspection Period shall be deemed approval by Purchaser of all matters set forth in the Title Commitment. Likewise, to the extent Purchaser does properly notify Seller of any Title Objections, all matters set forth in the Title Commitment that are not included as Title Objections shall be deemed approved by Purchaser. (b) If, after the expiration of the Inspection Period but prior to the Closing Date, additional title exceptions arise which were not set forth in the Title Commitment, Purchaser shall notify Seller, within five (5) days after its notification thereof or by the Closing Date (whichever is sooner), of any objections that Purchaser may have to such additional exceptions (the "New Title --------- Objections"). The failure of Purchaser to so notify Seller of any such New - ---------- Title Objections shall be deemed approval by Purchaser of all matters set forth on the Title Commitment other than the Title Objections. All of the matters set forth in the Title Commitment approved, waived by Purchaser or deemed approved by Purchaser shall also be included as "Permitted Encumbrances" for all purposes ---------------------- under this Agreement. (c) Seller shall, at Seller's sole cost and expense, at or prior to the Closing, cause the removal of any liens securing the payment of money resulting from the actions or inactions of Seller (except that any liens for non delinquent taxes or non delinquent assessments may remain of record, provided that Seller pay to Purchaser at the Closing, Seller's pro rata share of any such taxes and assessments). Subject to the provisions of Section 7.4, Seller shall ----------- use commercially reasonable efforts to cause the removal of any other Title Objections or New Title Objections. Seller shall be entitled to a reasonable adjournment of the Closing Date, but not more than thirty (30) days, in order to cure any Title Objections or New Title Objections. (d) At the Closing, Seller shall cooperate with any reasonable requests by Purchaser to deliver to the Title Company a customary seller's affidavit regarding leases, mechanics liens, and other matters of title affecting the Real Property in order for the Title Company to issue its title policy. 15. 7.2 Violations. ---------- (a) As used in this Agreement, "Violations" shall mean any violations ---------- of any Legal Requirement noted or issued with respect to the Real Property by any Governmental Agency having jurisdiction over or affecting the Real Property. (b) No later than the end of the Inspection Period, Purchaser shall notify Seller of any outstanding Violations noted or issued in the Title Commitments. If, after the expiration of the Inspection Period but prior to the Closing Date, additional violations arise which were not set forth in the Title Commitment, Purchaser shall notify Seller, within five (5) days after its notification thereof or by the Closing Date (whichever is sooner), of any new violations (the "New Violations"). The failure of Purchaser to so notify Seller -------------- of any such New Violations shall be deemed approval by Purchaser of such Violations. Subject to the provisions of Section 7.4, Seller shall use ----------- commercially reasonable efforts to cause the Violations and New Violations to be removed prior to Closing; provided that if such removal has not been completed -------- ---- prior to the Closing, Purchaser shall have the option to either (i) terminate this Agreement prior to the Closing Date by written notice to Seller to that effect, or (ii) waive the Violations and New Violations and proceed to close pursuant to the terms hereof, in which case such Violations and New Violations shall be deemed approved by Purchaser for all purposes, including but without limitation, under this Agreement and under the Master Lease. (c) Seller, upon written request from Purchaser, shall furnish to Purchaser authorization to make any necessary searches for purposes of determining whether notes or notices of Violations or New Violations have been noted or issued with respect to the Real Property. 7.3 Survey. ------ Seller has delivered to Purchaser a true, complete and correct copy of the Survey. At the Closing, Seller shall deliver to Purchaser and/or the Title Company, an affidavit with respect to any changes at the Real Property since the date of the Survey. 7.4 Curing Objections to Title and Violations. ----------------------------------------- (a) Notwithstanding the provisions of Sections 7.1(c) and 7.2(b), if --------------- ------ the cost to remove or correct any Title Objections or New Title Objections (other than Title Objections or New Title Objections relating to liens securing the payment of money resulting from the actions or inactions of Seller) or to comply with any Violations and New Violations, as determined by Seller shall exceed $25,000.00 (not including any sums required to remove any voluntarily granted liens securing the payment of money), Seller shall have the right to cancel this Agreement, in which event Seller shall so notify Purchaser and Purchaser may elect by notice to Seller (given on the earlier of the Closing Date or five (5) days from receipt of notice from Seller) (i) not to accept such title as Seller is able to convey, whereupon this Agreement shall terminate, the Initial Deposit and the Additional Deposit (if made) shall be returned to Purchaser and neither party shall have any further rights or obligations hereunder or (ii) to accept such title as Seller is able to convey and to accept the Property subject to all Violations and New 16. Violations, with no adjustment to the Purchase Price. If Purchaser fails to make the election provided for in the preceding sentence, then Purchaser shall be deemed to have elected to proceed to close the transactions contemplated hereunder. (b) Seller, in lieu of satisfying any Encumbrances affecting the Property, may deposit with the Title Company such amount of money, or deliver to the Title Company such instruments of indemnification, as may be sufficient to induce it to insure against collection of such liens or encumbrances, including interest and penalties, out of the Real Property, in which event such liens and encumbrances shall not constitute objections to title. ARTICLE VIII THE CLOSING 8.1 Closing. ------- Subject to extensions authorized by both Seller and Purchaser in writing, and subject to the satisfaction or waiver of the conditions set forth in Article ------- 10 hereof, the closing of the transactions contemplated hereunder (the - -- "Closing") shall take place on or before September 3, 1999, or on such earlier ------- date as the parties shall mutually approve (the "Closing Date"), at the offices ------------ of Larkin, Hoffman, Daly & Lindgren, Ltd., 1500 Norwest Financial Center, 7900 Xerxes Avenue South, Bloomington, Minnesota 55431, or the offices of Purchaser's lender or its counsel. 8.2 Deliveries at Closing. --------------------- (a) At the Closing, Seller shall deliver, or cause to be delivered, to Purchaser the following: (i) a fully executed and acknowledged limited warranty deed (the "Deed") with covenants against grantor's acts with respect to the Real ---- Property in the form attached hereto as Exhibit B; --------- (ii) a fully executed bill of sale in the form attached hereto as Exhibit C transferring to Purchaser the Personal Property; --------- (iii) a fully executed assignment and assumption agreement in the form attached hereto as Exhibit D conveying and transferring to --------- Purchaser all of Seller's right, title and interest in, to and under the Contracts, the Development Agreements, the Permits and the Warranties (other than Excluded Contracts and Excluded Permits); (iv) intentionally omitted. (v) a fully executed estoppel certificate from Tenant substantially in the form attached hereto as Exhibit F; --------- 17. (vi) fully executed counterparts of any and all required transfer tax forms; (vii) the originals of any of the following that are (aa) not public record and (bb) in Seller's possession: all Permits, the Development Agreements, and governmental approvals, if any, including, without limitation, the building permit and the final certificates of occupancy for the Improvements, issued by the appropriate governmental authority. If delivery of an original is impossible because such original is required to be posted at the Property or held by Governmental Authorities, delivery of an exact duplicate shall be permitted, or Seller may furnish to Purchaser other evidence reasonably satisfactory to Purchaser that such permits have been obtained and are in full force and effect; (viii) the Records and Plans and all surveys and maps relating to the Property, if in the possession of Seller; (ix) Intentionally omitted. (x) the originals of all Contracts and Warranties then in effect; (xi) Intentionally omitted. (xii) an affidavit certifying that Seller is not a "foreign person" within the meaning of the Internal Revenue Code of 1986, as amended (the "Code"), that the transaction contemplated hereby does not constitute ---- a disposition of a United States real property interest by a foreign person, and that, at the Closing, Seller will not be subject to the withholding requirements of Section 1445 of the Code; (xiii) a certificate of Seller confirming that the representations and warranties made by Seller herein are true and correct in all material respects as of the Closing Date; (xiv) a customary owner's affidavit of title certifying as to those matters as will typically enable the Title Company to issue to Purchaser an extended coverage title insurance policy and to enable the Title Company to issue a pro forma policy of title insurance or binding marked-up commitment with an effective date as of the recording of the Deed, and such other affidavits and indemnities, if any, as are customarily delivered by sellers of real property in Minnesota; (xv) certified copies of the resolutions of Seller's board of directors and/or shareholders (as applicable), approving this Agreement, the Master Lease, the Warrant Agreement and all other agreements contemplated hereby and thereby and the consummation of the transactions contemplated hereby and thereby; (xvi) an officer's certificate certifying Seller's articles of incorporation and by-laws and the incumbency of each officer of Seller executing this Agreement, the 18. Master Lease, the Warrant Agreement or any other agreement or instrument contemplated hereby or thereby; (xvii) such other evidence as Purchaser may reasonably request confirming Seller's authority to execute and deliver the documents required of it; (xviii) a fully executed counterpart of the Master Lease; (xix) a fully executed counterpart of the Warrant Agreement; (xx) the Warrants; and (xxi) any other documents and other items required by this Agreement to be delivered by Seller. The above instruments of assignment, transfer and conveyance will run directly from Seller to Purchaser, will vest all of the Property in Purchaser (subject to Permitted Encumbrances), and shall be duly recorded to the extent required. (b) At the Closing, Purchaser shall deliver, or cause to be delivered, the following to Seller, at its sole cost and expense: (i) balance of the full Purchase Price; (ii) such evidence as Seller may reasonably request confirming Purchaser's authority to execute and deliver the documents required of it; (iii) a certificate of Purchaser confirming that the representations and warranties made by Purchaser herein are true and correct in all material respects as of the Closing Date; (iv) fully executed counterparts of the assignment and assumption agreements required to be delivered by Seller; (v) a fully executed counterpart of the Master Lease; and (vi) a fully executed counterpart of the Warrant Agreement. (vii) any other documents or other items required by this Agreement to be delivered by Purchaser. 8.3 Closing Costs. ------------- Purchaser shall be responsible for the costs of preparation of the Title Commitment and the Title Policy (which costs shall include title examinations and search fees and other costs incidental to the preparation of the Title Commitment and Title Policy), as well as the actual title insurance premiums and for the cost of any endorsements requested by Purchaser. Seller shall be responsible for the cost of the Survey. All deed or other similar taxes payable upon recording the 19. Deed, all recording fees and any and all sales and transfer taxes shall be paid in equal shares by Purchaser and Seller. Any fees and expenses of the Escrow Agent shall also be paid in equal shares by Purchaser and Seller. 8.4 Reporting. --------- Seller and Purchaser acknowledge that Section 6045(e) of the United States Internal Revenue Code and the regulations promulgated thereunder (collectively, the "Reporting Requirements") require an informational return to be made to the United States Internal Revenue Service, and a statement to be furnished to the Seller, in connection with the Closing. (a) The Title Company is hereby designated by Seller and Purchaser as the "Reporting Person" (as defined in the Reporting Requirements) with respect of the Closing. The Title Company shall perform all duties that are required by the Reporting Requirements to be performed by the Reporting Person for the Closing. (b) Seller and Purchaser shall furnish to the Title Company, in a timely manner, any information requested by the Title Company and necessary for the Title Company to perform its duties as Reporting Person for the Closing. (c) Seller agrees to furnish to Title Company Seller's correct taxpayer identification number. Seller acknowledges that any failure by Seller to provide the Title Company with Seller's correct taxpayer identification number may subject Seller to civil or criminal penalties imposed by law. Accordingly, Seller hereby certifies under penalty of perjury, that Seller's correct taxpayer identification number is 41-1795247. (d) The State of Minnesota Certificate of Real Estate Value requires Purchaser's taxpayer identification number. Purchaser hereby certifies under penalty of perjury that Purchaser's correct taxpayer identification number is 13-4078215. ARTICLE IX ADJUSTMENTS AND PRORATIONS; CLOSING STATEMENTS 9.1 Adjustments and Prorations. -------------------------- The following matters and items shall be apportioned between the parties hereto on an accrual basis as of 11:59 p.m. local time on the date Immediately Preceding the closing date (the "Cut-off Time"): (a) Credit for Interest. Purchaser shall receive a credit at the ------------------- Closing in an amount equal to the interest earned on the Initial and Additional Deposits described in Section 3.2. ----------- (b) Taxes and Assessments. All ad valorem real estate taxes due and --------------------- payable in the year 1999, special or general assessments, sales taxes, occupancy and entertainment taxes, water and sewer rents, rates and charges and vault charges and other municipal permit fees. If 20. the amount of any such item is unascertainable on the Closing Date, the credit therefor shall be based on the most recent available bill. If the actual amount of any such item, when later determined and prorated for the applicable period, differs from the credit given therefor at the Closing, the parties shall promptly make the appropriate adjustment, and the party owing sums by reason of such adjustment shall promptly remit such sums to the other party. Purchaser shall give Seller written notice of the actual amounts of any such bills within five (5) business days after Purchaser's receipt thereof. (c) Utility Contracts. Telephone contracts and contracts for the ----------------- supply of heat, steam, cable, satellite, electric power, gas, lighting and any other utility service, with Seller receiving a credit for all deposits, if any, made by Seller as security under any such public service contract(s) if the same is transferable and provided such deposit remains on deposit for the benefit of Purchaser. (d) License Fees. Fees paid or payable for Permits (other than ------------ Excluded Permits, unless and to the extent Purchaser has the benefit of such Excluded Permits after the Closing Date). (e) Intentionally omitted. (f) Rents. Rents, including without limitation all payments from ----- Tenant under the SGI Lease for items such as minimum or base rent, additional rent, reimbursement for real estate taxes, for utilities, for operating and maintenance expenses and for insurance, as well as other reimbursements (herein collectively called "Rental Payments") received by Seller before or after the Closing Date, shall not be prorated as of the Closing Date; Seller shall remain entitled to retain and receive for its own account all Rental Payments applicable prior to and during the term of the Master Lease. (g) Intentionally omitted. (h) Intentionally omitted. (i) Contracts. On or before 5:00 p.m. Eastern Daylight Time on the --------- Due Diligence Approval Date, Purchaser shall notify Seller in writing if Purchaser elects not to assume at Closing any of the Contracts. Provided that this Agreement is not terminated prior to Closing pursuant to the terms hereof, Seller shall give notice of termination of such disapproved Contracts to the other parties thereto and Seller shall be responsible for all termination fees payable as a result of the termination of such contracts. However, Purchaser agrees that as of the Closing Date, at Seller's option , Seller's property manager and leasing agent, if any (whether such persons are independent contractors or employees of Seller) shall continue to manage the affairs of the Property. (j) Intentionally omitted. (k) No Adjustments. This Section 9.1(k) shall govern any inconsistent -------------- provision herein. Seller and Purchaser acknowledge that because Seller and Purchaser will enter into the Master Lease on the Closing Date, it will be unnecessary to prorate real estate taxes, assessments, 21. utility charges, insurance premiums or any other operating expenses or additional rent items that are to be paid directly by Seller as tenant under the Master Lease. Accordingly, any and all of the costs, expenses, fees or other charges set forth above in this Section 9.1 shall not be prorated as of the Closing Date if and to the extent the same are operating expenses or other additional rent items to be paid directly by Seller as tenant under the Master Lease. 9.2 Closing Statement. ----------------- Seller authorizes Purchaser's agents and employees to enter the Property upon two (2) business days' prior notice to Seller (which notice may be telephonic) before the Closing Date for the purpose of making such inventories, examinations and audits of the Property, and of the books and records of the Property, as Purchaser reasonably deems necessary in order to make the adjustments and prorations required under this Article 9, or under any other --------- provisions of this Agreement, and to determine which items of Personal Property are excluded from this transaction and are to be retained by Seller or are subject to payment by Purchaser or proration between Purchaser and Seller in accordance with the terms of this Agreement. Based upon such audits and inventories made by both Purchaser and Seller, at or before the Closing, the Title Company shall prepare, subject to Seller's and Purchaser's review and approval, a closing statement (the "Closing Statement") which will show the net ----------------- amount due either to Seller or to Purchaser as the result of the adjustments contemplated herein, and such net due amount will be added to or subtracted from the payment of the cash balance of the Purchase Price to be paid to Seller pursuant to Article 3 hereof. The adjustments, prorations and determinations --------- agreed to by Seller and Purchaser shall be conclusive and binding on the parties hereto. 9.3 Calculations. ------------ Subject to the provisions of Section 9.1(a) above and solely for purposes -------------- of calculating prorations, Purchaser shall be deemed to be entitled to the Property and, therefore, entitled to the income therefrom and responsible for the expenses thereof for the entire day upon which Closing occurs. All such prorations shall be made on the basis of the actual number of days of the year and month which shall have elapsed as of the Closing Date. Except as set forth herein, all items of income and expense for the period after Closing will be for the account of Purchaser, all as determined by the accrual method of accounting in accordance with generally accepted accounting principles consistently applied. Bills received after Closing which relate to expenses incurred, services performed, and any and all amounts allocable to the period prior to Closing, shall be paid by Seller and amounts received (including, without limitation, refunds and insurance proceeds) relating to the period prior to the Closing shall be paid to Seller. 9.4 Survival. -------- The provisions of this Article 9 shall survive the Closing. --------- 22. ARTICLE X CONDITIONS TO SELLER'S OBLIGATIONS Seller's obligation to close the transactions contemplated by this Agreement and to deliver the documents and instruments required under Article 8 --------- is subject to the following conditions (which may be waived by Notice from Seller): (a) Purchaser shall have paid the balance of the Purchase Price, plus or minus prorations and adjustments shown in the Closing Statement, by wire transfer of funds to the Title Company, which shall transfer such funds to the account or accounts as shall have been designated to the Title Company by Seller in advance of the Closing; (b) Purchaser shall have completed all of the deliveries required of Purchaser under Article 8, and all such documents and instruments shall be in --------- form reasonably satisfactory to Seller and its counsel; (c) all of the representations set forth in Section 6 shall be true in --------- all material respects as of the Closing Date; and (d) all covenants and agreements which are required to be performed by Purchaser on or before Closing shall have been duly and timely performed and satisfied in all respects. ARTICLE XI CONDITIONS TO PURCHASER'S OBLIGATIONS Purchaser's obligation to close the transactions contemplated by this Agreement and to deliver the balance of the Purchase Price and the other documents and instruments required under Article 8 is subject to the following --------- conditions (which may be waived by Notice from Purchaser): (a) Purchaser shall have received from Seller all of the items described in Section 8.2(a) above that Seller is required to deliver to -------------- Purchaser; (b) all of the representations set forth in Section 5.1 shall be true ----------- in all material respects as of the date hereof and as of the Closing Date; (c) Intentionally omitted. (d) Purchaser shall have received an ALTA owner's policy of title insurance with full extended coverage (including deletion of the mechanics lien and survey exceptions) and together with the Title Endorsements, or a commitment therefor reasonably satisfactory to Purchaser, issued by the Title Company, dated as of the date and time of the Closing and with liability in the amount of the Purchase Price, showing record fee simple title to the Real Property to be vested in Purchaser (subject only to the Permitted Encumbrances). If Purchaser wishes the 23. Title Company to issue any endorsements, Purchaser shall pay any costs associated with such endorsements; (e) All covenants and agreements which are required to be performed by Seller on or before Closing shall have been duly and timely performed and satisfied in all respects; (f) Between the Due Diligence Approval Date and the Closing Date, there shall not have occurred any event or change in the Property which results in the Improvements (a) becoming a non-conforming use under applicable zoning ordinances, (b) violating any restrictions, conditions or agreements which materially and adversely affects the value or operation of the Improvements following Closing, or (c) violating any applicable law, ordinance or regulation which materially and adversely affects the value or operation of the Improvements following Closing. (g) Between the Due Diligence Approval Date and the Closing Date, there shall not have occurred any event or change in the Property which results in the introduction of any hazardous substance or hazardous materials as defined by federal, state or local law, provided, however, that Seller shall be permitted to introduce to the Property such materials as reasonably and commonly used, and only in such quantities as reasonably and commonly used, in the operation of an office building complex such as the Property, provided, however, that such materials are used in accordance with all applicable laws. If the conditions described above have not been fulfilled on or before the Closing Date, then this Agreement may be terminated at Purchaser's sole option, by written notice from Purchaser to Seller delivered on or before the Closing Date, in which event both the Initial Deposit and the Additional Deposit, together with interest accrued thereon, shall be returned to Purchaser. If no such termination notice is timely delivered to Seller, the foregoing conditions shall be deemed satisfied or waived by Purchaser. ARTICLE XII ACTIONS AND OPERATIONS PENDING CLOSING Seller agrees that, between the date of this Agreement and the Closing Date: (a) Seller shall continue to operate and maintain the Property substantially in accordance with the present standards. (b) Until the Closing Date, Seller shall maintain or replace in the ordinary course of business all Personal Property associated with the Property and shall not sell, transfer, encumber or permit the sale, transfer or encumbrance of any such Personal Property except in the ordinary course of business, unless such Personal Property so removed is replaced with new Personal Property of similar quality and utility. (c) Seller shall maintain all Contracts and Permits in full force and effect, and in the ordinary course of business timely make all payments and observe and perform all material 24. obligations to be paid, observed or performed by Seller thereunder. Seller shall renew or replace with reasonably comparable service the Contracts which expire prior to the Closing Date, unless Purchaser requests in writing that they not be extended, renewed or replaced after being given reasonable notice of the expected expiration of the Contracts, which requests shall not be unreasonably made. (d) After the expiration of the Inspection Period, assuming that Purchaser has not terminated the Agreement, Seller shall not enter into any new Permits, Contracts or leases not subject to termination or cancellation by Seller by the expiration of the term of the Master Lease, materially modify or renew any existing Contracts or leases to extend beyond the term of the Master Lease, without the prior written consent of Purchaser. Purchaser will not unreasonably withhold, delay or qualify any consent requested by Seller under this subparagraph (b), and if Purchaser shall fail to give Notice of consent or disapproval of any such matter within five (5) business days after request therefor from Seller, then Purchaser shall be deemed to have consented thereto. (e) Seller shall execute and Purchaser, where necessary, shall join in the execution of, all applications and instruments required in connection with the transfer of all Permits (other than Excluded Permits) in order to transfer the benefits of such Permits to Purchaser on or prior to the Closing Date. Purchaser shall be responsible for, and pay promptly upon Seller's request, all costs related to such applications and instruments. Seller, subject to the next succeeding sentence, shall use its best efforts to preserve in full force and effect all existing Permits and to cause all those expiring to be renewed prior to the Closing Date. If any such Permit shall be suspended or revoked, Seller shall promptly so notify Purchaser and shall take all measures necessary to cause the reinstatement of such Permit without any additional limitation or condition. (f) Seller shall maintain in effect all policies of casualty and liability insurance or similar policies of insurance, with no less than the limits of coverage now carried with respect to the Real Property. ARTICLE XIII CASUALTIES AND TAKINGS 13.1 Casualties. ---------- (a) Materiality Threshold. For purposes of this Section, "material" --------------------- shall mean damage or destruction of the Property ("Casualty") for which the aggregate estimated cost of repair, restoration and rehabilitation (including all indirect and incidental costs and expenses), determined by Purchaser in its reasonable discretion, is in excess of Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00). (b) Notice. Seller shall give Purchaser prompt written notice of any ------ damage or destruction of the Property, without regard to the extent of such damage or destruction, which 25. notice shall specify the damage and the Seller's estimated cost of repair, restoration and rehabilitation, including all indirect and incidental costs and expenses (the "Casualty Notice"). (c) Material Loss from Casualty. If, prior to Closing, any portion of --------------------------- the Property is damaged or destroyed to a "material" degree, Purchaser may, at its option, terminate this Agreement by delivery of written notice of such termination (the "Casualty Termination Notice") to Seller within fifteen (15) business days after receipt of the Casualty Notice. If damage or destruction occurs within fifteen (15) business days prior to the Closing Date, such Closing Date shall be extended to the date which is fifteen (15) business days after the receipt by Purchaser of the Casualty Notice. If Purchaser elects not to so terminate this Agreement then, (i) prior to the Closing, Seller will not settle the loss or otherwise irrevocably bind Purchaser to an award without Purchaser's consent, which consent shall not be unreasonably withheld, conditioned or delayed, and (ii) Purchaser shall have the exclusive right to settle the loss and to receive all proceeds of the casualty insurance covering the Improvements so damaged or destroyed. (d) Minor Loss from Casualty. If, prior to Closing, any portion of the ------------------------ Property is damaged or destroyed, but such damage or destruction is not "material," Seller shall use commercially reasonable efforts to restore, prior to Closing, the Property to its previous condition. If Seller is unable to complete said restoration of the Property to its previous condition prior to the Closing, then Purchaser shall accept an assignment from Seller to Purchaser of all of Seller's rights with respect to the settlement of all insurance proceeds receivable with respect to such damage or destruction and shall receive a proration credit at Closing equal to all deductibles therefrom (but not in excess of the amount of the cost of repair). (e) Termination. If Purchaser elects to terminate this Agreement ----------- pursuant to this Section 13.1, both the Initial Deposit and the Additional ------------ Deposit (if made), together with interest accrued thereon, shall be returned to Purchaser. 13.2 Taking. ------ In the event that Seller has knowledge of the actual or threatened taking of all or any part of the Real Property by exercise of right of eminent domain, Seller will give Purchaser prompt written notice (a "Condemnation Notice") of ------------------- such event. If, on or before the Closing Date, any Real Property shall be taken or threatened to be taken by exercise of right of eminent domain, or there shall be taken or threatened to be taken so material a part thereof that, in the reasonable opinion of Purchaser, the taking does or would materially interfere with the economic operation or use of the Property, then Purchaser may elect to terminate this Agreement by giving Seller Notice to such effect by the earlier to occur of (a) the Closing Date, or (b) ten (10) days after Seller has given Purchaser the Condemnation Notice. In the event that Purchaser elects to terminate this Agreement pursuant to this Section 13.2, both the Initial Deposit ------------ and the Additional Deposit (if made), together with interest accrued thereon prior to the termination of the Inspection Period, shall be returned to Purchaser. If Purchaser does not elect to terminate this Agreement, then the Closing shall take place as herein provided without any abatement of the Purchase Price, and Seller shall, by written instrument at the Closing, assign to Purchaser all of Seller's right, title and interest in and to any condemnation award which may be payable to Seller 26. on account of such condemnation without recourse. If, prior to the Closing Date, all or any portion of the Real Property shall be taken by exercise of right of eminent domain in a manner which does not give Purchaser the right to terminate this Agreement, the transaction contemplated hereby shall take place as provided in the preceding sentence. For purposes of this Section 13.2, the term "taking" ------------ shall include temporary as well as permanent takings, and a taking shall not be deemed to be "threatened" unless and until a fund for the payment of the anticipated compensation for such taking shall have been appropriated or some official action with respect to such taking shall have been taken by a governmental body possessing powers of eminent domain. ARTICLE XIV ESCROW INSTRUCTIONS (a) Immediately after execution of this Agreement, Purchaser and Seller shall open an escrow account with Escrow Agent. The transactions contemplated by this Agreement shall be completed through Escrow Agent. This Agreement, together with Escrow Agent's standard form provisions and any additional restrictions not inconsistent with this Agreement as may be reasonably required by Escrow Agent, shall constitute joint escrow instructions to Escrow Agent regarding this matter. (b) In the event that the Closing hereunder shall occur, all interest accruing on the Initial Deposit and Additional Deposit shall thereupon be paid to Seller (with appropriate credit to Purchaser on the Settlement Statement). Such interest shall otherwise be payable to the party entitled to receive the Initial and Additional Deposits pursuant to this Agreement. (c) If disbursement from the Escrow Agent is requested at any time other than at the Closing, notice thereof shall be given by the requesting party to the non-requesting party, their respective attorneys, and the Escrow Agent. Such notice shall detail the basis for the request and shall be given by certified mail, return receipt requested, and the Escrow Agent shall not make any disbursement pursuant to (b) above until five (5) business days after receipt by the Escrow Agent of such notice and only if the Escrow Agent shall not receive notice disputing such payment prior to the expiration of said five (5) business days. (d) The Escrow Agent, in its sole discretion, may at any time deposit the Initial Deposit and the Additional Deposit (if made) and any accrued interest with a court of competent jurisdiction selected by it in its capacity as Escrow Agent, and, in such event, the Escrow Agent shall be fully released and discharged from all liabilities and responsibilities in connection with holding the Initial Deposit and the Additional Deposit (if made). (e) The duties of the Escrow Agent are only as herein specifically provided and are purely ministerial in nature and the Escrow Agent shall incur no liability whatever with respect thereto, provided the Escrow Agent has acted in good faith. 27. (f) The Escrow Agent is executing this Agreement solely to confirm that it will hold the Initial and Additional Deposits in escrow pursuant to the provisions of this paragraph. (g) The parties hereto acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and that the Escrow Agent shall not be deemed to be an agent of either of the parties in any action that it shall take in its capacity as Escrow Agent. The Escrow Agent shall not be liable for any action or omission on its part unless such action is taken or suffered as the result of the willful misconduct or gross negligence of the Escrow Agent. The Escrow Agent will incur no liability for acting upon any instruction, notice, receipt or document believed by it to be genuine and to have been made, signed, sent or presented by a person or persons authorized to perform such acts. The Escrow Agent shall be under no duty to obtain the highest rate of interest upon the deposit to be placed in escrow. ARTICLE XV NOTICES Except as otherwise provided in this Agreement, all notices, demands, requests, consents approvals and other communications (herein collectively called "Notices") required or permitted to be given hereunder, or which are to ------- be given with respect to this Agreement, shall be in writing and shall be personally served or sent by registered or certified mail, postage prepaid, return receipt requested, addressed to the party to be so notified as follows: If to Purchaser: c/o Chase Capital Partners 380 Madison Avenue New York, New York 10017 Attention: Dwight I. Arnesen Telephone: (212) 622-3667 Telecopy: (212) 622-4026 with a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Steven C. Koppel, Esq. Telephone: (212) 408-2490 Telecopy: (212) 728-5950 If to Seller: WAM!NET, INC. 655 Lone Oak Drive Eagan, Minnesota 55121 Attention: Mark Marlow Telephone: (651) 256-5177 Telecopy: 651-256-5435 28. with a copy to: WAM!NET, Inc. 655 Lone Oak Drive Eagan, Minnesota 55121 Attention: General Counsel with a copy to: Larkin Hoffman Daly & Lindgren, Ltd. 1500 Northwest Financial Center 7900 Xerxes Avenue South Bloomington, Minnesota 55431 Attention: Gary A. Renneke, Esq. Telephone: 612-896-3238 Telecopy: 612-896-3250 A Notice shall be effective on the earlier of actual receipt or three (3) days after the mailing thereof. Notices may also be sent or delivered by (a) hand, (b) overnight delivery or (c) facsimile, provided that in utilizing any form of delivery authorized by this sentence other than (a) or (b), such Notice must also be immediately sent to the addressee via certified mail, return receipt requested. Either party may at any time change the address for Notices to such party by giving a Notice as aforesaid. ARTICLE XVI DEFAULT (a) Purchaser and Seller agree that it will be difficult or impossible to ascertain Seller's damages in the event of a default by Purchaser hereunder, and that the Initial Deposit and the Additional Deposit (if paid) represents a fair and reasonable estimate thereof. Therefore, if Seller shall fully perform its obligations hereunder, and Purchaser shall fail or refuse to perform its obligations as required by the terms hereof, the sole remedy of the Seller shall be to retain the Initial Deposit and the Additional Deposit (if paid) as liquidated damages and not as a penalty and Purchaser's liability hereunder shall be limited to the Initial and Additional Deposits and neither party hereto shall have any further liability to the other hereunder, except for Purchaser's surviving obligations under Section 4(a) hereof. (b) If Purchaser shall fully perform its obligations hereunder and if Seller shall fail or refuse to perform its obligations hereunder, Seller's liability for damages shall be expressly limited to the return of the Initial Deposit and the Additional Deposit (if paid) (together with all interest accruing thereon) to Purchaser and the reimbursement of Purchaser for all reasonable costs of title examination, survey costs, reasonable legal fees and any fees and expenses actually incurred by or on behalf of Purchaser in connection with the transactions contemplated hereunder, provided that Seller's obligations shall not exceed Fifty Thousand Dollars and 00/100 ($50,000) in the aggregate. Alternatively, Purchaser shall have the right to specific performance of this Agreement. The foregoing remedies of damages or specific performance shall be Purchaser's sole remedies available. 