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032607 CC WS AgP CITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, MARCH 26, 2007 AGENDA 1. CONVENE CITY COUNCIL WORK SESSION A. Ro II Call B. Review Agenda 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS 7:30 P.M. or Immediately following the Regular City Council meeting Mayor Lizee _ Woodruff Turgeon _ Callies Wellens 2. LIQUOR OPERATIONS (Att. - Liquor Committee's memorandum and Attachments) 3. OTHER 4. ADJOURN CITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD. SHOREWOOD, M!NNESOTA 55331-8927 . (952) 474-3236 FAX (952) 474-0128' www.cLshorewood.mn.us . cityhall@cLshorewood.mn.us Celebrating 50 Years. 1956 - 2006 MEMORANDUM TO: City Council FROM: Liquor Committee DATE: March 22, 2007 SUBJECT: Discussion about City's Liquor Enterprise - Work Session Item Earlier this year, Council agreed that it should have a discussion about future planning for the City's municipal 6ff-sale liquor operations. The work session regarding this item was set for March 26. Minnesota permits municipalities to operate on-sale (i.e., restaurant/bar) and off-sale (i.e., retail store) liquor establishments, subject to statutory requirements. A city may not have both municipal and private off-sale liquor operators. Shorewood has had municipal off-sale liquor operations for decades. The primary benefits identified for municipal liquor include: . Control of access to alcoholic beverages (particularly for minors), and corresponding benefits to public health and safety. . . The opportunity for any profits to be transferred to other City funds for a variety of uses. The $50,000 transfer from the Liquor Fund to the General Fund in 2007 is equivalent to 1.14% of the Shorewood's tax levy of $4,393,600. Philosophical issues are frequently raised whether off-sale liquor is something the government should be involved in, as it is an activity that can be provided successfully by the private sector. In some states, like Pennsylvania and Utah, liquor is sold only in state-run stores. Within a statutory scheme, Minnesota allows residents (or their representatives) to decide whether liquor will be available from their local government or private businesses. Minnesota statutes do require that a decision for municipal operations be revisited if, in two of any three consecutive years, they have a net loss prior to any inter-fund transfers. If this happens, the city council must hold a public hearing and may decide whether to continue operations (and possibly be subject to a petition for a referendum to continue them), or to exit the business. Business considerations obviously are important. Sufficient profitability, market trends, increasing competition, regulatory changes (e.g., wine-in-grocery-stores initiatives), the "salability" of the enterprise, all influence the effort a city may choose to make to continue operations. Given recent pelformance and trends, Shorewood's liquor operations should be reviewed for business considerations. (Jf) rt '0 PRINTED 0,-.; ?ECYCLED PA?ER wCl Discussion Re: City Liquor Enterprise March 26, 2007, City Council Work Session Page 2 On March 19, the Council's Liquor Committee and staff had a wide-ranging discussion about the City's liquor operations. Several elements are inten-elated, and some alternatives have additional impacts. What follows is a synopsis of the matters discussed, as well as some other items needing additional evaluation. 2004 Market Study: In June 2004, Dakota Worldwide Corporation presented a repOlt to the City to help us detelmine whether to operate a third liquor store in the vicinity of the former Tonka Bay liquor store that Shorewood previously had operated. Ultimately, the Council determined not to open the third store. Dakota Worldwide ran several scenalios regarding how many stores the City operated, and what would be likely to happen if other competition entered or exited our market area. One of those scenarios included the City continuing to operate its two stores, and the entry of a new private liquor operation at Tanka Village shopping center. Subsequent to the report, an MGM liquor store opened in Tonka Village. The estimated impact to the City's operations - a reduction in sales of approximately $220,000 - has now occUlTed, as that is almost identical to the reduction in sales'in the City's system from 2004 to 2006. Operational Management: The profit margin, savvy purchasing, level of inventory, and inventory turn-over are very good. These parts of the business have been fine-tuned, and it is very difficult to improve upon this performance. Industry standards suggest that personnel costs comprise about 10 percent of operations, and our costs in this area have crept up beyond that level. It would be prudent to consider elimination of one full-time position soon, as a fundamental action to restore profitability to the liquor enterprise. Sales have dropped, in part as predicted by the 2004 market study, but also as part of a general industry trend. Liquor enterprise staff constantly strives to increase overall sales. It may, however, be worthwhile to engage the services of a marketing consultant to identify and pursue additional strategies to increase sales. Improvement in this area obviously would help profitability, but performance projections at this time should assume that progress would be incremental. The Bottom Lines: The annual Statements of Cash Flow show that in prior years, the liquor operations have generally yielded in the $100,000 range after adjusting for non-cash items such as depreciation and other adjustments. By statute, however, the performance of the operations is recorded after these accounting requirements and before any inter-fund transfers. Therefore, for 2006, the operation's net income shows a loss of $15,400; compared to 2005, where the operation had positive net income of about $42,000. The 2006 results include one- time charges to the fund of about $16,000. If these costs were excluded, a break-even situation would have resulted after 2006' s operations. These results are for an operation of nearly $2 million. 2 Discussion Re: City Liquor Enterprise March 26,2007, City Council Work Session Page 3 It is estimated that without recurrence of one-time charges and with the reduction of a full-time position, the yield from operations could be in the $50,000+ range going forward. The cash position of the Liquor Enterplise was approximately $360,000 at year-end'2006. Existing Lease Obligations: The lease for Store #1 (the East, or Waterford, Store) expires March 31,2007. It may be continued on a month-to-month basis at 25 percent above the CUlTent rent. Staff has requested the month-to-month basis until the Council reaches a decision about future operations. The lease for Store #2 (the .West, or Plaza, Store) runs through October 31, 2008. Store Performance: Store #1 has seen steady but slight improvements in overall sales and profitability. Store #2 had sales declines in the past two years, and pelformed at a loss in 2006. Wine-in-Grocerv-Stores Legislation: This initiative has been a constant one at the Minnesota Legislature. At present, some 33 states allow this type of sales. Wine has the largest profit margin of any class of alcoholic beverages. Industry analysts note that grocery stores typically sell the best-sold low- to mid-p11ce wines. This is a key component in a liquor store's operatiQns. Wine-in-grocery-stores would be a significant challenge to the viability of liquor stores, and those that remain would likely have a niche that grocery stores would not fill. Considerations regarding Downsizing or Exiting Municipal Liquor Operations: A number of other matters were identified to consider if the City were to reconfigure or exit the business. . Two stores, One store, or None?: Many costs of the operation are able to be spread between the two stores. If one store were closed, the remaining store would bear all of these costs, and would likely not be profitable. It would appear prudent to shut down completely. . Lease obligation: The lease at Store #2 is in effect until October 31, 2008, with monthly lease payments of about $5,000 plus common area costs. . Severance: Accrued leave will need to be paid to employees. Additionally, the City would need to pay unemployment compensation, as the City, bystatute, does not cany unemployment insurance. . Additional Costs Shifted: Currently, non-liquor staff time spent on behalf of liquor operations is coded to and paid by the liquor enterprise. As these staff would continue to work full eight-hour days, these staff costs would be picked up by other funds (mostly in the General Fund). In actuality, this amount is minimal. o Loss of Revenue: The $50,000 transfer from the Liquor Enterprise to the General Fund represents about 1 percent of the tax levy. Revenue replacement and/or service reductions would need to be identified. (For example, if the business were "sold" as discussed below, each $500,000 invested and earning 5 percent interest would yield $25,000/yr.) :3 Discussion Re: City Liquor Enterplise March 26, 2007, City Council Work Session Page 4 . "Sale" of the Liquor Business: If this were to occur, the City should engage a business broker to identify potential buyers and terms for them to "buy" the City's business. It may include assumption of existing lease(s), and an agreement not to grant other off-sale licenses for some period of time. Additional velification is needed whether State statute would preclude one buyer from operating both stores. The Council would need to determine how to use the one-time revenue (possibly $0.5 - 1.0 million) from the sale. Statutory Process To Exit Operations: The Council may abandon operations simply by adopting an ordinance to do so. No public hearing is required, although the Council may wish to gain public comment prior to making a decision whether to remain in the business. According to Minnesota Rules, after a decision to abolish municipal operations, the City must negotiate the sale of the fixtures and buildings, and certify the inventory of the stock on hand. According to information from the League of Minnesota Cities Handbook, the Rules do not address the sale of the "business" itself. 4 CHAPTER \ I See LMClT Infonnation memo LMCtT Liq!lor Liability Covemge. The League of Minnesota Cities Insurance Trust (LMCIT) offers liquor liability coverage for off-sale municipal liquor stores, on-sale municipal liquor stores, and "special event" sales by an instrumentality of the city-for example, special event malt liquor sales by a fire relief association. 7. Suspending municipal liquor store operations Minn. Stat. ~ 340A.604. The state can suspend a city's liquor store operations when any city officer or employee is convicted of selling intoxicating liquor or 3.2 percent malt liquor (beer): . To a minor or other ineligible person. . At a time when the law prohibits the sale. . For resale. . If the city has not paid the state tax. The state can also suspend a city's liquor store's operations when any city officer or employee is convicted of violating gambling laws. The court must notify the commissioner of the Department of Public Safety within 10 days of the conviction. The commissioner then has the authority to suspend the operation of the municipal liquor store for up to 30 days. The commissioner must notify the city of the effective dates of the suspension. The city has the right to appeal the decision. ~8. Abolishing a municipal liquor store < --- Minn. Stat. ~ 340A.602. A city may discontinue the operation of a municipal liquor store in several ways: . The liquor store must cease to operate if the city voters vote to have the city become dry. In this case, it is uncertain whether the municipal store must cease operations immediately after the election. or whether it may continue to operate for the balance of the year. . If a city liquor store has a net loss prior to any inter-fund transfers in any two of three consecutive years, the city council must hold a public hearing on the question of whether the city shall continue to operate the liquor store. . The hearing must take place not more than 45 days prior to the end of the fiscal year following the three-year period. After the hearing, the council may, on its own motion, or must, upon petition of 5 percent or more of the registered voters of the city, submit the question of whether the city should continue liquor store operations by a date determined by the city council to the voters at the general or special election. The date to discontinue operation, designated by the city council, must not be more than 30 months after the election. Minn. Stat. ~ 340A.412. subd. 4(a)(6) Minn. Stat. ~ 340A.602. 11 :33 HANDBOOK FOR MlNNESOTA ClTlES This chapter last updated 1/3/2007 5 Minn. Rule 75 \ 5.0470 Minn. Stat. * IISA.93 Minn. Stat. ~ 412.221 , subd. 21. See LMClT risk management memo FIu.Oj>, Fido. & Igor: Animal COIl/rol Ordimmces and the League's Model Animal COl/lml Ordinance. Minn. Stat. * 346.\55. Minn. Stat. ~ 412.221, subd. 2\ CHAPTER 11 Finally, the council can, at any time, abolish the municipal liquor store or make changes in the manner of sale, such as changing from off-sale only to on- and off-sale. In the first case, the council would repeal the municipal liquor ordinance; in the second case, it would ame.nd the ordinance. After a city abolishes a municipal liquor store, it must negotiate the sale ofthe fixtures and buildings. The clerk must submit a celiified inventory of the stock on hand to the liquor control division, giving the brand names, the size and number of containers, and the details of disposition. The clerk must also submit the retailer's identification card to the division for cancellation. C. Solid-waste collection A person, or entity, may not operate a business to coliect mixed municipal solid waste without a license from the city where the solid waste is collected. D. Animals State law allows cities to regulate animal ownership; to prevent animals running at large; to authorize impounding, sale or summary destruction of animals; and to establish animal pounds. While this probably does not authorize a complete prohibition against keeping animals within the city limits, it does permit reasonable regulations preventing a public nuisance. For example, cities can prohibit bees, farm animals, and fowl from certain districts within the city. 1. Regulated exotic animals State law regulates the purchase, possession, breeding, and sale of large cats, bears, and nonhuman primates. A regulated animal includes any hybrid or cross between an animal listed above and a domestic animal, and offspring from all subsequent generations of those crosses or hybrids. Every person that possesses one or more of these regulated animals must be licensed by the USDA or must be registered with a local animal control authority. State law also criminalizes negligent failure to control a regulated animal or keep it properly confined if the animal causes harm to another person. 2. Dogs and cats This section. refers specifically to dogs because most cities regulate them, but a city may apply the same regulatory measures to other animals-such as cats. (The League has sample ordinances regulating many different types of animals.) Cities may license dogs and regulate their keeping. The license fee must be reasonable, but should be substantial enough to cover regulatory costs. Cities usually make licensing ordinances apply only to dogs once they are a certain age, usually three to six months old. 11:34 HANDBOOK FOR M\NNESOT A CITIES This chapter last revised \/3/2007 6 CITY OF SHOREWOOD, MINNESOTA 2006 LIQUOR OPERATIONS FINANCIAL INFORMATION 7 Date: 03/16/2007 Time: 09: 48: 17 Operator: Bonnie City of Shore wood Balance Sheet Calendar Period: 12/2006 Fiscal Period: 12/2006 WATER FORD LIQUOR Assets 642-10100 CASH ~~ INVESTMENTS 642-10200 PETTY CASH 642-10410 ALLOW FOR UNREALIZED INVEST GAIN/LOSS 642-10450 ACCRUED INTEREST RECEIVABLE 642-11500 ACCOUNTS RECEIVABLE 642-11800 RETURNED CHECKS 642-14210 INVENTORY - LIQUOR 642-14220 INVENTORY - WINE 642-14230 INVENTORY BEER 642-14240 INVENTORY - MISC 642-15500 PREPAID INSURANCE 642-15510 PREPAID EXPENSES - OTHER 642-16420 FURNITURE AND FIXTURES 642-16430 ALLOWANCE FOR DEPRECIATION - FURN & FIX Total Assets: Liabilities 642-20100 ACCOUNTS PAYABLE 642-20700 DUE TO OTHER FUNDS 642-20801 SALES TAX PAYABLE 642-21600 ACCRUED WAGES & SALARIES PAYABLE 642-21700 COMPENSATED ABSENCES-CURRENT 642-21705 VOLUNTARY PAYROLL DEDUCTS PAYABLE Total Liabilities: Equity 642-27220 UNRESERVED, UNDESIGNATED RETAINED EARN Fund Balance YTD Total Equity: Total Liability & Equity: Page: 2 3,410.62 600.00 294.95- 282.77 .00 .00 34,105.26 40,548.42 21,312.81 2,075.05 1,952.21 .00 68,198.50 59,796.17- 112,394.52 =============='= 8,445.91 .00 7,336.35 2,417.85 12,305.99 .00 30.506.10 125,217.67 43,329.25- 81,888.42 112,394.52 --------------- --------------- 8 Date: 03/16/2007 Time, 09:47:36 City of Shorewood Income Statement Operator: Calendar Period: 12/2006 Fiscal Period: 12/2006 .WATERFORD LIQUOR SALES 642-37811 LIQUOR SALES 642-37812 WINE SALES 642-37813 BEER SALES 642-37814 MISC SALES 642-37816 BOTTLE DEPOSITS TOTAL SALES COST OF GOODS SOLD 642-49750-251 LIQUOR PURCHASES 642-49750-252 WINE PURCHASES 642-49750-253 BEER PURCHASES 642-49750-254 MISC PURCHASES TOTAL COST OF GOODS SOLD GROSS PROFIT ~RATING EXPENSES PERSONAL SERVICES 642-49750-101 FULL-TIME REGULAR 642-49750-102 OVERTIME 642-49750-103 PART-TIME 642-49750-104 TEMPORARY REGULAR 642-49750-111 SEVERANCE PAY 642-49750-121 PERA CONTRIB - CITY SHARE 642-49750-122 FICA CONTRIB - CITY SHARE 642-49750-131 EMPLOYEE INSURANCE - CITY 642-49750-141 UNEMPLOYMENT COMPENSATION 642-49750-151 WORKERS COMPENSATION TOTAL PERSONAL SERVICES SUPPLIES 642-49750-200 OFFICE SUPPLIES 642-49750-208 POSTAGE 642-49750-221 MAINTENANCE OF EQUIPME}IT 642-49750-223 MAINTENANCE OF BUILDINGS 642-49750-245 GENERAL SUPPLIES TOTAL SUPPLIES *** Current *** Amount PCT *** Year to Date *** Amount PCT 26,640.56 37.79 264.,802.19 30.72 15,24.1.37 21. 62 218,429.83 25.34 27,397.75 38.86 350,759.11 40.69 1,218.13 . 1.73 28,195.94 3.27 1.20- 0.00 98.38- 0.01- 70,496.61 100.00 862,088.69 100.00 22.176.60 31. 46 199,150.46 23.10 18,428.67 26.14 148,197.77 17.19 21,939.49 31.12 265,226.79 30.77 1,561.26 2.21 19.779.18 2.29 64,106.02 90.93 632,354.20 73.35 6,390.59 9.07 229,734.49 26.65 17,053.81 24.19 85,799.89 9.95 0.00 0.00 0.00 0.00 6,302.07 8.94 28,539.71 3.31 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 816.69 1.16 6,221.05 0.72 1,104.13 1.57 8,047.33 0.93 SHARE 0.00 0.00 8,025.76 0.93 0.00 0.00 56.24 0.01 1,486.32- 2.11- 153.68 0.02 23,7%.38 33.75 136,843.66 15.87 35.60 0.05 381.35 0.04 0.00 0.00 0.00 0.00 0.00 o. 00 975,00 0.11 0.00 O. 00 0.00 0.00 97.11 O. 14 2,637.61 0.31 132.7l 0.19 4,043.96 '0.47 9 Bonnie Page: Date' 03/16/2007 Time, 09,47,36 OTHER CHARGES 642-49750-301 AUDITING & ACCOUNTING SERVICES 642-49750-302 CONSULTING FEES 642-49750-304 LEGAL FEES 642-49750-321 COMMUNICATIONS - TELEPHONE 642-49750-331 TRAVEL, CONFERENCE & SCHOOLS 642-49750-342 ADVERTISING & PROMOTIONS 642-49750-351 PRINTING AND PUBLISHING 642-49750-360 INSURANCE 642-49750-380 UTILITY SERVICES 642-49750-400 CONTRACTUAL SERVICES 642-49750-410 RENTS 642-49750-420 DEPRECIATION 642-49750-432 UNCOLLECTIBLE CHECKS 642-49750-433 DUES AND SUBSCRIPTIONS 642-49750-437 TAXES/LICENSES 642-49750-440 MISC SERVICES 642-49750-445 CREDIT CARD FEES 642-49750-560 FURNITURE AND FIXTURES TOTAL OTHER CHARGES TOTAL OPERATING EXPENSES NET OPERATING INCOME/LOSS OTHER INCOME/EXPENSE 642-36210 INTEREST EARNINGS 642-49750.450 BAN1< SERVICE CHARGES 642-36270 MISC REVENUE-WINE CLUB 642-37840 CASH OVER 642-49750-431 CASH SHORT TOTAL OTHER INCOME/EXPENSE I~ITERFUND TRANSFERS 642-49750-720 OPERATING T~~SFERS TOTAL INTERFUND TRANSFERS NET INCOME/LOSS City of Shore wood Income Statement Operator: Calendar Period: 12/2006 Fiscal Period: 12/2006 WATERFORD LIQUOR *** Current *** *** Year to Date *** Amount PCT Amount PCT 0.00 0.00 2,000.00 0.23 0.00 0.00 725.00 0.08 0.00 0.00 0.00 0.00 267.18 0.38 1,354.79 0.16 38.22 0.05 452.29 0.05 379.88 0.54 7,086.81 0.82. 0.00 0.00 176.07 0.02 772.70- 1.10- 6,091. 74 0.71 1,969.70 2.79 8,733.45 1. 01 0.00 0.00 596.34 0.07 0.00 0.00 67,425.36 7.82 2 50.92 0.36 3.011.01 0.35 558.00 0.79 558.00 0.06 0.00 0.00 812.42 0.09 0.00 0.00 20.00 0.00 0.00 0.00 530.17 0.06 863.29 1. 22 12,921.55 1. 50 0.00 0..00 0.00 0.00 3,554.49 5.04 112,495.00 13.05 27,477.58 38.98 253,382.62 29.39 21,086.99- 29.91- 23,648.13- 2.74- 361. 62 0.51 2,335.06 0.27 4.97 0.01 12.81 0.00 873.26 1. 24 3,138.26 0.36 68.87 0.10 1.334.64 0.15 68.79 0.10 1,253.56 0.15 1,229.99 1.74 5,541.59 0.64 25,000.00 35.46 25,000.00 2.90 25,000.00 35.46 25,000.00 2.90 44,857.00- 63.63- 43,105.54- 5.00- 10 Bonnie Page: 2 Date: 03/16/2007 Time: 09:47:04 City of Shorewood Income Statement Operator: Bonnie Page: 1 Calendar Period: 12/2006 Fiscal Period: 12/2006 Variance to Last Year WATERFORD LIQUOR ________________ MONTH-TO-DATE ---------------- Current Last Year Budget Variance Description _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ YEAR - TO - DATE - - - - -- - - - - -- - - - - - - - - Current Last Year Budget Variance Pct SALES 26,641 25,771 21,337 870 LIQUOR SALES 264,802 248,495 256,000 16,307 106.56 15,241 31,924 19,538 16,683- WINE SALES 218,430 229,120 234,500 10.690- 95.33 27,398 27,746 30,000 348- BEER SALES 350,759 343,478 360,000 7,281 102.12 1, 218 3,223 2,712 2,005- MISC SALES 28,196 31,047 32.500 2,851- 90.82 1- 2 0 4- BOTTLE DEPOSITS 98- 57 0 155-173 .20- 70,497 88,666 73,587 18,170- TOTAL SALES 862,089 852,197 883,000 9,892 101.16 COST OF GOODS SOLD 22,177 24,868 16,060 2,691- LIQUOR PURCHASES 199,150 193.853 192,775 5,298 102.73 18,429 16,319 13,096 2,110 WINE PURCHASES 148,198 146,073 157,196 2,125 101.45 21,939 21,060 22,825 880 BEER PURCHASES 265,227 256,995 273,911 8,232 103.20 1,561 2,560 1,878 998- MISC PURCHASES 19,779 20,952 22,481 1,173- 94.40 64,106 64,806 53,859 700- TOTAL COST OF GOODS SOL 632,354 617.872 646,363 14,482 102.34 6,391 23,860 19,728 17,470- GROSS PROFIT 229,734 234,325 236,637 4,590- 98.04 OPERATING EXPENSES PERSONAL SERVICES 17,054 7,122 6,170 9,932 FULL-TIME REGULAR 85,800 68,352 74,051 17,448 125.53 0 0 0 0 OVERTIME 0 0 0 0 .00 6,302 1,994 2,087 4,308 PART-TIME 28,540 21,386 25,000 7,154 133.45 0 0 0 0 TEMPORJ>..P.Y REGULi'.R 0 0 0 0 .00 0 0 0 0 SEVERANCE PAY 0 0 0 0 .00 817 441 498 376 PERA CONTRIB - CITY SHARE 6,221 4.912 5,943 1,309 126.65 1,104 664 636 440 FICA CONTRIB - CITY Slli>.RE 8.047 6,818 7,577 1,229 118.02 0 62 913 62- EMPLOYEE INSURANCE CITY 8,026 8,507 11,000 481- 94.35 0 0 0 0 UNEt1PLOYMENT COMPENSl'_TION 56 0 0 56 0'-' 1.486- 140 0 1,626- \'iO?KE?S CCJMPENSA':lON 154 1.792 i, 1,6~3 8 "0 11 Date: 03/16/2007 Time: 09,17:01 City of Shorewood Income Statement Operator: Bonnie Page: 2 Calendar Period: 12/2006 Fiscal Period: 12/2006 Variance to Last Year WATERFORD LIQUOR ________________ MONTH-TO-DATE ---------------- current Last Year Budget Variance Description ___________________ YEAR-TO-DATE -------------------- Current Last Year Budget Variance pct 23,790 10,423 10,301 13,368 TOTAL PERSONAL SERVICES 136,844 111,767 123,571 25,076 122.44 SUPPLIES 36 15 19 21 OFFICE SUPPLIES 381 338 250 43 112.81 0 0 0 0 POSTAGE 0 0 0 0 .00 0 100 125 100- MAINTENANCE OF EQUIPMENT 975 2,257 1,500 1,282- 43.21 0 0 0 0 MAINTENANCE OF BUILDINGS 0 404 0 404- .00 97 149 125 52 - GENERAL SUPPLIES 2,688 2;048 1,500 639 131.22 133 264 269 131- TOTAL SUPPLIES 4,044 5,047 3.250 1,003- 80.13 OTHER CHARGES 0 0 212 0 AUDITING & ACCOUNTING SER 2,000 2,143 2,500 143- 93.32 0 0 0 0 CONSULTING FEES 725 0 0 725 .0 0 0 0 0 LEGAL FEES 0 0 0 0 .00 267 249 113 18 COMMUNICATIONS - TELEPHON 1,355 1,429 1,400 74- 94.82 38 150 38 112- TRAVEL, CONFERENCE & SCHO 452 439 500 14 103.12 380 478- 663 858 ADVERTISING & PROMOTIONS 7,087 5,859 8,000 1.228 120.96 0 0 6 0 PRINTING AND PUBLISHING 176 152 50 24 115.55 773- 663 663 1,435- INSURANCE 6,092 7,101 8,000 1,010- 85.78 1,970 565 663 1,405 UTILITY SERVICES 8,733 6,805 8,000 1,929 128.35 0 0 44 0 CONTRACTUAL SERVICES 596 510 550 86 116.89 0 5,659 5,587 5,659- RENTS 67,425 67,426 67,000 1-100.00 251 135 263 116 DEPRECIATION 3,011 3,386 3,200 375- 88.92 558 417 87 141 UNCOLLECTIBLE CHECKS 558 417 1,000 141 133.77 0 0 61 0 DUES AND SUBSCRIPTIONS 812 745 765 67 109.05 0 0 17 0 TAXES/LICENSES 20 413 270 393 - 4.85 0 3 0 3- MISC SERVICES 530 117 0 413 153.18 863 397 750 466 CREDIT CARD FEES 12,922 9,811 9,000 3,110 131.70 0 0 337 0 FURNITURE AND FIXTURES 0 0 4,000 0 .00 3.554 7,760 9,504 4,206- TOTAL OTHER CHARGES 112,495 106,753 114,235 5,742 105.38 27.478 18,447 20,077 9,030 TOTAL OPERATING EXPEN 253,383 223,567 241,056 29,815 113.34 12 Date: 03/16/2007 Time: 09:47:04 City of Shorewood Income Statement Operator: Bonnie Page: 3 Calendar Period: 12/2006 Fiscal Period: 12/2006 Variance to Last Year \,ATERFORD LIQUOR ________________ MONTH-TO-DATE ---------------- Cu~rent Last Year Budget Variance Description __ _ _ _ _ _ -- -- -- - - - - - - YEAR-TO - DATE -- - - - - - - - -- - - - - -- - -- Current Last Year Budget Variance Pct 21,087- 5,413 349- 26,500- NET OPERATING INCOM 23,648- 10,757 4,419- 34.406-219.83- OTHER INCOME/EXPENSE 362 0 0 362 INTEREST EARNINGS 2,335 0 0 2,335 .00 5 0 0 5 BAN1< SERVICE CHARGES 13 0 0 13 .00 873 216 0 658 MISC REVENUE-WINE CLUB :3,138 2,466 0 673 127.29 69 240 0 171- CASH OVER 1,335 2,496 0 1,162- 53.4 7 69 109 0 40- CASH SHORT 1,254 2,374 0 1,120- 52.80 1,230 346 884 TOTAL OTHER INCOME!EXPE 5,542 2,588 o 2,954 214.15 INTERFUND TRANSFERS 25,000 25,000 o o OPERATING TRANSFERS 25,000 25,000 o o 100.00 25,000 25,000 o o TOTAL INTERFUND TRANSFE 25,000 25,000 o o 100.00 44,857- 19,241- 349- 25,616- NET INCOME/LOSS 43,107- 11,655- 4,419- 31,452-369.86 13 Date: 03/16/2007 Time: 09:48:17 Operator: Bonnie City of Shorewood Balance Sheet Calendar Period: 12/2006 Fiscal Period: 12/2006 SHOREWOOD PLAZA LIQUOR Assets 641-10100 CASH AND INVESTMENTS 641-10200 PETTY CASH 641-10410 ALLOW FOR UNREALIZED INVEST GAIN/LOSS 641-10450 ACCRUED INTEREST RECEIVABLE 641-11500 ACCOUNTS RECEIVABLE 641-11800 RETURNED CHECKS 641-13100 DUE FROM OTHER FUNDS 641-14210 INVENTORY - LIQUOR 641-14220 INVENTORY - WINE 641-14230 INVENTORY - BEER 641-142'40 INVENTORY - MISC 641-15500 PREPAID INSURANCE 641-15510 PREPAID EXPENSES - OTHER 641-16420 FURNITURE AND FIXTURES 641-16430 ALLOWANCE FOR DEPRECIATION - FURN & FIX 'Total Assets: Liabili ties 641-20100 ACCOUNTS PAYABLE 641-20801 SALES TAX PAYABLE 641-21600 ACCRUED WAGES & SALARIES PAYABLE 641-21700 COMPENSATED ABSENCES-CURRENT 641-21705 VOLUNTARY PAYROLL DEDUCTS PAYABLE Total Liabilities; Equity 641-26300 CONTRIBUTED CAPITAL 641-27220 UNRESERVED, UNDESIGNATED RETAINED EARN Fund Balance YTD Total Equity: Total Liability & Equity: Page: 1 361,803.86 600.00 2,803.25- 2,687.49 .00 .00 .00 46,324.13 63,871.46 28,015.60 4,096.55 1,953.20 .00 247,983.38 126,089.39- 628,443.03 20,490.67 10,882.51 2,360.91 19,561.22 .00 53,295.31 30,000.00 567,693.49 22,545.77- 575,147.72 628,443.03 14 Date: 03/16/2007 Time: 09:47:23 City of Shorewood Income Statement Operator: Calendar Period: 12/2006 Fiscal Period: 12/2006 Shorewood Plaza Liquor *** Current Amount Year to Da te ** * PCT Amount PCT SALES 641-37811 LIQUOR SALES 641-37812 WINE SALES 641-37813 BEER SALES 641-37814 MISC SALES 641-37816 BOTTLE DEPOSITS 30,462.06 25.90 349,142.06 31.35 56,322.71 47.89 371,978.69 33.40 27,619.05 23.48 359,657.01 32.29 3,211..36 2.73 32,903.18 2.95 2.40 0.00 30.91 0.00 117,617.58 100.00 1,113.711.85 100.00 TOTAL SALES COST OF GOODS SOLD 641-49750-251 LIQUOR PURCHASES 641-49750-252 WrNE PURCHASES 641-49750-253 BEER PURCHASES 641-49750-254 MISC PURCHASES 30.568.87 25.99 269,174.01 24.17 41,604.7, 35.37 248,309.05 22.30 22,763.72 19.35 268.873.34 24.14 3,452.62 2.94 24,091.69 2.16 98,389.98 83.65 810,448.09 72.77 19,227.60 16.35 303,263.76 27.23 TOTAL COST OF GOODS SOLD GROSS PROFIT ,RATING EXPENSES PERSONAL SERVICES 641-49750-101 FULL-TIME REGULAR 20,213.75 17.19 85,048.70 7.64 641-49750-102 OVERTIME '0.00 0.00 0.00 0.00 641-49750-103 PART-TIME 6,885.06 5.85 36,214.52 3.25 641-49750-104 TEMPORARY REGULAR 0.00 0.00 0.00 0.00 641-49750-111 SEVERANCE PAY 0.00 0.00 0.00 0.00 641-49750-121 PERA CONTRIB - CITY SHARE 823.31 0.70 5,642.84 0.51 641-49750-122 FICA CONTRIB - CITY SHARE 1.620.86 1. 38 8.804.68 0.79 641-49750-131 EMPLOYEE INSURANCE - CITY SHARE 0.00 0.00 7,391.8.. 0.66 641-49750-141 UNEMPLOYMENT COMPENSATION 0.00 0.00 87.96 0.01 641-49750-151 Y70RKERS COMPENSATION 1,486.32- 1. 26- 153.68 0.01 TOTAL PERSONAL SERVICES 28,056.66 23.85 14~, 344 .22 12,87 SUPPLIES 641-49750-200 OFFICE SUPPLIES 50.30 0.04 759.27 0.07 641-49750-208 POST.l\.GE 0.00 0.00 0.00 0.00 641-49750-221 M.lUNTENANCE OF EQUIPMENT 0.00 0.00 1,300.00 0.12 641-49750-223 MAINTEN~~'rCE OF BUILDINGS 0.00 0.00 0.00 0.00 641-49750-245 GSNERAL SUPPLISS '>06.30 0.43 2,235.95 0.20 TOT.^>L SUPPLIES 556.60 0.0 4,295.23 0.39 1!:\ Bonnie Page: 1 Date: 03/16/2007 Time: 09:47 :23 OTHER CHARGES City of Shorewood Income Statement Operator: Calendar Period: 12/2006 Fiscal Period: 12/2006 Shorewood Plaza Liquor *** Current Amount Year to Date Amount PCT PCT 641-49750-301 AUDITING & ACCOUNTING SERVICES 641-49750-302 CONSULTING FEES 641-49750-304 LEGAL FEES 641-49750-321 COMMUNICATIONS - TELEPHONE 641-49750-331 TRAVEL, CONFERENCE & SCHOOLS 6"1-49750-342 ADVERTISING & PROMOTIONS 641-49750-351 PRINTING AND PUBLISHING 641-49750-360 INSURANCE 641-49750-380 UTILITY SERVICES 641-49750-400 CONTRACTUAL SERVICES 641-49750-410 RENTS 641-49750-420 DEPRECIATION 641-49750-432 UNCOLLECTIBLE CHECKS 641-49750-433 DUES AND SUBSCRIPTIONS 641-49750-437 TAXES/LICENSES 641-49750-440 MISC SERVICES 641-49750-445 CREDIT CARD FEES TOTAL OTHER CHARGES TOTAL OPERATING EXPENSES NET OPERATING INCOME/LOSS OTHER INCOME/EXPENSE 641-36210 INTEREST EARNINGS 641-49750-450 BANK SERVICE CHARGES 641-36270 MISC REVENUE-WINE CLUB 641-37840 CASH OVER 641-49750-431 CASH SHORT TOTAL OTHER INCOME/EXPENSE INTERFUND TR~~SFERS 641-49750-720 OPER~TING TRJ0TSFERS TOTAL INTERF~TD TRP~SFERS NET INCOME/LOSS 0.00 0.00 2,000.00 0.18 0.00 0.00 725.00 0.07 0.00 0.00 0.00 0.00 219.92 0.19 1,307.09 0.12 92.60 0.08 506.67 0.05 379.88 0.32 7, 197 . 02 0.65 0.00 0.00 176.07 0.02 772.70- 0.66- 6,091.74 0.55 2,647.85 2.25 11,693.50 1. 05 0.00 0.00 1,115.49 0.10 0.00 0.00 87,558.54 7.86 2,539.17 2.16 30,470.02 2.74 1,276.66 1. 09 1,276.66 0.11 0.00 0.00 762.48 0.07 0.00 0.00 270.00 0.02 0.00 0.00 782.80 0.07 1,646.90 1.40 18,392.84 1.65 8,030.28 6.83 170,325.92 15.29 36,643.54 31.15 :n 7,965..37 28.55 17,415.94- 14.81- 14,701.61- 1.32- 1,839.11 1. 