29. ARTICLE XVII MISCELLANEOUS 17.1 Assessments. ----------- Assessments affecting the Property shall be payable by the party owning the Property at the time such assessments become due and payable. Notwithstanding the foregoing, if, on the Closing Date, the Property or any part thereof shall be or shall have been affected by an assessment or assessments which are or may become payable in installments, Seller shall be obligated to pay only those installments due and payable prior to or on the Closing Date and Purchaser shall be obligated to pay all installments due and payable after the Closing Date. 17.2 Assignment. ---------- Purchaser shall not have the right to assign its right, title or interest in this Agreement to any person or entity without Seller's prior written consent, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, Purchaser may assign this Agreement without Seller's consent to one (1) or more affiliates of Purchaser or to Purchaser's lending sources. Any attempted assignment by Purchaser in violation of the preceding sentence shall be null and void and of no force and effect, at Seller's option. Purchaser hereby agrees that any assignment by Purchaser (whether or not consented to by Seller) shall not relieve Purchaser of its obligations and liabilities hereunder. 17.3 Assignment of Contracts, Rights, etc. --------------------------------------- Anything contained in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement or attempted agreement to transfer, sublease or assign any contract, license, real or personal property lease, or other agreement, or any Permit, if an attempted transfer, sublease or assignment thereof, without the required consent of any other party thereto, would constitute a breach thereof or in any way affect the rights of Purchaser or Seller thereunder. The parties shall use commercially reasonable efforts to obtain the consent of any such third party to the foregoing to the transfer or assignment thereof to Purchaser in all cases in which such consent is required for such transfer or assignment. If such consent is not obtained, the parties shall cooperate in any arrangements necessary or desirable to provide for Purchaser the benefits thereunder, including, without limitation, enforcement by Seller for the benefit of Purchaser of any and all rights of Seller thereunder against the other party thereto. 17.4 Attorneys' Fees. --------------- If any action is brought by either Purchaser or Seller, each party shall pay its own costs and expenses incurred in such action. 17.5 Broker's Commission. ------------------- Purchaser represents to Seller that it has not dealt with any broker other than Pearson Partners, Inc. ("Pearson") in connection with this transaction. Seller represents to Purchaser that it has not dealt with any broker other than Nelson, Tietz & Hoye ("NTH") and Grubb & Ellis 30. ("G&E") in connection with this transaction. Seller shall be exclusively responsible for payment of any commission or other compensation earned by NTH, G&E and Pearson through G&E in connection herewith. Purchaser agrees to indemnify, defend and hold Seller harmless from and against any and all claims, losses, liability, costs and expenses (including reasonable attorneys' fees and disbursements) resulting from any claim that may be made against Seller by any other broker or other person claiming a commission, fee or other compensation by reason of this transaction, if the same shall arise by, through or on account of any act, omission or alleged act or omission of Purchaser or its representatives. Seller agrees to indemnify, defend and hold Purchaser harmless from and against any and all claims, losses, liability, costs and expenses (including reasonable attorneys' fees and disbursements) resulting from any claim that may be made against Purchaser by any other broker or other person claiming a commission, fee or other compensation by reason of this transaction, if the same shall arise by, through or on account of any act, omission or alleged act or omission of Seller or its representatives. 17.6 Confidentiality. --------------- Seller and Purchaser hereby covenant and agree that, at all times after the date of this Agreement and prior to the Closing, unless expressly consented to in writing by the other party, no public disclosure (by press release or other media) shall be made concerning this transaction except for Seller's S-1 filing with the United States Securities and Exchange Commission. Purchaser agrees to keep strictly confidential all information provided to or obtained by Purchaser pursuant to this Agreement provided, however, that disclosures with -------- ------- respect to the Agreement, the transactions contemplated thereby and any negotiations or discussions with respect thereto shall be permitted among Purchaser, Purchaser agents and any persons or entities that may potentially supply financing to Purchaser to consummate the transactions contemplated hereby. 17.7 Construction. ------------ The parties acknowledge that their attorneys have reviewed this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any Exhibits, Schedules or amendments hereto. 17.8 Cooperation. ----------- The parties agree to use commercially reasonable efforts to satisfy, and to cooperate with and assist the other parties hereto to satisfy, the conditions to Closing in a timely manner. 17.9 Delivery of Keys. ---------------- At the Closing, Seller shall deliver to Purchaser a key to the main entrance of the Property. 31. 17.10 Further Assurances. ------------------ Subject to the terms and conditions of this Agreement, each of the parties hereto shall use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate transactions contemplated by this Agreement. From time to time after the Closing Date, without further consideration, the parties shall execute and deliver or cause to be executed and delivered such documents as may be reasonably request for the implementation and consummation of the transactions contemplated by this Agreement. Each party hereto which is a designated signatory to any Exhibits and Schedules hereto agrees to execute and deliver the execution copies of such Exhibits and Schedules at or prior to the Closing. 17.11 Further Instruments and Acts. ---------------------------- The parties shall execute and deliver such additional instruments and shall do such further acts as may be reasonably necessary to carry out the provisions of this Agreement. 17.12 General. ------- This Agreement may be executed in any number of counterparts, each of which shall constitute an original but all of which, taken together, shall constitute but one and the same instrument. This Agreement (including, without limitation, all Schedules and Exhibits hereto) contains the entire agreement between the parties with respect to the subject matter hereof, supersedes all prior understandings, if any, with respect thereto and may not be amended, supplemented or terminated, nor shall any obligation hereunder or condition hereof be deemed waived, except by a written instrument to such effect signed by the party to be charged. The warranties, representations, agreements and undertakings contained herein shall not be deemed to have been made for the benefit of any person or entity other than the parties hereto. Within this Agreement, words of any gender shall be held and construed to include any other gender, and words in the singular number shall be held and construed to include the plural, unless the context otherwise requires. All Schedules and Exhibits described herein and attached hereto are fully incorporated into this Agreement by this reference for all purposes. 17.13 Governing Law. ------------- THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE SATE OF MINNESOTA. PURCHASER AND SELLER EACH HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY MINNESOTA STATE COURT OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT AND FURTHER HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH MINNESOTA STATE COURT. PURCHASER AND SELLER EACH HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY EACH EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING. 32. 17.14 Indemnities. ----------- Purchaser agrees that it will indemnify, defend, protect and hold Seller and their agents harmless from and against all actions, claims, penalties, damages and expense including, without limitation, reasonable attorneys' fees and disbursements, based upon or arising out of all matters relating to the operation of the Property and any claim for personal injury or property damage based on any event occurring on or about the Property after the Closing Date or in connection with Purchaser's access to the Property in accordance with this Agreement prior to the Closing Date (the foregoing indemnity shall survive any termination of this Agreement). Seller agrees that it will indemnify, defend, protect and hold Purchaser harmless from and against all costs, claims, penalties, damages and expense including, without limitation, reasonable attorneys' fees, based upon or arising out of (i) all matters relating to the operation of the Property prior to the Closing Date, (ii) any claim for personal injury or property damage based upon an event occurring in or about the Property prior to the Closing Date and (iii) all matters arising out of any contract or agreement relating to and of the Property that has been terminated by Seller on or prior to the Closing Date. 17.15 Joint and Several Obligations. ----------------------------- If more than one person signs this Agreement as Seller or Purchaser, their obligations under this Agreement will be joint and several. 17.16 No Solicitation. --------------- (a) Seller shall, and shall direct and cause its officers, directors, employees, investment bankers, financial advisors, attorneys, accountants and its other representatives and agents (collectively, "Representatives") to, --------------- immediately cease any discussions or negotiations with any parties other than Purchaser that may be ongoing with respect to an Alternative Transaction (as hereinafter defined). From and after the date hereof until the earlier of the Closing or the termination of this Agreement pursuant to the terms hereof, Seller shall not authorize or permit its Representatives to, directly or indirectly, (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action to facilitate, any inquiries or the making of any proposal that may lead to an Alternative Transaction, (ii) participate in any discussions or negotiations regarding any proposed Alternative Transaction or (iii) execute any agreements regarding an Alternative Transaction. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding sentence by any Representative of Seller shall be deemed to be a breach of this Section 17.16 by ------------- Seller. For purposes of this Agreement, an "Alternative Transaction" means the ----------------------- purchase or lease of all or of any portion of the Property or any debt or equity financing of the Property other than an equity investment or debt financing in Seller by an investor which is not secured by the Property. (c) The parties recognize and acknowledge that in the event of a breach of this Section 17.16 will cause irreparable and material loss and damage ------------- to the non-breaching party as to which it will not have an adequate remedy at law or in equity. Accordingly, each party acknowledges and agrees that the issuance of an injunction or other equitable remedy is an appropriate remedy for any such breach. 33. (d) Notwithstanding the foregoing provisions of this Section 17.16, ------------- during the period after August 14, 1999 and prior to the end of the Inspection Period, Seller shall have the right to enter into agreements for the sale of the Property (and to enter into discussions and negotiations related thereto) with other persons or entities (any such person or entity being referred to herein as a "Back-Up Purchaser") provided that (i) Seller shall disclose to any Back-Up Purchaser the fact that Seller has entered into an agreement for the sale of the Property, and (ii) Seller shall not disclose to any Back-Up Purchaser or to any of its representatives any of the terms of this Agreement or any agreements executed or contemplated to be executed in connection herewith. On the Closing Date, Seller shall immediately terminate any agreements entered into (and any discussions and negotiation related thereto) with any Back-Up Purchaser. 17.17 Paragraph Headings. ------------------ The paragraph headings contained in this Agreement are for convenience only and shall in no way enlarge or limit the scope or meaning of the various and several paragraphs hereof. 17.18 No Recording. ------------ Neither party shall record this Agreement or a memorandum hereof. 17.19 Remedies. -------- Except as otherwise set forth herein, the parties shall have and retain all rights and remedies existing in their favor at law or in equity, including without limitation, any actions for specific performance and/or injunctive or other equitable relief (including without limitation, the remedy of rescission) to enforce or prevent any violations of the provisions of this Agreement. 17.20 Rights Cumulative. ----------------- Except as set forth herein, all rights, powers and remedies herein given to Purchaser and Seller are cumulative and not alternative, and are in addition to all statutes or rules of law. All agreements and covenants hereunder shall be given independent effect so that if a certain action or condition constitutes a default under a certain agreement or covenant, the fact that such action or condition is permitted by another agreement or covenant shall not affect the occurrence of such default, unless expressly permitted under an exception to such initial covenant. In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of or a breach of a representation and warrant hereunder. 17.21 Severability. ------------ The provisions of this Agreement are severable, and if any provision or part hereof or the application thereof to any person or circumstances shall ever be held by any court of competent jurisdiction to be invalid or unconstitutional for any reason, the remainder of this Agreement and 34. the application of such provisions or part hereof to other persons or circumstances shall not be affected thereby. 17.22 Successors. ---------- The terms and provisions of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. 17.23 Survival. -------- The provisions of this Article 17 shall survive the Closing. ---------- 17.24 Waiver. ------ No waiver of a breach of, or default under, any provision of this Agreement shall be deemed a waiver of such provision or of any subsequent breach or default of the same or similar nature or of any other provision or condition of this Agreement. 17.25 Master Lease and Warrant Agreement. ---------------------------------- Commencing on the date hereof, the parties shall negotiate in good faith and prepare the Master Lease and the Warrant Agreement. If the Master Lease and/or the Warrant Agreement has not been finalized prior to the Closing Date, either party shall have the right to terminate this Agreement which right shall be exercised by delivering written notice to the other party within five (5) days thereafter. Notwithstanding the foregoing, if either party has not acted in good faith in negotiating the Master Lease and/or the Warrant Agreement, such party shall not have the right to terminate this Agreement pursuant to this Section 17.25. For purposes of this Section 17.25, a party shall be deemed to - ------------- ------------- have not acted in good faith if, among other things, such party has not made itself and its representatives reasonably available for negotiations of the Master Lease and/or the Warrant Agreement. If this Agreement is terminated by either party pursuant to the provisions of this Section 17.25, the Initial Deposit and the Additional Deposit (if made), together with all interest thereon, shall be returned to Purchaser within two (2) business days after the other party's receipt of the terminating party's notice of termination. 17.26 Break-up Fee. ------------ In the event that the Seller does not obtain board approval for the execution of the Master Lease or Warrant Agreement which incorporate the terms of the transactions contemplated hereunder and Purchaser is otherwise willing and able to execute the Master Lease or Warrant Agreement consistent with the terms of Exhibit G and Exhibit H, the Seller shall reimburse Purchaser for all --------- --------- costs of title examination, surveys, reasonable legal fees, engineering reports, environmental reports and any other fees and expenses incurred by or on behalf of Purchaser in connection with the transactions contemplated hereunder, not to exceed Fifty Thousand and 00/100 Dollars ($50,000) in the aggregate. 35. 17.27 Termination and Return of Deposits. ---------------------------------- This Section 17.26 shall govern any inconsistent provision of this Agreement. In the event of the termination of this Agreement and the Initial Deposit and/or the Additional Deposit are to be returned to Purchaser, neither the Initial Deposit nor the Additional Deposit (as applicable) shall be returned to Purchaser until the following conditions are satisfied: (i) Purchaser executes and delivers a purchase agreement cancellation instrument reasonably satisfactory to Seller; and (ii) Purchaser pays any and all amounts to be paid in connection with Purchaser's Reports, if the failure to pay the same may subject Seller or the Property to any liability or liens, and Purchaser provides Seller with paid receipts and lien waivers (if applicable) for the same; and (iii) Purchaser has delivered to Seller true and complete copies of all of Purchaser's Reports and other written materials pertaining to its due diligence; however, this subsection (iii) shall apply only if Seller is obligated to pay and in fact pays (a) the break-up fee referred to in Section 17.26 of this Agreement, or (b) Purchaser's costs, fees and expenses pursuant to Section 16(b) of this Agreement. 17.28 Assignment of Foothill Loan. --------------------------- Seller hereby consents to Purchaser and Purchaser's lender contacting Foothill Capital Corporation in connection with a possible partial assignment of the Foothill Loan (as hereinafter defined) from Foothill to Purchaser's lender. As used herein, the "Foothill Loan" shall mean that certain loan by Foothill to Seller pursuant to that certain Loan and Security Agreement and that certain Mortgage with Power of Sale, Assignment of Rents, Security Agreement and Fixture Filing (the "Mortgage"), each dated as of July 16, 1999. Purchaser understands and acknowledges that although the lien of the Mortgage against the Property is to be released in conjunction with the Closing, the Foothill Loan will not be paid in its entirety as of the Closing and that Seller intends to continue to utilize the Foothill Loan as an ongoing line of credit pursuant to said Loan and Security Agreement. Accordingly, Seller does not hereby make any representation regarding the practicability or feasibility of any such partial assignment, even if the same is otherwise acceptable to all parties thereto. Purchaser shall cause any such assignment to be conditioned upon Seller being fully released of liability under and in connection with that part of the Foothill Loan to be assigned. Purchaser shall reimburse Seller for any and all costs and expenses incurred by Seller, including but not limited to attorneys' fees, incurred in connection with its cooperation, facilitation and execution of documents in connection with such assignment. Purchaser shall make such reimbursement to Seller upon the earlier of the Closing or ten (10) days after written request therefor by Seller. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. SELLER: WAM!NET INC. By: ________________________________ Name: 36. Title: PURCHASER: CCPRE-EAGAN, LLC By: _____________________________ Name: Title: 37. TABLE OF CONTENTS
Page Preliminary statement....................................................................................... 1 ARTICLE I DEFINITIONS...................................................................................... 1 1.1 Definitions............................................................................................. 1 ----------- 1.2 References.............................................................................................. 5 ---------- ARTICLE II SALE AND PURCHASE............................................................................... 6 2.1 Sale and Purchase....................................................................................... 6 ----------------- 2.2 Liabilities Not Being Assumed........................................................................... 6 ----------------------------- ARTICLE III PURCHASE PRICE AND DOWN PAYMENTS............................................................... 6 3.1 Purchase Price.......................................................................................... 6 -------------- 3.2 Downpayments............................................................................................ 6 ------------ ARTICLE IV INSPECTION BY PURCHASER......................................................................... 8 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER......................................................... 9 5.1 Seller's Representations and Warranties................................................................. 9 --------------------------------------- 5.2 Survival................................................................................................ 13 -------- 5.3 As Is................................................................................................... 13 ----- ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER..................................................... 14 6.1 Purchaser's Representations and Warranties.............................................................. 14 ------------------------------------------ 6.2 Survival................................................................................................ 15 -------- ARTICLE VII TITLE AND SURVEY MATTERS....................................................................... 15 7.1 Objections to Title..................................................................................... 15 ------------------- 7.2 Violations.............................................................................................. 16 ---------- 7.3 Survey.................................................................................................. 16 ------ 7.4 Curing Objections to Title and Violations............................................................... 17 ----------------------------------------- ARTICLE VIII THE CLOSING................................................................................... 17 8.1 Closing................................................................................................. 17 ------- 8.2 Deliveries at Closing................................................................................... 17 --------------------- 8.3 Closing Costs........................................................................................... 20 ------------- 8.4 Reporting............................................................................................... 20 --------- ARTICLE IX ADJUSTMENTS AND PRORATIONS; CLOSING STATEMENTS.................................................. 21 9.1 Adjustments and Prorations.............................................................................. 21 9.2 Closing Statement....................................................................................... 22 ----------------- 9.3 Calculations............................................................................................ 22 ------------ 9.4 Survival................................................................................................ 23 -------- ARTICLE X CONDITIONS TO SELLER'S OBLIGATIONS............................................................... 23 ARTICLE XI CONDITIONS TO PURCHASER'S OBLIGATIONS........................................................... 23 ARTICLE XII ACTIONS AND OPERATIONS PENDING CLOSING......................................................... 25 ARTICLE XIII CASUALTIES AND TAKINGS........................................................................ 26 13.1 Casualties............................................................................................. 26 ----------- 13.2 Taking................................................................................................. 27 ------- ARTICLE XIV ESCROW INSTRUCTIONS............................................................................ 27 ARTICLE XV NOTICES......................................................................................... 28 ARTICLE XVI DEFAULT........................................................................................ 29
i. ARTICLE XVII MISCELLANEOUS.................................................................................. 30 17.1 Assessments........................................................................................... 30 ------------ 17.2 Assignment............................................................................................ 30 ---------- 17.3 Assignment of Contracts, Rights, etc.................................................................. 30 ------------------------------------ 17.4 Attorneys' Fees....................................................................................... 31 --------------- 17.5 Broker's Commission................................................................................... 31 ------------------- 17.6 Confidentiality....................................................................................... 31 --------------- 17.7 Construction.......................................................................................... 32 ------------ 17.8 Cooperation........................................................................................... 32 ----------- 17.9 Delivery of Keys...................................................................................... 32 ---------------- 17.10 Further Assurances.................................................................................... 32 ------------------ 17.11 Further Instruments and Acts.......................................................................... 32 ---------------------------- 17.12 General............................................................................................... 32 ------- 17.13 Governing Law......................................................................................... 33 ------------- 17.14 Indemnities........................................................................................... 33 ----------- 17.15 Joint and Several Obligations......................................................................... 33 ----------------------------- 17.16 No Solicitation....................................................................................... 33 --------------- 17.17 Paragraph Headings.................................................................................... 34 ------------------ 17.18 No Recording.......................................................................................... 34 ------------ 17.19 Remedies.............................................................................................. 34 -------- 17.20 Rights Cumulative..................................................................................... 35 ----------------- 17.21 Severability.......................................................................................... 35 ------------ 17.22 Successors............................................................................................ 35 ---------- 17.23 Survival.............................................................................................. 35 -------- 17.24 Waiver................................................................................................ 35 ------ 17.25 Master Lease and Warrant Agreement.................................................................... 35 ---------------------------------- 17.26 Break-up Fee.......................................................................................... 36 ------------ 17.26 Termination and Return of Deposits.................................................................... 36 ----------------------------------
ii. SCHEDULES Schedule A-1 - Contracts Schedule A-2 - Excluded Contracts Schedule B - Excluded Permits Schedule C - Personal Property Schedule D - Warranties Schedule 5.1(d) - Consents Schedule 5.1(f) - Permitted Encumbrances Schedule 5.1(n) - Litigation Schedule 5.1(p) - Environmental Disclosures iii. EXHIBITS Exhibit A-1 - Operating Parcel Exhibit A-2 - Vacant Parcel Exhibit B - Limited Warranty Deed Exhibit C - Bill of Sale Exhibit D - Assignment and Assumption Agreement Exhibit E - Omitted Exhibit F - Tenant Estoppel Certificate Exhibit G - Master Lease Terms Exhibit H - Warrant Terms Exhibit I - Development Agreements Exhibit J - Title Endorsement Exhibit K Financial Statements iv. SCHEDULE A-1 CONTRACTS SCHEDULE A-2 EXCLUDED CONTRACTS SCHEDULE B EXCLUDED PERMITS SCHEDULE C PERSONAL PROPERTY SCHEDULE D WARRANTIES SCHEDULE 5.1(f) PERMITTED ENCUMBRANCES SCHEDULE 5.1(n) LITIGATION SCHEDULE 5.1(p) ENVIRONMENTAL DISCLOSURES EXHIBIT A-1 OPERATING PARCEL Lots 1 and 2, Cray Second Addition, according to the recorded plat thereof, Dakota County, Minnesota. EXHIBIT A-2 VACANT PARCEL Not Applicable. All of the Land is comprised of the Operating Parcel. There is no separate and distinct Vacant Parcel. EXHIBIT B LIMITED WARRANTY DEED EXHIBIT C BILL OF SALE Not Applicable. EXHIBIT D ASSIGNMENT AND ASSUMPTION AGREEMENT EXHIBIT E Intentionally Omitted/Blank. EXHIBIT F TENANT ESTOPPEL CERTIFICATE EXHIBIT G MASTER LEASE TERMS See Letter of Intent dated August 4, 1999, by and between Seller and Purchaser. EXHIBIT H WARRANT TERMS See Letter of Intent dated August 4, 1999, by and between Seller and Purchaser. EXHIBIT I DEVELOPMENT AGREEMENTS 1. Agreement (Land Use Covenants and Restrictions) dated December 2, 1986 by and between First National Bank of Minneapolis, as Trustee and JAR Eagan Properties, Inc. 2. Development Contract dated December 17, 1987 between the City of Eagan and Cray Research, Inc. 3. Development Contract dated August 15, 1989 between the City of Eagan and Cray Research, Inc. 4. Amendment to Agreement dated February 28, 1992, between First Bank National Association, as Trustee, and Cray Research, Inc. 5. Development Rights Distribution Agreement dated March 4, 1999 between Cray Research, LLC, and WAM!NET Inc. 6. Allocation of Parking Spaces Agreement dated March 4, 1999 between Cray Research, LLC and WAM!NET Inc. 7. Indirect Source Permit 99-14 issued by the City of Eagan to WAM!NET Inc. EXHIBIT J TITLE ENDORSEMENT 1. ALTA/Form 9 2. Delineated Survey 3. Access 4. Subdivision 5. Tax Parcel 6. ALTA/Form 3.1 7. ALTA/Form 116 8. Environmental Protection 9. Doing Business 10. ALTA/Form 1 11. First Loss 12. Arbitration 13. Creditor's Rights 14. Usury 15. ALTA/Form 6 EXHIBIT K FINANCIAL STATEMENTS SCHEDULE A-1 TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS CONTRACTS 1. Development Agreement dated December 17, 1987, as amended by First Amendment to Development Contract dated June 20, 1989. 2. Development Contract dated August 15, 1989, by and between the City of Eagan and Cray Research, Inc. 3. Agreement (Land Use Covenants and Restrictions) dated December 2, 1986, by and between First National Bank of Minneapolis and JAR Eagan Properties, Inc., as amended by Amendment to Agreement (Land Use Covenants and Restrictions) dated February 28, 1992. 4. Development Rights Distribution Agreement dated March 4, 1999, by and between Cray Research, L.L.C. and WAM!NET INC. 5. Allocation of Parking Spaces Agreement dated March 4, 1999, by Cray Research, L.L.C. and WAM!NET INC. 6. Lease dated March 4, 1999, by and between WAM!NET INC., as Lessor, and Silicon Graphics, Inc., as Lessee. 7. Property Management Agreement dated March 4, 1999, by and between WAM!NET INC., as Owner, and Silicon Graphics, Inc., as Property Manager. 8. Pollution Legal Liability Select Policy by AIG Environmental in favor of WAM!NET INC. dated March 3, 1999. 9. Indirect Source Permit (ISP) 99-14 dated June 7, 1999. SCHEDULE A-2 TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS EXCLUDED CONTRACTS 1. Property Management Agreement dated March 4, 1999, by and between WAM!NET INC., as Owner, and Silicon Graphics, Inc., as Property Manager. 2. The SGI Lease. SCHEDULE B TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS EXCLUDED PERMITS NONE. SCHEDULE C TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS PERSONAL PROPERTY NONE. SCHEDULE D TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS WARRANTIES Any and all warranties pertaining to the Property and benefiting Seller, if and to the extent assignable. SCHEDULE 5.1 (d) TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS CONSENTS NONE. SCHEDULE 5.1 (f) TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS PERMITTED ENCUMBRANCES 1. Terms and conditions of Lease as evidenced by Memorandum of Lease dated as of March 4, 1999, filed of record March 8, 1999, as Document No. 1586099, by and between Wam!Net Inc., a Minnesota corporation, Lessor, and Silicon Graphics, Inc., a Delaware corporation, Lessee. 2. As to Lots 1 and 2: Terms and conditions of the unrecorded Allocation of Parking Spaces Agreement dated March 4, 1999, by and between Cray Research, L.L.C., and Wam!Net Inc. 3. As to Lots 1 and 2: Agreement (Land Use Covenants and Restrictions) dated December 2, 1986, filed or record December 3, 1986, as Document No. 754646, by and between First National Bank of Minneapolis, and JAR Eagan Properties, Inc., a Delaware corporation, as amended by Amendment to Agreement (Land Use Covenants and Restrictions) dated February 28, 1992, filed of record March 8, 1999, as Document No. 1586097. 4. As to Lots 1 and 2: Terms and conditions of Development Rights Distribution Agreement dated as of March 4, 1999, filed of record March 8, 1999, as Document No. 1586100, by and between Cray Research, L.L.C., a Delaware limited liability company, and WAM!NET Inc., a Minnesota corporation. 5. Drainage and utility easement(s) as shown on the recorded plat of Cray Second Addition. 6. As to Lot 1: 20-foot easement in favor of the City of Eagan as contained in Easement filed of record March 7, 1990, as Document No. 928999. 7. As to Lot 1: Easement over the Southerly 20 feet of the subject property in favor of the City of Eagan as contained in Easement filed of record June 22, 1990, as Document No. 943309. 8. As to Lot 1: Limitation of access from subject property to County State Aid Highway No. 26 (Lone Oak Road) along the Southerly boundary as per the Official Plat of Lone Oak and Cray Second Addition. 9. As to Lot 1: Easement to Socony Mobil Oil Co. over the North 100 feet of the East 100 feet as per Grant filed of record in Book 64 of Miscellaneous Records, page 504. 10. As to Lot 1: Drainage and utility easements over Southwesterly 10 feet of subject property as per the Official Plat of Lone Oak, as partially vacated by Resolution filed of record October 21, 1987, as Document No. 811972. 11. As to Lots 1 and 2: Memorandum of Development Agreement dated December 17, 1987, filed of record April 19, 1988, as Document No. 835970, as amended by unrecorded First Amendment to Development Contract dated June 20, 1989. 12. As to Lots 1 and 2: Terms and conditions contained in the unrecorded Development Contract dated August 15, 1989, by and between the City of Eagan, a Minnesota municipal corporation, and Cray Research, Inc., a Delaware corporation. SCHEDULE 5.1 (n) TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS LITIGATION NONE. SCHEDULE 5.1 (p) TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS ENVIRONMENTAL DISCLOSURES a) Copies of all correspondence and communications betweeen SGI and the Minnesota Pollution Control Agency, Environmental Protection Agency, or any other governmental body/agency in connection with the property. a) June 26, 1995 - Correspondence to Minnesota Emergency Reponse Commission Regarding Original Toxic Chemical Release Inventory Form b) 1997 Tier Tow Turnaround Report to State of Minnesota, Department of Public Safety c) 1996 Tier Two Turnaround Report to State of Minnesota, Department of Public Safety d) June 24, 1994 - Minnesota Pollution Control Agency Above-Ground Tank Facility Notification Form e) August 19, 1996 - Minnesota Pollution Control Agency Above Ground Tank Facility Notification Form f) 1991 Dakota County Annual Report and Re-license Application g) January 31, 1995 - Correspondence to the Minnesota Department of Public Safety enclosing Tier Tow Turnaround Reports and MSDS h) 1995 Tier Tow Turnaround Report to State of Minnesota, Department of Public Safety i) Novemebr 29, 1994 - Hazardous Chemical Release/Inventory Fee Statement from the Minnesota Department of Public Safety j) May 7, 1998 - Hazardous Chemical Release/Inventory Fee Statement from the Minnesota Department of Public Safety k) December 15, 1995 - Cray Research, Inc., Modified Contingency Plan l) Correspondence from the Minnesota Department of Public Safety regarding verification report m) July 9, 1996 - Corresponence to the Minnesota Energy Commission regarding Pollution Prevention Plan and Report n) November 3, 1994 - Correspondence from Minnesota Emergency Response Commission enclosing three (3) Toxic Chemical Release Inventory forms o) February 27, 1992 - Correspondence to the Minnesota Emergency Response Board enclosing the 1991 Tier Two Turnaround Report p) February 27, 1993 - Correspondence to the Emergency Response Commission enclosing the Tier Tow Turnaround Report for 1992 q) 1994 Interoffice Memorandum Regarding Cray Research, Inc. EPA ID numbers and Air Permits r) August 26, 1991 - Correspondence to United States Environmental Protection Agency regarding Conditional Exempt Generator Status s) September 11, 1991 - Correspondence from United Statements Environmental Protection Association Regarding Generator Status t) September 15, 1995 - Correspondence to EPCRA Reporting Center Regarding Deletion of a SARA Title III Form R Report u) November 15, 1995 - Toxic Release Inventory Releasive Value Report v) December 5, 1995 - Toxic Release Inventory Releasive Value Report w) December 9, 1994 - Correspondence from EPCRA Reporting Center Regarding Toxic Release Inventory Reports x) June 27, 1991 - Correspondence to EPCRA Reporting Center Regarding Toxic Chemical Release Reporting Information y) August 21, 1992 - EPA Form R z) June 25, 1993 - Correspondence to EPCRA Reporting Center Regarding Toxic Chemical Release Reporting Information aa) July 23, 1991 - Notification of Regulated Waste Activity bb) August 21, 1992 - Correspondence to EPCRA Reporting Center Regarding Toxic Chemical Release Reporting Information cc) June 30, 1994 - Correspondence to EPCRA Reporting Center Regarding Toxic Chemical Reporting Information dd) September 15, 1995 - Correspondence to Minnesota Pollution Control Agency Regarding Pollution Prevention Plan or Report ee) August 15, 1995 - Correspondence to Minnesota Pollution Control Agency Regarding Air Emission Registration Premit No. 03700222-001 ff) April 24, 1997 - Correspondence to Minnesota Pollution Control Agency Regarding Request to Amend the Registration Option C Plan Text Permit for Cray Research gg) June 20, 1995 - Minnesota Pollution Control Agency Facility Information hh) 1995 Air Emission Inventory for Option C Registration Permitees - Minnesota Pollution Control Agency ii) 1996 Minnesota Pollution Control Agency Air Emissions Estimate jj) December 17, 1998 - Correspondence from Minnesota Pollution Control Agency Regarding 1997 Air Emissions Estimate kk) 1995 Emission Inventory Certification ll) April 4, 1996 - Internal correspondence Regarding Air Permit Invoice mm) August 21, 1992 - Correspondence to Minnesota Pollution Control Agency Regarding Pollution Prevention Plan and Report nn) March 29, 1993 - Correspondence to Minnesota Pollution Control Agency Regarding Storm Water Permit Application oo) August 25, 1993 - Correspondence to Minnesota Pollution Control Agency Regarding Pollution Prevention Plan and Report pp) January 11, 1995 - Correspondence to the Minnesota Pollution Control Agency Enclosing Hazardous Waste Manifest and Land Band qq) September 24, 1997 - Correspondence to the Minnesota Pollution Control Agency Regarding Manifest Inspection Data Tracking Form rr) September 12, 1986 - Correspondence to City of Eagan Regarding Environmental Impact Statement ss) April 27, 1987 - Correspondence to Minnesota Pollution Control Agency Indirect Source Permit ISP 87-3 b) Existing Phase I and Phase II Environmental Reports and/or wetlands analysis, if any, issued in connection with the property a) E86-196 Preliminary Environmental Evaluation - Braun Environmental Laboratories b) October 15, 1986 - Correspondence regarding E86 - 196 Addendum to Environmental Evaluation Report c) Bay West Environmental and "Green" Audit 6/23/94 (sent to Tom Alexander on February 22, 1999) d) Update on Bay West Audit 10/97 (sent to Tom Alexander on February 22, 1999). III. Copies of all governemental permits and approvals, including without limitation all indirect source permits and variances, granted in connection with the construction or operation of the property a) February, 1986 - Application for Indirect Source Permit b) April 10, 1989 - Permit Application of Waters of the State, Non-irrigation c) January 27, 1999 - Environmental, Health and Safety-Due Diligence for 655 Lone Oak Drive, Eagan, Minnesota d) 1992 - 1993, Dakota County Environmental Management Correspondence Enclosing Hazardous Waste Generator License e) 1995 - 1996, Dakota County Environmental Management correspondence Enclosing Hazardous Waste Generator License f) 1998 - 1999, Dakota County Environmental Management correspondence Enclosing Hazardous Waste Generator License g) October 28, 1992 - Dakota County Environmental Management Correspondence Enclosing Hazardous Waste Generator License Application h) July 15, 1991 - Dakota County Environmental Management Correspondence Enclosing Hazardous Waste Generator License Application i) July 16, 1991 - Dakota County Hazardous Waste Generator Fee Statement j) December 18, 1991 - Correspondence from Dakota County Regarding Hazardous Waste License k) February 1, 1995 - Dakota County Environmental Management Invoice l) February 5, 1997 - Dakota County Environmental Management Invoice m) January 13, 1998 - 1997 Hazardous Waste Generator Annual Report and License Renewal Application n) 1996 Hazardous Waste Base Tax for VSQGs o) July 18, 1991 - Correspondence from Dakota County Public Health Department Regarding Hazardous Waste Generator Inspection p) Commercial License from March 1, 1998 to 1999 q) May 12, 1987 - Correspondence from the Minnesota Pollution Control Agency Regarding Transfer of Indirect Source Permit 87-3 r) Indirect Source Permit (ISP) 92-11 (sent to Ed Driscoll on January 21, 1999) s) Ingress and Egress Easement in Connection with Private Project #89-E t) Letter Agreement of January 17, 1989 with Northwest Airlines, Inc. (delivered to Tom Alexander January 29, 1999) u) Correspondence of December 19, 1988 with Steven Rosholt, Counsel for City of Eagan with Tax Increment Financing Plan (delivered to Tom Alexander January 29, 1999) v) Correspondence of December 6, 1988 from Ronald A. Zamansky to City of Eagan regarding Tax increment Financing; (delivered to Tom Alexander January 29, 1999) w) Response of City of Eagan Counsel dated Janaury 12, 1989 to Ronald A. Zamansky. x) Limited OSHA Compliance Survey Report 6/19/96 sent to Tom Alexander on February 22, 1999) y) January 17, 1989, City of Eagan Resolutions regarding Tax Increment Financing (sent via fax to Tom Alexander March 2, 1999) IV. Pollution Legal Liability Select Policy by AIG Environmental in favor of WAM!NET INC. dated March 3, 1999. 5.l(p)3