56 14,604.89 1.31 9.85 0.01 101.60 0.01 890.26 0.00 3,155.26 0.00 52.80 0.04 915.13 0.08 37.40 0.03 1,195.14 0.11 2,734.92 2.33 17,378.54 1.56 25,000.00 21.26 25,000.00 2.24 25,000.00 21.26 25,000.00 2.24 39,681.02- 33.74- 22.323.07- 2.00- 16 Bonni.e Page: Date: 03(16(2007 Time: 09:46:49 City of Shorewood Income Statement Operator: Bonnie Page: Calendar Period: 12(2006 Fiscal Period: 12(2006 Variance to Last Year Shorewood Plaza Liquor ________________ MONTH-TO-DATE ---------------- Current Last Year Budget Variance Description ___________________ YEAR-TO-DATE -------------------- Current Last Year Budget Variance Pct SALES 30,462 44.918 31,750 14,456- LIQUOR SALES 349,142 373,697 381,000 24,555- 93.43 56,323 50,183 32,250 6,140 WINE SALES 371,979 379,052 387,000 7,074- 98.13 27,619 32,569 33.837 4,950- BEER SALES 359,657 393,816 406,000 34,159- 91.33 3,211 3,086 3,000 126 MISC SALES 32,903 32,653 36,000 250 100.77 2 2 0 0 BOTTLE DEPOSITS 31 47 0 16- 66.05 117,618 130,758 100,837 13,140- TOTAL SALES 1,113,712 1,179,266 1,210,000 65,554- 94.44 COST OF GOODS SOLD 30,569 33,269 24,712 2,700- LIQUOR PURCHASES 269,174 283,202 296,500 14,028- 95.05 41,605 38,020 22,663 3,584 WINE PURCHASES 248,309 259,036 272,000 10,727- 95.86 22.764 24,704 24,712 1,940- BEER PURCHASES 268,873 294,765 296,500 25,892- 91. 22 3,453 2,950 2,000 503 MISC PURCHASES 24,092 21,990 24,000 2,101 109.56 98,390 98,943 74,087 553- TOTAL COST OF GOODS SOL 810,448 858,993 889,000 48,545- 94.35 19,228 31,815 26,750 12.587- GROSS PROFIT 303,264 320,272 321,000 17,009- 94.69 OPERATING EXPENSES PERSONAL SERVICES 20,214 7,749 5,967 12,465 FULL-TIl';E REGULAR 85,049 68,385 71,615 16,664 124.37 0 0 0 0 OVERTIME 0 0 0 0 .00 6.885 3,805 3.087 3,080 PART-TIME 36,215 38,001 37,000 1,786- 95.30 0 0 0 0 TEMPORA-R.Y REGULAR 0 0 0 0 .00 0 0 0 0 SEVERl'.NCE PAY 0 0 0 0 .00 823 526 531 297 PERA CONTRIB - CITY SHARE 5,643 5,802 6,427 160- 97.25 1,621 791 682 830 FICA CONTRIB CITY SHARE 8,805 8,031 8,195 774 109.63 0 62- 913 62 EMPLOYEE INSURl'.NCE - CITY 7,392 7,169 11,000 223 103. L 0 0 0 0 UNEMP",OYMENT COMPENSP-.TIOl"l 88 91 0 3- 97.15 1,486- 140 0 1,626- 1'10RKERS C01~PENSF.TION 154 1,792 a 1,636- g . =~: 17 Date: 03/16/2007 Time: 09:46:49 City of Shorewood Income Statement Operator: Bonnie Page: 2 Calendar Period: 12/2006 Fiscal Period: 12/2006 Variance to Last Year Shorewood Plaza Liquor ________________ MONTH-TO-DATE ---------------- current Last Year Budget Variance _ __ __ _ _ - _ - -- -- - -- - YEAR-TO-DATE - - - - - - - -- - - - - - - -- --- Description Current Last Year Budget Variance Pet 28.057 12,950 11.180 15,107 TOTAL PERSONAL SERVICES 143,344 129,271 134,237 14,074 110.89 SUPPLIES 50 15 32 36 OFFICE SUPPLIES 759 506 450 254 150.15 a 0 0 0 POSTAGE 0 0 0 0 .00 0 100 125 100- !/1AINTENANCE OF EQUIPMENT 1,300 1,400 1,500 100- 92.86 0 0 0 0 MAINTENANCE OF BUILDINGS 0 0 0 0 .00 506 421 163 85 GENERAL SUPPLIES 2,236 2,447 2,000 211- 91.37 557 536 320 21 TOTAL SUPPLIES 4,295 4,353 3,950 58- 98.67 OTHER CHARGES 0 0 212 0 AUDITING & ACCOUNTING SER 2,000 2,143 2,500 143- 93.32 0 0 a 0 CONSULTING FEES 725 a 0 725 .0 0 0 0 0 LEGAL FEES 0 0 0 0 .00 220 274 113 54- COMMUNICATIONS - TELEPHON 1,307 1,294 1,400 13 101. 01 93 150 38 58- TRAVEL, CONFERENCE & SCHO 507 439 500 68 11 5 . 52 380 1,200 663 820- ADVERTISING & PROMOTIONS 7,197 5,859 8,000 1,338 122.84 0 0 '6 0 PRINTING AND PUBLISHING 176 152 50 2'1 115.55 773- 663 663 1,435- INSURANCE 6,092 7,101 8,000 1.010- 85.7B 2,648 3,489 1,000 841- UTILITY SERVICES 11,694 13 , 72 6 12,000 2,032- 85.19 a 54 100 5'1- CONTRACTUAL SERVICES 1,115 1,135 1,200 19- 98.32 0 6,250 0 RENTS 87,559 82,263 75,000 5.296 106.44 2,539 2,771 2,750 232- DEPRECIATION 30,470 33,573 .l3,000 3,103 - 90.76 1,277 698 57 578 UNCOLLECTIBLE CHECKS 1,277 698 750 578 182.84 0 0 61 0 DUES AND SUBSCRIPTIONS 762 790 765 28- 96.52 0 0 17 0 TAXES/LICENSES 270 717 270 447, 37.64 0 0 3 - MISe SERVICES 783 285 0 4Sc. 274: .68 1,647 885 1,250 762 CREDIT CARD FEES 18,393 16,826 15,000 1,567 109.31 8,030 10.185 13,180 2,155- TOTAL OTHER C~.RGES 170,326 167,000 158,435 3,326 101.99 36/644 23,671 24,680 12,972 TOTAL OPEPATING EX PEN 317,965 300,624 296,622 17,341105.77 18 Date: 03/16/2007 Time: 09:46:49 City of Shorewood Income Statement Operator: Bonnie Page: 3 Calendar Period: 12/2006 Fiscal Period: 12/2006 Variance to Last Year Shorewood Plaza Liquor ________________ MONTH-TO-DATE ---------------- Current Last Year Budget Variance Description ___________________ YEAR-TO-DATE -------------------- Current Last Year Budget Variance Pct 17,416- 8,144 2,070 25,559- NET OPERATING INCOM 14,702- 19,648 24,378 34,350- 74.82- OTHER INCOME/EXPENSE 1,839 280 0 1,559 INTEREST EAfu~INGS 14,605 7,832 0 6,773 186.47 10 6 0 4 BANK SERVICE CHARGES 102 87 0 14 116.26 890 119 0 771 MISC REVENUE-WINE CLUB 3,155 2,369 0 786 133.16 53 l.i4 0 9 CASH OVER 915 1,522 0 606- 60.14 37 189 0 152- CASH SHORT 1,195 2,098 0 903- 56.95 2,735 248 o 2,487 TOTAL OTHER INCOME/EXPE 17.379 9,537 o 7,841 182.21 INTERFUND TRANSFERS 25,000 25,000 o o OPERATING TRANSFERS 25,000 25,000 o o 100.00 25,000 25,000 o o TOTAL INTERFUND TRANSFE 25,000 25,000 o o 100.00 39,681- 16,608- 2,070 23,073- NET INCOME/LOSS 22,323 4,186 24,378 26,509-533.29- 19 20 0C'1 f'-. 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III a: m 'u c: ~ i.I m ~ .<{ '0 ~ U :J <{ Qj u o (f) 24 (!,OP VI b l N r:; l) :,;;;.ro tt t :;. c i L-,--u~rR A-TlrU 6-r PVSSI f) LE' 'P EJ(SOrJlJe-L keDtLCT{ orJ DEPT # 49750 FUND: # 640 SUBFUND: Liquor Operations (East & West) :T INCOME (lOSS) AFTER TSFRS Actual Actual Budget YTD Sept Pr Adopted $$ 0/0 2004 2005 2006 2006 2007 Change Change 2,195,387 2,031,416 2,093,000 1,478,822 2,120,000 2,120,000 88,584 4.36% 1,608,759 1,476,865 1,535,363 1,053,534 1,541,625 1,541,625 64,760 4.38% 586,629 554,551 557,637 425,288 . 578,375 578,375 23,824 4.30% ...... ){ 255,867 241 ,038 257,808 177,193 <f~N~ 274,568 3,145 1.30% 10,011 9,818 7,600 7,406 ..7,700 7,700 (2,118) -21 .5701< 225,269 236,795 232,470 202,770 " 252,090 252,090 15,295 6.46O~ 39,057 36;959 36,200 25,111 '.'" ;30,700 30,700 (6,259) -16.930/ 4,286 0 4,000 0 . .." i,~ ......:, '. '0.' 31,000 0 #DIV/O\ 534,489 524,609 538,078 412,480 ..534,673 596,058 10,064 1.92~ 52,139 29,942 19,559 12,808 43,702 (17,683) 13,760 45.96' 8,521 269,626 32,400 18,987 ' 28,500 58,500 (241,126) -89.43' 30,000 54,472 50,000 2,048 40,400., 40,400 (14,072) -25.83' 30,660 245,095 1,959 29,747 417 (213,293) -87.02 r "'GET REVENUE Sales Cost of Goods GROSS PROFIT EXPENSES Staffing Supplies/Materials Services & Charges Depreciation Capital Outlay TOTAL EXPENSES TOTAL OPERATING INCOME (LOSS) Other Sources Other Uses SERVICE INDICATORS: Gross Profit as a % of Sales Oper. Income as a % of Sales 26.72% 27.30% 26.64% 28.76% .27.28% 27.28% 2.37% 1.47% 0.93% 0.87% 2;06% -0.83% CASH FLOW IMPACT: Part time: Sales Clerks 231,211 322,407 389,308 289,308 389,308 389,308 52,139 29,942 19,559 12,808 43,702 (17,683) 39,057 36,959 36,200 25,111 30,700 30,700 0 0 0 0 0 0 $322,407 $389,308 $445,067 $427,227 $463,709 $402,325 1.00 1.00 1,00 1,00 1~ 1.00 2.00 1.00 1.00 1.00 } 1.00 1,00 1.00 1.00 1. 0 1,00 .10 ,10 .10 .10 . 0 ,10 15.00 10.00 10,00 10.00 12,00 12.00 I Beginning Cash 3alance Net Operating Income/Loss Depreciation Other Cash Flow Impacts Ending Cash Balance STAFFING: Full time: Operations Manager Assistant Manager Full Time Clerk Sr. Acctg. Clerk ?!i FUND: #640 FUND: Liquor DEPT #49750 BUDGET Actual Actual Budget YTD Sept P reposed Adopted ITEM 2004 2005 2006 2006 2007 2007 SALES 37811 Liquor 664,892 622,192 637,000 456,397 666,000 666,000 37812 Wine 608,009 608,173 621,500 422,004 639,000 639,000 37813 Beer 852,596 737,295 766,000 550,724 763,000 763,000 37814 Miscellaneous 69,890 63,757 68,500 49,697 52,000 52,000 TOTAL SALES 2,195,387 2,031,416 2,093,000 1,478,822 2,120,000 2,120,000 COST OF GOODS SOLD 251 Liquor 504,312 477 ,054 489,275 337,763 506,275 506,275 252 Wine 414,388 405,109 429,196 281,648 425,000 425,000 253 Beer 642,195 551,760 570,411 400,908 577,500 577,500 254 Miscellaneous 47,864 42,942 46,481 33,214 32,850 32,850 TOTAL COST OF GOODS SOLD 1,608,759 1,476,865 1,535,363 1,053,534 1,541,625 1,541,625 GROSS PROFIT 586,629 554,551 557,637 425,288 578,375 .. 578,375 26 FUND: #640 FUND: Liquor ~ DEPH'9750 BUDGET Actual Actual Budget YTD Sept Proposed Adopted ITEM 2004 2005 2006 2006 2007 2007 EXPENSES 0.73279 0.72701 0.73357 0.71241 0.72718 0.72718 PERSONAL SERVICES 101 Regular Salaries 155,103 136,737 145,666 103,829 132,711 172,731 102 0.1. Salaries 0 0 0 0 0 0 103 Part Time Salaries 57,354 59,387 62,000 39,902 73,000 53,000 121 PERA City Share 11 ,1 08 10,714 12,370 9,048 8,294 10,796 122 FICA City She.re 16,202 14,849 15,772 11 ,522 15,713 17,241 131 Ins. City Share 16,100 15,676 22,000 12,836 14,465 20,800 141 Unemployment Comp 91 0 56 0 0 151 Workers Comp 3,584 0 0 0 0 Total 255,867 241,038 257,808 177,193 244,183 274,568 SUPPLIES 200 Office Supplies 757 844 700 1,055 800... 800 201 Postage 0 0 0 0 0 0 217 Uniforms Purchased 819 418 400 326 '.400< 400 221 Maint-Equipment 3,025 3.657 3,000 2.925 3,000 3,000 223 Maint-Buildings 479 404 0 0 0 0 245 General Supplies 4,931 4,495 3.500 3,100 3,500 3,500 Total 10,011 9,818 7,600 7,406 7,700 7,700 OTHER SERVICES 301 Audit & Accounting 2,800 4,286 5,000 4,000 4,QOO 4,000 302 Consulting Fees 4,667 0 0 1,450 0 0 304 Legal 0 0 0 0 0 0 321 Communication 2,201 2,723 2,800 1,732 2;700 2.700 331 Travel, Conf,Sch 1,026 877 1,000 668 1,000 . 1.000 342 Advertising & Promo 12,152 11,717 16,000 12,006 . 14,000 14,000 351 Print/Publish 82 305 100 352 350 350 360 Insurance-Total 14,454 14,203 16,000 11 ,233 15,500. 15,500 380 Utilities-Gas/Elec 18,228 20,530 20,000 14,330 22,000 22,000 400 Contractual 1,736 1,645 1,750 1,369 .1,700 1,700 410 Rent 134,213 149.689 142,000 128,505 160,000 160,000 420 Depreciation 39,057 36,959 36,200 25,111 30,700 30,700 432 Uncollectible Checks 1,664 1,115 1,750 0 850 850 433 Dues & Subscriptions 1,530 1.535 1,530 1,575 1,600 1,600 437 Taxes/Licenses 1,060 1,130 540 500 540 540 440 Mise Services 62 402 0 1,213 0 0 445 Credit Card Fees 29,304 26,637 24,000 23,838 27,850 27,850 Total 264,326 273,754 268,670 227,881 282,790 282,790 CAPITAL OUTLAY 560 Furniture & Fixtures 4,286 0 4,000 0 0 31,000 Total 4,286 0 4,000 0 0 31,000 TOTAL EXPENSES 534,489 524,609 538,078 412,480 534,673 596,058 TOTAL OPERATING INCOME/(LOSS) 52,139 29,942 19,559 12,808 43,702 (17,683) Other Sources 8,521 269,626 32,400 18,987 28,500 58,500 Other Uses 30,000 54,472 50,000 2,048 40,400 40,400 NET INCOME/(LOSS) 30,660 245,095 1,959 29,747 31,802 417 x 'r v\ ~LLa)-eS 0JS'Y-S EC:JTI'rvu+-7tb S t\! J2i~lthC ~ Or ~ (2 C(jO { ?7 FUND: #642 ~D' Liqooc - Watertocd (Ea"1 ~ DEPT #49750 BUDGET Actual Actual Budget YTD Sept P Adopted ITEM 2004 2005 2006 2006 2007 SALES 37811 Liquor 248,580 248,495 256,000 193,257 280,000 280,000 37812 Wine 215,100 229,120 234,500 166,281 243,000 243,000 37813 Beer 361,315 343,478 360,000 268,539 369,000 369,000 37814 Miscellaneous 32,521 31,104 32,500 23,832 23,000 23,000 TOTAL SALES 857,516 852,197 883,000 651,909 915,000 915,000 COST OF GOODS SOLD 251 Liquor 187,187 193,852 192,775 141 ,728 207,775 207,775 252 Wine 144,192 146,073 157,196 106,160 159,500 159,500 253 Beer 274,912 256,995 273,911 193,303 281,500 281 ,500 254 Miscellaneous 22,495 20,952 22,481 15,273 14,850 14,850 TOTAL COST OF GOODS SOLD 628,785 617,872 646,363 456,465 663,625 663,625 GROSS PROFIT 228,730 234,325 236,637 195,444 251,375 251,375 EXPENSES 0.73326 0.72503 0.73201 0.70020 0.72527 0.72527 PERSONAL SERVICES 101 Regular Salaries 69,001 68,352 74,051 53,148 .;.........;53~144. 86,331 102 O.T. Salaries 0 0 ................}\..P... 0 103 Part Time Salaries 23,718 21,386 25,000 16,626 . "43,000' 23,000 121 PERA City Share 5,081 4,912 5,943 4,417 ....?3!322 5,396 122 FICA City Share 7,175 6,818 7,577 5,591 .7,331 8,336 131 Ins. City Share 7,208 8,507 11,000 6,672 '. '4;\397'. 10,400 141 Unemployment Comp 0 0 0 12 ',,>0 0 151 Workers Comp 1,699 1,792 0 0 '0 0 Total 113,883 111,767 123,571 86,466 .... . 111,493 133,463 SUPPLIES 200 Office Supplies 251 338 250 346 300 300 201 Postage 0 0 0 0 0 217 Uniform Purchases 410 209 200 163 200 200 221 Maint-Equipment 1,625 2,257 1,500 1,500 1,500 223 Maint-Buildings 325 404 0 0 0 245 General Supplies 1,973 2,048 1,500 1,506 1,500 1,500 Total 4,583 5,256 3,450 2,015 3,500 3,500 OTHER SERVICES 301 Audit & Accounting 1 ,400 2,143 2,500 2,000 2,000 2,000 302 Consulting Fees 2,333 0 0 725 0 0 304 Legal 0 0 0 0 0 0 321 Commun ication 1,111 1 ,429 1 ,400 867 1,350 1,350 331 Travel, Conf,Sch 513 439 500 334 500 50G 342 Advertising & Promo 6,538 5,859 8,000 6,003 7,000 7,000 351 Print/Publish 41 152 50 176 175 175 360 !nsurance-Total 7,227 7,101 8,000 5,616 8,000 8,000 380 Utilities-Gas/Elec 7,356 6,805 8,000 6,213 8,000 8,000 400 Contractual 551 510 550 596 550 550 410 Rent 64,010 67,426 67,000 56,215 70,000 70,000 420 Depreciation 5,152 3,386 3,200 2,258 2,700 2,700 432 Uncollectible Checks 1,139 417 1,000 0 425 425 433 Dues & Subscriptions 765 745 765 812 800 800 437 Taxes/Licenses 520 413 270 250 270 270 440 Mise Services 28 117 0 480 0 0 445 Credit Card Fees 9,958 9,811 9,000 10,074 10,600 10.600 Total 108,642 106,753 110,235 92,626 112.370 112,370 28 FUND: #642 SUBFUND: liquor - Waterford (East) DEPT #49750 BUDGET Actual Actual Budget YTD Sept Proposed Adopted ITEM 2004 2005 2006 2006 2007 2007 CAPITAL OUTLAY 560 Furniture & Fixtures 0 4,000 0 30,000 Total 0 0 4,000 0 0 30,000 TOTAL EXPENSES 227,107 223,776 241 ,256 181,108 227,363 279,333 TOTAL OPERATING INC/(LOSS) 1,623 10,549 (4,619) 14,337 24,012 (27,958) NET lNCOME/(LOSS) 1,623 10,549 (4,619) 14.337 24,012 (27,958) OTHER SOURCES Transfers In (liquor Fund Rsv) 229,447 25,000 0 3,000 33,000 Mise Revenue 113 4,962 1,000 4,970 5,500 5,500 Total 113 234,409 26,000 4,970 8,500 38,500 OTHER USES Transfers Out 15,000 25,000 20,000 0 : 10,OOO"~ 10,000 Misc Expense 2,374 1.019' ... ':>200 200 Total 15,000 27,374 20,000 1,019 10,200 10,200 NET INCOME/(LOSS) (13,264) 217,584 1,381 18,28 29 ----------... FUND: #641 ~ Liq"oc- Sho<ewood PI~~ DEPT #49750 ',- . ~ BUDGET Actual Actual Budget YTD Sept Pr Adopted ITEM' 2004 2005 2006 2006 2007 SALES 37811 liquor 416,312 373,697 381,000 263,140 386,000 386,000 37812 Wine 392,909 379,052 387,000 255,723 396,000 396,000 37813 Beer 491,281 393,816 406,000 282,185 394,000 394,000 37814 Miscellaneous 37,370 32,653 36,000 25,865 29,000 29,000 TOTAL SALES 1,337,872 1,179,219 1,210,000 826,913 1,205,000 1,205,000 COST OF GOODS SOLD 251 Liquor 317,125 283,202 296,500 196,035 298,500 298,500 252 Wine 270,196 259,036 272,000 175,488 265,500 265,500 253 Beer 367,283 294,765 296,500 207,605 296,000 296,000 254 Miscellaneous 25,369 21,990 24,000 17,941 18,000 18,000 TOTAL COST OF GOODS SOLD 979,973 858,993 889,000 597,069 878,000 878,000 GROSS PROFIT 357,898 320,226 321,000 229,844 327,000 327,000 EXPENSES 0.73249 0,72844 0.73471 0.72205 0.72863 0.72863 PERSONAL SERVICES 101 Regular Salaries 86,102 68,385 71,615 50,680 86,400 102 O.T. Salaries 0 0 0 0 103 Part Time Salaries 33,635 38,001 37,000 23,276 30,000 121 PERA City Share 6,026 5,802 6,427 4,632 5,400 122 FICA City Share 9,027 8,031 8,195 5,931 8,905 131 Ins. City Share 8,892 7,169 11 ,000 6,164 10,400 141 Unemployment Comp 0 91 0 44 0 151 Workers Comp 1,672 1,792 0 0 0 0 Total 145,355 129,271 134,237 90,727 132,690 141,105 SUPPLIES 200 Office Supplies 506 506 450 709 500 500 201 postage 0 0 0 217 Uniform Purchases 410 209 200 163 200 200 221 Maint-Equipment 1 ,400 1 ,400 1,500 2,925 1,500 1,500 223 Maint-Buildings 155 0 0 0 0 0 245 General Supplies 2,958 2,447 2,000 1,594 2,000 2,000 Total 5,428 4,562 4,150 5,391 4,200 4,200 OTHER SERVICES 301 Audit & Accounting 1 ,400 2,143 2,500 2,000 2,000 2,000 302 Consulting Fees 2,333 0 0 725 0 0 304 Legal 0 0 0 0 0 321 Communication 1,091 1,294 1 ,400 865 1,350 1,350 331 Travel, Conf,Sch 513 439 500 334 500 500 342 Advertising & Promo 5,614 5,859 8,000 6,003 7,000 7,000 351 PrintJP ublish 41 152 50 176 175 175 360 Insurance-Total 7,227 7,101 8,000 5,616 7,500 7,500 380 Utilities-Gas/Elec 10,872 . 13,726 12,000 8,117 14,000 14,000 400 Contractual 1,185 1.135 1,200 772 1,150 ' 1,150 410 Rent 70,203 82,263 75,000 72,290 90,000 90,000 420 Depreciation 33,905 33,573 33,000 22,853 28,000 28,000 432 Uncollectible Checks 525 698 750 0 425 425 433 Dues & Subscriptions 765 790 765 762 800 800 437 Taxes/Licenses 540 717 270 250 270 270 440 Mise Services 33 285 0 733 0 0 445 Credit Card Fees 19,346 16,826 15,000 13.764 1 7,250 17.250 Total 155,684 167,088 158,435 135,336 170,420 170,420 30 FUND: #641 SUBFUND: Liquor - Shorewood Plaza (West) DEPT #49750 BUDGET Actual Actual Budget YTO Sept Proposed Adopted ITEM 2004 2005 2006 2006 2007 2007 CAPITAL OUTLAY 520 Buildings & Structures 0 0 0 0 560 Furniture & Fixtures 4,286 0 0 0 0 1,000 Total 4,286 0 0 0 0 1,000 TOT AL EXPENSES 310,753 300,920 296,822 231.454 307,310 316,725 TOTAL OPERATING INC/(LOSS) 47,145 19,305 24,178 (1,610) 19,690 10,275 NET INCOME/(LOSS) 47,145 19,305 24,178 (1,610) 19,690 10,275 OTHER SOURCES Transfers In 0 23,447 0 0 3,000 3,000 Mise Revenue 5,631 11,770 6,400 14,016 17,000 17,000 Total 5,631 35,217 6,400 14,016 20,000 20,000 OTHER USES Transfers Out 15,000 25,000 30,000 0 30,000 30,000 Mise Expense 2,098 0 1,029 200 200 Total 15,000 27,098 30,000 1,029 30,200 30,200 NET INCOME/(LOSS) 37,776 27,424 578 11,378 9,490 75 AFTER TRANSFERS 31 32 l:I= :::::l .... 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MINNESOTA 55331-8927. (952) 474-3236 FAX (952) 474-0128. www.cLshorewood.mn.us . cityhall@ci.shorewood.mn.us MEMORANDUM CITY OF SHOREWOOD TO: City CQ\.illcil FROM: Liquor Committee DATE: August 19,2004 SUBJECT: .Major Findings from Liquor Marketing Study In May, the City Council authorized the services of Dakota Worldwide, Inc., to review the operations of Shorewood Liquors and assess the implications of a new store by the intersection of CR 19, Country Club Road, and Smithtown Road. The firm studied many scenarios, and the Liquor Committee focused on the ones which were most likely and over which the City could exercise some control. The executive summary and sUmmary tables are attached to this memorandum. The market area was defined as Highway 101 to the east, Chanhassen to Saint Bonifacius to the south, Mound to the west, and Spring Park, Navarre, and Deephaven on the north. Within this area, MOM Liquors controls the largest market share - 28.31 percent - with three stores. Shorewood Liquors, with two stores, has the second largest market share - 15.37 percent. The study evaluated three locations for Shorewood - the northwest (Legion) quadrant of the intersection, the southeast (Oasis Market) quadrant of the intersection, and the single-family residential property east of Truffle Hill Chocolate - as well as one location in Tonka Bay, the Tonka Village Shopping Center. They were evaluated as operating as single sites, as well as two sites operating simultaneously - one in Shorewood, and the one in Tonka Bay. Without competition in Tonka Bay, opening a third store would generate additional sales to the Shorewood system of $310,000 to $450,000. These increases in overall sales are not very profitable, however, as expenses for operating a third store would reduce profits from $105,000 projected for 2004 to the $20,000 _ $65,000 range. It would appear that about $775,000 in sales is necessary for any operation _ in Shorewood or Tonka Bay - to "break even". Dakota Worldwide's projections indicate that either ofthe locations, either public off-sale in Shorewood or private off-sale in Tonka Bay, would be fortunate to reach that level of sales. If a successful private operation were to open in Tonka Bay and Shorewood were to open a third store, the profits of the Shorewood system would at or below $O-that is to say, Shorewood Liquor operations would lose money. t7'U V:J..J ??l~':TE.!J 0": ?':.CYCL:.C P.;"?'::? 39 Liquor Committee Report August 23,2004, City Council Meeting Page 2 In short, competition in Tonka Bay should not affect the viability of Shorewood Liquors unless Shorewood also built a store to the intersection. That competition would reduce the net profit of Shorewood's liquor operations. The best scenario for aU would seem that no liquor store be established in the CR 19 intersection area. As it is, staff understands that an application cUlTently is being made for a private off-sale liquor establishment in the Tonka Village Shopping Center. RECOMMENDATION: The Liquor Committee recommends that the City Council take no action at this time, and revisit the concept of opening a third store at this time next year in preparation for the 2002 budget deliberations. 40 Shorewood, Minnesota . Prepared for: City of Shorewood By: Dakota Worldwide Corporation. June 2004 COSOOl 4801 31st Street, Suite 105. Minneapolis, MN 55437 Telephone 952.835.4505 0 F~'~. 952.835A~6t Internee: "''1-';;/-'.'7. dif:o [2.0;;'-,'4 't"Jrn E-rr~~ i1: da~co ::;;:.'.-::.;~.da't:.c t2.";;.-;;I. coe, Pagel Shorewood, Minllesota Market Study (COSOOl -June 2004) . Executive Summary The pilliPose of this market analysis study is to determine the feasibility of opening a third Shorewood Liquor store in the city that would replace the Tonka Bay store managed by Shorey/ood in the Tonka Bay Center. Three locations of 4,000 square feet (2,500 sales area square feet) are tested at the intersection of County Road 19 and Smithtown Road. Also tested in conjunction with the three sites is the maturation of image for MGM at Map Key 2, The Barrel at Map Key 11 and Y Liquor at Map Key 16, the downsizing or closing of Shore wood Liquor # 1, a possible new store in a remodeled Tonka Bay shopping center, a closed Bottle Basket at Map Key 3 and the feasibility of further expanding Shorewood #2 as a single super store. This trade area includes all of the cities of Shorewood, Woodland, Deephaven, Greenwood, Tonka Bay, Excelsior, Spring Park, Minnetonka Beach, the Navarre portion of Orono, and parts of Victoria, Chanhassen and Minnetonka. Population growth for the trade area was 3.7% since the 2000 Census and future growth will be approximately 4.3%, primarily due to developments in Chanhassen and Victoria. MGM Liquor Warehouse is the market share leader with three stores and a 28.31 % market share, closely followed by Shorewood with two stores and a 15.37% market share. Haskell's with a 14.47% market share, Cheers with an 8.51% market share, Tonka bay Bottle with a 7.15% market share, Byerly's at 6.39% market share, and Excelsior Vintage with a 4.06% market share. The remaining six stores have a combined market share of6.17%. Float is 9.5.7% and consists of the sales leaving to stores outside the trade area, sales in off-sale departments of local bars and 3.2 beer sales in grocery stores. Shorewood #2 at Map Key 8 is an excellent location, and the site for Shorewood #1 is a good convenience quick stop location adjacent to a Holiday Station store. The three sites tested at Smith town Road and County Road 19 all can achieve different degrees of success dependent on the ingress/egress available after the reconstruction of the intersection. Site 2001 with a left turn to and from a Frontag~ Road and Site 3000 has the best chance for success with sales exceeding $900,000 a year. Without the ability to make a left turn from County Road 19 sales projections at the Oasis location can drop by approximately $138,000 per year. The determining factor as to the success of a new site is sister store effect. The close proximity of Shore wood # 2 to the sites limits sales gains to less than $550,000 or $275/square foot at best A competitive store in the 'Tonka Bay Shopping Center will have a lesser affect on the existing stores because of no sister store effect, especially if they maintain a merchandising and pricing advantage over a new competitor in a center with less than a strong performance in recent years. The closing of Shorewood # 1 will do little to add to the overall sales structure for the Shorewood municipal operation since the sales will be picked up fairly evenly by all the competitors in the first 1 to 2 miles. Dakota Worldwide Corp. 480\ 8\st Street, Suite 105 . Minneapolis, M:N 55437 Telephone 800.'1.75.4505 . Fax 952.835.446\ 42 Shorewood, Minnesota Market Study (CaSaOI -Julie 2004) Page 2 The projections for the various scenarios are found in the following Decision Matrix. The comparison of these scenarios, and especially the sales per square foot, with a break even profit and los~ analysis will best determine the best course of action for the city of Shorewood. Tactic?lly, the best scenario would seem to be the downsi~ing and remodel of Shorewood # 1 and continued emphasis on building up the inventory mix and strengthening the merchandising at Shorewood # 2. Scenario # 5 was included as a test for one Shorewood Liquor Superstore adjacent to Cub to show the strength of the overa1l10cation. Ai:, a stand alone operation its sales are only slightly higher than both stores today. This probably does not justify closing Shorewood # 1. 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Iri -" ~ ,"001 N .... 5 co.. o '0 '.Z -.:t lrJ '$. ~t C"i ~ gijv; -"".... c-4 ... ~ o 0 o .g g '8 ~ en g..0; .:i '1:l o o '" OJ ~ Ui .. -0 '" ;2 :c c ::l o U .- o o '" o o o ,.., <.n .-- Iw %~2 I:- M "'<l' tr) tr) ~ '<l' 0\ I(") ..; I(") ""' "" .~ c o c U ~ ~ ~ 't;l .! '~ ~ 't;l 'i: o t ~~ o:l .... Q .:.:: o:l ~ ,..... o ..- - v5 N ~ ,..... '<t t"'l co 00 "<l' ~ '" ~ IS Page 5 S/lorewoOd, Mlttnesota Market Study (COSOOl -JllIte 2004) Market Changes: Market Change 1: . MGM at Map Key 2, The Barrel at Map Key 11 and Y Liquor at Map Key 16 images matures. Market Change 2: MGM at Map Key 2, The Barrel at'Map Key 11 and YLiquor at Map Key 16 images matures. A new liquor store opens at Map Key 100. Scenarios: Scenario 1: Scenario lA: Scenario 2: Scenario 3: . Scenario 3A: Scenario 3B: Scenario 3C: Scenario 3D: Market changes in effect. Shorewood #1 remodels and downsizes to 2,800 total square feet (1,700 sales area square feet) Market changes in effect. Shorewood #1 remodels and downsizes to 2,800 total square feet (1,700 sales area square feet). A new liquor store opens at Map Key 100. Market changes in effect. A new 4,000 total square foot (2,500 sales area square feet) Shorewood Liquor opens at Site 1000 at the intersection of Smithtown Road and County Road 19. This proj ection assumes no left turn accessibility. Market changes in effect. A new 4,000 total square feet (2,500 sales area square feet) Shorewood Liquor opens at Site 2000 at the intersection of Smith town Road and County Road 19. This projection assumes left turn accessibility with a Frontage Road on County Road 19. A new liquor store opens at Map Key 100. Market changes in effect. A new 4,000 total square foot (2,500 sales area square foot) Shorewood Liquor opens at Site 2000 at the intersection of Smithtown Road and County Road 19. This projection assumes left turn accessibility with a Frontage Road on County Road 19. Shorewood #1 remodels and downsizes to 2,800 total square feet (1,700 sales area square feet) . Scenario 3B with Bottle Basket at Map Key 3 closes. Market changes in effect. A new 4,000 total square foot (2,500 sales area square feet) Shorewood Liquor opens at Site 2000 at the intersection of Smithtown Road and County Road 19. This proj ection assumes left turn accessibility with a Frontage Road on County Road 19. Shorewood Liquor #1 at Map Key 9 is closed. Dakota Worldwide Corp. 48Ql 81" Street., Suite 105 . MinneapoEs,1.YfN 55437 Te',ephone 800.475.4505 . Fa;" 952.835.446\ 46 Page 5 SllOrewood, Minnesota Market Study (COSOOl -JulIe 2004) Scenario 3E: Scenar\o 3F: Scenario 3G: Scenario 3H: Scenario 4: Scenario 4A: Scenario 4B: Scenario 4C: Scenario 4D: Scenario 5: Scenario 3D with Bottle Basket at Map Key 3 closed. Market changes in effect. A new 4,000 total square foot (2,000 sales area square feet) Shorewood Liquor opens at Site 2000 at the intersection of Smithtown Road and County Road 19. This projection assumes left turn accessibility with a Frontage Ro ad on County Road 19. Market changes in effect. A new 4,500 total square foot (3,000 sales area square feet) Shorewood Liquor opens at Site 2000 at the intersection of 'Smithtown Road and County Road 19. This projection assumes left turn accessibility with a Frontage Road on County Road 19. Market changes in effect. A new 4,000 total square foot (2,500 sales. area square feet) Shorewood Liquor opens at Site 2001 at the intersection of Smithtown Road and County Road 19. Tills proj ection assumes no left turn accessibility at this site. Market Changes in effect. A new 4,000 total square feet (2,500 sales area square feet) Shorewood Liquor opens at Site 3000 at the intersection of Smithtown Road and County Road 19, east of the Tonka Bay Shopping Center. . . Scenario 4 with a new liquor store opens at Map Key 100. Market changes in effect. Anew 4,000 square foot (2,500 sales area square feet) Shorewood Liquor opens at Site 3000 at the intersection of Smithtown Road and County Road 19, east of the TonkaBay Shopping Center. Shorewood #1 remodels and downsizes to 2,800 total square feet (1,700 sales area square feet). Scenario 4B with Bottle Basket at Map Key 3 closed. 1vlarket changes in effect. A new 4,000 total square foot (2,500 sales area square feet) Shorewood Liquor opens at Site 3000 at the intersection of SmithtownRoad and County Road 19, east of the in Tonka Bay Shopping Center. Shorewood Liquor #1 and Bottle Basket at Map Key 3 are closed. Market changes in effect. Test Shorewood # 2 expanded to a 9,500 total square feet (5,000 sales area sq,uare feet) Superstore at Map Key 8.2 and Shorewood Liquor #1 is closed. Dakota Worldwi.de Corp. 480181" Street, Su.ite 105 . MinneapQlis, l'vrN 55437 'Telephone 800.475.4505 . Fax 952.835.446\ A7 48 Waterford Center LLP P.O. Box 1185 St. Cloud:MN 56302 320-252-5885 Fax 320-252-5889 ...--'-'.--" .-.... .... l~ r "". July 1 7, 2002 ~ ' "M . ;,. \: '. .' i,' .} ,'. , ~ . ~ . , 'J \ r~, 1.\: ui L \t., 1'i \ \j ',.:; L-- \ ~--'----- City of Shorewood Bonnie Burton 5755 Country Club Rd Shorewood:MN 55331-8927 RE: Waterford Shopping Center Shorewood :MN Dear Ms. Burton: . ......-:.