EXHIBIT B MD Form No. 23-M-LIMITED WARRANTY DEED Minnesota Uniform Conveyancing Blanks (1/15/97) Miller - Davis CO., St. Paul, MN - ------------------------------------------------------- --------------------------------------------------------------------------- Corporation, Partnership or Limited Liability Company to Corporation, Partnership or Limited Liability Company - ------------------------------------------------------- No delinquent taxes and transfer entered; Certificate of Real Estate Value ( ) filed ( )not required. Certificate of Real Estate Value No. __________________ _______________________________________________________ Date _______________________________________________________ County Auditor by:____________________________________________________ Deputy - ------------------------------------------------------- DEED TAX DUE:__________________________________________ Date:__________________________________________________ - ------------------------------------------------------- --------------------------------------------------------------------------- FOR VALUABLE CONSIDERATION, WAM!NET INC.___________________________________________________________________________________________ ___________________________________________________________________________________________________________________________________ ____________________________________________________, a _______________________________corporation_______________ under the laws of the State of Minnesota, Grantor, hereby conveys and quitclaims to CCPRE-EAGAN, LLC_________________________________________________ ___________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________, Grantee, a limited liability company_______ under the laws of the State of Deleware_________________________________________, real property in ________________________________ Dakota____County, Minnesota, described as follows: SEE EXHIBIT A ATTACHED HERETO Together with all hereditaments and appurtenances. This Deed conveys after-acquired title. Grantor warrants that Grantor has not done or suffered anything to encumber the property, EXCEPT: SEE EXHIBITS B ATTACHED HERETO____________________________________________________________________________________________ - ----------------------------------------------------------------------------------------------------------------------------------- Check box if applicable [_] The Seller certifies that the seller does not know of any wells on the described real property. [_] A well disclosure certificate accompanies this document. [_] I am familiar with the property described in this instrument and I certify that the status and number of wells on the described real property have not changed since the last previously filed well disclosure certificate. WAM!NET INC. ----------------------------------- By -------------------------------- Its ----------------------------- Affix Deed Tax Stamp here By -------------------------------- STATE OF MINNESOTA Its ----------------------------- COUNTY OF __________ This instrument was acknowledged before me on_____________________________________________________________________________, (Date) by _____________________________________________________ and _____________________________________________________________, the ____________________________________________________ and ______________________________________________________________ of WAM!NET INC._____________________________________________________________, a ____________ corporation under the laws of _______ the State of Minnesota, on behalf of the __________________________ corporation - --------------------------------------------------------------- ------------------------------------------------------------------- NOTARIAL STAMP OR SEAL (OR OTHER TITLE OR RANK): ____________________________________________ SIGNATURE OF NOTARY PUBLIC OR OTHER OFFICIAL [_] Check here if part or all of the land is Registered (Torrens) - --------------------------------------------------------------- ------------------------------------------------------------------- THIS INSTRUMENT WAS DRAFTED BY (NAME AND ADDRESS): Tax Statements for the real property described in this instrument should be sent to (include name and address of Grantee): Thomas F. Alexander Larkin, Hoffman, Daly & Lindgren, Ltd. 1500 Norwest Financial Center 7900 Xerxes Avenue South Bloomington, MN 55431 (612) 835-3800 (247935) - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A TO LIMITED WARRANTY DEED Legal Description: - ------------------ Lots 1 and 2, Block 1, Cray Second Addition, according to the recorded plat thereof, Dakota County, Minnesota EXHIBIT B TO LIMITED WARRANTY DEED 1. Terms and conditions of Lease as evidenced by Memorandum of Lease dated as of March 4, 1999, filed of record March 8, 1999, as Document No. 1586099, by and between Wam!Net Inc., a Minnesota corporation, Lessor, and Silicon Graphics, Inc., a Delaware corporation, Lessee. 2. Terms and conditions of the unrecorded Allocation of Parking Spaces Agreement dated March 4, 1999, by and between Cray Research, L.L.C., and Wam!Net Inc. 3. Agreement (Land Use Covenants and Restrictions) dated December 2, 1986, filed or record December 3, 1986, as Document No. 754646, by and between First National Bank of Minneapolis, and JAR Eagan Properties, Inc., a Delaware corporation, as amended by Amendment to Agreement (Land Use Covenants and Restrictions) dated February 28, 1992, filed of record March 8, 1999, as Document No. 1586097. 4. Terms and conditions of Development Rights Distribution Agreement dated as of March 4, 1999, filed of record March 8, 1999, as Document No. 1586100, by and between Cray Research, L.L.C., a Delaware limited liability company, and WAM!NET Inc., a Minnesota corporation. 5. Term and conditions of Lease as evidenced by Memorandum of Lease dated as of September 30, 1999, filed of record _______________________, 1999, as Document No. ______________, by and between CCPRE-Eagan, LLC, a Delaware limited liability company, as Landlord, and WAM!NET Inc., a Minnesota corporation, as Tenant. Grantor hereby reserves all of Grantor's right, title and interest in and to the subject property under and pursuant to said Lease. EXHIBIT D ASSIGNMENT OF PERMITS, CONTRACTS AND INTANGIBLES THIS ASSIGNMENT (this "Assignment") is made as of September __, 1999, by WAM!NET INC., a Minnesota corporation ("Assignor"), in favor of CCPRE-EAGAN, LLC, a Delaware limited liability company ("Assignee"). All capitalized terms used herein but not defined herein shall have the meanings given to such terms in that certain Purchase and Sale Agreement dated as of September __, 1999, between Assignor and Assignee (the "Purchase Agreement"). Unless otherwise defined herein or unless the context otherwise requires, capitalized terms used in this Assignment shall have the same meaning as in that certain Purchase and Sale Agreement and Escrow Instructions by and between Assignor, as seller, and Assignee, as purchaser, dated as of September __, 1999. FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, Assignor hereby grants, sells, transfers and assigns unto Assignee, if and to the extent assignable, all of the right, title and interest, if any, of Assignor in, to and under any and all of the following items, to the extent that they are related to that certain real property located in the County of Dakota, State of Minnesota, which is legally described on Exhibit A attached hereto (the "Real Property"): (a) Any and all Contracts, except for Excluded Contracts; (b) Any and all Permits, except for Excluded Permits; (c) Any and all Warranties; (d) Any and all Development Agreements; and (e) all rights, benefits and indemnities inuring to Assignor's benefit under that certain Sale and Purchase Agreement dated March 3, 1999 by and between Silicon Graphics, Inc. and Cray Research LLC, as seller and Assignor, as purchaser. Assignee hereby accepts the foregoing assignment and agrees to assume the obligations of Assignor, if any, under any of the foregoing that arise from and after the date hereof. The provisions of this Assignment shall be binding upon, and shall inure to the benefit of, the successors and assigns of Assignor and Assignee, respectively. This Assignment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, Assignor and Assignee have caused their duly authorized representatives to execute this Assignment in duplicate original as of the date first above written. ASSIGNOR: WAM!NET INC. By: ----------------------------------- Name: Title: ASSIGNEE: CCPRE - EAGAN, LLC By: ----------------------------------- Name: Title: EXHIBIT A Legal Description of Real Property Lots 1 and 2, Block 1, Cray Second Addition, according to the recorded plat thereof, Dakota County, Minnesota. EXHIBIT F TENANT ESTOPPEL CERTIFICATE THIS TENANT ESTOPPEL CERTIFICATE (this "Certificate") is made by SILICON GRAPHICS, INC., a Delaware corporation, on behalf of itself and its successors and assigns ("Tenant"), for the benefit of CCPRE-EAGAN, LLC, a Delaware limited liability company ("Purchaser") and to any lender or investor supplying financing to Purchaser, including without limitation, Deutsche Bank Mortgage Capital, L.L.C. ("Lender"), with the understanding that Purchaser and Lender and their respective counsel will rely on this Certificate in connection with the acquisition and financing of the premises located at 655 Lone Oak Parkway, Eagan, Minnesota (the "Property"). Tenant hereby certifies as follows: 1. Lease. The undersigned, on behalf of itself and its wholly-owned subsidiary, Gray Research, L.L.C., a Delaware limited liability company, is the tenant under that certain lease (the "Lease") dated as of March 4, 1999, a true, complete and correct copy of which is attached hereto as Exhibit A-I. Capitalized terms used herein but not defined herein shall have the meaning given to such terms in the Lease. Except with respect to the proposed amendment to the Lease, a true, complete and correct copy of which is attached hereto as Exhibit A-2, the Lease is the entire agreement between Landlord (or any affiliated party) and Tenant (or any affiliated party) pertaining to the Premises (as defined herein). There are no modifications, amendments, supplements, renewals or assignments of the Lease. The Lease is in full force and effect in accordance with its terms. There are no other oral or written side agreements, representations or warranties by Landlord, which entitle Tenant to payments or credits from Landlord or which entitle Tenant to expand or contract the Premises or to extend or contract the term of the Lease. The Lease has been duly executed and delivered by, and is a binding obligation of, Tenant. 2. Leased Premises. The premises covered by the Lease (the "Premises") consist of a total of approximately 341,941 square feet comprised of approximately ___ square feet in Building D, approximately ___ square feet in Building E and all of Building F, containing approximately ___ square feet within the buildings known as Building D, E and F. Tenant has vacated all of Building A and 76,633 square feet in Building E in accordance with the terms of the Lease. Any and all Demising Improvements required or desired in connection with the vacating by Tenant of Building A and Building E have been completed and paid for in full, except for approximately $40,000. Exhibit B sets forth a complete description of any and all such Demising Improvements. 3. Term of Lease. The Lease commenced on March 4, 1999 and, unless otherwise terminated in accordance with the terms of the Lease or unless Tenant exercises its early termination rights as set forth in Article 2, will expire on May 31, 2004. 4. Rents. (a) The present amount of monthly Base Rent payable under the Lease is $325,796.00 and has been paid in full through August 31, 1999. (b) In addition to Base Rent, Tenant is currently paying $_______ per month as additional rent to cover Tenant's Proportionate Share of Operating Expenses. Attached hereto as Exhibit C as is a true, complete and correct copy of the most recent written estimate of the Operating Expenses for the 1999 calendar year (the "1999 Operating Expense Statement"). Tenant's Proportionate Share is currently sixty-seven and eighth tenths percent (67.8%). 5. Security Deposit. Landlord is not holding any security deposit under the Lease. 6. Renewal and Extention Options. Tenant does not have any right or option to renew or extend the term of the Lease or to expand into any additional space or to terminate the Lease in whole or in part prior to the expiration of the term except as expressly set forth in the Lease. 7. Acceptance of Premises. Tenant has unconditionally accepted the Premises. Tenant has taken possession and is in occupancy of the and as of the date hereof Tenant is not aware of any defect in the Premises. To Tenant's knowledge, without independent investigation, Landlord has satisfied all commitments made to induce Tenant to enter into the Lease; there are no offsets or credits against rentals payable under the Lease; no free periods of rent, tenant improvements, contributions or other concessions have been granted to Tenant; Landlord is not reimbursing Tenant or paying Tenant's rent obligations under any other lease; and Tenant has not advanced any funds for or on behalf of Landlord with respect to Landlord's obligations under the Lease for which Tenant has a right of deduction from, or set off against, future rent payments under the Lease. 8. No Landlord Defaults. All obligations of Landlord under the Lease have been performed, and, to the best of Tenant's knowledge, no event has occurred and no condition exists that, with the giving of notice or lapse of time or both, would constitute a default by Landlord under the Lease. To Tenant's knowledge, there are no offsets or defenses that Tenant has against the full enforcement of the Lease by Landlord. 9. No Tenant Defaults. Tenant is not in any respect in default under the Lease and has not assigned, transferred or hypothecated the Lease or any interest therein or subleased all or any portion of the Premises. Tenant is not insolvent and is able to pay its debts as they mature. Tenant has not declared bankruptcy or filed a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, Tenant has no present intentions of doing so, and no such proceeding has been commenced against Tenant seeking such relief, and Tenant has no knowledge that any such proceeding is threatened. 10. Purchase Options. Tenant does not have any right or option to purchase all or any part of the Property. 11. Notices to Ground Lessor. Tenant from and after the date hereof shall send a copy of any notices under the Lease to Lender at the same time such notice or statement is sent to Landlord under the Lease and agrees that, notwithstanding any provisions of the Lease to the contrary, such notice shall not be effective unless Lender shall have been given such notice and shall have failed to cure such default as herein provided. All notices given under this Agreement shall be sent by certified or registered mail, postage prepaid, return receipt requested, or shall be delivered to the parties at the addresses set forth above (or at such other addresses as the parties hereto shall specify in a written notice to the other parties at the addresses specified herein). Any notices hereunder shall be deemed to be given on the earlier to occur of (a) the day of receipt or (b) three (3) days after deposit in the mail. 12. Other Agreements. The terms and provisions of this Certificate shall not be deemed to affect the rights and obligations of Landlord and Tenant under any other document to which Landlord and Tenant are a party. 13. No Further Amendment. Tenant agrees that no future modifications or amendments of the Lease will be enforceable unless the modification or amendment has been consented to in writing by the Purchaser and Lender. 14. No Assignments. Tenant has no notice of any assignment of the Lease by Landlord, or any assignment, hypothecation or pledge of rents accruing under the Lease by Landlord. 15. Payment of Rent. Tenant represents that it has not and Tenant further agrees that, from and after the date hereof, the Tenant shall not pay any rent under the Lease more than thirty (30) days in advance of its due date and will not assign or sublet its interest in the Demised Premises or any portion thereof or make or cause to be made any additions, alterations or improvements to the Demised Premises except as expressly permitted under the Lease without the prior written consent of the Landlord and Purchaser. 16. Successors and Assigns. This Certificate is made for the benefit of, and may be relied upon by, the Purchaser and the Lender and their respective successors and assigns. 17. Due Authorization. The person executing this Certificate is authorized by Tenant to do so and the execution hereof is the binding act of Tenant enforceable against Tenant. Dated: September ____, 1999 SILICON GRAPHICS, INC. By: ----------------------------------- Name: ------------------------------ Title: ----------------------------- EXHIBIT K TO PURCHASE AGREEMENT 1999 Grand Total - Facility end Services
Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 - ---------------- ------------ ------------ ------------ ------------ ------------- ------------ Labor and $40,508 $40,508 $40,508 $40,508 $40,508 $4,508 Benefits Travel and $2,722 $2,722 $2,722 $1,850 $1,850 1,850 Training Repairs $9,109 $9,109 $9,109 $9,133 $9,133 $9,133 Contract $71,038 $71,038 $71,038 $68,722 $78,722 $93,131 Services Supplies $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 Janitorial $39,046 $39,046 $39,046 $38,937 $38,937 $38,937 Security $39,161 $39,161 $39,161 $37,982 $37,982 $39,482 Grounds $40,000 $40,000 $26,500 $6,408 $6,408 $6,408 Utilities $34,573 $34,573 $34,573 $34,573 $34,573 $34,573 Insurances $10,891 $10,891 $10,891 $10,891 $10,891 $10,891 Other $1,138 $1,138 $1,138 $319 $319 $319 - ---------------- ------------ ------------ ------------ ------------ ------------- ------------ Subtotal $302,186 $302,186 $288,686 $263,323 $273,323 $252,782 Taxes $134,000 $134,000 $134,000 $134,000 $134,000 $134,000 - ---------------- ------------ ------------ ------------ ------------ ------------- ------------ Grand Total $436,168 $436,186 $422,686 $397,323 $407,323 $386,782 ================ ============ ============ ============ ============ ============= ============
[WIDE TABLE CONTINUES BELOW]
Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99 TOTAL - ---------------- ------------ ------------ ------------ ------------ ------------- ------------ ------------- Labor and $40,420 $40,420 $40,420 $41,278 $41,278 $41,278 $451.692 Benefits Travel and $2,400 $2,400 $2,400 $7,400 $2,400 $2,400 $33,116 Training Repairs $9,005 $9,555 $9,005 $11,205 $7,905 $7,905 $109.306 Contract $56,007 $63,403 $73,457 $56,007 $76,438 $73,457 $852,458 Services Supplies $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $168,000 Janitorial $39,100 $39,100 $39,100 $39,100 $39,100 $39,100 $468,549 Security $39,500 $39,500 $39,500 $39,500 $39,500 $39,500 $469,929 Grounds $4,000 $4,000 $4,000 $4,000 $26,500 $40,000 $208,224 Utilities $34,573 $34,573 $34,573 $34,573 $34,573 $34,573 $414.876 Insurances $10,891 $10,891 $10,891 $10,891 $10,891 $10,891 $10,891 Other $1,548 $1,548 $1,548 $1,548 $1,548 $1,548 $13,659 - ---------------- ------------ ------------ ------------ ------------ ------------- ------------ ------------- Subtotal $251,444 $259,390 $268,894 $259,502 $294,133 $304,652 $3,320,501 Taxes $134,000 $134,000 $134,000 $134,000 $134,000 $134,000 $1,608,000 - ---------------- ------------ ------------ ------------ ------------ ------------- ------------ ------------- Grand Total $385,444 $393,390 $402,894 $393,502 $428,133 $438,652 $4,928,501 ================ ============ ============ ============ ============ ============= ============ =============
Date: 9/17/99. Prepared by: Nelson, Tietz 8 Hoye. Source: Information furnished and deemed reliable by Wam!Net. K-1 Eagan Operating Expenses 1998 - -------------------------------------------------------------------------------- Data Center Facilities TOTAL ------------------------------------------- Operations $336,000 $1,139,000 $1,475,000 Labor and benefits Travel & Training Repairs Contract Services Repairs/Contract Services - Data Center Supplies Security Janitorial $ 37,000 $ 360,000 $ 397,000 Grounds $ - $ 246,000 $ 246,000 Utilities $ - $ 390,000 $ 390,000 Insurance $ - $ 130,000 $ 130,000 Property Taxes $ - $1,743,000 $1,743,000 - -------------------------------------------------------------------------- TOTAL $373,000 $4,008,000 $4,381,000 ========================================================================== - -------------------------------------------------------------------------------- Date: 9/17/99. Prepared by: Nelson, Tietz & Hoye. Source: Information furnished and deemed reliable by Wam!Net. K-2 Eagan Operating Expenses 1997 - -------------------------------------------------------------------------------- Data Center Facilities TOTAL --------------------------------------------- Operations $230,000 $1,810,000 $2,040,000 Labor and benefits Travel & Training Repairs Contract Services Repairs/Contract Services - Data Center Supplies Security Janitorial $ 30,000 $ 390,000 $ 420,000 Grounds $ - $ 250,000 $ 250,000 Utilities $ - $ 434,000 $ 434,000 Insurance $ 36,000 $ 100,000 $ 136,000 Property Taxes $ - $1,600,000 $1,600,000 - -------------------------------------------------------------------------- TOTAL $296,000 $4,584,000 $4,880,000 ========================================================================== - -------------------------------------------------------------------------------- Date: 9/17/99. Prepared by: Nelson, Tietz & Hoye. Source: Information furnished and deemed reliable by Wam!Net. K-3 EX-10.29 3 AMENDMENT NO. 1 TO PURCHASE & SALE AGREEMENT Exhibit 10.29 AMENDMENT NO. ONE TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS THIS AMENDMENT is made this 30th day of September, 1999, by and between WAM!NET INC. ("Seller") and CCPRE-EAGAN, LLC ("Purchaser"). RECITALS -------- Seller and Purchaser entered into that certain Purchase and Sale Agreement and Escrow Instructions (the "Purchase Agreement") dated September 30, 1999 regarding the sale and purchase of property located at 655 Lone Oak Drive, Eagan, Minnesota, as more specifically described in Purchase Agreement. Seller and Purchaser desire to amend the Purchase Agreement as set forth hereinbelow. NOW, THEREFORE, in consideration of One Dollar and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by both parties, Seller and Purchaser hereby agree as follows: 1.) Recitals. The foregoing recitals are correct and are incorporated -------- herein. 2.) Definitions. Unless otherwise defined in this Amendment or unless the ----------- context otherwise requires, capitalized terms used in this Amendment shall have the same meaning as in the Purchase Agreement. 3.) Contract for Deed. Purchaser shall purchase, and Seller shall sell, ----------------- the Property pursuant to a contract for deed (the "Contract for Deed"). Seller and Purchaser shall execute and deliver counterparts of the Contract for Deed on the Closing Date. The Deed shall not be delivered to Purchaser on the Closing Date. Seller shall deposit the Deed in escrow with the Title Company to hold in trust for Seller pending full payment and performance by Purchaser under the Contract for Deed. Upon such full payment and performance, Seller shall authorize and instruct the Title Company to deliver the Deed to Purchaser. 4.) Closing. Section 8.1 is hereby amended to change the Closing Date ------- from September 3, 1999 to September 30, 1999. 5.) Nullification of Assignments. In the event of a default by Purchaser ---------------------------- under the Contract for Deed and cancellation of the Contract for Deed, (i) the assignment or other transfer by Seller to Purchaser of any other rights or benefits pertaining to the Property, including, but without limitation, contracts, development agreements, permits (including, but without limitation, the indirect source permit), warranties and any other rights, title, interest or benefits (collectively the "Rights") assigned or transferred by Seller to Purchaser, shall be deemed null and void and automatically reassigned and transferred by Purchaser to Seller, and (ii) Purchaser shall cooperate with Seller and execute such documents as reasonably requested to further evidence the assignment and transfer of the Rights back to Seller. This Section 5 shall survive closing and shall not merge with the Contract for Deed or any other closing document. 6.) Ratification. As hereby amended, the Purchase Agreement is hereby ------------ ratified and affirmed by Seller and Purchaser. 7.) Facsimile Signatures. Facsimile signatures on the Purchase Agreement -------------------- and/or this Amendment shall be deemed effective and enforceable. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. SELLER: WAM!NET INC. By: ___________________________ Its: PURCHASER: CCPRE-EAGAN, LLC By: ___________________________ Its: 2. EX-10.30 4 CCPRE- EAGAN, LLC & WAM!NET INC. NET LEASE Exhibit 10.30 ================================================================================ CCPRE-EAGAN, LLC, Landlord AND WAM!NET INC., Tenant ____________________________________ NET LEASE _______________________________ Dated As of September ___, 1999 ================================================================================ THIS LEASE (this "Lease"), dated as of September __, 1999, between CCPRE-EAGAN, LLC, a Delaware limited liability company having an office c/o Chase Capital Partners, 380 Madison Avenue, New York, New York 10017 ("Landlord"), and WAM!NET INC., a Minnesota corporation having an office at 655 Lone Oak Drive, Eagan, Minnesota ("Tenant"). Landlord desires to lease and demise to Tenant, and Tenant desires to lease, hire and take from Landlord, the Demised Premises (as hereinafter defined) upon the terms and conditions hereinafter set forth. Accordingly, the parties hereto hereby agree as follows: ARTICLE 1 DEMISE OF PREMISES ------------------ Landlord, for and in consideration of the rents to be paid and of the covenants and agreements hereinafter contained to be kept and performed by Tenant, hereby demises and leases to Tenant, and Tenant hereby leases, hires and takes from Landlord upon the terms and conditions herein contained the Demised Premises, for the term hereinafter set forth; SUBJECT, HOWEVER, to the following: (i) any state of facts which an inspection or survey would show;. (ii) Impositions (as defined in Section 6.1 hereof); (iii) grants, licenses or consents, if any, with respect to public utility lines and equipment; (iv) rules and regulations adopted by the Governmental Authorities (as hereinafter defined) now or hereafter having jurisdiction over the Demised Premises and the use and improvement thereof; (v) present and future zoning laws, ordinances, resolutions and regulations and orders of the Governmental Authorities; (vi) the effect of all tenants, including without limitation SGI (as defined herein), present and future municipal, state and federal laws, orders and regulations relating to tenants and subtenants, their rights and rentals to be charged for the use of all or part of the Demised Premises; (vii) violations of law, ordinances, orders or requirements that might be disclosed by an examination and inspection or search of the Demised Premises by any of the Governmental Authorities, as the same may exist on the date of the commencement of the Term; (viii) the condition and state of repair of the Demised Premises as the same may exist on the date of the commencement of the term of this Lease and Landlord 1. makes no warranty or representation of any kind with respect thereto, INCLUDING IN RESPECT OF ANY FIXTURES OR OTHER ITEMS OF PERSONAL PROPERTY, LANDLORD MAKES NO EXPRESS OR IMPLIED WARRANTY WHATSOEVER OF MERCHANTABILITY OR FITNESS FOR PURPOSE; (ix) covenants, conditions, restrictions, easements, rights, licenses, leases or any other matters affecting title except those caused by the acts or omissions of Landlord, unless approved in writing by Tenant, whether or not of record; (x) any defects of title or encumbrances or encroachments, existing at the date of the commencement of the Term whether or not of record; (xi) assessments or installments of assessments becoming a lien against the Demised Premises during the term of this Lease; TO HAVE AND TO HOLD the same, subject as aforesaid, unto Tenant, and, subject to the provisions hereof, its permitted successors and assigns, for the term hereinafter specified. ARTICLE 2 CERTAIN DEFINITIONS AND INTERPRETIVE PROVISIONS ----------------------------------------------- (a) Unless the context otherwise requires, the terms defined below have the meanings set forth below: (i) "AAA" has the meaning given to it in Section 10.5 of this Lease. (ii) "Additional Rent" has the meaning given to it in Section 5.3 of this Lease. (iii) "CPI" has the meaning given to it in Section 46.3(c) of this Lease. (iv) "Default" means an Event of Default and any event which would constitute an Event of Default if any requirement in connection therewith for the giving of notice, or the lapse of time or the happening of any further condition, event or action had been satisfied. (v) "Demised Premises" means the Land, Improvements and Personal Property each as defined in the Original Purchase Agreement, located in Eagan, Minnesota, the real property element of which is described on Exhibit A attached hereto. --------- (vi) "Event of Default" has the meaning given to it in Section 22.1 of this Lease. (vii) "Fixed Rent" has the meaning given to it in Section 5.1 of this Lease. 2. (viii) "Governmental Authorities" means municipal, county, state and Federal governments, agencies, departments, authorities, both public and quasi-public, courts, boards, bureaus, commissions and officers. (ix) "Hazardous Material" means any hazardous or toxic substance, material or waste which is or becomes regulated by any Governmental Authority and any other flammable, explosive or radioactive material, hazardous waste or material, toxic waste or material or other similar substances, including substances regulated under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et. seq.), the Hazardous Materials Transportation -- --- Act, as amended (49 U.S.C. Section 1801, et. seq.), the Resource -- --- Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901, et. -- seq.). --- (x) "Imposition" or "Impositions" has the meaning given to them in Section 6.1 of this Lease. (xi) "Improvements" shall have the meaning attributed to it in the Original Purchase Agreement now or hereafter located on the Demised Premises and any restoration, addition to or replacement thereof. (xii) "Interest Rate" means the lesser of (i) two percent (2%) per annum in excess of the rate publicly announced from time to time by Citibank, N.A. in New York City as its prime rate or (ii) the maximum applicable legal rate, if any. (xiii) "Insurance Threshold Amount" has the meaning given to it in Section 8.4 of this Lease. (xiv) "Lease" means this lease. (xv) "Major Sublease" has the meaning given to it in Section 22.1(h). (xvi) "Mortgagee" means the holder of any Underlying Mortgage. (xvii) "Original Purchase Agreement" has the meaning given to it in Section 47(a) of this Lease. (xviii) "Proceeding" means the taking of the whole or of a part of the Demised Premises by virtue of eminent domain or for any public or quasi public purpose (or by deed in lieu thereof). (xix) "SGI" means Silicon Graphics, Inc. and Cray Research, LLC, a wholly owned subsidiary of Silicon Graphics, Inc. (xx) "SGI Lease" means the lease dated as of March 4, 1999, between Tenant, as landlord and SGI, as tenant. (xxi) "Superior Lessor" means the landlord under any Underlying Lease. 3. (xxii) "Underlying Lease" means any lease which now affects or may hereafter affect Landlord's interest in the Demised Premises. (xxiii) "Underlying Mortgage" means any mortgage or deed of trust which now affects or which may hereafter affect Landlord's interest in the Demised Premises. (b) Interpretation. No provision of this Lease will be interpreted -------------- in favor of, or against, any of the parties hereto by reason of the extent to which any such party or its counsel participated in the drafting thereof or by reason of the extent to which any such provision is inconsistent with any prior draft hereof. The use in this Lease of the term "including" means "including, --------- ---------- without limitation." The words "herein", "hereof", "hereunder", "hereby", - ------------------ ------ ------ --------- ------ "hereto", "hereinafter", and other words of similar import refer to this Lease ------ ----------- as a whole, including the schedules and exhibits, as the same may from time to time be amended, modified, supplemented or restated, and not to any particular article, section, subsection, paragraph, subparagraph or clause contained in this Lease. All references to articles, sections, subsections, clauses, paragraphs, and exhibits mean such provisions of this Lease and the schedules and exhibits attached to this Lease, except where otherwise stated. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Lease has been chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party. ARTICLE 3 USE OF DEMISED PREMISES ----------------------- Tenant covenants and agrees that it will use and occupy the Demised Premises, or cause the same to be used and occupied for purposes of general, administrative and sales office, research and development, training and any other lawful purpose incidental thereto, in addition to all lawful uses currently being made of the Demised Premises, as well as any other uses permitted under the SGI Lease. Tenant shall not at any time during the Term use or occupy the Demised Premises, nor knowingly permit the Demised Premises to be used or occupied; (i) in violation of any certificate of occupancy or certificate of compliance covering or affecting all or part of the Demised Premises (as the same may be modified from time to time) or of any law, ordinance, order or regulation of the Governmental Authorities (collectively "Law"), (ii) in a manner to cause a reduction in the coverage or a termination of any insurance policy or policies relating to the Demised Premises or which is not in compliance with the requirements of insurance bodies which impose any violation or duty on Landlord or Tenant with respect to the Demised Premises, (iii) in a manner which constitutes waste, damage, disfigurement or injury to the Improvements, or (iv) in a manner which will constitute a public or private nuisance or in connection with any dangerous, noxious or offensive business. 4. ARTICLE 4 TERM OF LEASE ------------- The term of this Lease shall commence on the date hereof (the "Commencement Date") and shall expire, unless sooner terminated as hereinafter provided, on the date immediately prior to the twentieth (20th) anniversary of such date on September 30, 2019 (the "Expiration Date"). ARTICLE 5 FIXED RENT AND ADDITIONAL RENT ------------------------------ SECTION 5.1 Tenant shall pay to Landlord during the term of this Lease in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, at the address of Landlord for notices as specified in ARTICLE 38 or at such other address as Landlord shall specify by written notice to Tenant, a fixed net annual rental (the "Fixed Rent"), over and above the other additional payments to be made by Tenant as hereinafter provided. The Fixed Rent for each year of the term of this Lease shall be paid by Tenant to Landlord in equal monthly installments in advance on the twentieth (20th) day of each calendar month during the term of this Lease (or if that day is a Saturday, Sunday or holiday, on the next business day thereafter) as follows:
----------------------------------------------------------------------------- Lease Year Fixed Rent ------------ ----------------------- ----------------------------------------------------------------------------- 1-3 $5,768,688.00 per annum ($480,724.00 per month) ----------------------------------------------------------------------------- 4 $6,633,991.20 per annum ($552,832.60 per month) ----------------------------------------------------------------------------- 5 $6,866,180.89 per annum ($572,181.74 per month) ----------------------------------------------------------------------------- 6 $7,106,497.22 per annum ($592,208.10 per month) ----------------------------------------------------------------------------- 7 $7,355,224.62 per annum ($612,935.39 per month) ----------------------------------------------------------------------------- 8 $7,612,657.48 per annum (per month $634,388.12) ----------------------------------------------------------------------------- 9 $7,879,100.49 per annum ($656,591.71) per month ----------------------------------------------------------------------------- 10 $8,154,869.01 per annum -----------------------------------------------------------------------------
5.