~>~\y , "'\ ; ;\ . :.; ; :!' , ,\ , , I 0\ \ J 1 Q ". ',) \ u LvV~ Enclosed for your :file is the signed lease for the MlU1icipal Liquor Store in the Waterford Shopping Center, along with Rider #1 . Thank you for your help in putting this lease together. I am sure we will continue to have an excellent business relationship. Charles P. Dukowitz Property Manager 4~ -' LEASE TillS LEASE is made as of the day of , between Waterford Center, LLP, a Minnesota limited tiabUity partnership (hereinafter designated "Landlord") and City of Shorewood, a Minnesota municipal corporation (herinafter designated "Tenant"). wrrNESSETH: FOR.AND IN CONSIDERATION of the sum of One DoHar ($1.00) in hand paid by each ofthe parties to the other, and other good and valuable consideration, receipt and. sufficiency of which is hereby acknowledged, the parties agree as follows: DATA SHEET 1. PREMISES: The area crosshatched on the Floor Plan attached as Exhibit "A" containing approximately 4500 square feet. 2. TERM: The initial term of the Lease (the "initial Term"). shall consist of a period of approximately five (5) years, commencing on April 1,2002 and terminating on the last day of the sixtieth (60tl1) full calendar month thereafter (hereinafter referred to as the "Termination Date"). 3. PERMITTED USE: The Premises shaH be used by Tenant solely for the retail "off' or packaged sale of intoxicating beverages and such related goods as are incidental thereto; provided, in no event shall either the sale of cigarettes or the sale of pop constitute more than five percent (5%) of Tenant's annual gross revenue in the Premises. 4. MINiMUM RENT: During the Initial Term, Tenant shall pay Minimum Rent as follows: For the period of the Commencement Date through the expiration of the sixtieth (60th) full calendar month thereafter, Minimum Rent shall be payable at an annual rate equal to $55,0000, and shall be due and payable, in advance, in monthly installments equal to $4583.33 (as prorated for any partial calendar month in which the Commencement Date occurs). 5. PERCENT AGE RENT: In addition to the Minimum rent stated above the rent win also be based on 12% of the tenant's gross sales above $750,000 per year not to exceed $1,000,000 gross sales per year. Adjustments to the rent will be made on the first of April of each year, based on sales from the previous calendar year. 6. SECURITY DEPOSIT: None 7. TRADE NAME: Tenant shall operate its business in the Premises under the trade name "Shorewood Liquor Store" or some derivation thereof. Each reference in this Lease to any of the data contained in this Data Sheet shall be Construed to incorporate the data stated under that title. ARTICLE 1 DEFENlTIONS. As used herein and in addition to the terms defined Elsewhere in this Lease, the following terms, unless the context specifically requires Otherwise, shall have the following meanings: "Building" refers, collectively, to all buildings and other improvements and fixtures located upon the Shopping Center. 50 ARTICLE 1 DEFENITlONS. As used herein and in addition to the terms defmed Elsewhere in this Lease, the following terms, unless the context specifically requires Otherwise, shall have the following meanings: "Building" refers, collectively, to all buildings and other improvements and fixtures located upon the Shopping Center. '13usiness Day" means all days other than Saturdays, Sundays, and legal holidays. "Common Area" means the entire areas designated for common use or benefit within the outer property limits of the Shopping Center Tract, and the I-N AC equipment and systems servicing those portions of the Shopping Center other than the premises that shall serve as an anchor for the Shopping Center which is presently designated and approved for use as a convenience store/gas station, including but not by way oflimitation, parking lots, landscaped and vacant areas, passages for trucks and automobiles, areaways roads, walks, curbs, corridors, malls, roof, lanes and arcades together with public facilities such as washrooms, comfort rooms, lounges, dri.'1ldng fountains, toilets, public stairs, ramps, elevators, escalators, shelters, porches, bus stations and loading docks, with facilities appurtenant to each. The Common Area shall not include commercial areas intended for renting as the same shall exist from time to time, or roads within the outer property limits, while maintained by public authority. Said Common Area, and the purposes to which it is put, may be expanded, contracted or changed by Landlord from time to time as deemed desirable by Landlord. Such changes shall not interfere with the Tenant's use of access to, visibility of business in the Premises. "Common Area Costs" shall mean the total costs incurred in operating, maintaining, equipped, inspecting, insuring, lighting, protecting, replacing and repairing the Common Area and other expenses from time to time reasonably allocated to the Shopping Center, including, without limitation, the following: costs incurred in providing electrical energy to, and in heating, ventilating and cooling, the Common Area (including depreciation on any such equipment); gardening and landscaping (including planting, replanting, and replacing flowers and shrubs); reasonable costs incurred in an appeal or protest of the amount of Taxes, to the extent that the Taxes being appealed are payable during the term hereof; cleaning; fire protection; license fees; painting; operation of loudspeakers and other equipment supplying music; operation of public toilets; sanitary control' water charges; sewer service charges; maintenance, repair and cleaning of exterior glass and facades of the Shopping Center; removal of ice, snow, trash, rubbish, debris, garbage and other refuse; depreciation of machinery and equipment used in maintenance and in security (or the cost of rental services therefore); personnel to provide, manage and superVise any . services (including their office space, furnishings, and equipment; wages, unemployment and social security taxes; uniforms; fidelity bond; workers' compensation and other employment- related insurance; and other related costs), but only a reasonable allocation of such personnel costs to the sprinkler system plus an amount equal to ten percent (10%) of all ofthe foregoing costs to cover the administrative expenses incurred by Landlord in connection with the operation of the Common Area, provided, the following shall be excluded from Common Area Costs: (i) costs of altering leased premises; (ii) costs of capital improvements or costs of curing construction defects; (iii) depreciation not otherwise specifically recoverable hereunder; (iv) interest and principal payments on mortgages and other financing costs; (v) real estate brokers' leasing commissions or compensation; (vi) any costs or expenditures for which Landlord is reimbursed, whether by insurance proceeds or otherwise; and (vii) costs of any license fees incurred in connection with the development or initial construction of the Shopping Center; (viii) fees or penalties incurred as a result of Landlord's failure to pay costs when due; (ix) costs of repairs of damage caused by Landlord's negligence or by casualty; provided, the costs of such repairs shaH be included as Common Area Costs to the extent that the damages arise from an occurrence that was insured under the property insurance policy required to be maintained by Landlord upon the Shopping Center and to the extent that such damages are within the deductible limit of such policy; and (x) costs of repairs of damage caused by Landlord's intentional acts. Notwithstanding the foregoing, depreciation of any capital improvements made after the date of this Lease which are intended to reduce Common Area Costs, which are made to H:Y AC equipment or which are required under :2 51 any governmental laws, regulations, or ordinances which were not applicable to the Shopping Center Tract at the time it was constructed, shall be included in Common Area Costs. The useful life of any such capital improvements shall be reasonably determined by Landlord and interest on the undepreciated cost of such improvements (at the prevailing rate available to Landlord on the date the costs of such improvement was incurred), shall also be included in Corrunon Area Costs. "Estimated Monthly Operating Charge" shall have the meaning set forth in Article 9(b). "Fractional Lease Year" shall mean any portion ofthe term ofthis Lease, whether at the beginning or end of the term, that does not constitute a full Lease Year. "Gross Sales" shall mean the entire amount of the actual sale price, whether wholly or partly for cash or on credit, of all merchandise and services sold and all other receipts by sale, barter, or otherwise of all business conducted in or from the Premises, including, without limiting the foregoing, all deposits not refunded to purchasers, all orders taken in or from the Premises although said orders may be received by telephone or mail, or filled elsewhere, or procured from the Premises by house to house or other canvassing, all sales by vending machines on the Premises, and sales by any sublessee, licensee or concessionaire in or from. the Premises, all without credit to Tenant for cash discounts or uncollected or uncollectible credit accounts. There shall be excluded from "Gross Sales" any sums collected and paid out for any sales or exercise tax based upon all sales in this definition of Gross Sales as required by law, whether now or hereafter in force, to be paid by Tenant or collected from its customers, to the extent that such taxes have been included in the Gross Sales price, sales to employees and bad debts up to 2% of Gross Sales. The term "Gross Sales" shall not include the mere exchange or transfer of merchandise between the stores of Tenant, if any, where such exchanges or transfers of merchandise are made solely for the convenient operation of the business of Tenant and not for the purpose of consummating a sale which otherwise would be made at, in, from or upon the Premises, nor shall said term include the amount of returns to vendors or manufacturers, nor the amount of any cash or credit refund made upon any sale where the merchandise sold, or some part thereof, is thereafter returned by the purchaser to, and accepted by, Tenant, nor sales of fixtures. Each sale upon installation or credit shall be treated as a sale of full price in the month in which such sale shall be made irrespective of the time when Tenant shall receive complete or partial payments from its customer. "Landlord's Work" shall have the meaning set forth on Exhibit B attached hereto. "Lease Year" shall mean a period of twelve full consecutive calendar months commencing the first day of January. Lease Years shall run consecutively, each commencing on January 1st. "Mall Building" is that building within the Shopping Center that is identified as such on the site plan attached hereto as part of Exhibit "A". "Minimum Rent" shall have the meaning set forth in Article 4(a). "Notice of Substantial Completion" shall have the meaning set forth in Article Sea). "Out Parcel Building" is any building within the Shopping Center Tract that is detached from the Mall Building. "Out Parcel Tenants" are tenants leasing, or other parties in occupancy of, premises within any Out Parcel Building. "Premises" shall have the meaning set forth in the Data Sheet, as the same may be adjusted in accordance with Article 2. "Projected Delivery Date" shall be the date so designated on the Data Sheet. 52 "Rent" shall collectively refer to all Minimum Rent, Percentage Rent, Taxes, and Common Area Costs, that Tenant is obligated to pay hereunder. "Shopping Center" shalt be defined as that certain real property that is described or depicted on Exhibit "A" attached hereto. "Shopping Center Tract" shall be defined as that certain property that is described or depicted on Exhibit "A" attached hereto. "Taxes" shall mean the aggregate of the real estate taxes, assessments and other governmental charges, general and special (including, without limitation, assessments for public improvements or benefits and interest on unpaid installments thereof) which may be levied or assessed against, or become liens upon the Shopping Center Tract, or which arise out of the use, occupancy or possession thereof, provided, the term "Taxes" shall not include inheritance, estate, succession, transfer, gift, franchise, corporation, income or profit taxes imposed upon Landlord., nor interest or penalties imposed upon Landlord for Landlord's delinquent payments of Taxes and, provided further, the term ''Taxes'' shall not include real estate taxes or assessments separately levied or assessed against land andlor buildings owned by Anchor Stores which may be located in the Shopping Center Tract. If at any time during the term of this Lease the methods of a taxation shall be altered so that in lieu of taxes now levied on real estate there shall be levied there shaH be a tax or license fee on the rents received by Landlord, such alternative taxes, shaH be included in the. computation of Taxes: In the event the Taxes on the Shopping Center or Shopping Center Tract are not separately assessed, Landlord shall make an equitable allocation 6fthe Taxes between the Shopping Center or Shopping Center Tract and any other parcel included in such assessment. "Tenant's Work" shall have the meaning set forth on Exhibit "B" attached hereto. "Work" shall have the meaning set forth in Article S(a)- ARTICLE 2 PREMISES. Landlord hereby demises and leases the Premises to Tenant, and Tenant hereby rents and takes the Premises from Landlord, subject to and with the benefit or the terms, covenants, conditions, and provisions of this Lease. The use by Tenant of the Premises shall include the non-exclusive right of access over and across the Common Area. In the event of any dispute concerning the size of the Premises following the completion of the construction of contemplated leasehold improvements, a certificate of such actual size, as measured extending to the center line of any walls adjoining other structural elements, prepared by an A.I.A. registered architect reasonably designated by Landlord shaH control, and all Rent shall be adjusted accordingly. ARTICLE 3 TERM. To have and hold for a term beginning at the earlier of (a) the Commencement Date as set forth on the Data Sheet of this Lease and continuing until the Termination Date as set forth on said Data Sheet, or (b) the opening by Tenant of its business in the Premises, and continuing until said Termination Date, unless sooner term inated as herein provided. ARTICLE 4 RENT. Landlord reserves and Tenant covenants to pay to Landlord, without demand, at its management office, c/o Cinco Corp., Box 1185, St. Cloud, N1N, 56302, or at such other place as Landlord may from time to time designate in writing, on the days and in the manner herein prescribed forthe payiIlent thereof, Rent for the Premises as follows: (a) Minimum Rent. A fixed rent herein called ''Minimum Rent", in the amount set forth on the Data Sheet, shall be payable in twelve (12) equal monthly installments on or before the first day of each month, in advance; provided, Minimum Rent payable for any fractional calendar month at the beginning or end of the lease term shall be prorated based on the proportion which the number of 4 53 days in such month comprised within the lease term bears to the total number of days in such month. ARTICLE 5 CONSTRUCTION OF THE PREMISES. (a) Performance of Landlord's Work. Landlord shall construct or shall provide, at its own