----------------------------------------------------------------------------- Lease Year Fixed Rent ------------ ----------------------- ----------------------------------------------------------------------------- ($679,572.42 per month) ----------------------------------------------------------------------------- 11 $8,440,289.43 per annum ($703,357.45 per month) ----------------------------------------------------------------------------- 12 $8,735,699.56 per annum ($727,974.96 per month) ----------------------------------------------------------------------------- 13 $9,041,449.04 per annum ($753,454.09 per month) ----------------------------------------------------------------------------- 14 $9,357,899.76 per annum ($779,824.98 per month) ----------------------------------------------------------------------------- 15 $9,685,426.25 per annum ($807,118.85 per month) ----------------------------------------------------------------------------- 16 $10,024,416.16 per annum ($835,368.01 per month) ----------------------------------------------------------------------------- 17 $10,375,270.72 per annum ($864,605.89 per month) ----------------------------------------------------------------------------- 18 $10,738,405.19 per annum ($894,867.10 per month) ----------------------------------------------------------------------------- 19 $11,114,249.37 per annum ($926,187.54 per month) ----------------------------------------------------------------------------- 20 $11,503,248.09 per annum ($958,604.01 per month) -----------------------------------------------------------------------------
The first monthly installment of Fixed Rent (the "First Installment") in the amount of $480,724.00 shall be paid upon execution of this Lease. The First Installment shall be applied against Fixed Rent due for the first full month of the Term. In addition, if the Commencement Date shall occur on a date which is not the first day of a month, Tenant shall pay to Landlord upon execution of this Lease together with the payment of the First Installment an amount equal to the pro-rated amount of Fixed Rent for the number of days remaining in the month in which the Commencement Date occurs. The term "Lease Year" shall mean the twelve (12) month period commencing on the Commencement Date (if that date is the first day of a month) or commencing on the first day of the month immediately following the Commencement Date (if that date is not the first day of a month but, in such event, the first Lease Year shall include the days between the Commencement Date and the first day of the following month). 6. SECTION 5.2 (a) The liability and obligation of Tenant to pay the Fixed Rent is a separate, absolute, unconditional and independent covenant. Tenant shall pay the Fixed Rent without notice, demand, set-off, counterclaim, deduction, defense, abatement, suspension, deferment, recoupment, diminution or reduction. (b) Except as otherwise expressly provided in ARTICLE 10 of this Lease, Tenant shall have no right to terminate this Lease or to be released, relieved or discharged from any obligations or liabilities hereunder for any reason whatsoever, including without limitation: (i) any damage to or destruction of all or part of the Demised Premises; (ii) any limitation, restriction, deprivation or prevention of, or any interference with, any use of all or part of the Demised Premises; (iii) any taking of all or part of the Demised Premises by condemnation or otherwise; (iv) any eviction from all or part of the Demised Premises, following an Event of Default; (v) any action, omission or breach on the part of Landlord under this Lease or under any other agreement at the time existing between Landlord and Tenant; (vi) any claim as a result of any other business dealings of Landlord or Tenant; and (vii) any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, winding up or similar proceeding involving or affecting Landlord. SECTION 5.3 Tenant shall also pay, as additional rent, all Impositions and all sums, costs, expenses and other payments which Tenant under any of the provisions of this Lease assumes or agrees to pay (which Impositions and all sums, costs, expenses and other payments are hereinafter collectively called "Additional Rent"), and, in the event of any nonpayment of Additional Rent, Landlord shall have all the rights and remedies provided herein or by law in the case of nonpayment of Fixed Rent. SECTION 5.4 This Lease is a net lease and the Fixed Rent shall be absolutely net to Landlord (except for Landlord's administrative and internal costs), so that this Lease shall yield, net, to Landlord, 7. the Fixed Rent during the term of this Lease, and, all costs, expenses and obligations of every kind and nature whatsoever relating to the Demised Premises which arise and are attributable to the ownership, operation, use and/or occupancy of the Demised Premises during the term of this Lease shall be paid by Tenant and Tenant shall indemnify and save Landlord harmless against the same. SECTION 5.5 Unless and until an Event of Default shall occur hereunder, Tenant may pay the Fixed Rent by unendorsed check payable to Landlord, subject to collection; provided, however, that, from and after the occurrence of any Event of Default - -------- ------- and whether or not the same may thereafter be cured, Landlord may, by notice to Tenant, thereafter require Tenant to pay the Fixed Rent by unendorsed certified or official bank check payable to Landlord drawn on a bank or trust company reasonably acceptable to Landlord in which event Tenant may elect to pay by such check or by wire transfer of immediately available federal funds to an account designated by Landlord. SECTION 5.6 (a) Tenant shall deposit with Landlord upon the earlier to occur of (i) a default by SGI under the SGI Lease or (ii) the later to occur of (aa) the expiration of the SGI Lease or (bb) July 1, 2001, an amount equal to One Million Four Hundred Thousand One Hundred Seventy-Two and 00/100 Dollars ($1,442,172.00), referred to herein as the "Security Deposit Amount". The Security Deposit Amount which is deposited by Tenant under this Section and any interest and earnings thereon (the "Security Deposit") shall serve as security for the full and faithful performance and observance by Tenant of Tenant's covenants and obligations under this Lease, and shall be deposited in an interest bearing account earning not less than money market rates in a bank chosen by Landlord, and all interest thereon shall be paid monthly to Tenant. (b) Effective as of the date that is four (4) years from the date hereof (the "Fourth Anniversary"), the Security Deposit Amount shall be increased by Two Hundred Sixteen Thousand Three Hundred Twenty-five and 80/100 Dollars ($216,325.80) (the "Fourth Anniversary Supplemental Security Deposit Amount") to One Million Six Hundred Fifty-eight Thousand Four Hundred Ninety- seven and 80/100 Dollars ($1,658,497.80). Tenant, on or before the Fourth Anniversary, shall deliver to Landlord an amount equal to the Fourth Anniversary Supplemental Security Deposit Amount. (c) Effective as of the date that is five (5) years from the date hereof and each annual anniversary thereafter (each "Annual Anniversary Date"), the Security Deposit Amount shall be increased by an amount (the "Annual Security Deposit Supplemental Amount") equal to three and one-half percent (3.5%) of the Security Deposit Amount for the immediately preceding Lease Year. Tenant, on or before each Annual Anniversary Date, shall deliver to Landlord an amount equal to the Annual Security Deposit Supplemental Amount. (d) Landlord may, but shall not be required to, use, apply or retain the whole or any part of the Security Deposit to the extent required for the payment of any Fixed Rent and 8. other Additional Rent or for any sum which Landlord may reasonably expend or may be required to expend by reason of an Event of Default whether accruing before or after summary proceedings or other re-entry by Landlord. If Landlord shall so use, apply or retain the whole or any part of the Security Deposit, Tenant shall, upon demand, immediately deposit with Landlord a sum equal to the amount so used, applied or retained. The Security Deposit together with accrued interest thereon, less any portion of the Security Deposit to which Landlord is entitled pursuant to the terms of this Lease, shall be paid to Tenant immediately after the date fixed as the end of this Lease and after delivery to Landlord of entire possession of the Demised Premises in the manner required by the terms of the Lease. (e) Tenant shall have the right to furnish to Landlord, at Tenant's sole cost and expense, in lieu of and in substitution for the whole (and not part) of the Security Deposit, a clean, transferable, irrevocable and unconditional letter of credit (the "Letter of Credit") drawn in favor of Landlord on a member bank of the New York Clearinghouse Associates or such other bank as Landlord shall have approved, in its discretion in writing, and substantially in the form attached hereto as Exhibit B. If Tenant furnishes to --------- Landlord such Letter of Credit as herein provided, Landlord shall refund to Tenant any unapplied Security Deposit held by Landlord pursuant to this Section 5.6 and shall be increased each year to the increased amount of the Security Deposit required under this Section 5.6 at the same time as Tenant is obligated under this Section 5.6 to increase the amount of the Security Deposit. The Letter of Credit shall be assignable, upon request of Landlord, to any Mortgagee or to a successor of Landlord at no additional charge. Tenant shall, not later than thirty (30) days prior to the expiration of the term of the Letter of Credit or any replacement thereof, deliver to Landlord a replacement letter of credit (a "Replacement Letter") such that the Letter of Credit or a Replacement Letter shall be in effect at all times after the date of this Lease until the end of the term of this Lease and thereafter so long as Tenant (or any assignee or subtenant of Tenant) is in occupancy of any part of the Demised Premises. Each Letter of Credit or Replacement Letter shall be in a face amount at least equal to the amount of the Security Deposit required pursuant to this Section 5.6. If Tenant fails to deliver to Landlord a Replacement Letter within the time limit set forth in this Section 5.6, Landlord may draw the full amount of the existing Letter of Credit or Replacement Letter without notice or demand and retain the proceeds thereof as security subject to the provisions of this Section 5.6, until such time as the Replacement Letter is delivered, at which time the proceeds shall be returned to Tenant. ARTICLE 6 PAYMENT OF IMPOSITIONS ---------------------- SECTION 6.1 Tenant shall pay as Additional Rent all (a) taxes, (b) assessments, (c) water and sewer rents, rates and charges, whether governmental or non- governmental, (d) excises, levies, license and permit fees and other charges of the Governmental Authorities, general and special, ordinary and extraordinary, foreseen and unforeseen, of any kind and nature whatsoever which at any time during the term of this Lease may be assessed, levied, confirmed, imposed upon, and become due and payable out of or in respect of, or become a lien on, (i) the Demised Premises or any part 9. thereof or any appurtenances thereto, (ii) the rent, income or other payments received by Tenant or anyone claiming by, through or under Tenant (iii) upon or against this Lease or the leasehold estate hereby created or any document to which Tenant is a party creating or transferring any interest or estate in the Demised Premises, (iv) any use or occupation of the Demised Premises, or (v) such franchises as may be appurtenant to the use of the Demised Premises (all such rent, taxes, assessments, water and sewer rents, rates and charges, excises, levies, license and permit fees and other charges of the Governmental Authorities and any other amounts referred to in this Section 6.1 are hereinafter called "Impositions" and any of the same are hereinafter called an "Imposition"), together with any penalties, interest or costs which may be imposed thereon or added for late payment thereof. Tenant shall have the option to pay any Impositions in installments over the longest period allowed by law, and Tenant shall only pay such installments that become due and payable during the Term as they respectively become due and payable. SECTION 6.2 Nothing herein contained shall require Tenant to pay any income and/or excess profits, capital levy, corporate franchise, payroll, estate, succession, inheritance, gift or transfer taxes levied or assessed by any Governmental Authority against Landlord. If at any time during the term of this Lease the methods of taxation prevailing at the commencement of the term shall be altered so as to cause the whole or any part of such taxes, assessments, rates, levies, fees, impositions or charges now levied, or hereafter assessed or imposed on, real estate and the improvements thereon to be levied, assessed and imposed wholly or partially as a capital levy, or otherwise, directly on the rents received therefrom, or if, as the result of the alteration of any such method, any such tax, assessment, rate, levy, fee, imposition or charge, or any part thereof, shall be measured by or based, in whole or in part, upon the Demised Premises, the Fixed Rent or the Additional Rent and shall be imposed upon Landlord, then all such taxes, assessments, rates, levies, fees, impositions or charges or the part thereof so measured or based shall be deemed to be included within the term "Impositions" for the purposes hereof to the extent that such Impositions would be payable if the Demised Premises were the only property of Landlord subject to such Impositions and Tenant shall pay and discharge the same. SECTION 6.3 (a) Tenant, upon written request of Landlord or any Mortgagee, will furnish to or as directed by Landlord or any Mortgagee, within twenty (20) days after the date when any Imposition would become delinquent, true and complete copies of official receipts of the appropriate taxing authority, or other evidence reasonably satisfactory to Landlord or such Mortgagee, evidencing the payment thereof. If such official receipts are not available within twenty (20) days after the date any Imposition would become delinquent, Tenant will furnish the same within twenty (20) days after they are available. This Section 6.3(a) shall not apply if Tenant is required to make monthly deposits under Section 6.3(b). (b) After an Event of Default, or if required by any Mortgagee, Tenant shall upon delivery of notice from Landlord or such Mortgagee, deposit from and after the date of delivery of such notice with or as directed by such Mortgagee the amount of any Impositions to be paid by Tenant pursuant to Section 6.1, (a) ten (10) days before the same would otherwise be payable pursuant to 10. Section 6.1 hereof, or (b) monthly in advance in an amount equal to one-twelfth thereof. Landlord shall cause such monthly deposits to be deposited in an interest bearing account earning not less than money market rates in a bank chosen by Landlord, and all interest thereon shall be paid monthly to Tenant; however, if Landlord is required to provide such monthly deposits to a Mortgagee, then Landlord shall cause the Mortgagee to deposit such monthly deposits in an interest bearing account and the interest payable to Tenant hereunder shall be the same as the interest earned in said account. Landlord shall cause all Impositions to be paid to the appropriate taxing authority on or before the date due and payable. SECTION 6.4 Tenant shall have the right to contest the amount or validity, in whole or in part, of any Imposition to be paid hereunder by Tenant by appropriate proceedings diligently conducted in good faith and to seek a reduction in the valuation of the Demised Premises assessed for tax purposes. Tenant shall provide Landlord with written notice of any such proceeding. Any refund or credit relating to Impositions for a fiscal year in which both Landlord and Tenant were responsible for Impositions shall be apportioned between Landlord and Tenant pursuant to ARTICLE 26. Landlord shall have the right during the last three (3) years of the term of this Lease at its own expense after notice to Tenant to seek a reduction in the valuation of the Demised Premises assessed for tax purposes and to participate in any action or proceeding theretofore commenced by Tenant. SECTION 6.5 Landlord shall not be required to join in any proceedings referred to in Section 6.4 hereof unless the provisions of any Law at the time in effect shall require that such proceedings be brought by or in the name of Landlord, in which event Landlord shall join in such proceedings or permit the same to be brought in its name. Landlord shall, at the request of Tenant, cooperate with Tenant in connection with any such proceedings. Subject to the terms and conditions of the second paragraph of Section 6.4 above, Landlord shall not be subjected to any liability for the payment of any costs or expenses (including those relating to its own activity) in connection with any such proceedings, and Tenant will indemnify and save Landlord harmless from any such costs and expenses, including reasonable attorneys' fees incurred at any stage of such proceedings or on appeal therefrom. Except as otherwise provided in Section 26.1 of this Lease, Tenant shall be entitled to any refund of any Imposition and penalties or interest thereon received by Landlord which have been paid by Tenant, or which have been paid by Landlord but previously reimbursed in full by Tenant. SECTION 6.6 Landlord appoints Tenant the attorney-in-fact of Landlord for the purpose of making all payments to be made by Tenant pursuant to any of the provisions of this Lease to persons or entities ("Persons") other than Landlord and for the purposes of contesting in accordance with this Lease the amount or validity of any Imposition. In case any Person to whom any sum is 11. directly payable by Tenant under any of the provisions of this Lease shall refuse to accept payment of such sum from Tenant, Tenant shall thereupon give written notice of such fact to Landlord and shall pay such sum directly to Landlord at the address of Landlord specified pursuant to ARTICLE 38 hereof, or at such other place as Landlord may from time to time specify by notice given pursuant to ARTICLE 38 and to the attention of such officer or other person as Landlord may by like notice from time to time designate to Tenant, and Landlord shall thereupon pay such sum or cause such sum to be paid to such Person and provide evidence of such payment to Tenant. ARTICLE 7 SERVICES AND UTILITIES ---------------------- Tenant shall pay or cause to be paid all charges for (i) utilities for the Demised Premises, including but not limited to electricity, steam, water, telephone and other communication service and cable; (ii) security system; and (iii) new and further installations and equipment to supply the same, and Tenant shall indemnify and hold Landlord harmless against any liability, loss, expense or damage incurred in connection therewith. In furtherance of the foregoing, Tenant shall procure any and all necessary permits, licenses or other authorizations required for the lawful and proper installation and maintenance upon the Demised Premises of wires, pipes, conduits, tubes and other equipment and appliances for use in supplying any such service to and upon the Demised Premises. Landlord shall not be required to furnish to Tenant or provide any facilities or services of any kind, nor shall Landlord be liable for any failure of water supply, electric current or other utilities or any security system or service therefor, except as may be caused by acts or omissions of Landlord, its employees, agents or contractors. ARTICLE 8 INSURANCE --------- SECTION 8.1 Tenant, at its sole cost and expense, shall keep the Improvements insured, during the term of this Lease, (i) against loss or damage by flood with a sublimit of $1,000,000.00 and (ii) against loss or damage by fire, lightning, windstorm, hail, explosion, riot and civil commotion, aircraft and vehicles, smoke, damage or leakage of sprinkler systems now or hereafter installed, vandalism and malicious mischief and such other casualties as are presently included in the so-called All Risk Coverage Endorsement in an amount not less than 100% of the "full replacement cost" of the Improvements (without regard to and with a waiver of any depreciation thereof) containing an agreed amount endorsement with respect to Improvements and personal property waiving co- insurance and provisions providing for no deductible in excess of Twenty-Five Thousand Dollars and 00/100 ($25,000) for all such insurance coverage. Such "full replacement cost" when applied to the Improvements, shall mean the actual replacement cost (excluding land, excavation costs and that part of the footing and foundation cost which is customarily not insurable under fire policies) without regard to depreciation, and shall be determined from time to time (not more frequently than once in any twelve (12) consecutive months), at the request of 12. Landlord, but at the expense of Tenant, by one of the insurers, a reputable insurance broker or by an appraiser chosen by Tenant subject to the reasonable approval of Landlord. Landlord's failure to request such a determination shall not relieve Tenant of its obligation hereunder. Landlord may require Tenant to furnish additional insurance at any time that Landlord deems such insurance to be inadequate based upon the requirements of an owner of property similar to the Demised Premises. SECTION 8.2 Tenant, at its sole cost and expense, shall maintain: (a) comprehensive general liability insurance including, without limitation, contractual liability, on an "occurrence basis", (so long as all or any risks under comprehensive liability coverage can be obtained from insurers meeting the standards set forth in Section 8.3 hereof on an occurrence basis, and without regard for the cost thereof) against claims for personal injury (including without limitation bodily injury and death) or property damage, occurring on, in or about the Demised Premises or any elevator or any escalator therein and on, in or about the adjoining sidewalks, streets and passageways, such insurance to afford minimum protection, during the Term, of not less than $10,000,000 in respect of personal injury or death to any one individual and in respect of any one "occurrence" involving any one or more individuals and for property damage; (b) boiler and machinery insurance, provided the Improvements contain equipment of the nature ordinarily covered by such a policy; (c) insurance covering Tenant's obligation to indemnify hereunder Landlord and each Mortgagee; (d) specific excess workers' compensation insurance including Employer's Liability insurance in an amount not less than $5,000,000, with no more than $10,000 self insured retention covering all individuals and other Persons employed by Tenant in connection with the Demised Premises and with respect to whom death or bodily injury claims could be asserted against Landlord, Tenant or the Demised Premises; (e) rental income insurance covering rental income under the SGI Lease for a period of not less than twelve (12) months; (f) business interruption insurance in an amount equal to not less than $10,000,000.00 per occurrence; (g) vandalism and malicious mischief insurance in an amount of not less than $1,000,000; and (h) such other insurance, in such amounts as may from time to time be required by Landlord against other insurable hazards based upon the requirements of an owner of property similar to the Demised Premises. 13. Tenant shall not violate or permit to be violated any of the conditions or provisions of any policy provided for herein. SECTION 8.3 All insurance provided for in this ARTICLE shall be effected under valid and enforceable policies in such forms and amounts as may, from time to time, be required as herein and elsewhere specified in this Lease, issued by insurers of recognized responsibility which are licensed to do business in the State of Minnesota, are rated "A VII" or better by Best's Key Rating Guide or, if there is no Best's Key Rating Guide, a comparable rating by another national rating organization reasonably acceptable to Landlord. The aggregate limit of liability underwritten by any insurer in conformance with the provisions of this Lease shall not exceed 5% of that insurer's surplus to policyholders. Upon execution of this Lease, and thereafter not less than fifteen (15) days prior to the expiration dates of the expiring policies theretofore furnished pursuant to this ARTICLE, certificates of the insurers reasonably satisfactory to Landlord and, upon request, duplicate originals of the policies involved, shall be delivered by Tenant to or as directed by Landlord. Each policy of insurance procured pursuant to Section 8.1 shall contain, if obtainable, either (i) a waiver by the insurer of the right of subrogation against Landlord for negligence of Landlord, or (ii) a statement that the insurance shall not be invalidated should any insured waive in writing prior to a loss any or all right of recovery against Landlord for loss accruing to the property described in the insurance policy. Tenant shall not carry separate or additional insurance, concurrent in form or contributing, in the event of any loss or damage, with any insurance required to be obtained by Tenant under this Lease. SECTION 8.4 All policies of insurance provided for in Sections 8.1 and 8.2 hereof shall insure Landlord and Tenant and any Mortgagee as named insureds. Such policies shall also, if requested by Landlord, be made payable, subject to the provisions of this Lease, to any Mortgagee, as its interest may appear, pursuant to a standard mortgagee clause, its equivalent, or a loss payable clause reasonably acceptable to Landlord and acceptable to such Mortgagee. Landlord requests, and Tenant acknowledges the request of Landlord, that Deutsche Banc Mortgage Capital, L.L.C. be so named as Mortgagee under the insurance provided for in Sections 8.1 and 8.2 hereof. The loss, if any, under any policies provided for in Section 8.1 and in paragraphs (b), (d) and (e) of Section 8.2 shall be adjusted with the insurance companies (a) by Tenant, in the case of any particular casualty resulting in damage or destruction not exceeding the Insurance Threshold Amount in the aggregate, and provided Tenant is not in default under this Lease (i.e. Landlord shall consent in writing and cause any Mortgagee to consent in writing to Tenant's adjustment of any losses not exceeding the Insurance Threshold Amount, provided Tenant is not in default under this Lease) or (b) by Landlord, Tenant and any Mortgagee, if requested by such Mortgagee, in the case of any particular casualty resulting in damage or destruction exceeding the Insurance Threshold Amount in the aggregate or if Tenant shall be in default under this Lease (regardless of the extent of the damage or destruction). The proceeds of any such insurance, as so adjusted, shall be payable: 14. (i) to Tenant in the case of any particular casualty resulting in damage or destruction to the Improvements not exceeding the Insurance Threshold Amount in the aggregate, provided Tenant is not in default under this Lease, or (ii) in the case of any particular casualty resulting in damage or destruction exceeding the Insurance Threshold Amount in the aggregate, or if Tenant is in default under this Lease (regardless of the extent of the damage or destruction), to any Mortgagee or Mortgagees so long as Landlord's interest in this Lease is assigned to such Mortgagee or Mortgagees, or if there is no Mortgagee, then to Landlord. All such policies shall provide Landlord and any Mortgagee with not less than the rights and benefits with respect to payment and adjustment provided above in this Section 8.4. Each policy shall contain (a) a provision that no inadvertent act or omission of Landlord or Tenant which would otherwise result in a forfeiture or reduction of the insurance therein provided shall affect or limit the obligation of the insurance company so to pay in accordance with Sections 8.4 and 8.7 of this Lease the amount of any loss sustained, (b) an agreement by the insurer that such policy shall not be cancelled without at least thirty (30) days prior written notice to Landlord and to any Mortgagee and (c) an agreement by the insurer to give written notice to Landlord and any Mortgagee if such policy has not been renewed fifteen (15) days prior to its expiration. The "Insurance Threshold Amount" means Five Hundred Thousand and 00/100 Dollars ($500,000.00). SECTION 8.5 If, at any time during the term of this Lease, Landlord or any Mortgagee shall request that the amount of insurance required under Sections 8.1 and 8.2 hereof be increased on the ground that such coverage is inadequate properly to protect the interest of Landlord and such Mortgagee, or if Landlord or any Mortgagee shall require other insurance pursuant to the provisions of Section 8.1 and Section 8.2, Tenant shall thereafter carry the amount and such kind of insurance as determined by Landlord or any Mortgagee to be adequate and required, but in no event shall the amount of insurance under Sections 8.1 and 8.2 hereof be (i) less than the amount required by such Sections, or (ii) materially greater than amounts typically required by landlords and mortgagees of comparable properties in the Minneapolis - St. Paul metropolitan area. SECTION 8.6 Any insurance provided for in this ARTICLE 8 may be effected by a policy or policies of blanket insurance; provided, however, that the amount of the total -------- ------- insurance shall be such as to furnish in protection the equivalent of separate policies in the amounts herein required; and provided, further that in all other -------- ------- respects, any such policy or policies shall comply with the other provisions of this Lease. In any such case, Tenant shall deliver to or as directed by Landlord a certificate or duplicate of such policy. 15. SECTION 8.7 Tenant shall furnish Landlord annually, a certificate signed by an authorized officer of Tenant containing a detailed list of the insurance policies then outstanding and in force on the Demised Premises and stating that such insurance complies with the requirements of this ARTICLE 8. ARTICLE 9 DAMAGE OR DESTRUCTION --------------------- SECTION 9.1 In the case of any particular casualty to the Improvements resulting in damage or destruction in excess of One Hundred Thousand and No/100 Dollars ($100,000), Tenant shall promptly give written notice thereof to Landlord. Regardless of the amount of any damage or destruction, Tenant shall, at its sole cost and expense, and whether or not the insurance proceeds, if any, shall be sufficient for the purpose, either restore, repair, replace, rebuild or alter the Improvements as nearly as possible to their value, condition and character immediately prior to such damage or destruction substantially in accordance with plans and specifications approved in writing by Landlord and any Mortgagee (such approval shall not be unreasonably withheld, conditioned or delayed). Such restoration, repairs, replacements, rebuilding or alterations shall be commenced promptly, and prosecuted in a good and workmanlike manner with reasonable diligence. Within thirty (30) days or such longer period as is reasonably necessary after any casualty, but in no event greater than sixty (60) days after such casualty, Tenant shall deliver to Landlord an estimate of the costs to repair, restore and/or rebuild the Demised Premises in accordance with the terms of this Lease, which estimate shall be prepared by a licensed contractor or architect acceptable to Landlord (such consent shall not be unreasonably withheld, conditioned or delayed). SECTION 9.2 All insurance proceeds received by Landlord or any Mortgagee, on account of such damage or destruction, less the costs, fees and expenses, if any, incurred in connection with adjustment of the loss, shall be applied to pay or, if Tenant elected to make advance payments, reimburse Tenant, for the payment of the cost of the aforesaid restoration, repairs, replacements, rebuilding or alterations, including the cost of temporary repairs or for the protection of property pending the completion of permanent restoration, repairs, replacements, rebuilding or alteration (all of which temporary repairs, protection of property and permanent restorations, repairs, replacements, rebuilding or alterations are hereinafter collectively referred to as the "restoration"), and provided there is no Event of Default under this Lease, shall be paid out from time to time as such restoration progresses upon the written request of Tenant which shall be accompanied by the following: (a) A certificate signed by Tenant, dated not more than five (5) days prior to such request, setting forth the following: 16. (i) that the sum then requested either has been paid by Tenant, or is justly due to contractors, subcontractors, materialmen, engineers, architects or other Persons who have rendered services or furnished materials for the restoration therein specified, the names and addresses of such Persons, a brief description of such services and materials, the several amounts so paid or due to each of such Persons in respect thereof, that no part of such expenditures has been or is being made the basis, in any previous or then pending request, for the withdrawal of insurance money or has been made out of the proceeds of insurance received by Tenant, and that the sum then requested does not exceed the value of the services and materials described in the certificate; (ii) that on the date of Tenant's certificate, except for the amount, if any, stated pursuant to the foregoing subclause (a)(i) in such certificate to be due for services or materials and any retainage permitted under the agreement with the contractor, there is no outstanding indebtedness known to the Tenant, after due inquiry, which is then due for labor, wages, materials, supplies or services in connection with such restoration; and (iii) that on the date of Tenant's certificate the cost, as estimated by Tenant, of the restoration required to be done subsequent to the date of such certificate in order to complete the same, does not exceed the insurance money, plus amounts otherwise available to Tenant, after payment of the sum requested in such certificate; (b) A title company or official search, showing that there have not been filed with respect to the Demised Premises, any vendor's, contractor's, mechanic's, laborer's or materialman's statutory or similar lien which has not been discharged of record, except such as will be discharged upon payment of the sum requested in such certificate; and In the event the total cost of the restoration exceeds the Insurance Threshold Amount at the time the certificate is delivered, the certificate required by clause (a) of this Section 9.2 shall be signed also by an independent licensed architect and/or engineer, who shall be in charge of the restoration and shall be selected by Tenant and approved in writing by Landlord. Upon compliance with the foregoing provisions of this Section 9.2, there shall be paid or caused to be paid out of such insurance money to Tenant or the Persons named pursuant to subclause (a)(i) of this Section 9.2 in such certificate the respective amounts stated therein to have been paid by Tenant or be due to them, as the case may be. If the insurance money at the time available for the purpose, less the actual costs, fees and expenses, if any, incurred in connection with the adjustment of the loss, shall be insufficient to pay the entire cost of such restoration, Tenant shall pay the deficiency. Any such deficiency shall be paid by Tenant prior to application of the insurance money. Upon receipt by Landlord, or the Mortgagee, of the items required by clauses (a) and (b) of this Section 9.2 evidencing that the restoration has been completed and paid for in full and that there are no liens of the character referred to herein or right to obtain the same by filing, and provided (i) Lessor shall be reasonably satisfied that sufficient funds are available to complete the restoration, and (ii) Tenant is not in default under this Lease, any balance of the insurance 17. money held by Landlord or the Mortgagee shall be paid to Tenant. Notwithstanding any contrary or inconsistent provision in this Lease, regardless of (i) Tenant's default hereunder; or (ii) Tenant's satisfaction of any of the provisions contained in Article 9, upon closing of the re-purchase by Tenant pursuant to Article 47 below, Article 48 below, or otherwise, Landlord shall simultaneously assign, transfer and pay over to Tenant any and all insurance proceeds and related rights and benefits less any reasonable out-of-pocket costs theretofore incurred in connection with receiving such proceeds. If, notwithstanding the provisions of this Article 9, Landlord or the Mortgagee is entitled to receive the insurance proceeds but Tenant instead receives such insurance proceeds, Tenant shall hold such insurance proceeds in trust and shall immediately cause such insurance proceeds to paid to Landlord or the Mortgagee, as required under this Article 9. SECTION 9.3 No destruction of or damage to the Demised Premises or any part thereof by fire or any other casualty shall terminate or permit Tenant to surrender this Lease or shall relieve Tenant from its liability to pay the Fixed Rent, Additional Rent and other charges payable under this Lease or from any of its other obligations under this Lease, and Tenant waives any rights now or hereafter conferred upon it by statute or otherwise to quit or surrender this Lease or the Demised Premises or any part thereof, or to any suspension, diminution, abatement or reduction of rent on account of any such destruction or damage. No destruction of or damage to the Demised Premises or any part thereof by fire or any other casualty shall terminate or permit Landlord to terminate this Lease or shall relieve Landlord from its obligations under this Lease. SECTION 9.4 If insurance proceeds are received by Landlord and paid out to Tenant as provided in Section 9.2, Tenant shall pay the reasonable fees and expenses of any third Person architect or engineer engaged by and reasonably required by Landlord, in its judgment, to