expense, improvements to the Premises in accordance with the plans and specifications prepared by Landlord or Landlord's architect, incorporating in such construction all items of Landlord's Work pursuant to Exhibit "B" hereof(collectively, the "Work"). All such Work shall be done in a good and workman-like manner employing new, first class materials and so as to conform to all applicable federal, state and local laws, including all building codes and regulations; provided, Landlord shan have no obligations to confirm or otherwise assure Tenant that the beer coolers installed conform to applicable law. Landlord may make any changes in such Work which Landlord deems to be reasonably necessary or advisable; provided such changes shall not, however, materially alter the general appearance, relative location or aggregate amount of floor area of the Premises without Tenaat's written approval. Actual possession of the Premises shall be delivered to Tenant ready for Tenant's Work when Landlord shall have substantially completed construction of the Work. The phrase "substantially completed" as used herein means that the Work has been completed with the exception of minor items which can be fully completed prior to completion of Tenant's Work without material interference with Tenant's Work. Landlord shall, from time to time during the course of construction of the Premises, provide information to Tenant concerning the progress of such construction, and shall notify Tenant (the "Notice of Substantial Completion") when the construction of the Work is substantially complete and the Premises are ready for the commencement of Tenant's Work. In the event that the construction ofthe Work shall not in fact have been substantially completed, Tenant shall notify Landlord in writing within ten (10) business days after the delivery of said Notice of Substantial Completion from Landlord. Landlord shall have a reasonable time after receipt of such notice of incompletion from Tenant in which to take such corrective action as Landlord deems necessary and shall notify Tenant in writing as soon as it deems such corrective action, if any, has been completed and the Work substantially completed. In the event there shall be any dispute as to whether Landlord has completed its Work, the decision in writing of Landlord's architect shall be conclusive and binding on Landlord and Tenant. NOhvithstanding the foregoing, in the event Landlord is unable to substantially complete construction and deliver possession of the Premises to Tenant on or before the Projected Delivery Date, for any reason whatsoever, Landlord shall not be liable to Tenant for any damages whatsoever and this Lease shall remain in full force and effect; provided, however, the Commencement Date and the Termination Date set forth on the Data Sheet shall be extended for a period equivalent to the delay resulting from the Landlord's failure to substantially complete its Work. Landlord shan continue to use its best efforts to complete construction ofthe same as soon as reasonably possible. Upon delivery of the Notice of Suostantial Completion to the Tenant, then Tenant, by occupying and possessing the same, shall be deemed to have accepted the Premises, acknowledged that Landlord has substantially completed the Work, and agreed that Landlord is not then in default of any of its obligations under this Lease, subject to any "punch list" items noted by Tenant in any notice of incompletion that is delivered to Landlord in a timely manner and that can be completed by Landlord without materially disrupting Tenant's completion of Tenant's Work. (b) Performance of Tenant's Work. Tenant shall commence the performance of Tenant's Work within ten (10) days after the occurrence of the "Delivery Date"; provided, however, that before entering the Premises to perform any element of the Tenant's Work Tenant shall first: (i) obtain all permits and licenses for the performance of Tenant's Work required by applicable law; (ii) obtain Landlord's prior written approval of plans and specifications depicting the nature and extent of all items of Tenant's Work; and (Hi) deliver to Landlord all certificates of insurance contemplated in Article 15. Tenant shall utilize its best efforts to complete all Tenant's Work in a good and workman-like manner, employing new, first-class materials and in accordance with the approved plans and specifications therefore and aU applicable federal, state and local laws, ) 54 including all building codes and regulations. Tenant's Work shall be conducted in such manner as not to unreasonably interfere with the completion of any unfinished "punch list" items of Work. Article 6 Taxes. Real Estate Taxes due on the premises are included in the Minimum Rent. Tenant at all times shall be responsible for, and shall pay before delinquency, all taxes separately levied or assessed against Tenant's leasehold interest or right of occupancy in the Premises, any investment of Tenant in the Premises, or any personal property of any kind owned, installed or used by Tenant. ARTICLE 7 STATEMENTS OF GROSS SALES. Within fourteen (14) days of Landlord's delivery to Tenant of a written request therefore, Tenant shall submit to Landlord an unaudited written statement, certified by Tenant to be accurate, showing in reasonable detail the full amount of Gross Sales achieved in the Premises for any period of time not previously reported by Tenant to Landlord; provided, Landlord shall not be entitled to deliver more than four (4) such requests in anyone calendar year. ARTICLE 8 BUSINESS USE. The Premises shall be used and occupied by Tenant solely for the purpose as set forth on the Data Sheet, and for no other purpose and such use and occupancy shall be in compliance with all applicable laws, ordinances and governmental regulations; provided., Tenant shall only be required to construct structural alterations to the Premises as a consequence of a violation of any such laws, ordinances or regulations to the extent set forth in Article 14 hereof. Tenant will not be responsible for compliance with any required. structural matters. Tenant agrees to open for business on the first day for which Rent is payable and to operate its business in all of the Premises during the tersuch type of business and on all business days, but in no event for less than the schedule of hours and days permitted from time to time by applicable law, unless prevented from doing soby causes beyond Tenant's control. If Tenant shall fail to remain open for business asrequired herein, Landlord may, in addition to other remedies available by law or in equity, impose a penalty of Fifty Dollars ($50.00) per day for each day of violation. Tenant shall carry a stock of merchandise and maintain sales personnel reasonably adequate to assure the successful operation of Tenant's business and shall maintain at all times displays of merchandise in any display windows of the Premises, keeping such display windows neatly dressed, and exterior feature lights or signs fully lit, during the business hours specified in this Article. Tenant shall not operate its business in the manner which is commonly known and accepted in the retail trade as a "discount house", ''wholesale house", or "outlet store", and Tenant shall conduct its business at all times in a high-class and reputable manner. Tenant shall not use the sidewalks adjacent to the Premises, or other parts of the Common Area, for business purposes, except ingress and egress. No "auction", "fire", "bankruptcy", or similar sales shall be conducted in the Premises vrithout the advance \vTitten consent of the Landlord. No incense or perfumed oil or candles may be burned in, nor may other objectionable smells or objectionable noises emanate from, the Premises without the advance written consent of applicable municipal authorities and Landlord. A.."RTICLE 9 COMMON AREA. For the purposes of this lease Common Area Costs (CAM) are included in the minimum rent. ARTICLE 10 SUBORDINATION. Tenant agrees that this Lease shall be subordinate to any mortgages that may hereafter be placed upon the Premises and to any and all advances to be made thereunder, and to all renewals, replacements and extensions thereof; provided, it shall be a condition to Tenant's agreement to subordinate its interests under this Lease to such a future mortgage that the holder of any such mortgage shall, in the even such holder acquires the Landlord's interest in the Premises, recognize the validity and continuance of tais Lease, so long as Tenant is not in default hereunder beyond any period in which Tenant may cure any such default. Notwithstanding the foregoing, in the event any mortgagee elects to have Tenant's interest in the Lease superior to the lien of its mortgage, then by written notice to Tenant from such mortagegee, this Lease shall be deemed prior to the lien of said mortgage, whether this Lease is dated prior to or subsequent to the date of said mortgage. Tenant shall at any time hereafter on demand execute any reasonable ,- o 55 instruments, releases or other documents that are reasonable and customary in form and which may be required by any such mortgagee for the purpose of subjecting and subordinating this Lease to the lien of any such mortgage or for the purpose of evidencing the superiority of this Lease to the lien of any such mortgage, as the case may be. ARTICLE 11 CARE OF PREMISES. Tenant shall, at its expense, keep the Premises, including show windows signs and loading platforms used by it, in a clean, safe and sanitary condition, operate its business in the Premises in conformance with applicable laws, ordinances, regulations and codes; store all trash and garbage in rat-proof receptacles and remove it regularly; forthwith replace broken glass in exterior and interior windows and doors with glass of the same quality; and, on Landlord's request, remove any encroachments maintained by Tenant on any portion of the Common Area without Landlord's written consent. Tenant shall not perform any of the following acts: deface, injure, damage, or the permit waste to occur in the Premises; conduct business so as to constitute a ,nuisance to other tenants or occupants; bum trash or garbage within the Shopping Center; display merchandise on or about the Common Area or the premises of other tenants or occupants; overload any tloor or facility, make any structural alterations except as provided in this Lease; or throw foreign substances in plumbing facilities or use the same for any purpose other than that for which constructed. ARTICLE 12 REPAIRS. Landlord shall keep the foundations, four outer walls, the roof and the downspouts and gutters of the building in which the Premises is situated, and the HV AC equipment that is situated outside the Premises and that services the Premises in good repair, ordinary wear and tear excepted, but shall not be required to make any other repairs, or to perform work outside the scope of the Work. Except as otherwise provided in this Article, the Premises and its mechanical and electrical systems shall at all times be kept in good order, condition and repair by Tenant at its own expense and in accordance with all laws, directions, rules and regulations of regulatory bodies or officials having jurisdiction. If Tenant refuses or neglects to commence repairs within ten days after written demand, or adequately to complete such repairs with a reasonable time thereafter, Landlord may make the repairs without liability to Tenant for any loss or damage that may accrue to Tenant's stock or business by reason thereof, and if Landlord makes such repairs, Tenant shall pay to Landlord, on demand, as additional rent, the costs of thereof with interest at the rate designated in Article 25. If Landlord shall fail to make any repair to the Premises or any area of the Building outside the Premises, which is required to be made by Landlord under this Lease either within ten (10) days after receipt of written notice (the "Repair Notice") from Tenant of such failure or, if such repair cannot reasonably be completed within such ten (10) day period, Landlord fails to commence such repair within such ten (10) day period after receipt of the Repair Notice and if the condition that is the subject of such proposed repair has an adverse impact on the routine conduct of Tenant' s business in the Premises, then Tenant shall have the right to make the repair and offset the reasonable, verifiable and direct cost thereof against the Rent next coming due under this Lease; provided, in the event of an emergency that is not being addressed by Landlord, Tenant may make such repairs and provide Landlord a Repair Notice relating thereto as soon as practicable thereafter and, provided further, that the foregoing right of offset shall be subject to the following terms and conditions: (a) The foregoing offset right shall not be available with respect to any repairs required or desired in connection with any condemnation, casualty, or other insured event. (b) Landlord shall not be construed to have falled to proceed with due diligence to the extent that any such failure is due to reasons offorce majeure or delays caused by Tenant. (c) The foregoing offset right shall not be applicable with respect to any "lost profits" or other consequential damages or losses that Tenant may incur or allege in connection with any such condition or failure to repair. (d) The Repair Notice shall state with specificity the nature and extent of each item of repair that Tenant believes should be performed, Tenant's estimate of the cost thereof, and the potential amount of offset. 7 56 (e) Any offset effected hereunder shall be exercised through the delivery of written notice to Landlord specifying the amount of the offset and including, as attachments, copies of aU invoices or other source documents reasonably necessary to verify the costs underlying such offset, which notice shall be delivered on or before the date that the Rent being offset is otherwise due. (f) In no event shall any offset right claimed in connection with anyone repair exceed an amount equal to $7,500.00. Notwithstanding the foregoing, in the event that, within ten (10) days of the date of Landlord's receipt of the Repair Notice, Landlord delivers to Tenant written notice (the "Dispute Notice") that Landlord disputes that a default in the performance of its obligations exists with respect to all or any portion of the items designated in the Repair Notice or the reasonableness of such costs, then Tenant shall have no right to exercise the foregoing right of offset with respect to the items identified in the Dispute Notice until such time, if any, that Tenant has obtained a final declaratory or other judgment from a' court or competent jurisdiction finding that a default with respect to any such disputed item(s) does, in fact, exist. ARTICLE 13 DlSPLA Y WINDOWS; BUSINESS ADDRESS. This Article and Exhibit "c" hereto attached are intended to permit reasonable scope for individuality in signs and to assist in maintaining the high architectural and business character of the Shopping Center. Tenant shall submit to Landlord for approval; drawings, showing all proposed signage to be erected in connection with the Premises. Such signs shall conform to the sign criteria as outlined in Exhibit "c" attached hereto and drawings submitted for approval shall clearly show graphic as well as construction and attachment details of aU sings, including electrical load requirements and brightness in foot-lamberts. Erection of any signs, notices, customer information, or banners shall be prohibited unless approved in advance in writing by Landlord. Loud speakers, phonographs, radios, or other means of broadcasting in a manner to be heard outside the Premises is prohibited. No sign or advertising medium shall be used so as to be a nuisance or menace to Landlord or other tenants. The costs of designing, installing, maintaining, changing, and removing aU signs shall be borne by Tenant; provided, if such removal or replacement is required by Landlord in connection with the performance of any repairs required of Landlord hereunder or any remodeling of the Shopping Center, all costs thereof shall be borne by Landlord. Display windows shall be well lighted during hours when either the Shopping Center or the Premises are open. In the event that Landlord should install a sign for the Shopping Center that includes a "message" panel, to the extent that such "message" panel is available.for use by tenants of the Shopping Center, Tenant shall have a right to use thereof in a proportion that corresponds to the ratio or the number of square feet of the Premises divided by the total number of leasable square feet in the Shopping Center. ARTICLE 14 ALTERATIONS, INSTALLATIONS, FlXTIJRES. Except as hereinafter provided, Tenant shall not make any structural alterations in or additions to the Premises. If structural alterations become necessary because of the application of laws or ordinances or of the directions, rules or regulations of any regulatory body, to the specific business carried on by Tenant, or because of any act or default on the part of Ten ant, or because Tenant has overloaded any electrical or other facility, Tenant shall make such structural alterations at its own expense, after first obtaining Landlord's written approval of plans and specifications and furnishing such indemnification against liens, costs, damages and expenses as Landlord may reasonably require. At the commencement of the term, or prior thereto as hereinabove provided, and throughout the term, Tenant at its own expense, shall provide, install and maintain the lighting fixtures, store fixtures, floor coverings, and other equipment required by it and all interior painting and decorating. Tenant shall make no alterations to the interior improvements of the Premises without the advance written consent of the Landlord; provided, Tenant shall have the right to construct or install alterations or additions to the interior of the Premises at a cost not to exceed $10,000.00 in the aggregate during an consecutive nvelve (12) month period witbout first obt,,-ffiing the consent of Landlord; provided, such right shall be subject to the following conditions: (i) all such alterations or additions shall be nonstructural in nature and shall not include any penetration of the roof; (ii) no such alterations or additions shall impair or restrict the mechanical, plumbing, or electrical systems servicing portions of the Shopping Center other than the Premises; and (iii) all such alterations or additions shall be performed with due diligence, in a good and workmanlike manner and in accordance with all applicable codes, laws, and regulations. Except to the ~ " 57 extent of signage permitted pursuant to Article 13 hereof, Tenant shall not, without the advance written consent of Landlord, install any exterior lighting or plumbing fixtures, shades, awnings, canopies, marquees or any exterior decorations or painting, or build any fences, or install any radio or television antennae, loud speakers, sound amplifiers, or similar devices on the roof or exterior walls of the Building. ARTICLE 15 INSURNACE (i) Liability Insurance. Tennant shall, at it own expense; maintain in effect at all times during the lease term"Commercial General Liability Insurance" pottcy (Insurance service Office from title). Providing coverage on an "occurrence" rather than on a "claims made basis", with a total combined policy limit of at least $600,000, which policy shall include, but not be limited to, coverage's for Bodily Injury, Property Damage, Personal Injury and Contractual Liability (applying to this Lease), or an equivalent form (or forms), so long as such equivalent form (or fonns) affords coverage which is at least as broad. An Insurance Services Office: Comprehensive General Liability" policy which includes a Broad Form Endorsement GL 0404(Insurance Services Office designation) shall be considered to be an equivalent policy fonn. Tenants liability Insurance coverage may be subjected to a deductible, "retention" or "participation"(or other similar provisions) requiring the tenant to remain responsible for a stated amount or percentage of each loss covered; provided however, that such deductible, retention or participation amount may not exceed $1,000.00 each occurrence. Such pottcy shall name landlord as an Additional Insured there under. (ii) Property Insurance. Tenant shall at its own sole cost and expense, maintain in effect at all times during the lease, Insurance covering all of the tenants improvements, fixtures and property in the premises against loss by fire and other hazards covered by the so- called "all-risk" fonn of policy, in an amount to equal the actual replacement cost thereof, without deductions for physical depreciation. Such insurance shall contain "Contingent Liability from Operation of Building Laws," demolition and increased cost to rebuild coverage's; Valuable Papers and Records coverage, providing for the Reproduction costs measure of recovery; business interruption coverage for a period of at least twelve months; and coverage for damage to Electronic Data Processing Equipment and Media, including coverage for the perils of mechanical breakdown and electronic disturbance. If the tenant's property in the premis4es includes steam boilers or other equipment excluded from coverage pursuant to Boiler and Machinery exclusion, such insurance policy shall include Boiler and Machinery insurance in an amount reasonably satisfactory to Landlord. (Ui) Policy Provision. Policies for the liability and property insurance coverage's contemplated by this paragraph shall be in a form and with an insurer reasonably acceptable to the Landlord and shall require a t least a 30 days prior written notice to Landlord and, if requested by Landlord, Landlord's mortgagee(s), of termination or material alteration. The liability insurance under subparagraph 15(a) shall be primary with respect to Landlord and its agents and not participating with any other available insurance. Tenant shall deliver on the commencement date and on each anniversary thereof to the Landlord, insurer-certified copies of such policies, or other evidence reasonably satisfactory to Landlord, confirming the tenns of such insurance, confirming that the premium is paid at least one year in advance and confirming that the policies are in full force and effect. Landlord may from time to time, but not more than every 3 years, require a contents inventory or an insurance appraisal satisfactory top the Landlord confirming the replacement costs of the insured property. If tenant has a blanket insurance policy in force providing coverage for several properties of tenant, including the premises, landlord win accept a certificate of such insurance, together with a copy of such blanket insurance policy; provided, the certificate sets forth the amounts of insurance and coverage, such amounts are at least equal to the amount required hereinabove, and otherwise such policy complies with the requirements hereof. (b) Landlords Insurance. Landlord shall mairltain a poiicy of liability insurance and a policy of property insurance insuring its interests in the Shopping Center, which policies shall be in a form and ('\ )' 58 amount customarily maintained by prudent owners of similar properties or otherwise in a form and amount permitted by the holder of any first mortgage upon the Shopping Center. Tenant will not do or suffer to be done, or keep or suffer to be kept, anything in, upon or about the premises which will contravene Landlords property insurance or any public liability insurance carried by landlord or which will prevent landlord from procuring policies of insurance in companies acceptable to the landlord. If anything done, omitted to be done or suffered to be done by the tenant, or kept or suffered by tenant to be kept, in, upon or about the premises shall cause the rate of fire or other insurance on the premises or other property of the landlord in companies acceptable to the landlord, to be increased beyond the minimum rate from time to time applicable to the premises for the use permitted under this lease or to any other property for the use or uses made thereof, tenant will pay the amount of any increase. Contemplated use by the premises by the tenant does not appear to violate this provision. ARTICLE 16 MECHANIC'S LIENS. Tenant agrees to promptly pay all sums of money, or provide bond coverage, in respect of any labor, services, materials, supplies or equipment furnished or alleged to have been furnished to Tenant or anyone holding the Premises or any part thereof, through, or under Tenant in, at or about the Premises, or furnished to Tenant's agents, employees, contractors or subcontractors, which may be secured by any mechanics, materialmen, suppliers, or other type of lien against the Premises or the Landlord's interest therein. In the event any such or similar lien shall be filed, Tenant shall within five (5) days of receipt thereof, give notice to Landlord of such lien, and Tenant shall, within ten (10) business days after receiving notice of the filing of the lien, discharge such lien. Failure of Tenant to discharge the lien shall constitute a default under this Lease and in addition to any other right or remedy of Landlord, Landlord may but not be obligated to discharge the same of record by paying the amount claimed to be due, and the amount so paid by Landlord and all cost and expenses incurred by Landlord therewith, including reasonable attorneys' fees, shall be due and payable by Tenant to Landlord as additional rent. Tenant acknowledges that Landlord may post notice on the Premises of non-responsibility for such liens and, in such event, Tenant shall so advise all contractors, materialmen, suppliers, and other persons performing work or providing services andlor supplies to the Premises on behalf of Tenant. ARTICLE 17 DELIVERIES, P ARKJNG. Tenant and its employees and agents shall park cars only in areas designated from time to time by Landlord as employees' parking areas. Upon written request from Landlord, Tenant will furnish Landlord or its authorized agent the state automobile license number or numbers assigned to its automobile and those of all persons employed on the Premises. Trucks or other delivery vehicles shall not be parked in the front of the Premises or adjacent to the building in which the Premises is situated so as to interface with the use thereof, or in the parking area. A delivery lane has been provided at the rear entrance of the premises. ARTICLE 18 INDEMNIFICATION AND WAIVER. Except to the extent liability for damage or loss is caused by the negligence of Landlord, Tenant shall indemnify Landlord from and against any liability for damages to any person or property in or upon the Premises, or arising from Tenant's negligence or intentional misconduct occurring in or around the Shopping Center Tract. Notwithstanding any contrary provision herein, Tenant hereby waives any claims against Landlord relating to, and Landlord shall not be liable to Tenant for, any damage to any equipment, inventory, tenant fixture or other property situated in the Premises or in, on or about the Shopping Center Tract due to any condition, design or defect in the building in which the Premises is situated or leakage of the roof, windows, and pipes, or of damage from gas, oil, water, steam, smoke or electricity, or due to any other cause whatsoever, including Landlord's negligence, and Tenant assumes all risks of damage to such property; provided, the waiver and assumption contemplated by this sentence shall apply only to the extent covered by insurance in place or required to be maintained by the terms of this Lease. Landlord hereby waives any claims against Tenant relating to, and Tenant shall not be liable to Landlord for, any damage to any property sitlated in the Premises or occurring in, on or about the Shopping Center Tract due to any reason, including Tenant's negligence, and Landlord assumes all risks of damage to such property; provided, the waiver and assumption contemplated by this sentence shall apply only 10 the extent any such damage is covered by insurance in place or required to be maintained by the terms of this Lease. ARTICLE 19 ASSIGNMENT OR SUBLETTING. Tenant shall not to sell, assign, mortgage, pledge, or in any maIli'1er transfer this Lease or any estate or interest hereunder and not to sublet the Premises or any 10 59 part or parts thereof and not to permit any licensee, concessionaire or other occupancy therein without the previous written consent of La.'1dlord in each instance, which consent shall not be unreasonably withheld; provided, in addition to any other grounds for denial, Landlord's consent shall be deemed reasonably withheld if the proposed assignee, subtenant or occupant fails t execute an assumption and attornment agreement with Landlord that is reasonable in form. In no event shall the granting of such consent be deemed a release of Tenant from its obligations hereunder. Consent by Landlord t one assignment of this Lease or to one subletting of the Premises shall not be a waiver of Landlord's rights under this Article to withhold its consent to any subsequent assignment or subletting. Landlord's rights to assign this Lease are and shall remain unqualified. Upon any transfer of title to the Premises, and providing the pUrchaser assumes all future obligations of Landlord under this Lease, Landlord shall thereupon be entirely freed of all obligations of the Landlord that accrue after the date of such conveyance. ARTICLE 20 ACCESS TO PREMISES. Landlord ,reserves the right to enter upon the Premises at reasonable hours to inspect the same, or to make repairs, additions, or alterations to the Premises or other property, or to exhibit the Premises to prospective tenants, purchasers or others, to enter at anytime in the event of an emergency, and to display during the last ninety days of the teall, without hindrance or molestation by Tenant, "For Rent" or similar signs on windows or doors in the Premises; provided notice at least twenty-four (24) hours prior to any entry that occurs under non-emergency conditions. Such access shall not interfere with the Tenant's use or, access to, visibility of business in the premises. ARTICLE 21 UTILITY SERVICES. (a) Gas, Water, Sewer, and Electricity. Landlord agrees to cause mains, conduits, and other facilities. to be provided and maintained to supply gas, water, sewer, and electricity to the Premises. Tenant