review any plans and specifications prepared by Tenant and to inspect any work performed by Tenant under this ARTICLE 9 and any other reasonable out-of-pocket expenses incurred by Landlord in review of such plans and specifications and inspection of such work. However, Tenant's obligations under this Section 9.4 shall in no event exceed Seven Thousand Five Hundred Dollars ($7,500.00) per casualty. ARTICLE 10 CONDEMNATION ------------ SECTION 10.1 Tenant hereby assigns to Landlord any award, payment or compensation to which it may be or become entitled during the term of this Lease by reason of any taking of the Demised Premises or a part thereof, in or by condemnation or other eminent domain Proceeding pursuant to any law, general or special, or, except as otherwise provided in Sections 10.3 and 10.4, by 18. reason of the temporary requisition of the use or occupancy of the Demised Premises or a part thereof, by any Governmental Authority whether the same shall be paid or payable in respect of Tenant's leasehold interest hereunder, provided that such award, payment or compensation and any interest or income earned thereon shall be applied as hereinafter provided for in this ARTICLE 10. Landlord and Mortgagee shall be entitled to participate in any such Proceedings and if Landlord participates therein, Landlord shall pay all costs and expenses, including fees of attorneys, appraisers, architects and engineers, incurred by Landlord in so participating. Tenant shall not be liable for any such costs or expenses incurred by Landlord or Mortgagee. Notwithstanding the foregoing provisions of this Section 10.1, Tenant shall have the right to make a separate claim in condemnation or other eminent domain Proceedings solely for the loss of all or part of its leasehold estate, and for its removal expenses, value of the leasehold, value of Tenant's fixtures, and relocation expenses as a result of such Proceeding. No claim may be made by Tenant in any such Proceeding and Tenant shall not be entitled to any award, payment or compensation for the cost of any demolition, repairs and replacement required as a result of any such Proceeding or for the cost of any of Tenant's leasehold improvements. SECTION 10.2 If, during the term of this Lease, all or substantially all of the Demised Premises shall be taken in or by condemnation or other eminent domain Proceeding pursuant to any Law, general or special, then this Lease and all right, title and interest of Tenant hereunder shall terminate as of the date that title to the Demised Premises shall vest in accordance with such Proceeding. If substantially all (but not all) of the Demised Premises is so taken and Landlord disputes Tenant's exercise of its right to so terminate this Lease, and the resolution of the dispute is that Tenant had the right to so terminate the Lease, then such termination shall occur as of the termination date specified in such notice by Tenant, provided that Tenant has vacated the Demised Premises on or before such date. In the event that this Lease shall so terminate or be terminated, the Fixed Rent and the Additional Rent shall be appropriately apportioned as of the date of such termination. Any dispute by Landlord or Tenant under the provisions of this Section 10.2 shall be resolved by arbitration in the manner provided in Section 10.5. For purposes of this Section, substantially all of the Demised Premises shall be deemed to have been taken if the portion of the Demised Premises not so taken, taking into consideration the amount of the award available for such purpose, cannot in the reasonable opinion of Landlord and Tenant be so repaired or reconstructed as to constitute a facility suitable for all of the uses permitted hereunder. SECTION 10.3 If, during the term of this Lease, any portion of the Demised Premises shall be taken in or by any such Proceeding and this Lease shall not terminate or be terminated pursuant to Section 10.2 hereof, then this Lease shall continue in full force and effect, and Tenant's obligation to pay the Fixed Rent, Additional Rent and all other charges on the part of Tenant to be paid and to perform all other covenants and agreements on the part of Tenant to be performed shall not be affected by any such taking of the Demised Premises, and Tenant hereby waives the provisions of any Laws now or hereafter in effect contrary to such obligation of Tenant or which relieves Tenant therefrom to pay costs of demolition, repair and restoration required as a result of the taking in any such Proceeding. Landlord shall deliver such award to Tenant if such costs are 19. estimated to be less than the Insurance Threshold Amount provided Tenant is not in default under this Lease. If such costs are estimated to exceed the Insurance Threshold Amount, or if Tenant is in default under this Lease regardless of such costs, such award shall be retained by Landlord, or shall be applied by Tenant, if delivered to Tenant, and paid over to Tenant if delivered to any Mortgagee or Landlord, to be applied in the manner provided in Section 9.2, for the cost of demolition, repair and restoration, if any, required as a result of the taking in any such Proceeding, which demolition, repair and restoration shall be undertaken by Tenant in substantially the same manner as required in Section 9.1 hereof. Any balance of such award remaining after payment of such costs of demolition, repair and restoration shall be retained by Landlord. If any portion of the Demised Premises shall be taken in or by any condemnation or other eminent domain Proceeding and this Lease shall not terminate or be terminated, then the Purchase Option Price and the Put Option Price shall be reduced by an amount equal to the portion of any award received by Landlord in connection with such Proceeding. The Purchase Option Price and the Put Option Price shall not, however, be reduced by the amount of any award received by Tenant under Section 10.4 hereof for any temporary taking. Tenant shall have the right provided in Section 10.1 to make a separate claim for its own award solely for loss of all or part of its leasehold estate and its removal expenses and relocation expenses, but not for its leasehold improvements (which shall be considered only in valuing Tenant's leasehold estate.) SECTION 10.4 If, during the term of this Lease, the temporary use or occupancy of all or part of the Demised Premises shall be taken in or by such Proceeding or in any other manner for any public or quasi-public use or purpose or by agreement between Landlord and those authorized to exercise such right, then, if the period of temporary use is totally within the term of this Lease, the sums awarded or made available as a result of such temporary taking shall be paid to Tenant and that portion of the award which represents reimbursement for the cost of restoration of the Demised Premises as reasonably estimated by an independent licensed architect or engineer chosen by Landlord and reasonably acceptable to Tenant, and engaged at the expense of Tenant, shall be applied by Tenant toward the cost of its restoration of the Demised Premises. In addition, Tenant shall be entitled to receive that portion of the award which represents compensation for the taking of Tenant's personal property (if any, and only to the extent that Tenant's personal property is so taken) and for relocation expenses if Tenant is required to relocate, and Tenant shall be entitled to a credit against Fixed Rent of that portion of the award or payment which represents compensation for the use and occupancy of the Demised Premises. If the period of temporary use is not totally within the term of this Lease, or if it is not possible to determine whether it is totally within the term of this Lease, then the sums awarded or made available as a result of such temporary taking shall be paid to Landlord and shall be applied in the following order of priority: (a) first, Landlord shall be entitled to receive that portion of the award which represents reimbursement for the cost of restoration of the Premises as reasonably estimated by an independent licensed architect or engineer chosen and engaged by Landlord and reasonably acceptable to Tenant, and Tenant shall (to the extent feasible within the remainder of the term of this Lease) restore the Demised Premises and Landlord shall pay over such portion of such award in the same manner as is provided for insurance proceeds under ARTICLE 9, (b) second, Tenant shall be entitled to receive that portion of the award which represents compensation for the taking of Tenant's personal property and for relocation expenses, and (c) 20. third, Tenant shall be entitled to a credit against Fixed Rent of that portion of the award or payment which represents compensation for the use and occupancy of the Demised Premises (but in no event more than the Fixed Rent due under this Lease). This Lease shall be unaffected by such taking and Tenant shall continue to be responsible for all of its obligations hereunder and shall continue to pay in full the Fixed Rent, and Additional Rent when due except to the extent of the credit provided for above. All monies paid to Landlord as, or as part of, an award for which the Fixed Rent have been paid shall be received, held and applied by Landlord as a trust fund for payment of the Fixed Rent becoming due hereunder. Notwithstanding any contrary or inconsistent provision in this Lease, regardless of (i) Tenant's default hereunder; or (ii) Tenant's satisfaction of any of the provisions contained in Article 10, upon closing of the re-purchase by Tenant pursuant to Article 47 below, Article 48 below, or otherwise, Landlord shall simultaneously assign, transfer and pay over to Tenant any and all condemnation award(s) and related rights and benefits. SECTION 10.5 In any instance in this ARTICLE 10 where this Agreement provides for submission of a dispute or matter to arbitration (and not under any other circumstance) the arbitration shall be conducted by the American Arbitration Association ("AAA"), or any successor thereto, in the City of Minneapolis, Minnesota, in accordance with its rules then obtaining and the provisions of this Section 10.5. The party requesting arbitration shall give written notice to that effect to the other party, specifying in said notice the name and address of the Qualified Arbitrator (as hereinafter defined) designated to act as arbitrator on behalf of the requesting party. Each arbitrator shall be an impartial third party having experience in matters similar to the subject matter of the dispute (a "Qualified Arbitrator"). Within fifteen (15) days after the -------------------- service of such notice, the other party shall give written notice to the requesting party specifying the name and address of a Qualified Arbitrator designated to act as arbitrator on its behalf. If the other party fails to notify the requesting party of the appointment of its arbitrator within the time specified, the second arbitrator shall be a Qualified Arbitrator appointed by the AAA. The arbitrators so chosen shall meet within ten (10) days after the second arbitrator is appointed. If, within thirty (30) days after the second arbitrator is appointed, the two arbitrators shall not agree upon a resolution of the dispute, they shall themselves appoint a third Qualified Arbitrator. If they are unable to agree upon such appointment within ten (10) days after the expiration of said thirty (30)-day period, the third Qualified Arbitrator shall be selected by the parties. If the parties are unable to agree upon a third Qualified Arbitrator within fifteen (15) days, then such third Qualified Arbitrator shall be appointed by the AAA. The decision of the arbitrators so chosen shall be given within a period of thirty (30) days after the appointment of the third Qualified Arbitrator, if a third Qualified Arbitrator is appointed, or within thirty (30) days after the second arbitrator is appointed. Such decision shall be final and conclusive on Landlord and Tenant and judgment thereon may be entered in any court of competent jurisdiction. In acting under this Lease, the arbitrators shall: (i) not modify the provisions of this Lease; and (ii) apply the applicable laws of the State of Minnesota. The costs of the arbitrators and of the AAA shall be paid fifty percent (50%) by Landlord and fifty percent (50%) by Tenant. 21. ARTICLE 11 MAINTENANCE AND REPAIRS ----------------------- SECTION 11.1 (a) Throughout the term of this Lease, Tenant shall, at its sole cost and expense, take good care of the Demised Premises (including the Improvements), all alleyways and passageways and the sidewalks, curbs and vaults adjoining the Demised Premises, and keep the same in good order, condition and repair, ordinary wear and tear and obsolescence excepted, and make all necessary repairs thereto, interior and exterior, structural and nonstructural, ordinary and extraordinary, foreseen and unforeseen. When used in this ARTICLE 11, the term "repairs" shall include all necessary replacements, renewals, alterations and additions and any rebuilt, additional or substituted buildings, structures, facilities and other improvements. Landlord shall not be required to furnish any services or facilities or to make any repairs or alterations in or to the Demised Premises, Tenant hereby assuming the full and sole responsibility for the condition, operation, repair, replacement, maintenance and management of the Demised Premises. All repairs made by Tenant shall be made in a good and workmanlike manner. The necessity for and adequacy of repairs to the Improvements pursuant to this ARTICLE 11 shall be measured by the standards which are generally appropriate for buildings and facilities of similar construction, age and use. (b) In the event that Tenant is required pursuant to the provisions of Section 11.1(a) during the term of this Lease or during the Renewal Options or any extension of the term to replace the roof of any of the buildings located at the Demised Premises, make a structural change or structural repair in any of the buildings located at the Demised Premises or to replace all or part of the HVAC system in any of the buildings located at the Demised Premises (collectively, the "Capital Work") at an aggregate cost for Capital Work in any twelve (12) month period exceeding One Hundred Seventy-five Thousand Dollars ($175,000.00), Tenant shall notify Landlord thereof. In addition, if Tenant desires that the cost thereof be shared by Landlord in the manner provided in this Section 11.1(b), Tenant and Landlord shall jointly participate in and determine the Persons to perform the Capital Work (including architects, engineers and contractors), the plans and specifications for the Capital Work and the cost thereof which, in hiring the contractor or contractors performing such work, shall be determined by a bid process determined by Tenant and reasonably acceptable to Landlord. To the extent that the improvements resulting from such Capital Work constitute capital improvements and which under Generally Accepted Accounting Principles, applied consistently ("GAAP"), will have a useful life extending beyond the term of this Lease, then Tenant may elect by notice to Landlord that Landlord pay to Tenant as provided in this Section 11.1(b) a portion of the cost of such Capital Work. In the event Tenant makes such an election and complies with the foregoing provisions of this section, Landlord shall pay to Tenant a portion of the cost appropriately classified as capitalized under GAAP of the improvements resulting from such Capital Work. Landlord's share of such costs shall be equivalent to the product of the amount that is capitalized times a fraction, the numerator of which is the number of years remaining in the useful life of such capital improvements at the Trigger Date (as hereinafter defined) determined under GAAP and the denominator of which is the total useful life of such capitalized improvement. Such 22. payment shall be made by Landlord to Tenant not later than ten (10) business days after the date of the last to occur of the following (the "Trigger Date"): (i) the termination of this Lease pursuant to the terms of this Lease; (ii) the end of the term of this Lease (including any exercised Renewal Options), and (iii) vacation by Tenant of the Demised Premises after such termination or expiration. Landlord shall have the right to offset from the amount of such payment any delinquent Fixed Rent or other delinquent amounts due Landlord from Tenant. Landlord shall deliver notice of any such offset simultaneously with delivery of such payment by Landlord. Determinations under GAAP under this Section 11.1(b) shall be made by Tenant's independent certified public accountants, subject to Landlord's right as hereinafter specified to dispute any such determination. Any disputes between Tenant and Landlord under this Section 11.1(b), except disputes pertaining to an interpretation under GAAP, shall be ------ determined by arbitration before a single Qualified Arbitrator appointed by and in accordance with the rules of the AAA. If Landlord disputes a determination under GAAP, that dispute shall be determined by an accounting firm, independent of both Landlord and Tenant, chosen by lot by Landlord and Tenant from among the six (6) largest United States accounting firms (by numbers of employees) in the United States. Such a determination by AAA or such accounting firm so chosen shall be final and conclusive on Landlord and Tenant and judgment thereon may be entered in any court of competent jurisdiction. Costs of the arbitrator, the AAA and such accounting firm shall be paid fifty percent (50%) by Landlord and fifty percent (50%) by Tenant. Notwithstanding the foregoing, if after requesting reimbursement from Landlord for any Capital Work, Tenant shall exercise any of its Renewal Options such that the entire useful life of such Capital Work falls within the term of this Lease as so extended, Landlord shall have no obligation to provide Tenant with any reimbursement whatsoever in connection with such Capital Work. SECTION 11.2 Tenant covenants not to permit or suffer any overloading of the floors of the Demised Premises or the electrical equipment therein contrary to the applicable certificate of occupancy, Board of Fire Underwriters certificate or any certificate of any insurance carrier and/or Law; however, Tenant shall not be obligated to correct any violation described above in this Section 11.2 unless required by, and pursuant to official notice from, the applicable governmental authority with jurisdiction over the matter. Tenant also covenants not to do or suffer any waste, disfigurement or injury to the Demised Premises. SECTION 11.3 Tenant shall not remove or permit removal of any of the permanent furnishings, fixtures or other property constituting a part of any buildings on the Demised Premises unless other property at least equal in value and utility shall be substituted therefor. SECTION 11.4 Landlord shall have the right, but not the obligation, to have the Demised Premises inspected from time to time during the term of this Lease by its engineering and environmental consultants after providing ten (10) days prior written notice of such inspection. If the results of any such inspection disclose any maintenance, repairs or replacements that must be performed to 23. bring the Demised Premises into good order and repair and otherwise consistent with the standards which are required under the terms of this Lease (collectively, the "Required Repairs"), which were not already scheduled for --- repair by Tenant, Tenant shall cause such Required Repairs to be made as soon as practicable after receipt of notification (the "Repair Notification") from Landlord. Landlord may exercise this right from time to time during the term of this Lease but not more frequently than one (1) time in any twelve (12) month period, except that if an Event of Default is continuing, Landlord may exercise this right at any time during which the Event of Default continues uncured. If the cost of such Required Repairs is less than $15,000.00, Landlord shall pay any and all costs and expenses (except for the cost of the Required Repairs) incurred by Landlord in connection with the performance of the inspections and any and all supplemental inspections performed in connection therewith. If the cost of the Required Repairs is $15,000.00 or more, Tenant shall, within ten (10) business days after receipt of the Repair Notification, pay to Landlord an amount equal to the amount of the reasonable costs and expenses incurred by or on behalf of Landlord in connection with the inspections and any supplemental inspections, up to a maximum of Seven Thousand Five Hundred Dollars ($7,500.00). SECTION 11.5 In connection with Tenant's obligations to maintain the Demised Premises pursuant to terms and conditions of Article 11, Tenant shall cause to be performed the maintenance items listed on Schedule 11.5 attached hereto as and when required by the terms of such Schedule. The listing of the maintenance items on Schedule 11.5 is intended only as a partial listing of those items required to be performed by Tenant in connection with its maintenance obligations under this Lease and in no event shall Tenant be deemed to have satisfied its maintenance obligations hereunder solely by the performance by Tenant of the items listed on said Schedule. ARTICLE 12 ALTERATIONS ----------- SECTION 12.1 Tenant shall have the right at any time and from time to time during the term of this Lease to make, at its sole cost and expense, changes, replacements, alterations, additions, enlargements or expansions in, of or to the Improvements, or to construct additional improvements on the Demised Premises (all of the foregoing hereinafter collectively called "Alterations" and individually called an "Alteration"), subject, however, in all cases to the following: (a) No particular Alteration involving an estimated cost of more than $250,000 shall be undertaken except after thirty (30) days prior written notice to Landlord. (b) No particular Alteration, structural or non-structural (including any restoration required by ARTICLE 9 or 10 herein), involving an estimated cost of more than the Insurance Threshold Amount shall be made without the prior written consent of any Mortgagee, if required by the terms of any Underlying Mortgage, and of Landlord, such written consent of Landlord and 24. Mortgagee shall be granted without unreasonable delay or conditions if the Alteration would not in the reasonable opinion of Landlord adversely affect in any way the value, rental value, rentability or usefulness of the Improvements (taking into consideration the length of the term remaining and any exercised extensions allowed under this Lease), the structural integrity of the Improvements or the proper functioning of the mechanical systems therein. If such approval is required, such Alterations will be made substantially in accordance with plans and specifications approved in writing by any such Mortgagee and by Landlord. Three (3) copies of plans and specifications in such reasonable detail as will permit Landlord to exercise its judgment shall be submitted to Landlord in connection with Alterations under this Section 12.1(b). Notwithstanding any contrary provision in this Article 12, Landlord may in its sole discretion withhold consent to any Alteration to the extent it entails constructing an addition on to the Improvements and/or constructing a new building on the Demised Premises or constructing other new improvements on the Demised Premises outside of the currently existing exterior walls of the Improvements. (c) If the estimated cost of any particular Alteration shall be in excess of the Insurance Threshold Amount, Tenant shall pay to or as directed by Landlord the reasonable fees and expenses of any third Person architects or engineers selected by any Mortgagee and by Landlord to review the plans and specifications and inspect the work on behalf of Landlord and such Mortgagee and other out-of-pocket expenses incurred by Landlord and such Mortgagee in review of such plans and specifications and inspection of such work. However, Tenant shall not be obligated to pay more than Seven Thousand Five Hundred Dollars ($7,500.00) for such review and inspection work. 25. (d) No Alteration shall be undertaken until Tenant shall have procured and paid for, so far as the same may be required from time to time, all permits and authorizations of the Governmental Authorities. Landlord shall join in the application for such permits or authorizations whenever such action is necessary, but without any liability or expense to Landlord. (e) Any Alteration shall, when completed, be of comparable materials and finish as then exist in the Demised Premises. (f) Any Alteration shall be made promptly and in a good and workmanlike manner, and, if such Alteration requires the consent of Landlord and any Mortgagee, it shall be made substantially in accordance with plans and specifications approved by Landlord and such Mortgagee. Any Alteration shall be made in compliance with all applicable permits and authorizations and building and zoning laws and with all other applicable Laws and requirements of all the Governmental Authorities, any national or local Board of Fire Underwriters, and any insurance policy affecting the Demised Premises or any other body hereafter exercising functions similar to those of any of the foregoing. Landlord shall, at the request of Tenant, cooperate at Tenant's sole cost and expense in connection with any requirement of the Governmental Authorities which requires Landlord participation in seeking permits and authorizations required for any Alteration. (g) The cost of any such Alterations shall be paid in cash or its equivalent when due. If the estimated cost of any Alterations exceeds the Insurance Threshold Amount, Tenant shall deliver security reasonably satisfactory to Landlord and Mortgagee for the amount such estimated cost exceeds the Insurance Threshold Amount. Without limitation, a payment bond or letter of credit for such excess amount shall be deemed satisfactory. (h) Tenant shall cause workers' compensation insurance including Employer's Liability insurance in an amount not less than $5,000,000 (part of which may be provided under Tenant's umbrella policies), covering all individuals employed in connection with the work and with respect to whom death or bodily injury claims could be asserted against Landlord, Tenant or the Demised Premises, and comprehensive general liability insurance on an occurrence basis for the mutual benefit of Tenant and Landlord, as named insureds, with limits of not less than $10,000,000 in the event of personal injury or death to any one individual and to any number of individuals in respect of any one "occurrence", and with limits of not less than $10,000,000 for property damage, shall be maintained or caused to be maintained by Tenant at Tenant's sole cost and expense at all times when any work is in process in connection with any Alteration. All such insurance shall be issued by a company or companies of recognized responsibility, and all policies or certificates therefor issued by the respective insurers, bearing notations evidencing the payment of premiums or accompanied by other evidence reasonably satisfactory to Landlord of such payment, shall be delivered to or as directed by Landlord. (i) All fixtures, equipment, improvements and appurtenances attached to or built into the Demised Premises shall be and shall remain a part of the Demised Premises and shall be deemed to be the property of Landlord and shall not be removed by Tenant. 26. (j) Upon completion of any restoration or Alteration for which plans and specifications are required to be delivered to Landlord and any Mortgagee, Tenant shall deliver to Landlord three copies of "as-built" plans for such restoration or Alteration. SECTION 12.2 No approval of plans or specifications by Landlord or any Mortgagee or consent by Landlord or any Mortgagee allowing Tenant to make a restoration or Alteration to the Demised Premises shall in any way be deemed to be an agreement by Landlord or such Mortgagee that the contemplated restoration or Alteration comply with requirements of the Governmental Authorities or any insurance policy affecting the Demised Premises or any certificates of occupancy for the Improvements nor shall it be deemed to be a waiver by Landlord of the compliance by Tenant with any of the terms of this Lease. ARTICLE 13 COMPLIANCE WITH LAW; HAZARDOUS MATERIAL --------------------------------------- SECTION 13.1 Tenant shall, during and after the term of this Lease, at its sole cost and expense, promptly comply with all Laws, any national or local Board of Fire Underwriters, any insurer of the Demised Premises or any other body exercising functions similar to those of any of the foregoing, foreseen or unforeseen, ordinary as well as extraordinary (including but not limited to Laws related to Hazardous Materials and clean up of Hazardous Materials and the Americans with Disabilities Act and local laws), which are now or may hereafter during the term of this Lease be applicable to the Demised Premises, the use, manner of use or occupancy thereof or any transaction related thereto, whether or not the same shall necessitate structural repairs or alterations or interfere with the use or occupancy of the Demised Premises; however, Tenant shall not be obligated to correct any building code, Americans with Disabilities Act or Hazardous Materials violations unless required by, and pursuant to official notice from, the applicable governmental authority with jurisdiction over the matter. Tenant shall not cause by Tenant's actions or negligent inactions or knowingly permit any Hazardous Material to be brought or deposited or used on the Demised Premises in a manner which is not in compliance with all Laws. Hazardous Material will be used, kept, stored and disposed of in compliance with the provisions of this Section 13.1. Tenant shall promptly notify Landlord in writing of the existence of new types of Hazardous Materials (not previously disclosed to Landlord) used by Tenant on the Demised Premises. SECTION 13.2 Tenant shall not cause or maintain any nuisance in or upon the Demised Premises, as determined by a court of competent jurisdiction. Tenant shall not knowingly suffer or permit the Demised Premises, or any portion thereof, to be used by the public, as such, in any way as to impair Landlord's title thereto. 27. SECTION 13.3 Tenant may, at its own cost and expense and in its name (or, if required by the Governmental Authorities, in Landlord's name) contest in any manner permitted by the Governmental Authorities the validity or enforcement of Laws of the Governmental Authorities with which Tenant is required to comply pursuant to this Lease and may defer compliance therewith, provided that: (a) such non-compliance shall not subject Landlord to criminal prosecution or the Demised Premises to lien or sale; (b) such non-compliance shall not be in violation of any Underlying Mortgage; provided that Landlord has given Tenant a copy of such mortgage; (c) At the request of Landlord, Tenant shall first deliver to Landlord a surety bond issued by a surety company of recognized responsibility satisfactory to Landlord and Mortgagee and in form and substance satisfactory to Landlord and Mortgagee, or shall provide other security satisfactory to Landlord protecting Landlord against loss or liability by reason of such non-compliance; and (d) Tenant shall promptly and diligently prosecute such contest. Landlord, without expense or liability to it, shall cooperate with Tenant in any such contest. ARTICLE 14 DISCHARGE OF LIENS ------------------ SECTION 14.1 Tenant will not create or permit to remain, and will discharge, any lien, encumbrance or charge (levied on account of any Imposition or any mechanic's, laborer's or materialman's lien or any security interest, conditional sale, title retention agreement or chattel mortgage, or otherwise) upon the Demised Premises or any part thereof, having any priority or preference over or ranking on a parity with the estate, rights and interest of Landlord in the Demised Premises or any part thereof or the income therefrom, and Tenant will not suffer any other matter or thing to be done whereby the estate, rights and interest of Landlord in the Demised Premises or any part thereof might be impaired; provided that any Imposition may, after the same becomes a lien on the Demised Premises, be paid or contested in accordance with ARTICLE 6 hereof, and any mechanic's, laborer's or materialman's lien may be discharged in accordance with Section 14.2 hereof. SECTION 14.2 If any mechanic's, laborer's or materialman's lien shall at any time be filed against the Demised Premises or any part thereof, Tenant, within thirty (30) days thereafter shall cause the same to be discharged of record by payment, deposit, bond, order of a court of competent 28. jurisdiction or otherwise. If Tenant shall fail to cause such lien to be discharged within the period aforesaid, then, in addition to any other right or remedy, Landlord may, but shall not be obligated to, discharge the same either by paying the amount claimed to be due or by procuring the discharge of such lien by deposit or by bonding proceedings. Any amount so paid by Landlord and all costs and expenses incurred by Landlord in connection therewith, together with interest thereon at the Interest Rate from the respective dates of the making of the payment or incurring of the cost and expense by Landlord shall be paid by Tenant to Landlord within ten (10) days after demand. SECTION 14.3 Nothing in this Lease contained shall be deemed or construed in any way as constituting the consent or request of Landlord or Tenant, express or implied by inference or otherwise, to any contractor, subcontractor, laborer or materialman for the performance of any labor or the furnishing of any materials for any specific improvement, alteration to or repair of all or part of the Demised Premises. ARTICLE 15 RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS ----------------------------------------------- SECTION 15.1 Landlord shall have the right at any time, after five (5) days' notice (which notice may be by facsimile) to Tenant (or without notice in case of emergency or in case any fine, penalty, interest or cost may otherwise be imposed or incurred on or by Landlord), but no earlier than the expiration of the applicable cure period hereunder (except in the case of emergency or in case any fine, penalty, interest or cost may otherwise be imposed or incurred on or by Landlord), to make any payment or perform any act required of Tenant under this Lease, and in exercising such right, to incur necessary and reasonable incidental costs and expenses, including fees and charges of counsel, accountants, appraisers, architects and engineers. Nothing herein shall imply any obligation on the part of Landlord to make any payment or perform any act required of Tenant, and the exercise of the right so to do shall not constitute a release of any obligation or a waiver of any Default. SECTION 15.2 All payments made by Landlord and all reasonable costs and expenses incurred by Landlord in connection with any exercise of such right, together with interest at the Interest Rate from the respective dates of the making of such payments or the incurring of such costs and expenses, shall be payable to Landlord by Tenant within ten (10) days after demand. All sums which may become payable to Landlord by Tenant pursuant to this ARTICLE 15 shall be deemed Additional Rent hereunder and Landlord shall have (in addition to any other right or remedy of Landlord) the same rights and remedies in the event of the non-payment of any such sums by Tenant as in the cases of default by Tenant in the payment of Fixed Rent or other Additional Rent. 29. ARTICLE 16 ENTRY ON PREMISES BY THE LANDLORD --------------------------------- SECTION 16.1 Subject to Landlord's compliance with Tenant's and/or any subtenant's established security measures and requirements provided the same do not prohibit access to any portion thereof, Tenant shall permit Landlord and any Mortgagee or prospective Mortgagee and the authorized representatives of Landlord to enter the Demised Premises without notice in the event of an emergency and upon notice (which notice may be by facsimile) at all reasonable times during usual business hours for the purpose of (a) inspecting the same (including, without limitation, performing tests reasonably required to determine if Tenant is complying with the provisions of this Lease to be complied with by it including those related to Hazardous Materials) and (b) making any necessary repairs to the Demised Premises and performing any work therein that may be necessary by reason of an Event of Default in making any such repairs or performing any such work. Nothing herein shall imply any obligation on the part of Landlord to do any such work which, under any provision of this Lease, Tenant may be required to perform and the performance thereof by Landlord shall not constitute a waiver of Tenant's Default in performing the same. Landlord may, during the progress of any such work keep and store upon the Demised Premises all necessary materials, tools, supplies and equipment. Landlord shall not be liable for reasonable inconvenience, annoyance, disturbance, loss of business or other damage of Tenant or any subtenant by reason of making such repairs or the performance of any such work, or on account of bringing materials, tools, supplies and equipment into or through the Demised Premises during the course thereof ''''and the obligations of Tenant under this Lease shall not be affected thereby. Landlord shall use commercially reasonable efforts to make such repairs in a manner so as to minimize interference with the normal conduct of business of Tenant and other occupants of the Demised Premises, provided that Landlord shall not be required to employ overtime or premium labor therefor. SECTION 16.2 Subject to Landlord's compliance with Tenant's and/or any subtenant's established security measures and requirements provided the same do not prohibit access to any portion thereof, Landlord shall have the right at all reasonable times to enter upon the Demised Premises for the purpose of exhibiting the same to prospective mortgagees, purchasers and, during the last twenty-four (24) months of the term of this Lease, to prospective tenants. 30. ARTICLE 17 ASSIGNMENT, MORTGAGES AND OTHER ------------------------------- TRANSFERS OF TENANT'S INTEREST; SUBLETTING ------------------------------------------ SECTION 17.1 Without the prior written consent of Landlord which shall not be unreasonably withheld, conditioned or delayed, neither this Lease nor any interest of Tenant in this Lease or in any sublease or in any subrents shall be sold, assigned, transferred, mortgaged, pledged, hypothecated, or otherwise disposed of or encumbered, whether voluntarily, by operation of law or otherwise, nor shall Tenant sublet all or any part of the Demised Premises or agree to do any of the foregoing. Landlord shall provide such consent or denial of consent within ten (10) business days after Tenant's request therefor. Any such denial shall include a reasonable explanation of the basis for denial. No such sale, assignment, transfer, mortgage, pledge or hypothecation shall release Tenant from liability hereunder, unless otherwise agreed in writing by Landlord and Mortgagee. Any assignment or other attempted disposition or encumbering of this Lease or any sublease hereof, or of the interest of Tenant hereunder, without the prior written consent of Landlord or without full compliance with any and all reasonable requirements set forth in such consent of Landlord or in this Lease, in addition to constituting an Event of Default under this Lease, shall be invalid and of no effect against Landlord. SECTION 17.2 The provisions of Section 17.1 shall apply to transfers of capital stock and any other mechanism which results in a change of control of Tenant (if Tenant is a corporation) and to transfers of an interest in the distributions of profits and losses and any other mechanism which results in a change of control of Tenant (if Tenant is a partnership or joint venture or other entity) as if such transfer or other mechanism were an assignment of this lease, except that the provisions of Section 17.1 shall not apply to (w) the public sale of securities of Tenant, (x) transactions with a corporation or other entity into or with which Tenant is merged or consolidated, (y) transactions with a corporation or other entity to which substantially all of Tenant's assets are transferred or (z) transfers to any corporation or other entity which controls or is controlled by Tenant or is under common control with Tenant (prior to or after the transaction involved), provided, that (i) in any of such events within -------- ---- ten (10) days after the effective date of any such transaction, the executed instrument of assignment and assumption, if applicable, in the form previously exhibited to Landlord, in which such assignee assumes all of the terms, covenants and conditions of this Lease on Tenant's part to be performed and observed shall have been delivered to Landlord and (ii) in the event of a transaction described in subsections (x) or (y), above, the successor to Tenant has a rating equal to or better than CCC+ (Standard and Poors) or the equivalent from another recognized rating agency. Tenant shall, however, notify Landlord of such assignment not less than ten (10) days prior to the effective date thereof and shall promptly deliver to Landlord such other documentation and evidence with respect thereto as Landlord may reasonably request. For purposes of this Section 17.2, the term "control" means, 31. in the case of a corporation, ownership or voting control, directly or indirectly, of at least fifty-one (51%) percent of all its voting stock, and in case of a partnership, joint venture or other entity, ownership, directly or indirectly, of at least fifty-one (51%) percent of all the general partnership or other interests therein. SECTION 17.3 Any consent by Landlord to a sale, assignment, transfer, mortgage, pledge, hypothecation, or other disposition or encumbering of this Lease or of any sublease, shall apply only to the specific transaction thereby authorized and shall not relieve Tenant from the requirement of obtaining the prior written consent of Landlord to any further sale, assignment, transfer, mortgage, pledge, hypothecation, or other disposition or encumbering of this Lease or of any sublease. Contemporaneously with the request of Tenant for each such consent, Tenant shall submit, in writing, information sufficient to enable Landlord to decide with respect thereto. SECTION 17.4 If this Lease be assigned, Landlord may, and is hereby empowered to collect rent from the assignee. If the Demised Premises or any part thereof be underlet or occupied by any Person other than Tenant, Landlord, upon the occurrence of and Event of Default, may, and is hereby empowered to, collect rent from the undertenant or occupant. In either of such events, Landlord shall apply the rent received by it to the Fixed Rent and the Additional Rent, and such collection shall not be deemed a waiver of the covenant of Tenant against mortgaging or pledging this Lease, or the acceptance of such assignee, undertenant or occupant as Tenant under this Lease or a release of Tenant from performance of Tenant's covenants hereunder. SECTION 17.5 Notwithstanding the foregoing provisions of this ARTICLE 17, Landlord shall not unreasonably withhold, condition or delay its consent to any subleases, licenses or concessions to be entered into by Tenant with respect to all or any portion of the Demised Premises. During the term of this Lease, Tenant shall be entitled to all rent, income and profits relating to any subleases, licenses or concessions at the Demised Premises (collectively, the "Sublease Profits"), provided, however, that Tenant hereby grants to Landlord a first priority - -------- ------- security interest in and to such Sublease Profits which shall entitle Landlord to exercise the right to receive the Sublease Profits while an Event of Default in payment of Fixed Rent and/or Additional Rent exists hereunder. Landlord shall apply all Sublease Profits toward payment of delinquent and current Fixed Rent and Additional Rent (as applicable), in that order. Any excess shall be promptly paid to Tenant. SECTION 17.6 Any violation of any provision of this Lease, whether by act or omission, by any assignee, subtenant or undertenant, shall be deemed a violation of such provision by Tenant, it being the intention and meaning of the parties hereto that Tenant shall assume and be liable to Landlord for 32. any and all acts and omissions of any and all assignees, subtenants and undertenants in violation of this Lease. SECTION 17.7 Landlord hereby approves the SGI Lease as an acceptable sublease, provided that the SGI Lease shall be subject and subordinate to this Lease upon the execution and delivery by SGI of a subordination, nondisturbance and attornment agreement in the form attached hereto as Exhibit C. Tenant shall promptly --------- notify Landlord of any material defaults under the SGI Lease or any other sublease entered into by Tenant and shall provide to Landlord copies of any and all notices of default or correspondence relating to material defaults whether received or delivered by Tenant. Notwithstanding any other provision of this Lease, Landlord hereby acknowledges that any provisions of or rights granted under the SGI Lease that may conflict or are inconsistent with the terms and conditions of this Lease shall not be deemed a violation of this Lease. ARTICLE 18 ADDITIONAL UNDERTAKING OF THE TENANT ------------------------------------ If, (a) for any reason, the Fixed Rent payable by Tenant to Landlord pursuant to this Lease shall during the Term hereof be diminished or subject to diminution through attachment, claim, demand, charge, lien, levy, process, encumbrance or by Law, or shall be subject to withholding or diminution at the source, by reason of any taxes (including a tax on rent), assessments, expenses, indebtedness, obligation or liabilities of any character, foreseen or unforeseen and the same is required to be paid by Tenant under this Lease, and whether or not valid, or (b) by reason of any claims, demands, charges or liens of any nature, foreseen or unforeseen, incurred by any Person, and the same is required to be paid by Tenant under this Lease, so that the Fixed Rent or any part thereof would be unavailable to Landlord, when due, or (c) the payment in full of the Fixed Rent when due and payable under this Lease shall be delayed, hindered or prevented, or the right of Landlord to use or apply the same shall be adversely affected due to the fault of Tenant, or (d) the Demised Premises shall be or become subject to or burdened by any lien, charge or encumbrance (i) of any kind other than permitted in this Lease or otherwise approved by Landlord and (ii) not created by Landlord, then and in any such event, Tenant promptly shall take at any time and from time to time after notice by Landlord such action (including the payment of money to Landlord) to the extent, and as often as may be, necessary to (i) pay fully and discharge such taxes, assessments, expenses, indebtedness, obligations and liabilities, and to eliminate or nullify the cause of such attachment, claim, demand, charge, lien, levy, order, process, encumbrance, withholding or diminution, (ii) eliminate or prevent any such delay, hindrance or obstacle in the payment in full of the Fixed Rent when the same is due and payable under this Lease, and (iii) protect fully the right of Landlord to use or apply the Fixed Rent for its purposes. Except as otherwise set forth in this Lease, it is the intention of the Tenant in giving the undertakings set forth in this ARTICLE 18 that the Fixed Rent, the Additional Rent and other sums payable under this Lease shall be received and enjoyed by the Landlord, or its assignee, as an absolutely net sum, so that said rent shall be available for use by the Landlord, or its assignee, when due, without diminution to any extent and without delay or postponement for any reason. 33. ARTICLE 19 CONDITION OF AND TITLE TO DEMISED PREMISES; QUIET ENJOYMENT ------------------------- SECTION 19.1 Tenant represents and agrees that the Demised Premises, the title thereto, and the present uses and non-uses thereof, have been examined by Tenant and that Tenant accepts the same in the condition or state in which they or any of them now are, without representation or warranty, express or implied in fact or by law, by Landlord and without recourse to Landlord, as to the title thereto, the nature, condition or usability thereof or the use or uses to which the Demised Premises or any part thereof may be put. Tenant further represents that Tenant was the previous owner of fee title to the Demised Premises and sold the Demised Premises to Landlord pursuant to the Original Purchase Agreement (as defined herein). SECTION 19.2 Tenant, upon paying the Fixed Rent and the other Additional Rent in this Lease provided for and observing and keeping the covenants, agreements, terms and conditions of this Lease on its part to be performed, shall, subject to its terms, lawfully and quietly hold, occupy and enjoy the Demised Premises during the term of this Lease, without hindrance or molestation by Landlord or by any other Person claiming under Landlord subject, however, to the exceptions and reservations of this Lease. Any breach or default of this ARTICLE 19, shall not give to Tenant any right during the term of this Lease to cancel or terminate this Lease or to abate or make deduction from or offset against Fixed Rent, Additional Rent or any other sums payable by Tenant under this Lease, or to fail to perform any other covenant, agreement or obligation of Tenant hereunder, but nothing herein shall preclude Tenant from obtaining damages and injunctive relief against Landlord or any Person claiming under Landlord. The covenant in this Section 19.2 shall be construed as a covenant running with the Demised Premises and not as a personal covenant or obligation of Landlord, except to the extent of Landlord's covenants, agreements, obligations and liabilities that arise while Landlord possesses an interest in this Lease and/or the Demised Premises, and provided that any successors or assigns of Landlord assume all of Landlord's covenants, agreements, obligations and liabilities hereunder. ARTICLE 20 INDEMNIFICATION OF THE LANDLORD, TENANT AND MORTGAGEES ------------------------------------------------------ SECTION 20.1 Tenant shall indemnify and save harmless Landlord and any Mortgagees from and against any and all liabilities, obligations, damages, penalties, claims, suits, and any reasonable Mortgagee costs, charges and expenses, including engineers', architects', appraisers', accountants', and attorneys' fees and charges, which may be imposed upon or asserted against 34. Landlord, or any Mortgagee whether during or after the term of this Lease by reason of any of the following occurring during the Term: (a) any work or thing done in, on or about the Demised Premises or any part thereof by Tenant or any subtenant, or their respective employees, agents or contractors; (b) any act, omission or negligence of Tenant or any agent, contractor, employee, licensee or invitee of Tenant; (c) any accident or injury to any individual (including death) or damage to property occurring in, on or about the Demised Premises or any part thereof or any street, alley, sidewalk, curb, passageway or space adjacent thereto which is not the result of any act or omission of Landlord, Mortgagee, or their respective employees, agents or contractors; and (d) any failure on the part of Tenant to perform or comply with any of the agreements, terms or conditions contained in this Lease on its part to be performed or complied with. Landlord shall promptly notify Tenant of any claim asserted against Landlord for which Landlord claims Tenant may have to indemnify Landlord hereunder. In the event that any action or proceeding shall be brought against Landlord or any Mortgagee by reason of any matter covered by this Section 20.1, Tenant, upon written notice from Landlord or any Mortgagee will, at Tenant's sole cost and expense, resist or defend the same. SECTION 20.2 Tenant shall indemnify and save harmless Landlord against all legal costs and charges, including counsel fees and charges, lawfully incurred in obtaining possession of the Demised Premises after an Event of Default or after Tenant's Default in surrendering possession upon expiration or earlier termination of the term of this Lease or enforcing any covenant or agreement of Tenant herein contained provided, and only to the extent, that Landlord is successful in obtaining possession and/or enforcing the terms of this Lease. SECTION 20.3 Landlord shall indemnify and save harmless Tenant against all legal costs and charges, including counsel fees and charges, lawfully incurred by Tenant as a result of Landlord's breach of this Lease and/or the negligence or willful misconduct of Landlord, its employees, agents or contractors. 35. ARTICLE 21 EXCAVATIONS ON ADJOINING PROPERTY --------------------------------- SECTION 21.1 If any excavation or other building operation shall be about to be made or shall be made upon any premises or streets adjoining the Demised Premises, Tenant shall permit the owner or lessee of such adjoining premises and their respective representatives to enter the Demised Premises and to shore the foundations and walls thereof, and to do any other act or thing necessary for the safety or preservation of the Demised Premises all at such owner or lessee's sole cost and expense. Landlord shall not be liable for any inconvenience, annoyance, disturbance, loss of business or other damage arising therefrom and Tenant's obligations hereunder shall not thereby be affected. Nothing in this ARTICLE 21 shall be construed as a waiver of any rights of Tenant against Persons other than Landlord. ARTICLE 22 DEFAULT ------- SECTION 22.1 If, during the term of this Lease, any one or more of the following acts or occurrences (any one of such occurrences or acts being hereinafter called an "Event of Default") shall happen: (a) Tenant shall fail to make payment of any installment of the Fixed Rent more than five (5) days after the same shall have become due; or (b) Tenant shall fail to make payment of any Additional Rent after the same shall have become due for more than ten (10) days after written notice thereof from Landlord to Tenant; (c) Tenant shall fail to perform or comply with any of the other covenants, agreements, terms and conditions of this Lease to be performed or complied with by Tenant, and such default shall continue for a period of thirty (30) days after written notice thereof from Landlord to Tenant, or, in the case of a default which by its nature cannot with due diligence be cured within thirty (30) days (and the continuance of which for the period required for cure will not (i) subject Landlord or any Mortgagee to prosecution for a crime, (ii) subject all or part of the Demised Premises to being condemned or (iii) result in the termination of any Underlying Mortgage, provided that Landlord has given Tenant a copy of such mortgage), Tenant shall not (x) proceed promptly upon the giving of such notice and with all due diligence to prosecute to completion all steps to remedy the same and (y) complete such remedy within a reasonable time after the giving of such notice by Landlord; or (d) Tenant shall file a voluntary petition under any bankruptcy or insolvency law or shall be adjudicated a bankrupt or insolvent, or shall file any petition or answer seeking any reorganization, composition, readjustment or similar relief under any present or future 36. bankruptcy or other applicable law, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver, or liquidator of Tenant or of all or any substantial part of its properties or of all or any substantial part of the Demised Premises; or (e) If within sixty (60) days after the filing of an involuntary petition in bankruptcy against Tenant or the commencement of any proceeding against Tenant seeking any reorganization, composition, readjustment or similar relief under any Law, such proceeding shall not have been dismissed, or if, within sixty (60) days after the appointment, without the consent or acquiescence of Tenant, of any trustee, receiver or liquidator of Tenant or of all or any substantial part of the properties of Tenant or all or any substantial part of the Demised Premises, such appointment shall not have been vacated or stayed on appeal or otherwise, or if, within sixty (60) days after the expiration of any such stay, such appointment shall not have been vacated, or if within sixty (60) days after the taking of possession, without the consent or acquiescence of Tenant, of the property of Tenant by any Governmental Authority pursuant to statutory authority for the dissolution or liquidation of Tenant, such taking shall not have been vacated or stayed on appeal or otherwise; or (f) if the Demised Premises shall be abandoned by Tenant, unless the same is being sublet by Tenant to other Persons pursuant to and in accordance with the terms of this Lease; (g) if any event shall occur or any contingency shall arise whereby this Lease and the estate hereby granted or the unexpired balance of the Term would, by operation of law or otherwise, devolve upon or pass to any party other than Tenant, except as is expressly permitted under ARTICLE 17; or (h) Tenant shall be in default under the SGI Lease or any other lease relating to more than 50,000 square feet of space at the Demised Premises (a "Major Sublease"); then, and in such event, Landlord may at its option, then or thereafter while any such Event of Default shall continue and notwithstanding the fact that Landlord may have any other remedy hereunder or at law or in equity, by written notice to Tenant, designate a date, not less than sixty (60) days after the giving of such notice, on which this Lease shall terminate; and thereupon, on such date the term of this Lease and the estate hereby granted shall expire and terminate upon the date specified in such notice with the same force and effect as if the date specified in such notice were the date herein fixed for the expiration of the term of this Lease, and all rights of Tenant hereunder shall expire and terminate, but Tenant shall remain liable as hereinafter provided. Nothing in the preceding paragraph shall be deemed to require Landlord to give the five (5) day notice provided for therein prior to the commencement of a summary proceeding for non-payment of rent or a plenary action for recovery of rent, it being intended that such notice is for the purpose of creating a conditional limitation hereunder pursuant to which this Lease shall terminate and Tenant, if it remains in occupancy, shall become a holdover tenant. 37. SECTION 22.2 Tenant's due and punctual performance of all of its obligations under this Lease throughout the Term is of importance to Landlord. Without limiting the provisions of Section 22.1, if Tenant shall default in the timely payment of any installment of Fixed Rent, and any such default shall continue or be repeated for two consecutive months or for a total of three months in any period of twelve months then, notwithstanding that such Defaults shall have each been cured within the applicable period, if any, as above provided, any further -------- similar Default shall be deemed to be deliberate and Landlord thereafter may serve the said five (5) days' notice of termination upon Tenant without affording to Tenant an opportunity to cure such further Default. SECTION 22.3 (a) If a petition is filed by, or an order-for relief is entered against Tenant under Chapter 7 of the Bankruptcy Code and the trustee of Tenant elects to assume this Lease for the purpose of assigning it, such election or assignment, or both, may be made only if all of the terms and conditions of subparagraphs (b) and (d) below are satisfied. To be effective, an election to assume this Lease must be in writing and addressed to Landlord, and in Landlord's business judgment, all of the conditions hereinafter stated, which Landlord and Tenant acknowledge to be commercially reasonable, must have been satisfied. If the trustee fails so to elect to assume this Lease within sixty (60) days after his appointment, this Lease will be deemed to have been rejected, and Landlord shall then immediately be entitled to possession of the Demised Premises without further obligation to Tenant or the trustee and this Lease shall be terminated. Landlord's right to be compensated for damages in the bankruptcy proceeding, however, shall survive such termination. (b) If Tenant files a petition for reorganization under Chapters 11 or 13 of the Bankruptcy Code, or if a proceeding fried by or against Tenant under any other chapter of the Bankruptcy Code is converted to a Chapter 11 or 13 proceeding and Tenant's trustee or Tenant as debtor-in-possession fails to assume this Lease within sixty (60) days from the date of the filing of such petition or conversion, then the trustee or the debtor-in-possession shall be deemed to have rejected this Lease. To be effective any election to assume this Lease must be in writing addressed to Landlord and, in Landlord's business judgment, all of the following conditions, which Landlord and Tenant acknowledge to be commercially reasonable, must have been satisfied: (i) The trustee or the debtor-in-possession has cured or has provided to Landlord adequate assurance, as defined in this subparagraph (b), that: (A) The trustee will cure all monetary defaults under this Lease within ten (10) days from the date of assumption (B) The trustee will cure all nonmonetary defaults under this Lease within thirty (30) days from the date of assumption. 38. (i) The trustee or the debtor-in-possession has compensated Landlord, or has provided Landlord with adequate assurance, as hereinafter defined, that within ten (10) days from the date of assumption Landlord will be compensated for any pecuniary loss it has incurred arising from the default of Tenant, the trustee, or the debtor-in-possession, as recited in Landlord's written statement of pecuniary loss sent to the trustee or debtor-in-possession. (ii) The trustee or the debtor-in-possession has provided Landlord with adequate assurance of the future performance of each of Tenant's obligations under this Lease; provided, however, that: (A) From and after the date of assumption of this Lease, the trustee or the debtor-in-possession shall pay the Fixed Rent and Additional Rent payable under this Lease in advance in equal monthly installments on each date that such Rent are payable. (B) The trustee or debtor-in-possession shall also deposit with Landlord, as security for the timely payment of any and all sums due under this Lease, an amount equal to three (3) months' Fixed Rent and other monetary charges accruing under this Lease; (C) If not otherwise requested by the terms of this Lease, the trustee or the debtor-in-possession shall also pay in advance, on each day that any installment of Fixed Rent is payable, one-twelfth (1/12) of Tenant's annual Impositions, operating expenses, and other obligations under this Lease; and (D) The obligations imposed upon the trustee or the debtor-in-possession will continue for Tenant after the completion of bankruptcy proceedings. (iii) Landlord has determined that the assumption of this Lease will not: (A) Breach any provision in any other lease, mortgage, financing agreement, or other agreement by which Landlord is bound relating to the Demised Premises; or (B) Disrupt, in Landlord's judgment, the occupant mix or occupant consistency of the Demised Premises or any other attempt by Landlord to provide or exclude a specific variety of occupants in the Demised Premises which, in Landlord's judgment, would be most beneficial to all of the tenants thereof (including Landlord) and would enhance the security, image, reputation, and profitability thereof. (iv) For purposes of this subparagraph (b), "adequate assurance" means that: 39. (A) Landlord determines that the trustee or the debtor-in- possession has, and will continue to have, sufficient unencumbered assets, after the payment of all secured obligations and administrative expenses, to assure Landlord that the trustee or the debtor-in-possession will have sufficient funds timely to fulfill Tenant's obligations under this Lease and to keep the Demised Premises properly staffed with sufficient employees to conduct a fully operational, actively promoted business in the Demised Premises; and (B) An order shall have been entered segregating sufficient cash payable to Landlord and/or a valid and perfected first lien and security interest shall have been granted in property of Tenant, trustee, or debtor-in-possession which is acceptable in value and kind to Landlord, to secure to Landlord the obligation of the trustee or debtor-in-possession to cure all monetary and nonmonetary defaults under this Lease within the time periods set forth above. (c) In the event this Lease is assumed by a trustee appointed for Tenant or by Tenant as debtor-in-possession under the provisions of subparagraph (b) above and, thereafter, Tenant is either adjudicated bankrupt or files a subsequent petition for arrangement under Chapter 11 of the Bankruptcy Code, then Landlord may, at its option, terminate this Lease and all the Tenant's rights under it, by giving written notice of Landlord's election so to terminate. (d) If the trustee or the debtor-in-possession has assumed this Lease, pursuant to subparagraph (a) or (b) above, to assign or to elect to assign Tenant's interest under this Lease or the estate created by that interest to any other person, such interest or estate may be assigned only if the intended assignee has provided adequate assurance of future performance, as defined in this subparagraph (d), of all of the terms, covenants, and conditions of this Lease. For purposes of this subparagraph (d), "adequate assurance of future performance" means that Landlord has ascertained that each of the following conditions has been satisfied: (ii) The assignee has submitted a current financial statement, audited by a certified public accountant, which shows a net worth and working capital in amounts determined by Landlord to be sufficient to assure the future performance by the assignee of the tenant's obligations under this Lease; (iii) If requested by Landlord, the assignee will obtain guarantees, in form and substance satisfactory to Landlord (i.e. letter(s) of credit), from one or more persons who satisfy Landlord's standards of creditworthiness; and (iv) Landlord has obtained consents or waivers from any third parties which may be required under any lease, mortgage, financing arrangement, or other agreement by which Landlord is bound, to enable Landlord to permit such assignment. 40. (e) When, pursuant to the Bankruptcy Code, the trustee or the debtor- in-possession is obligated to pay reasonable use and occupancy charges for the use of all or part of the Demised Premises, it is agreed that such charges will not be less than the Fixed Rent as defined in this Lease, plus Additional rent and other monetary obligations of Tenant included herein. (f) Neither Tenant's interest in this Lease nor any estate of Tenant created in this Lease shall pass to any trustee, receiver, assignee for the benefit of creditors, or any other person or entity, nor otherwise by operation of law under the laws of any state having jurisdiction of the person or property of Tenant, unless Landlord consents in writing to such transfer. Landlord's acceptance of Fixed Rent, Additional Rent or any other payments from any trustee, receiver, assignee, person, or other entity will not be deemed to have waived, or waive, either the requirement of Landlord's consent or Landlord's right to terminate this Lease for any transfer of Tenant's interest under this Lease without such consent. SECTION 22.4 If this Lease is terminated as provided in Section 22.1 or 22.2, or as permitted by law, Tenant shall peaceably quit and surrender possession of the Demised Premises to Landlord, and Landlord may, without further notice enter upon, re-enter, possess and repossess the same by summary proceedings, ejectment or other judicial proceeding, and again have, repossess and enjoy the same SECTION 22.5 (a) If Landlord re-enters and obtains possession of the Demised Premises, as provided in Section 22.4 of this Lease, Landlord shall have the right, without notice, to repair or alter the Demised Premises in such manner as Landlord may reasonably deem necessary or advisable so as to put the Demised Premises in good order, including restoration of the Demised Premises caused by any removal of machinery and equipment by Tenant, and shall have the right, at Landlord's option, to re-let the Demised Premises or a part thereof at such rentals and on such conditions, including concessions and free rent periods, as Landlord in good faith, in its reasonable discretion, may determine, and Tenant shall pay to Landlord on demand all reasonable expenses incurred by Landlord in obtaining possession, and in altering, repairing and putting the Demised Premises in good order and condition and in reletting the same, including fees and charges of attorneys, engineers and architects and brokers, and all other expenses or commissions. (b) Tenant shall pay to Landlord upon the Fixed Rent payment dates following the date of such re-entry to and including the date set forth in ARTICLE 4 hereof for the expiration of the Term of this Lease, the sums of money which would have been payable by Tenant as Fixed Rent hereunder on such Fixed Rent payment dates as if Landlord had not re-entered and resumed possession of the Demised Premises, deducting only the net amount of rent, if any, which Landlord shall actually receive (after deducting therefrom the expenses, costs and payments of Landlord which, in accordance with the terms of this Lease would have been borne by Tenant) in the meantime from and by any reletting of the Demised Premises, and Tenant shall remain liable for all sums otherwise payable by Tenant under this Lease, including but not limited to 41. Additional Rent, such expenses of Landlord, as well as for any deficiency aforesaid, and Landlord shall have the right from time to time to begin and maintain successive actions or other legal proceedings against Tenant for the recovery of such deficiency, expenses or damages and for a sum equal to any installments of Fixed Rent and Additional Rent. As an alternative remedy, in the event of termination of this Lease, Landlord shall be entitled to damages against Tenant for breach of this Lease, at any time (whether or not Landlord shall have become entitled to or shall have received any damages as hereinabove provided) in an amount equal to the excess, if any, of (x) the Fixed Rent and Additional Rent which would be payable under this Lease for the period commencing on the date of the expiration of this Lease to the end of the term of this Lease had not so terminated, over (y) the fair rental value (including Additional Rent) of the Demised Premises for the same period, discounted to the date of payment at the rate of six percent (6%) per annum. The obligation and liability of Tenant to pay the Fixed Rent and Additional Rent shall survive the commencement, prosecution and termination of any action to secure possession of the Demised Premises. Nothing contained herein shall be deemed to require Landlord to wait to begin such action or other legal proceedings until the date when this Lease would have expired had there not been any Event of Default. Landlord shall use reasonable efforts to relet the Demised Premises, but shall not be liable for its reasonable failure to relet all or part of the Demised Premises and shall not, under any circumstances, have any liability for its reasonable failure to sublet a part of the Demised Premises, particularly when the possible letting of the whole of the Demised Premises will be adversely affected thereby. (c) Nothing herein contained shall limit or prejudice the right of Landlord, in any bankruptcy or reorganization or insolvency proceeding, to prove for and obtain as liquidated damages by reason of such termination an amount equal to the maximum allowed by any bankruptcy or reorganization or insolvency proceedings, or to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law whether such amount shall be greater or less than the damages provided hereinafter. SECTION 22.6 TENANT AND LANDLORD HEREBY WAIVE THE BENEFITS OF TRIAL BY JURY IN ANY ACTION OR PROCEEDING AGAINST THE OTHER. TENANT HEREBY EXPRESSLY WAIVES, SO FAR AS PERMITTED BY LAW, ANY AND ALL RIGHT OF REDEMPTION IN CASE TENANT SHALL BE DISPOSSESSED BY A JUDGMENT OR BY WARRANT OF ANY COURT OF COMPETENT JURISDICTION OR IN CASE OF LEGAL AND PROPER RE-ENTRY OR REPOSSESSION BY LANDLORD OR IN CASE OF ANY EXPIRATION OR TERMINATION OF THIS LEASE. SECTION 22.7 At any time after an Event of Default shall have occurred and while it is continuing, Landlord shall be entitled to enjoin any breach by Tenant of any of the covenants, agreements, terms or conditions contained in this Lease and Landlord shall have the right to invoke any right and remedy allowed at law or in equity or by statute or otherwise as though re-entry, summary proceedings, and other remedies were not provided for in this Lease. 42. SECTION 22.8 Interest at the Interest Rate shall accrue from the due date thereof upon any Fixed Rent or Additional Rent payable under this Lease to Landlord during any period the payment thereof by Tenant to Landlord may be overdue by more than five (5) days. In addition, Tenant's failure to pay any Fixed Rent or Additional Rent within five (5) days of the due date thereof shall result in the imposition of a service charge for such late payment in the amount of five percent (5%) of the amount due. ARTICLE 23 ATTORNEYS' FEES --------------- In any action or proceeding (other than an arbitration proceeding under ARTICLE 10 or ARTICLE 11) which Landlord or Tenant may prosecute to enforce its rights hereunder, the non-prevailing party shall pay all reasonable costs incurred by the other party therein, including attorneys' fees and charges (including those on appeal) and such costs and attorneys' fees and charges shall be made a part of any judgment in such action. If Landlord shall, without fault on its part, be made a party to any litigation commenced against Tenant, and if Tenant shall not provide Landlord with counsel satisfactory to Landlord (of which fact Landlord shall promptly notify Tenant), Tenant shall pay all reasonable costs and attorneys' fees and charges (including those on appeal) reasonably incurred or paid by Landlord in connection with such litigation. ARTICLE 24 SUBORDINATION OF LEASE ---------------------- SECTION 24.1 The Lease shall be subject and subordinate at all times to any Underlying Mortgage and to any Underlying Lease, and to all renewals, modification, amendments, consolidations, replacements and extensions thereof, provided that Tenant receives from the holder of such Underlying Mortgage or Underlying Lease, an agreement that (a) the Tenant's possession, use and enjoyment of the Demised Premises under this Lease shall not be disturbed and (b) all of Tenant's rights and privileges under this Lease (including, but not limited to its Purchase Option rights) shall be upheld and honored so long as there is no Event of Default hereunder. The foregoing is self-operative and no further confirmation thereof is required. Until Tenant receives such an agreement, this Lease shall not be so subject and subordinate. If, by dispossess, foreclosure or otherwise, such Mortgagee or Superior Lessor, or any successor in interest, shall come into possession of the Demised Premises, or shall become the owner of the Demised Premises, or take over the rights of Landlord in the Demised Premises, it will not disturb the possession, use or enjoyment of the Demised Premises by Tenant, its successors or assigns, nor disaffirm this Lease or Tenant's rights or estate hereunder, so long as all of the obligations of Tenant are fully performed in accordance with the terms of this Lease. Tenant shall execute and deliver any instrument which may be required by Landlord or any Mortgagee or Superior Lessor in confirmation of such subordination promptly upon the request of Landlord, any Mortgagee or 43. any Superior Lessor. Such agreement shall contain such other provisions as the holder of any Underlying Mortgage may reasonably require, so long as such other provisions do not (i) modify this Lease or (ii) impose any additional costs, obligations or liabilities on Tenant except to a de minimis extent. SECTION 24.2 If any Mortgagee, Superior Lessor or any designee of any Mortgagee or any Superior Lessor ("Successor Landlord"), shall succeed to the rights of Landlord under this lease, whether through possession or foreclosure action or delivery of a new lease or deed, then at the request of such Successor Landlord and upon such Successor Landlord's written agreement to accept Tenant's attornment, Tenant shall attorn to and recognize such Successor Landlord as the landlord under this Lease and shall promptly execute and deliver any instrument that such Successor Landlord may reasonably request to evidence such attornment; provided that such instrument includes non-disturbance provisions reasonably satisfactory to Tenant. Such Successor Landlord shall not be (a) liable for any previous act or omission of Landlord; (b) subject to any credits, offsets, claims, counter- claims, demands or defenses which Tenant may have had against Landlord prior to Successor Landlord taking title or delivery of possession of the Demised Premises; or (c) bound by any payments of rent which Tenant might have made for more than one (1) month in advance to Landlord. SECTION 24.3 Tenant shall give notice to any Mortgagee or any Superior Lessor of any act or omission of Landlord which Tenant believes would give it the right to terminate this Lease or abate rent hereunder, if said Mortgagee or Superior Landlord has delivered a written request to Tenant to that effect, including said Mortgagee's or Superior Landlord's notice address. ARTICLE 25 SURRENDER AND HOLDING OVER -------------------------- SECTION 25.1 On the last day of the term hereof, or upon any earlier termination of this Lease, or upon any re-entry by Landlord upon the Demised Premises, Tenant shall surrender the Demised Premises unto the possession and use of Landlord without delay and in good order, condition and repair, reasonable wear and tear excepted, free and clear of all lettings and occupancies and free and clear of all liens and encumbrances other than those created or consented to by Landlord. Landlord hereby consents to (i) all liens and encumbrances of record affecting the Demised Premises as of the date of this Lease, and (ii) all matters disclosed by the survey of the Demised Premises dated 8/27/99 prepared by BRW. All machinery, equipment and fixed assets (except for Tenant's trade fixtures and business equipment) now or hereafter installed at the Demised Premises and used in the operations thereof shall be and remain part of the Demised Premises. 44. SECTION 25.2 Tenant may remove Tenant's personal property from the Demised Premises during the term of this Lease and Tenant shall repair any damage to the Demised Premises caused by such removal. At Landlord's election, Tenant shall remove Tenant's personal property from the Demised Premises no later than the last day of the Term. Any personal property of Tenant which shall remain in the Improvements after the termination of this Lease may, at the option of Landlord, be deemed to have been abandoned by Tenant and either may be retained by Landlord as its property or be disposed of without accountability in such manner as Landlord may see fit or Landlord may require Tenant to remove the same at Tenant's expense. SECTION 25.3 Landlord shall not be responsible for any loss or damage occurring to any property owned by Tenant or any subtenant unless such loss or damage is caused by Landlord's, or its employee's, agent's or contractor's negligent act or omission or willful misconduct. SECTION 25.4 Any subrents shall be apportioned between Landlord and Tenant as of the last day of the term hereof or as of the effective date of any earlier termination of this Lease, provided that if Tenant shall then be in default in the performance of any Tenant's covenants, agreements and undertakings in this Lease, then to the extent of the amount of any such default, Tenant shall not be entitled to receive an apportionment. SECTION 25.5 In the event of a termination of this Lease in accordance with its terms and a holding over by Tenant thereafter, there shall be no renewal or extension of this Lease by operation of law, but Tenant shall continue to pay to Landlord for each month of use and occupancy a sum equal to two times the Fixed Rent installment then payable, and also pay all other amounts payable by Tenant to Landlord hereunder, the Fixed Rent to be calculated on a per diem basis for each day or fraction thereof that Tenant remains in occupancy of the Demised Premises after expiration of the term of this Lease. SECTION 25.6 The provisions of this ARTICLE 25 shall survive any termination of this Lease. ARTICLE 26 CERTAIN APPORTIONMENTS AND OTHER MATTERS ---------------------------------------- SECTION 26.1 Tenant and Landlord shall apportion between them Impositions, with Landlord being responsible for Impositions which relate to the period after the end of the term of this Lease and 45. Tenant being responsible for Impositions relating to periods after the Commencement Date and to the end of the term of this Lease. Tenant shall be responsible under ARTICLE 7 for all services and utilities for the Demised Premises during the term of this Lease (including, without limitation, those to be provided to the tenants under any subleases) from the Commencement Date. ARTICLE 27 ESTOPPEL CERTIFICATES --------------------- Each of Tenant and Landlord shall, from time to time upon not less than ten (10) business days' prior request by the other, execute, acknowledge and deliver to the requesting party a statement in writing in the form attached hereto as Exhibit D or such other form as is reasonably requested, executed by an - --------- authorized officer of Tenant or Landlord, as the case may be, certifying that this Lease is unmodified and in full force and effect (or, if there have been modifications, that this Lease is in full force and effect as modified, and setting forth such modifications) and the dates to which the Fixed Rent and the other Additional Rent have been paid, and either stating that to the knowledge of Tenant or Landlord, as the case may be, no default exists in the performance of any covenant, agreement or condition contained in this Lease or specifying each default of which Tenant or Landlord, as the case may be, may have knowledge. Any such statement delivered pursuant to this ARTICLE 27 may be relied upon by any Mortgagee, by any prospective purchaser of the Demised Premises, any assignee of such Mortgagee, any subtenant of Tenant, purchaser of Tenant or purchaser/assignee of Tenant's interest in and under this Lease. ARTICLE 28 ASSIGNMENT OF THE LANDLORD'S INTEREST; UNDERLYING MORTGAGE ---------------------------------------------------------- Landlord may at any time and from time to time assign to any one Person (herein called the "Assignee"), by way of pledge or otherwise, any or all of the rights (in whole or in part) of Landlord under this Lease. The Assignee may enforce any and all of the terms of this Lease, to the extent so assigned, as though the Assignee had been a party hereto. 46. ARTICLE 29 LIMITATION OF THE LANDLORD'S LIABILITY -------------------------------------- SECTION 29.1 Provided that Landlord complies with Section 29.1, Landlord shall have no personal liability hereunder and Tenant shall look solely to Landlord's estate and interest in the Demised Premises, the Security Deposit, and/or Landlord's operating account(s) in connection with the Demised Premises and/or this Lease for the satisfaction of any right or remedy of Tenant for the collection of a judgment (or other judicial process) requiring payment of money by Landlord, and no other property of Landlord or the partners or members thereof, if Landlord is not an individual or corporation, shall be subject to levy, attachment or other enforcement procedures for satisfaction of Tenant's remedies under this Lease. Landlord covenants that it shall at all times during the term of this Lease maintain at least $5,000,000.00 of equity in the Demised Premises, where "equity" means (i) the fair market value of the Demised Premises minus (ii) the total amount of all mortgages, liens and other monetary encumbrances, if any, against the Demised Premises. Tenant agrees that Landlord's failure to pay any judgment or award to Tenant shall not affect Tenant's obligations under this Lease. The term "Landlord" as used in this Lease, so far as covenants or agreements on the part of Landlord are concerned, shall be limited to the owner or owners of Landlord's interest in this Lease at the time in question, and in the event of any transfer or transfers of all of such interest, except a transfer by way of security, Landlord herein named (and in case of any subsequent transfer, the then transferor) shall be automatically freed and relieved from and after the date of such transfer of all liability as respects the performance of any covenants or agreements on the part of Landlord contained in this Lease thereafter to be performed but shall remain liable for such obligations accruing prior to such transfer; provided, however, that -------- ------- (a) any funds in the hands of such Landlord or the then transferor at the time of such transfer, in which Tenant has an interest, shall be turned over to the transferee and any amount then due and payable to Tenant by Landlord or the then transferor under any provision of this Lease, shall be paid to Tenant simultaneous with such transfer; and (b) upon any such transfer, the transferee shall be deemed to have assumed, subject to the limitations of this ARTICLE 29, all of the covenants, agreements and conditions in this Lease to be performed on the part of Landlord, it being intended hereby that the covenants and agreements contained in this Lease on the part of Landlord shall, subject as aforesaid, be binding on Landlord, its successors and assigns, only during and in respect of their respective successive periods of ownership; however, no such transfer shall release any transferor from its obligations hereunder accruing during its respective period of ownership. 47. ARTICLE 30 SEPARATE COVENANTS; INVALIDITY OF PARTICULAR PROVISIONS ------------------------------------------------------- Each covenant and agreement contained in this Lease shall be construed to be a separate and independent covenant and agreement, and the breach of any such covenant or agreement by Landlord shall not discharge or relieve Tenant from Tenant's obligation to perform each and every covenant and agreement of this Lease to be performed by Tenant. If any term or provision of this Lease or the application thereof to any Person or circumstance shall to any extent be invalid and unenforceable, the remainder of this Lease, or the application of such term or provision to Persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected, and each term and provision of this Lease shall be valid and shall be enforced to the extent permitted by law. ARTICLE 31 CUMULATIVE REMEDIES; NO WAIVER ------------------------------ The specific remedies to which Landlord may resort under the terms of this Lease are cumulative and are not intended to be exclusive of any other remedies or means of redress to which Landlord may be lawfully entitled in case of any breach by Tenant of any provision of this Lease. The failure of Landlord to insist in any one or more cases upon the strict performance of any of the covenants of this Lease, or to exercise any option herein contained, shall not be construed as a waiver or relinquishment for the future of such covenants or option. A receipt by Landlord of Fixed Rent or Additional Rent with knowledge of the breach of any covenant hereof shall not be deemed a waiver of such breach. ARTICLE 32 RECORDING --------- SECTION 32.1 Tenant shall not record this Lease. Landlord and Tenant shall execute and deliver in recordable form a memorandum of lease for the purpose of recording and giving notice of this Lease. If this Lease terminates, Tenant shall, upon the request of Landlord, sign an agreement in recordable form reflecting termination of this Lease and if Tenant shall fail to do so within ten (10) business days of Landlord's request therefor, Tenant hereby appoints Landlord as Tenant's attorney in fact to sign such an agreement on behalf of Tenant. SECTION 32.2 The cost of recording or filing the memorandum of lease referred to in Section 32.1 shall be paid by Tenant. 48. ARTICLE 33 BROKERS ------- Tenant represents to Landlord that it has dealt with no real estate broker, sales person or agent other than Nelson, Tietz & Hoye ("Nelson"), Pearson Partners, Inc. ("Pearson") and Grubb & Ellis ( "G&E" and together with Nelson and Pearson, the "Broker") in connection with this Lease. Landlord represents to Tenant that it has dealt with no real estate broker, sales person or agent other than the Broker, in connection with this Lease. Tenant shall pay the commission due the Broker, in accordance with the terms of a separate agreement. Tenant shall indemnify and hold Landlord harmless from any loss, cost or expense including reasonable attorney fees and charges incurred as a result of a breach of Tenant's foregoing representation by Tenant. Landlord shall indemnify and hold Tenant harmless from any loss, cost or expense including reasonable attorneys fees and charges incurred as a result of a breach of Landlord's foregoing representation by Landlord. ARTICLE 34 FORCE MAJEURE ------------- In the event that Landlord or Tenant shall be delayed or prevented from performing any act (not including payment of money for Fixed Rent or Additional Rent) required hereunder by reason of strikes or lock-outs, inability to procure materials, failure of power, laws or regulations of Governmental Authorities, riots, insurrection or war or acts of God, then performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay. ARTICLE 35 LAWS APPLICABLE AND CONSTRUCTION -------------------------------- This Lease shall be construed and enforced in accordance with the laws of the State of Minnesota applicable to leases made and to be performed in Minnesota, without regard to choice of laws provisions of the State of Minnesota. ARTICLE 36 COUNTERPARTS ------------ If this Lease has been executed and delivered, for the convenience of Landlord and Tenant, in several counterparts, it is intended that all counterparts shall constitute only one Lease. 49. ARTICLE 37 AMENDMENT; NO ORAL MODIFICATION; SUCCESSORS AND ASSIGNS ------------------------------------------------------- This Lease may not be changed, modified or discharged except by a writing signed by Landlord and Tenant. All covenants, conditions and obligations contained in this Lease shall be binding upon and inure to the benefit of the respective successors and assigns of Landlord and Tenant to the same extent as if each such successor and assign were named as a party to this Lease. For so long as Mortgagee is Deutsche Banc Mortgage Capital, LLC, its successors or assigns, this Lease shall not be amended, modified or terminated without the consent of Mortgagee, if and to the extent is required under the Underlying Mortgage. Notwithstanding the foregoing, no consent of the Mortgagee shall be required to terminate this Lease pursuant to Section 10.2 hereof, or pursuant to closing the Purchase Option or Put Option transactions. ARTICLE 38 NOTICES ------- All notices, demands, consents, approvals, requests and other instruments herein required or permitted to be given to, or served upon, either party shall be in writing. Any such notice, demand, consent or request shall be sufficiently given or delivered if delivered personally, by recognized courier service or telecopier with receipt acknowledged or by registered or certified mail, postage prepaid return receipt requested, addressed to such party at its address set forth below, or at such other address or to such other parties as it shall designate by notice to the other party, as follows: To Landlord: CCPRE-EAGAN, LLC c/o Chase Capital Partners 380 Madison Avenue New York, New York 10017 Attn: David J. Gilbert Dwight I. Arneson with a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Attn: Steven C. Koppel, Esq. 50. To Tenant: WAM!NET Inc. 655 Lone Oak Drive Eagan, Minnesota 55121 Attn: President with a copy to: Larkin, Hoffman, Daly & Lindgren, Ltd. 1500 Norwest Financial Center 7900 Xerxes Avenue South Minneapolis, Minnesota 55431 Attn: Gary A. Renneke, Esq. Landlord may, by notice to Tenant, require that Tenant pay rent to Landlord at an address different from the address for notices provided for herein. Any notice so delivered by mail shall be deemed given or served on the third business day following the date mailed as aforesaid and any notification by Landlord as a notice of termination under ARTICLE 22 so delivered by mail shall be deemed given or served on the day of actual receipt thereof or refusal of delivery. ARTICLE 39 SEVERABILITY ------------ Intentionally left blank. ARTICLE 40 NO PARTNERSHIP -------------- Landlord shall not, by virtue of the execution of this Lease or the leasing of the Premises to Tenant, become or be deemed a partner of Tenant in the conduct of Tenant's business on the Demised Premises or otherwise. ARTICLE 41 EXECUTION BY LANDLORD --------------------- Submission of this instrument to Tenant, or Tenant's agents or attorneys, for examination or signature does not constitute or imply an offer to lease, reservation of space, or option to lease, and this Lease shall have no binding legal effect until execution hereof by both Landlord and Tenant. 51. ARTICLE 42 TIME OF ESSENCE --------------- Time is of the essence of this Lease and each of its provisions. ARTICLE 43 YEAR 2000 DISCLAIMER -------------------- Landlord and Tenant each hereby disclaims any liability for any and all damages, injuries or other losses, whether ordinary, special consequential, punitive or otherwise arising out of, relating to or in connection with (a) the failure of any automated, computerized and/or software system or other technology used in, on or about the Demised Premises or relating to the management or operation of the Demised Premises to accurately receive, provide or process date/time (including, but not limited to, calculating, comparing and sequencing) before, after, during and between the years 1999 A.D. and 2000 A.D., and leap year calculations and/or (b) the malfunction, ceasing to function or providing of invalid or incorrect results by any such technology as a result of date/time data. The foregoing disclaimer shall apply to any such technology used in, on or about the Demised Premises or that affect the Demised Premises, whether or not such technology is within the control of Landlord or Tenant or their respective agents or representatives. THE FOREGOING DISCLAIMER INCLUDES A DISCLAIMER BY LANDLORD OF ALL WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE MATTERS DESCRIBED HEREIN, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. ARTICLE 44 DRAFTING PARTY -------------- INTENTIONALLY LEFT BLANK. ARTICLE 45 HEADINGS AND TABLE OF CONTENTS ------------------------------ The headings of the ARTICLES of this Lease and the table of contents preceding this Lease are for convenience of reference only and in no way define, limit or describe the scope or intent of this Lease or in any way modify, amend or change the express terms and provisions of this Lease. 52. ARTICLE 46 RENEWAL OPTION -------------- SECTION 46.1 (a) Provided this Lease is in full force and effect and no Event of Default exists immediately prior to (i) the date Tenant delivers to Landlord the First Election Notice (as hereinafter defined) and (ii) the expiration of the initial term of this Lease, Tenant shall have the option (the "First Renewal Option") to renew the term of this Lease (the "First Renewal Option") for all of the Demised Premises for an additional five (5) year term (the "First Renewal Term") commencing on the date (the "First Renewal Term Commencement Date") following the Expiration Date of the initial term of this Lease and ending on the date immediately prior to the fifth (5th) anniversary of the First Renewal Term Commencement Date (which date shall hereupon be and become the Expiration Date of this Lease). The First Renewal Option shall be exercised by written notice (the "First Election Notice") to Landlord delivered no later than six (6) months prior to the Expiration Date of the initial term of this Lease. The annual Fixed Rent for the First Renewal Term shall be equal to the fair market rental value of the Demised Premises as determined pursuant to the provisions of Section 46.3(b) hereof. (b) Provided that Tenant has exercised the First Renewal Option and provided further that this Lease is in full force and effect and no Event of Default exists immediately prior to (i) the date Tenant delivers to Landlord the Second Election Notice (as hereinafter defined) and (ii) the expiration of the First Renewal Term, Tenant shall have the option to renew the term of this Lease (the "Second Renewal Option") for all of the Demised Premises for an additional five (5) year term (the "Second Renewal Term") commencing on the date (the "Second Renewal Term Commencement Date") immediately following the Expiration Date of the First Renewal Term and ending on the date immediately preceding the fifth (5th) anniversary of the Second Renewal Term Commencement Date (which date shall thereupon be and become the Expiration Date of this Lease). The Second Renewal Option shall be exercised by written notice (the "Second Election Notice") to Landlord delivered no later than six (6) months prior to the expiration of the First Renewal Term. The annual Fixed Rent for the Second Renewal Term shall be determined pursuant to the provisions of Section 46.3(c) hereof. (c) Provided that Tenant has exercised the First and Second Renewal Options and provided further that this Lease is in full force and effect and no Event of Default exists immediately prior to (i) the date Tenant delivers to Landlord the Third Election Notice (as hereinafter defined) and (ii) the expiration of the Second Renewal Term, Tenant shall have the option to renew the term of this Lease (the "Third Renewal Option") for all of the Demised Premises for an additional five (5) year term (the "Third Renewal Term") commencing on the date (the "Third Renewal Term Commencement Date") immediately following the Expiration Date of the Second Renewal Term and ending on the date immediately preceding the fifth (5th) anniversary of the Third Renewal Term Commencement Date (which date shall thereupon be and become the Expiration Date of this Lease). The Third Renewal Option shall be exercised by written notice (the "Third Election Notice") to Landlord delivered no later than six (6) months prior to the expiration of the Second Renewal Term. The annual Fixed Rent for the Third 53. Renewal Term shall be equal the fair market rental value of the Demised Premises as determined pursuant to the provisions of Section 46.3 (b) hereof. SECTION 46.2 This Lease, as so extended during the applicable Renewal Term, shall be upon the same terms and conditions as contained in this Lease except that the annual Fixed Rent for the First and Third Renewal Terms shall be a sum equal to the then fair market rental value of the Demised Premises, determined as of the commencement date of the respective Renewal Term assuming all of the terms set forth herein and the annual Fixed Rent for the Second Renewal Term shall be as determined pursuant to Section 46.3(c). SECTION 46.3 The exercise of any of the Renewal Options shall only be effective upon, and in strict compliance with, the following terms and conditions: (a) Each Renewal Option must be exercised in the manner specifically set forth for such Option in Section 46.1 hereof or such option shall be deemed waived and all of Tenant's rights with respect thereto shall wholly cease, terminate and expire. Time shall be of the essence in connection with the exercise of any Renewal Option and the delivery of any Election Notice by Tenant hereunder. Any such Election Notice shall be irrevocable by Tenant upon delivery. If Tenant shall fail to duly exercise any Renewal Option, Tenant agrees upon request of Landlord to confirm such non-exercise in writing, but failure to do so by Tenant shall not operate to revive any rights of Tenant under this Article. (b) Landlord and Tenant shall seek to agree as to the amount of such fair market rental value for the Demised Premises, taking into consideration the fair market rental value of comparable properties in the Minneapolis-St. Paul in comparable condition available for a comparable term and any commissions payable by Landlord to the Broker. The determination of fair market rental value shall exclude any increase in value as a result of improvements made after the Commencement Date if such improvements were not made at Landlord's expense. If Landlord and Tenant shall not agree as to such fair market rental value by the date which is two (2) months after the Election Notice is given, then each of Landlord and Tenant, by no later than three (3) months after the Election Notice is given, shall simultaneously meet and exchange notices setting forth in such notices the annual fair market rental value that such party believes is the basis for the Fixed Rent which should be paid by Tenant hereunder and in such event said annual fair market rental value shall be determined by arbitration as hereinafter in this Article provided. In no event shall the annual Fixed Rent for the First and Third Renewal Terms be less than the annual Fixed Rent for the last Lease Year of the immediately preceding term. (c) The annual Fixed Rent commencing on the first day of the Second Renewal Term and ending on the last day of the Second Renewal Term shall be an amount equal to (i) the annual Fixed Rent for the First Renewal Term, plus (ii) an amount equal to the greater of (A) five percent (5%) of the annual Fixed Rent for the First Renewal Term or (B) the annual Fixed Rent for the First Renewal Term multiplied by the percentage by which the CPI (as hereinafter 54. defined) in June 2024 exceeds the CPI in June 2019. As used in this Lease, the term "CPI" means the Consumer Price Index for All Items For All Urban Consumers for Minneapolis, Minnesota published by the Bureau of Labor Statistics of the U.S. Department of Labor with a 1993-95 = 100 base; provided, however, that (i) -------- ------- if such index (or any index substituted therefor as hereinafter provided) shall cease to be published, then for the purposes of this Lease there shall be substituted for such index another index of a similar kind published by a governmental or other nonpartisan organization as may be reasonably selected by Landlord, and (ii) if there is any change in the manner of computation of any such index, then for the purposes of this Lease such index as so changed shall be substituted for the index in effect prior thereto and appropriate adjustments shall be made to make the changed index comparable to the previous index. SECTION 46.4 If Landlord and Tenant shall be unable to agree as to the annual fair market rental value as set forth in Section 46.3(b), then and in such event said annual fair market rental value for the Demised Premises shall be determined by arbitration with three (3) arbitrators selected in accordance with the provisions of Section 10.5 except that the arbitrators so specified in such notices shall be licensed appraisers doing business in the City of Minneapolis, State of Minnesota, and having not less than ten (10) years' active experience as appraisers of said City and State. In making their determinations, the arbitrators shall consider the criteria set forth in Section 46.3(b) and follow the directions set forth in this Article. Each arbitrator shall independently determine the fair market rental value within thirty (30) days after being selected and each shall simultaneously deliver its report of the fair market value to Landlord and Tenant. The two (2) closest determinations of fair market value shall be averaged, and said average shall be deemed the fair market rental value for purposes of this Lease. The third determination of fair market rental value shall be ignored. SECTION 46.5 (a) If on the commencement date of the First or Third Renewal Terms, the amount of the Fixed Rent payable during such Renewal Term in accordance with the foregoing paragraphs of this Article shall not have been determined, then, pending such determination, Tenant shall pay Fixed Rent at the rate which is the average of the rates proposed by Landlord and Tenant for that Renewal Term (the "Temporary Rate"). After the determination by arbitration of the annual fair market rental value of the Demised Premises, if such rental value is greater or less than the "Temporary Rate," Landlord shall promptly pay to Tenant the excess of the Temporary Rate over (or Tenant shall promptly pay to Landlord the shortfall of the Temporary Rate below) the rental value determined by the arbitration, together with interest at the Prime Rate on the amount so paid; and the Fixed Rent so determined by the arbitration shall be payable during that Renewal Term. (b) Upon determination of the Fixed Rent for each Renewal Term, Landlord and Tenant shall execute, acknowledge and deliver to each other an agreement specifying the amount of the Fixed Rent for such Renewal Term (but any failure to execute such an agreement shall not affect Tenant's obligation to pay and Landlord's right to receive such Fixed Rent). 55. ARTICLE 47 PURCHASE OPTION --------------- (a) Provided this Lease is in full force and effect and no Event of Default exists hereunder and subject to the other terms and conditions of this Article 47, Tenant shall have an option (the "Purchase Option") to purchase from Landlord either on the twenty-fourth (24th) or thirty-sixth (36th) month anniversary of the Commencement Date (either date being referred to herein as the "Purchase Date") the Demised Premises and all other assets acquired by Landlord from Tenant pursuant to the purchase agreement (the "Original Purchase Agreement") dated as of September __, 1999, between Landlord, as purchaser, and Tenant, as seller (the Demised Premises and such other assets being referred to herein as the "Assets"). The Purchase Option shall be exercised by written notice (the "Purchase Option Notice") delivered to Landlord no later than the date which is six (6) months prior to the Purchase Date. Time shall be of the essence in connection with the exercise of the Purchase Option and the delivery of notice to exercise the Purchase Option shall be irrevocable upon delivery. (b) The purchase price for the purchase by Tenant of the Assets pursuant to the terms of this Article 47 shall be $45,600,000.00 (the "Purchase Option Price") less any amounts applied thereto pursuant to terms of this Lease which amount shall be paid to Landlord by wire transfer in immediately available New York funds on the Purchase Option Closing Date (as defined herein). Tenant shall execute and deliver to Landlord within ten (10) days after the Purchase Date a purchase agreement (the "Purchase Option Purchase Agreement") containing representations and warranties substantially the same form as in the Original Purchase Agreement, except to the extent necessary to make the representations and warranties contained in the Original Purchase Agreement true, complete and correct in all material respects. The Purchase Option Purchase Agreement shall otherwise be in form and content reasonably acceptable to Landlord and Tenant and shall be consistent with typical commercial real estate purchase agreements by and between institutional commercial real estate buyers and sellers desiring, but under no compulsion, to buy and sell. If Landlord and Tenant cannot agree as to the terms and conditions of such agreement, the parties shall submit such disagreements to arbitration as contemplated in Section 10.5 above. In no event, however, shall Landlord have any termination rights under the Purchase Option Purchase Agreement except in the event of Tenant's default and failure to cure under the terms and conditions of the Purchase Option Purchase Agreement. (c) The closing (the "Purchase Option Closing") of the sale under the Purchase Option Purchase Agreement shall occur on or before the date (the "Purchase Option Closing Date") which is the later of ten (10) days after mutual execution and delivery of the Purchase Option Purchase Agreement or thirty (30) days after the Purchase Date. The conveyance documents delivered pursuant to the Purchase Option Purchase Agreement shall be in substantially the same form as the conveyance documents delivered pursuant to the Original Purchase Agreement. If the Purchase Option Closing shall not occur on or before the Purchase Option Closing Date for any reason except by reason of force majeure or Landlord's default under the Purchase Option Purchase Agreement, the Purchase Option, at Landlord's option, shall be void and of no further effect. If Landlord elects to void the Purchase Option Purchase 56. Agreement pursuant to the foregoing sentence, the term of this Lease shall continue, unaffected by such election, pursuant to the terms and conditions of this Lease. Notwithstanding anything to the contrary contained in the Purchase Option Purchase Agreement, Landlord and Tenant shall have the right to specifically enforce the terms of the Purchase Option Purchase Agreement. (d) Tenant and Landlord shall each be responsible for all costs and expenses incurred by such party in connection with the consummation of the transactions contemplated under the Purchase Option Purchase Agreement, including without limitation, title and survey costs, engineering and environmental inspections and any and all transfer taxes due in connection therewith, unless otherwise set forth in the Purchase Option Purchase Agreement. (e) The provisions of this Article 47 shall inure to the benefit of Tenant and its successors and assigns as Tenant hereunder and no other Person shall have the right to exercise the Purchase Option. ARTICLE 48 PUT OPTION ---------- (a) Landlord shall have an option (the "Put Option") to require Tenant to purchase the Assets from Landlord at any time after the thirty-sixth (36th) month anniversary of the Commencement Date. The Put Option shall be exercised by written notice (the "Put Option Notice") delivered to Tenant. (b) The purchase price for the purchase by Tenant of the Assets pursuant to the terms of this Article 48.1 shall be $41,800,000.00 (the "Put Option Purchase Price") less any amounts applied thereto pursuant to terms of this Lease which amount shall be paid to Tenant by wire transfer on the Purchase Option Closing Date. Landlord shall execute and deliver to Tenant within ten (10) days after the Purchase Date a purchase agreement (the "Put Option Purchase Agreement") containing representations and warranties substantially the same form as in the Original Purchase Agreement, except to the extent necessary to make the representations and warranties contained in the Original Purchase Agreement true, complete and correct in all material respects. The Put Option Purchase Agreement shall otherwise be in form and content reasonably acceptable to Landlord and Tenant and shall be consistent with commercial real estate purchase agreements by and between institutional commercial real estate buyers and sellers desiring, but under no compulsion, to buy and sell. If Landlord and Tenant cannot agree as to the terms and conditions of such agreement, the parties shall submit such disagreements to arbitration as contemplated in Section 10.5 above. In no event, however, shall Landlord have any termination rights under the Put Option Purchase Agreement except in the event of Tenant's default and failure to cure under the terms and conditions of the Put Option Purchase Agreement. (c) The closing (the "Put Option Closing") of the sale under the Put Option Purchase Agreement shall occur on a date (the "Put Option Closing Date") which is no earlier than one hundred eighty (180) days and no later than two hundred seventy (270) days after Tenant's receipt of the Put Option Notice, as determined in a notice to be delivered by Tenant to Landlord within sixty (60) days after Tenant's receipt of the Put Option Notice. The conveyance 57. documents delivered pursuant to the Put Option Purchase Agreement shall be in substantially the same form as the conveyance documents delivered pursuant to the Original Purchase Agreement. (d) Tenant and Landlord shall each be responsible for all costs and expenses incurred by or on behalf of such party in connection with the consummation of the transactions contemplated under the Put Option Purchase Agreement, including without limitation, title and survey costs, engineering and environmental inspections and any and all transfer taxes due in connection therewith, unless otherwise set forth in the Put Option Purchase Agreement. (e) The provisions of this Article 48 shall inure to the benefit of Landlord and its successors and assigns as Landlord hereunder. IN WITNESS WHEREOF, Landlord and Tenant respectively have caused this Lease to be executed as of the day and year first above written. CCPRE-EAGAN, LLC By:____________________________________ Name: David Gilbert Title: President WAM!NET INC. By:____________________________________ Name: Title: 58. EXHIBIT A --------- Legal Description of the Demised Premises ----------------------------------------- Lots 1 and 2, Block 1, Cray Second Addition, according to the recorded plat thereof, Dakota County, Minnesota. EXHIBIT B --------- Form of Letter of Credit ------------------------ EXHIBIT C --------- SGI Subordination, Nondisturbance and Attornment Agreement ---------------------------------------------------------- EXHIBIT D --------- Form of Estoppel Certificate ---------------------------- SCHEDULE 11.5 ------------- Maintenance Schedule -------------------- See pages 11.5-1, 11.5-2 and 11.5-3, attached. The items listed in the column labeled "Immediate" shall be completed within ninety (90) days from the date hereof. The items listed in the column labeled "Short Term" shall be completed within one (1) year from the date hereof. The items listed in the column labeled "Long Term/Recomm." shall be completed within five (5) years from the date hereof. TABLE OF CONTENTS ----------------- ARTICLE 1 DEMISE OF PREMISES 1 ------------------ ARTICLE 2 CERTAIN DEFINITIONS AND INTERPRETIVE PROVISIONS 2 ----------------------------------------------- ARTICLE 3 USE OF DEMISED PREMISES 4 ----------------------- ARTICLE 4 TERM OF LEASE 5 ------------- ARTICLE 5 FIXED RENT AND ADDITIONAL RENT 5 ------------------------------ ARTICLE 6 PAYMENT OF IMPOSITIONS 9 ---------------------- ARTICLE 7 SERVICES AND UTILITIES 12 ---------------------- ARTICLE 8 INSURANCE 12 --------- ARTICLE 9 DAMAGE OR DESTRUCTION 16 --------------------- ARTICLE 10 CONDEMNATION 18 ----------- ARTICLE 11 MAINTENANCE AND REPAIRS 22 ----------------------- ARTICLE 12 ALTERATIONS 24 ----------- ARTICLE 13 COMPLIANCE WITH LAW; HAZARDOUS MATERIAL 27 --------------------------------------- ARTICLE 14 DISCHARGE OF LIENS 28 ------------------ ARTICLE 15 RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS 29 ----------------------------------------------- ARTICLE 16 ENTRY ON PREMISES BY THE LANDLORD 30 --------------------------------- ARTICLE 17 ASSIGNMENT, MORTGAGES AND OTHER TRANSFERS OF TENANT'S ----------------------------------------------------- INTEREST; SUBLETTING 31 -------------------- ARTICLE 18 ADDITIONAL UNDERTAKING OF THE TENANT 33 ------------------------------------ ARTICLE 19 CONDITION OF AND TITLE TO DEMISEDPREMISES; QUIET ENJOYMENT 34 ---------------------------------------------------------- ARTICLE 20 INDEMNIFICATION OF THE LANDLORD, TENANT AND MORTGAGEES 34 ------------------------------------------------------ ARTICLE 21 EXCAVATIONS ON ADJOINING PROPERTY 36 --------------------------------- ARTICLE 22 DEFAULT 36 -------
(i) ARTICLE 23 ATTORNEYS' FEES 43 --------------- ARTICLE 24 SUBORDINATION OF LEASE 43 ---------------------- ARTICLE 25 SURRENDER AND HOLDING OVER 44 -------------------------- ARTICLE 26 CERTAIN APPORTIONMENTS AND OTHER MATTERS 45 ---------------------------------------- ARTICLE 27 ESTOPPEL CERTIFICATES 46 --------------------- ARTICLE 28 ASSIGNMENT OF THE LANDLORD'S INTEREST; UNDERLYING MORTGAGE 46 ---------------------------------------------------------- ARTICLE 29 LIMITATION OF THE LANDLORD'S LIABILITY 47 -------------------------------------- ARTICLE 30 SEPARATE COVENANTS; INVALIDITY OF PARTICULAR PROVISIONS 48 ------------------------------------------------------- ARTICLE 31 CUMULATIVE REMEDIES; NO WAIVER 48 ------------------------------ ARTICLE 32 RECORDING 48 --------- ARTICLE 33 BROKERS 49 ------- ARTICLE 34 FORCE MAJEURE 49 ------------- ARTICLE 35 LAWS APPLICABLE AND CONSTRUCTION 49 -------------------------------- ARTICLE 36 COUNTERPARTS 49 ------------ ARTICLE 37 NO ORAL MODIFICATION; SUCCESSORS AND ASSIGNS 50 -------------------------------------------- ARTICLE 38 NOTICES 50 ------- ARTICLE 39 SEVERABILITY 51 ------------ ARTICLE 40 NO PARTNERSHIP 51 -------------- ARTICLE 41 EXECUTION BY LANDLORD 51 --------------------- ARTICLE 42 TIME OF ESSENCE 52 --------------- ARTICLE 43 YEAR 2000 DISCLAIMER 52 -------------------- ARTICLE 44 DRAFTING PARTY 52 -------------- ARTICLE 45 HEADINGS AND TABLE OF CONTENTS 52 ------------------------------ ARTICLE 46 RENEWAL OPTION 53 --------------
(ii) ARTICLE 47 PURCHASE OPTION 56 --------------- ARTICLE 48 PUT OPTION 57 ----------
(iii) Index of Definitions --------------------
Term Location - ---- -------- AAA................................................................................................... 10.5 Additional Rent....................................................................................... 5.3 Alterations/Alteration................................................................................ 12.1 Assignee.............................................................................................. 28 Commencement Date..................................................................................... 4 Default............................................................................................... 2(a)(iv) Demised Premises...................................................................................... 2(a)(v) Event of Default...................................................................................... 22.1 Fixed Rent............................................................................................ 5.1 Full Replacement Cost................................................................................. 8.1 GAAP.................................................................................................. 11.1(b) Governmental Authorities.............................................................................. 2(a)(viii) Hazardous Material.................................................................................... 2(a)(ix) Imposition or Impositions............................................................................. 6.1 Improvements.......................................................................................... 2(a)(xi) Insurance Threshold Amount............................................................................ 8.4 Interest Rate......................................................................................... 2(a)(xiii) Landlord.............................................................................................. Heading Law................................................................................................... 3 Letter of Credit...................................................................................... 5.6(e) Mortgagee............................................................................................. 2(a)(xvi) Occurrence Basis, Occurrence.......................................................................... 8.2(a) Persons............................................................................................... 6.6 Proceeding............................................................................................ 2(a)(xviii) Qualified Arbitrator.................................................................................. 10.5 Repairs............................................................................................... 11.1(a) Replacement Letter.................................................................................... 5.6 (e) Re-enter, Entry or Re-entry........................................................................... 22.5 Restoration........................................................................................... 9.2 Security Deposit...................................................................................... 5.6(a) Security Deposit Amount............................................................................... 5.6(a) Successor Landlord.................................................................................... 24.2 Tenant................................................................................................ Heading Underlying Mortgage................................................................................... 2(a)(xxiii)
Exhibits - -------- Exhibit A - Description of Demised Premises Exhibit B - Form of Letter of Credit Exhibit C - SGI Subordination Nondisturbance and Attornment Agreement EXHIBIT D TENANT ESTOPPEL CERTIFICATE THIS TENANT ESTOPPEL CERTIFICATE (this "Certificate") is made by WAM!NET INC., a Minnesota corporation, on behalf of itself and its successors and assigns ("Tenant"), for the benefit of CCPRE-EAGAN, LLC, a Delaware limited liability company ("Landlord") and to ____________________________ [specific -------- lender or investor supplying financing to Landlord] ("Lender"), with the - --------------------------------------------------- understanding that Purchaser and Lender and their respective counsel will rely on this Certificate in connection with the acquisition and financing of the premises located at 655 Lone Oak Drive, Eagan, Minnesota (the "Property"). Tenant hereby certifies as follows: 1. Lease. The undersigned is the tenant under that certain lease ----- (the "Lease") dated as of September __, 1999, a true, complete and correct copy of which is attached hereto as Exhibit A. Capitalized terms used herein but not --------- defined herein shall have the meaning given to such terms in the Lease. The Lease is the entire agreement between Landlord (or any affiliated party) and Tenant (or any affiliated party) pertaining to the leasing or occupancy of the Premises (as defined herein). There are no modifications, amendments, supplements, renewals or assignments of the Lease except as may be otherwise set forth on Exhibit B. The Lease is in full force and effect in accordance with --------- its terms. There are no other oral or written side agreements, representations or warranties by Landlord which entitle Tenant to payments or credits from Landlord or which entitle Tenant to expand or contract the Premises or to extend or contract the term of the Lease. The Lease has been duly executed and delivered by, and is a binding obligation of, Tenant. 2. Leased Premises. The premises covered by the Lease (the --------------- "Premises") consist of all of the property known as 655 Lone Oak Drive, Eagan, Minnesota, as described more particularly on Exhibit C. --------- 3. Term of Lease. The Lease commenced on September __, 1999 and, ------------- unless otherwise terminated in accordance with the terms of the Lease will expire on September __, 2019, subject to three (3) five (5) year renewal terms. 4. Rents. (a) The present amount of monthly Fixed Rent payable under ----- the Lease is $____________ and has been paid in full through _______________ __, _____. (b) In addition to Fixed Rent, Tenant is currently paying $__________ per month as additional rent to cover operating expenses. Attached hereto as Exhibit D as is a true, complete and correct copy of the most recent written - --------- estimate of the operating expenses for the _____ calendar year (the "_____ Operating Expense Statement"). To Tenant's knowledge, no conditions exist and no events have occurred which would have a material impact on the amount of the operating expenses. For purposes of this Certificate, "material impact" means an increase of five percent (5%) or more in the operating expenses as set forth on the _____ Operating Expense Statement. 5. Security Deposit. Landlord is not holding any security deposit ---------------- under the Lease. [Or, specify security deposit, if there is one.] 6. Renewal and Extension Options. Tenant does not have any right or ----------------------------- option to renew or extend the term of the Lease or to expand into any additional space or to terminate the Lease in whole or in part prior to the expiration of the term except as expressly set forth in the Lease. 7. Acceptance of Premises. Tenant has unconditionally accepted the ---------------------- Premises. Tenant has taken possession and is in occupancy of the Premises. Landlord has satisfied all commitments made to induce Tenant to enter into the Lease; there are no offsets or credits against rentals payable under the Lease; no free periods of rent, tenant improvements, contributions or other concessions have been granted to Tenant; Landlord is not reimbursing Tenant or paying Tenant's rent obligations under any other lease; and Tenant has not advanced any funds for or on behalf of Landlord for which Tenant has a right of deduction from, or set off against, future rent payments. 8. No Landlord Defaults. To the best of Tenant's knowledge, all -------------------- obligations of Landlord under the Lease have been performed through the date hereof, and no event has occurred and no condition exists that, with the giving of notice or lapse of time or both, would constitute a default by Landlord under the Lease. To the best of Tenant's knowledge, there are no offsets or defenses that Tenant has against the full enforcement of the Lease by Landlord. 9. No Tenant Defaults. To the best of Tenant's knowledge, Tenant is ------------------ not in any respect in default under the Lease and, except as set forth on Exhibit E, Tenant has not assigned, transferred or hypothecated the Lease or any - --------- interest therein or subleased all or any portion of the Premises. Tenant is not insolvent and is able to pay its debts as they mature. Tenant has not declared bankruptcy or filed a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, Tenant has no present intentions of doing so, and no such proceeding has been commenced against Tenant seeking such relief, and Tenant has no knowledge that any such proceeding is threatened. 10. Purchase Options. Tenant does not have any right or option to ---------------- purchase all or any part of the Property except as expressly set forth in the Lease. 11. No Further Amendment. Tenant agrees that no future modifications -------------------- or amendments of the Lease will be enforceable unless the modification or amendment has been consented to in writing by the Landlord. 12. Payment of Rent. Tenant represents that it has not and Tenant --------------- further agrees that, from and after the date hereof, the Tenant shall not pay any rent under the Lease more than thirty (30) days in advance of its due date. 13. Successors and Assigns. This Certificate is made for the benefit ---------------------- of, and may be relied upon by, the Landlord and the Lender and their respective successors and assigns. 2. 14. Due Authorization. The person executing this Certificate is ----------------- authorized by Tenant to do so and the execution hereof is the binding act of Tenant enforceable against Tenant. Dated: _____________ WAM!NET INC. By: ________________________________ Name: Title: 3. Exhibit A --------- to -- Tenant Estoppel Certificate --------------------------- Lease Exhibit B --------- to -- Tenant Estoppel Certificate --------------------------- List of Modifications, if any: [None, unless otherwise specified.] Exhibit C --------- to -- Tenant Estoppel Certificate --------------------------- Description of Leased Premises Exhibit D --------- to -- Tenant Estoppel Certificate --------------------------- Operating Expense Statement Exhibit E --------- to -- Tenant Estoppel Certificate --------------------------- Assignments, subleases, etc. [None, unless otherwise specified.] EXHIBIT B LETTER OF CREDIT ---------------- BENEFICIARY: CCPRE-EAGAN, LLC 380 MADISON AVENUE NEW YORK, NEW YORK IRREVOCABLE STANDBY LETTER OF CREDIT Gentlemen: We hereby establish our Irrevocable Standby Letter of Credit Number ________ in favor of CCPRE-EAGAN, LLC, its successors and assigns ("Eagan"), as Landlord by order and for account of WAM!NET INC. ("WAM!NET") for a sum or sums not exceeding in all ___________ 00/100 U.S. Dollars (USD _________) available by your sight draft(s) drawn on us accompanied by either: A. Your statement, purportedly signed by an authorized representative of Eagan, stating (i) that WAM!NET! is in default of the terms of the Lease dated September ___, 1999, between Eagan and WAM!NET!, (ii) the date written notice of such default was given (a copy of which notice shall be attached to the statement), and (iii) that such default was not cured within the applicable cure period; or B. Your statement, purportedly signed by an authorized representative of Eagan, stating that Eagan has received notice from us indicating that this Letter of Credit will not be renewed. Partial Drawing(s) permitted. The term "Beneficiary" includes any successor by operation of law of the named beneficiary, including without limitation, any liquidator, rehabilitator, receiver, or conservator. Drafts drawn hereunder must be marked "DRAWN UNDER [_____________ BANK] CREDIT NO. ___________ DATED ________________." The Letter of Credit shall be deemed to be automatically renewed, without amendment, for consecutive periods of one year each unless we send written notice to the Beneficiary by certified or registered mail, return receipt requested, not less than thirty (30) days next preceding the then expiration date of this Letter of Credit, that we elect nor to have this Letter of Credit renewed. This Letter of Credit sets forth in full the terms of our undertaking and such undertaking shall not in any way be modified, amended or amplified by reference to any document or instrument referred to herein or in which this Letter of Credit is referred to or to which this Letter of Credit relates, and any such reference shall not be deemed to incorporate herein by reference any documents or instrument. We engage with you that your draft(s) drawn hereunder and in compliance with the terms of this credit will be duly honored by us on delivery of documents as specified, if presented at ___________________________________________________, on or before the date which is one year from the date of this Letter of Credit or, if this Letter of Credit be automatically renewed for consecutive periods of one year, the anniversary date of this Letter of Credit applicable to such renewal. The terms hereof shall not be modified without the prior written consent of Eagan and WAM!NET!. Except as otherwise expressly stated herein, this credit is subject to the uniform customs and practice for documentary credits, 1993 revision, ICC Publication No. 500. Very truly yours, ----------------------------------- Authorized Signature EXHIBIT D TENANT ESTOPPEL CERTIFICATE THIS TENANT ESTOPPEL CERTIFICATE (this "Certificate") is made by WAM!NET INC., a Minnesota corporation, on behalf of itself and its successors and assigns ("Tenant"), for the benefit of CCPRE-EAGAN, LLC, a Delaware limited liability company ("Landlord") and to ____________________________ [specific lender or investor supplying financing to Landlord] ("Lender"), with the understanding that Purchaser and Lender and their respective counsel will rely on this Certificate in connection with the acquisition and financing of the premises located at 655 Lone Oak Drive, Eagan, Minnesota (the "Property"). Tenant hereby certifies as follows: 1. Lease. The undersigned is the tenant under that certain lease (the "Lease") dated as of September __, 1999, a true, complete and correct copy of which is attached hereto as Exhibit A. Capitalized terms used herein but not defined herein shall have the meaning given to such terms in the Lease. The Lease is the entire agreement between Landlord (or any affiliated party) and Tenant (or any affiliated party) pertaining to the leasing or occupancy of the Premises (as defined herein). There are no modifications, amendments, supplements, renewals or assignments of the Lease except as may be otherwise set forth on Exhibit B. The Lease is in full force and effect in accordance with its terms. There are no other oral or written side agreements, representations or warranties by Landlord which entitle Tenant to payments or credits from Landlord or which entitle Tenant to expand or contract the Premises or to extend or contract the term of the Lease. The Lease has been duly executed and delivered by, and is a binding obligation of, Tenant. 2. Leased Premises. The premises covered by the Lease (the "Premises") consist of all of the property known as 655 Lone Oak Drive, Eagan, Minnesota, as described more particularly on Exhibit C. 3. Term of Lease. The Lease commenced on September __, 1999 and, unless otherwise terminated in accordance with the terms of the Lease will expire on September __, 2019, subject to three (3) five (5) year renewal terms. 4. Rents. (a) The present amount of monthly Fixed Rent payable under the Lease is $____________ and has been paid in full through _______________ __, _____. (b) In addition to Fixed Rent, Tenant is currently paying $__________ per month as additional rent to cover operating expenses. Attached hereto as Exhibit D as is a true, complete and correct copy of the most recent written estimate of the operating expenses for the _____ calendar year (the "_____ Operating Expense Statement"). To Tenant's knowledge, no conditions exist and no events have occurred which would have a material impact on the amount of the operating expenses. For purposes of this Certificate, "material impact" means an increase of five percent (5%) or more in the operating expenses as set forth on the _____ Operating Expense Statement. 5. Security Deposit. Landlord is not holding any security deposit under the Lease. [Or, specify security deposit, if there is one.] 6. Renewal and Extension Options. Tenant does not have any right or option to renew or extend the term of the Lease or to expand into any additional space or to terminate the Lease in whole or in part prior to the expiration of the term except as expressly set forth in the Lease. 7. Acceptance of Premises. Tenant has unconditionally accepted the Premises. Tenant has taken possession and is in occupancy of the Premises. Landlord has satisfied all commitments made to induce Tenant to enter into the Lease; there are no offsets or credits against rentals payable under the Lease; no free periods of rent, tenant improvements, contributions or other concessions have been granted to Tenant; Landlord is not reimbursing Tenant or paying Tenant's rent obligations under any other lease; and Tenant has not advanced any funds for or on behalf of Landlord for which Tenant has a right of deduction from, or set off against, future rent payments. 8. No Landlord Defaults. To the best of Tenant's knowledge, all obligations of Landlord under the Lease have been performed through the date hereof, and no event has occurred and no condition exists that, with the giving of notice or lapse of time or both, would constitute a default by Landlord under the Lease. To the best of Tenant's knowledge, there are no offsets or defenses that Tenant has against the full enforcement of the Lease by Landlord. 9. No Tenant Defaults. To the best of Tenant's knowledge, Tenant is not in any respect in default under the Lease and, except as set forth on Exhibit E, Tenant has not assigned, transferred or hypothecated the Lease or any interest therein or subleased all or any portion of the Premises. Tenant is not insolvent and is able to pay its debts as they mature. Tenant has not declared bankruptcy or filed a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, Tenant has no present intentions of doing so, and no such proceeding has been commenced against Tenant seeking such relief, and Tenant has no knowledge that any such proceeding is threatened. 10. Purchase Options. Tenant does not have any right or option to purchase all or any part of the Property except as expressly set forth in the Lease. 11. No Further Amendment. Tenant agrees that no future modifications or amendments of the Lease will be enforceable unless the modification or amendment has been consented to in writing by the Landlord. 12. Payment of Rent. Tenant represents that it has not and Tenant further agrees that, from and after the date hereof, the Tenant shall not pay any rent under the Lease more than thirty (30) days in advance of its due date. 13. Successors and Assigns. This Certificate is made for the benefit of, and may be relied upon by, the Landlord and the Lender and their respective successors and assigns. 2. 14. Due Authorization. The person executing this Certificate is authorized by Tenant to do so and the execution hereof is the binding act of Tenant enforceable against Tenant. Dated: _____________ WAM!NET INC. By: ----------------------------------- Name: Title: 3. Exhibit A --------- to -- Tenant Estoppel Certificate --------------------------- Lease Exhibit B --------- to -- Tenant Estoppel Certificate --------------------------- List of Modifications, if any: [None, unless otherwise specified.] Exhibit C --------- to -- Tenant Estoppel Certificate --------------------------- Description of Leased Premises Exhibit D --------- to -- Tenant Estoppel Certificate --------------------------- Operating Expense Statement Exhibit E --------- to -- Tenant Estoppel Certificate --------------------------- Assignments, subleases, etc. [None, unless otherwise specified.] EXHIBIT C NONDISTURBANCE, SUBORDINATION AND ATTORNMENT AGREEMENT ------------------------------------------------------ THIS AGREEMENT (this "Agreement") is made as of the ___ day of September 1999, between CCPRE-EAGAN, LLC, a Delaware limited liability company, having an address c/o Chase Capital Partners, 380 Madison Avenue, New York, New York ("Ground Lessor"), WAM!NET INC., a Minnesota corporation, having an address at 655 Lone Oak Parkway, Eagan, Minnesota ("Landlord") and SILICON GRAPHICS, INC. a Delaware corporation, having an address at 655 Lone Oak Parkway, Eagan, Minnesota ("Tenant"). W I T N E S S E T H: WHEREAS, Landlord and Tenant are parties to (i) that certain lease dated as of March 4, 1999 with respect to certain premises (the "Premises") at the corporate campus located at 655 Loan Oak Parkway, Eagan, Minnesota (the "Project") (said lease, as the same may be amended, modified or supplemented subject to and in accordance with the terms of this Agreement being referred to herein as the "Lease"); and, (ii) that certain property management agreement (the "Property Management Agreement") dated as of March 4, 1999. WHEREAS, Ground Lessor has acquired fee title to the Project from Landlord pursuant to a deed dated September ____, 1999 and has entered into a lease (the "Master Lease") dated as of the date hereof with Landlord pursuant to which Ground Lessor will lease the Project to Landlord, the term of which Master Lease extends beyond the term of the Lease; and WHEREAS, Tenant has agreed to subordinate the Lease and Ground Lessor has agreed to grant nondisturbance and recognition to Tenant on the terms and conditions contained herein. NOW, THEREFORE, in consideration of the premises and the agreements of the parties contained herein, the parties hereto hereby covenant and agree as follows: Section 1. Subordination. Tenant agrees that the Lease is and shall be subject and subordinate to the Master Lease and to all renewals, amendments, modifications, supplements, consolidations, replacements and extensions thereof, provided that, as between Landlord and Tenant, nothing contained in this Agreement shall be deemed to affect the obligations of Landlord or the rights of Tenant under the Lease. Section 2. Nondisturbance. Ground Lessor hereby agrees that so long as (i) the Lease shall be in full force and effect and (ii) Tenant shall not be in default in the payment of Base Rent or Additional Rent or other charges due under the Lease or in default in the performance or observance of any of the other terms, covenants and conditions of the Lease, in each case, beyond any applicable notice and cure periods (the "Nondisturb Conditions"), (a) Ground Lessor shall not join Tenant as a party defendant in any action or proceeding which may be instituted or taken by Ground Lessor under the Master Lease, by reason of any default by Landlord thereunder or any financing instrument or collateral, to terminate the Master Lease, to remove or evict Landlord or to recover possession of the Premises, unless required by law in order to make such action or proceeding effective and then only for technical purposes and not for removal of Tenant or adversely affecting any interest of Tenant in the Premises or the Project, (b) Tenant shall not be evicted from the Demised Premises, and (c) Tenant's estate under the Lease shall not be diminished, interfered with, disturbed or terminated and, subject to the provisions of Section 2 and Section 4 of this Agreement, Ground Lessor shall recognize the Lease and Tenant's rights thereunder and under the Property Management Agreement. Section 3. Notices to Ground Lessor. (a) Tenant hereby agrees that in the event of any act or omission by Landlord which would give Tenant the right, either immediately or after the lapse of a period of time, to terminate the Lease, or to claim a partial or total eviction, Tenant shall not exercise any such right (a) until it has given written notice of such act or omission to Ground Lessor, and (b) until a reasonable period for remedying such act or omission shall have elapsed following such giving of notice (but in no event less than thirty (30) days). Tenant from and after the date hereof shall send a copy of any notices under the Lease to Ground Lessor at the same time such notice or statement is sent to Landlord under the Lease and agrees that, notwithstanding any provisions of the Lease to the contrary, such notice shall not be effective unless Ground Lessor shall have been given such notice and shall have failed to cure such default as herein provided. All notices given under this Agreement shall be sent by certified or registered mail, postage prepaid, return receipt requested, or shall be delivered to the parties at the addresses set forth above (or at such other addresses as the parties hereto shall specify in a written notice to the other parties at the addresses specified herein). Any notices hereunder shall be deemed to be given on the earlier to occur of (a) the day of receipt or (b) three (3) days after deposit in the mail. No cure of Landlord's default by Mortgagee shall be deemed an assumption of Landlord's other obligations under the Lease and no right of Mortgagee hereunder to receive any notice or to cure any default shall be deemed to impose any obligation on Mortgagee to cure (or attempt to cure) any such default. (b) Tenant agrees, from time to time, to state in writing to Ground Lessor, upon request, but not more than twice a year, whether or not, to the best of Tenant's actual knowledge, any default on the part of Landlord exists under the Lease and the nature of any such default. Section 4. Attornment. Tenant and Ground Lessor hereby agree that, in the event by reason of default on the part of Landlord under the Master Lease or by reason of the termination or surrender of the Master Lease, Ground Lessor shall enter into and become possessed of the Premises or shall otherwise succeed to Landlord's interest under the Lease (the date of such event shall be deemed the "Attornment Date"), then, so long as the Nondisturb Conditions shall then be satisfied, the Lease shall continue as a direct lease between Ground Lessor and Tenant upon all of the terms, covenants, conditions and agreements as set forth in the Lease, and Tenant agrees to be bound thereby and to attorn to Ground Lessor and recognize Ground Lessor as its landlord and Ground Lessor agrees to be bound thereby and recognize Tenant as its tenant thereunder provided, however, that Ground Lessor shall not: (a) be liable for any act or omission or negligence of any prior landlord under the Lease (including Landlord) except that nothing herein shall be construed to relieve Ground Lessor of liability in respect of any defaults under the Lease after the Adornment Date, but then only as if the same first occurred on the Attornment Date or of liability in respect of the negligence or willful misconduct of Ground Lessor occurring prior to the Attornment Date; (b) be subject to any counterclaim, offset or defense which theretofore accrued to the Tenant against any prior Landlord under the Lease; (c) be bound by any amendment, modification, cancellation or surrender of the Lease not entered into or permitted pursuant to the specific terms of the Lease and entered into without the prior written consent of Landlord, but only if the same is prohibited by the terms of the Lease; (d) be bound by any payment of Base Rent or Additional Rent for more than one (1)month in advance; (e) be liable for any security deposit given by Tenant under the Lease, unless and to the extent actually received by Ground Lessor. Upon the request of either Tenant or Ground Lessor, Ground Lessor or Tenant, respectively, shall promptly execute and deliver to the other an agreement or other instrument in recordable form which may be necessary or appropriate to evidence such attornment and recognition. Section 5. Collection of Rent. Tenant acknowledges that pursuant to the Master Lease, the Ground Lessor may elect to collect rent and all other sums due under the Lease under certain circumstances. In the event that the Ground Lessor notifies Tenant of its election to collect rent or other charges under the Master Lease, then from and after the such election, until further notice from Ground Lessor, Tenant shall pay its Base Rent, Additional Rent and all other sums due under the Lease directly to Ground Lessor; provided however, such receipt of rents and other sums, moneys and other amounts shall not relieve Landlord of its obligations under the Lease, and Tenant shall continue to look to Landlord only for performance thereof; provided that Tenant shall retain all of its rights to the extent Landlord shall fail to pay or perform such obligations. Tenant further agrees that, from and after the date that Ground Lessor notifies Tenant that there has been an event of default under the Master Lease, that any notice, demand approval, consent, election, determination, waiver or other action given or taken by Ground Lessor or in respect of the Lease from time to time shall have the same force and effect as a notice, demand, approval, consent, election, determination, waiver or other action or taken by Landlord thereunder in respect of the subject matter thereof and that, in the event of an inconsistent notice, demand, approval, consent, election, determination, waiver or other action given or taken from or by Landlord or Ground Lessor, the notice, demand, approval consent, election, determination, waiver or other action given or taken from or by Ground Lessor shall control and be dispositive and binding on Tenant for all purposes of the Lease and Landlord hereby agrees that Tenant is released from any payment owed to Landlord which Tenant makes to Ground Lessor pursuant to the Master Lease. Section 6. New Lease. Notwithstanding anything herein or in the Lease to the contrary, in the event that the Lease shall continue as a direct Lease between Ground Lessor and Tenant: (a) Ground Lessor shall thereafter have the right to enter into a new ground lease of the Premises and to substitute the tenant under such new ground lease as the landlord under the Lease provided that any person or entity so substituted shall agree to be bound by the terms of this Agreement. In such event, Ground Lessor shall have no obligation, nor incur any liability, for any obligations under the Lease accruing after such substitution, and Ground Lessor shall be released and discharged therefrom, but such obligations shall be deemed assumed by and binding upon such successor to Ground Lessor; and (b) Ground Lessor's obligations under the Lease, as modified hereby, or under any new ground lease entered into pursuant to Section 6(a), shall continue only during the period Ground Lessor owns the Demised Premises, and in the event the Demised Premises are sold or otherwise transferred, Ground Lessor shall have no obligation, nor incur any liability, for any obligations under the Lease or under any such new ground lease entered into thereafter accruing, and Ground Lessor shall be released and discharged therefrom, but such obligations shall be deemed assumed by and binding upon such successor to Ground Lessor. Section 7. No Changes to Lease. The Lease constitutes an inducement to the Ground Lessor to enter into this Agreement. Consequently, Tenant shall not, without obtaining the prior written consent of Ground Lessor, (i) enter into any agreement renewing, extending, amending, canceling, modifying, terminating or surrendering the Lease which are not entered into or permitted pursuant to the specific terms of the Lease except for that certain proposed lease amendment, a true, complete and correct copy of which is attached hereto as Exhibit A, provided that the final amendment entered into does not differ in any material respect from such proposed amendment, (ii) prepay any of the Base Rent and one billing period of additional rent due under the Lease for more than one (i) month in advance of the due dates thereof, (111) voluntarily surrender the Premises or terminate the Lease without cause or shorten the term thereof, except as and to the extent specifically provided for in the Lease, or (iv) assign the Lease or sublet the Premises or any part thereof other than pursuant to the provisions of the Lease and any such amendment, modification, termination, prepayment, voluntary surrender, assignment or subletting, without Ground Lessor's prior consent, shall not be binding upon Ground Lessor, but shall not otherwise have any effect on the rights and obligations of the parties hereunder. (i) agrees that upon notice from Ground Lessor, or its successors or assigns, all rents and other sums, moneys and other amounts due or to become due and (including, without limitation, all base rent and additional rent thereunder) shall be paid to Ground Lessor or as otherwise directed by Ground Lessor; (ii) agrees that Ground Lessor shall not, by reason of the Assignment of Leases, be subject to any obligation, duty or liability under the Lease, except that when Ground Lessor is exercising rights under the Lease, it shall do so in accordance with the terms and conditions thereof and, to the extent applicable, this Agreement. Section 8. Satisfaction. Tenant agrees that this Agreement, when executed, acknowledged and delivered by Ground Lessor satisfies any condition or requirement in the Lease relating to the delivery of a nondisturbance agreement by Landlord in connection with Landlord's sale of the Premises to the Ground Lessor. Section 9. Miscellaneous. (a) This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto and may not be modified or terminated orally. (b) This Agreement and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Minnesota. (c) This Agreement may be signed in counterparts. (d) This Agreement may not be modified, amended or terminated unless in writing and duly executed by the party against whom the same is sought to be asserted and constitutes the entire agreement between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. GROUND LESSOR: CCPRE-EAGAN, LLC By: CCPRE!, LLC, its sole member By: CCP REAL ESTATE EQUITY, L.P., its sole member By: CCP REAL ESTATE EQUITY, INC., its General Partner By: ----------------------------------- Name: Title: LANDLORD: WAM!NET INC. By: ----------------------------------- Name: Title: TENANT: SILICON GRAPHICS, INC. By: ----------------------------------- Name: Title: EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 31,919 0 6,018 880 1,572 42,612 137,106 33,374 189,235 35,689 261,964 1,152 88 93 (109,570) 189,235 5,622 17,483 2,220 21,709 73,082 2,403 25,479 (101,484) 0 (101,484) 0 0 0 (105,589) (11.36) (11.36)
-----END PRIVACY-ENHANCED MESSAGE-----