shall pay, when billed, for all gas, water, sewer services, and electricity used in the Premises. If Tenant shall use such utility services for any purpose in the Premises and if Landlord shall elect to supply the service or services used, Tenant shall accept and use the same as tendered by Landlord and pay therefore, when billed, as additional rent, at the applicable rates filed with the proper regulating authority, and in effect, or if not required to be so filed, or if not in effect, then at rates no greater than those charged by the utility companies. Tenant, at its own expense and with equipment installed in accordance with specifications approved in writing by Landlord, shall heat or chill water to meet its own requirements, if any. (b) Interruption of Service. Landlord reserves the right without notice to Tenant to cut off and discontinue gas, water, electricity, air conditioning, heating, ventilating, antenna service and any or all <;Jther service, without liability to Tenant, where necessary to make repairs or alterations under emergency conditions. Such interruptions shaH not exceed 48 hours. If the interruption is beyond 48 hours, tenant has the right to abate rent for the time beyond 48 hours. No such action by Landlord.. or notice thereof, shall be construed as an eviction or disturbance or possession or as an election by Landlord to terminate this Lease. Landlord shall not be liable in damages or otherwise if the furnishing by Landlord or by any other supplier of any utility service or other service to the Premises shall be interrupted or impaired by fire, accident, riot, strike, act of God, the making of necessary repairs or improvements or by any causes beyond Landlord's control. ARTICLE 22 EMINENT DOMAIN. (a) Entire Premises. If substantially all of the Premises shall be taken by any public authority under the power of eminent domain then the term of this Lease shall cease as of the day possession shall be taken by such public authority and the Rent shall be paid up to the day the condemning authority acquires possession of the Premises. (b) Partial Taking. If more than twenty percent (20%) of the Premises, or more than a third (1/3) of the twenty (20) parking stalls that are closest to the front door of the Premises, shall be taken under em inent domain, 1" enant shall have the right to terminate this Lease or, subject to Landlord's right of termination as provided in this Article, to continue in possession of the remainder of the Premises; provided, Tenant shall notify Landlord in writing of Tenant's election within sixty (60) days of the commencement of such condemnation proceedings or Tenant's option to terminate 11 so shall be deemed waived. In the event Tenant elects to remain in possession or ifless than twenty percent (20%) of the Premises shall be so taken, all of the terms herei.n provided shall continue in effect, except that the Minimum Rent due hereunder shall be reduced in proportion to the amount of the Premises taken and Landlord shall at its own cost and expense make all necessary repairs or alterations to the basic building, store front and interior work in accordance with the Description of Landlord's Work and Tenant's Work attached hereto as Exhibit '"E", so as to constitute the remaining premises a complete architectural unit. If more than ten percent of the area of either the Common Area or the buildiug in which L~e Premises is situated shall be taken, or if the unexpired portion of the term of this Lease shall be two years or less as of the date the condemning authority acquires pC'ssession of any portion of the Premises, Landlord may, by written notice to Tenant delivered on. or before the date of surrendering possession to the public authority, terminate this Lease effective as of the date of such surrender. (c) Damages. All damages awarded for any such taking under the power of eminent domain whether for the whole or a part of the Premises shall belong to and be the property of Landlord whether such compensation is awarded for diminution in value to the leasehold or to the fee of the Premises; provided, however, that Landlord shall not be entitled to any relocation benefits granted to Tenant or any award made to Tenant for loss of business, fair value of, and cost of removal of stock and fixtures. (d) Definition. The term "eminent domain" shall include the exercise of any similar governmental power and any purchase or other acquisition in lieu of condemnation. ARTICLE 23 DAMAGE. (a) In the event the Premises are damaged or destroyed by fire, or other casualty insurable under a standard fire and extended coverage policy, as issued from time to time in the State where the Shopping Center is located, Landlord shall, subject to being able to obtain aU necessary permits and approvals therefore within 180 days of such casualty, and provided the Lease has not been terminated pursuant to Article 23(c) or (d) hereof, commence to repair, reconstruct and restore Landlord's Work to the condition in which it was immediately prior to the happening of such casualty, except for the items Tenant is responsible to repair or replace pursuant to Article 23(b) hereof, and prosecute the same with reasonable diligence to completion. if the Premises are . rendered partially or totally untenantable as a result of such casualty, then to the extent the Premises are rendered untenantable, Minimum Rent shall be proportionately abated until Landlord has completed such repair, reconstruction or restoration. (b) In the event Landlord is required or elects to repair, reconstruct or restore Landlord's Work, Tenant agrees to repair or replace Tenant's Work, Tenant's leasehold improvements, its merchandise, trade fixtures, furnishings, operating equipment, and personal property, including wall covering, carpeting and drapes, as soon as possible after the occurrence of such casualty to at least a condition equal to that prior to its damage or destruction. in no event shall Landlord be liable for interruption to the business of Tenant or for damage to or repair, reconstruction or restoration. of any items belonging to Tenant or within the Premises. (c) Notwithstanding the foregoing, Landlord shall have the option to terminate upon giving notice to tenant of the exercise thereof within forty-five (45) days after the occurrence of an event described in Article 23(a) hereof, if: (i) the event occurs within the last two (2) years of the term of this Lease; or (ii) twenty percent (20%) or more of the number of the leasable square feet comprised within the Shopping Center immediately prior to such event is rendered untenantable thereby; or (iii) if ten percent (10%) or more of the number of leasable square feet comprised within tbe Shopping Center is rendered untenantable by an event which is not insurable under a standard Fire and Extended Coverage policy as issued from time to time Minnesota; or (iv) if insured, if Landlord's morgagee does not permit the use of insurance proceeds for reconstruction; (v) or if Landlord cannot obtain all necessary permits and approvals for the repair, reconstruction and restoration of the Premises within the period permitted under Article 23(a) hereof. 12 61 (d) Tenant shall have the option to terminate upon giving notice to Landlord of the exercise thereof within forty-five (45) days after the occurrence of an even described in Article 23(a) hereof if he event occurs within the last two (2) years of the term ofthis Lease. ( e) Upon any termination of this Lease under the provisions of this Article, the Rent imposed under this Lease shall be adjusted as of the date of such termination and the parties shall be released thereby without further obligation to the other party coincident with the surrender of possession of the Premises to the Landlord, except for items which have been theretofore accrued and are then unpaid, and except for obligations which are designated as surviving such termination. ARTICLE 24 SURRENDER. On the last day of the term. demised or on the sooner termination thereof, Tenant shall peaceably surrender the Premises in good order, condition and repair, broom-clean, fire and other unavoidable casualty and reasonable wear and tear only accepted. On or before the last day of the term or the sooner termination thereof, Tenant shall at its expense, remove its trade fixtures, signs, and carpeting from the Premises and any property not remove shall be deemed abandoned. Any damage caused by Tenant in the removal of such items shall be repaired by and at Tenant's expense. All alterations, additions, improvements and fixtures (other than Tenant's trade fixtures, signs, and carpeting) which shall have been made or installed by either Landlord or Tenant upon the Premises and all hard surface bonded or adhesively affixed flooring and all lighting fixtures shall remain upon and be surrendered with the Premises as a part thereof, without disturbance, molestation or injury, and without charge, at the expiration or earlier termination of this Lease. If the Premises be not surrendered at the end of the term or the sooner termination thereof, Tenant shall indemnify Landlord against loss or liability resulting from delay by Tenant in so surrendering the Premises, including without limitation, claims made by any succeeding tenant founded on such delay. Tenant shall promptly surrender all keys for the Premises to Landlord at the place then fixed for payment of Rent and shall inform Landlord of combinations on any locks and safes on the Premises. ARTICLE 25 DEFAULT OF TENANT. (a) In the event Tenant shall: (i) Fail to pay Rent due under this Lease within ten (10) days after the delivery of written notice that such Rent was not paid when due; or (ii) Vacate or abandon (not operating for business in the Premises for ten (i0) consecutive days as given in written notice from the landlord)) the Premises for reasons other than strike, casualty or other events or conditions beyond Tenant's control or to accommodate alterations performed pursuant to Article 14 hereof; or (iii) Fail to keep or perform any of the other terms, conditions, cr covenants of the Lease to be kept or performed by Tenant for more than thirty (30) days after written notice of such failure shall have been given to Tenant; then Landlord, besides other rights or remedies it may have, shall have the right to do one or more ofthe following: (a) terminate this Lease upon the expiration of five (5) days after wri.tten notice of such intent is given to Tenant, in which event the Term hereof shall expire and terminate with the same force and effect as though the date set forth in said notice were the date origi.nally set forth herein and fixed for the expiration of the term, or (b) re-enter the Premises, dispossess Tenant and/or other occupants of the Premises, remove all property from the Premises and stote the same in a public warehouse or elsewhere at the cost of, and for the account of Ten ant, and hold the Premises as hereinafter provided, without being deemed guilty of trespass, or becoming liable for any loss or damage which may be occasioned thereby, Tenant agreeing that no such re-entry or taking of possession of the Premises by Landlord shall be construed as an election on Landlord's part to terminate this Lease, such right, however, being continuously reserved by Landlord, or (c) perform any obligations of the Tenant under this Lease and charge the cost of such performance to Tenant and Tenant shall pay such cost to Landlord within ten (10) days after the receipt of an invoice therefore. 13 j:\? (b) In the event Landlord elects to re-enter the Premises, Landlord may, but shall not be obligated to, relet the Premises or any part thereof for such term or terms (which may extend beyond the term of this Lease) and at such rental and upon such other terms and conditions as Landlord in its sole discretion may deem advisable and Landlord may make such reasonable alterations and repairs as Landlord may deem necessary in order to achieve any such reletting. All rentals and other sums received by Landlord from any such reletting shall be apptied as follows: first, to the payments of . any indebtedness other than Rent due hereunder from Tenant to Landlord; second, to the payment of any costs and expenses of such alterations and repairs; third, to the payment of Landlord's expenses of reletting, including, without limitation, broker's commissions, attorneys' fees and lease inducements, such as moving or leasehold improvements allowances; fourth, to the payment of Rent and other charges due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future Rent as the same may become due and payable hereunder. If such rentals and other sums received from such reletting during any month be less than that to be paid during the month by Tenant hereunder, Tenant shall pay such deficiency to Landlord; if such rentals and sums shall be more, Tenant shall have no right to the excess. Such deficiency shall be calculc..ted and paid monthly. Not'ivithstanding any such re-entry by Landlord, Landlord may at any time hereafter elect to terminate this Lease for such previous breach. (c) It is acknowledged that the damages that would be incurred by Landlord in connection with the termination of this Lease following a default by Tenant would be difficult to estimate or ascertain. In the event Landlord elects to terminate this Lease, Landlord may, in addition to other remedies available at law or in equity, recover from Tenant, as liquidated damages, an amount equal to the sum ofthe following: (i) aU unpaid Rent that is payable by Tenant hereunder and that accrues as of the effective date of termination; plus (ii) a sum of money equal to the entire amount of Rent that would be payable under the Lease for the lesser of the following two periods; which amount shall be immediately due and payable upon demand but which shan be discounted to present value using a discount rate equal to the discount rate of the Federal reserve Bank of Minneapolis as of the date of termination plus one percent (1%); (A) the one (1) year period commencing upon the effective date or termination, or (B) the period commencing upon the effective date oftermination and ending upon the original date of the expiration of the term of the Lease. For purposes of calculating the amount of Rent that would be payable under the Lease for the period succeeding the effective date oftermination, such Rent shall be computed on the basis of the average monthly amount of Rent accruing during the twenty-four (24) month period immediately preceding the default to which such termination relates (exclusive of any months in which Tenant received "free" or abated rent concessions); provide, however, if the default occurs prior to the expiration of the first twenty-four (24) months of the Lease, then the Rent shall be computed on the basis of the average monthly amount of Rent accruing during all months preceding the month in which said default occurred (exclusive of any months in which Tenant received "free" or abated rent concessions). (d) Tenant shall also be liable to Landlord for the payment of interest at the rate often percent (10%) per annum if an individual or twelve percent (12%) per annum if a corporation, but in no case to exceed the lawful maximum rate of interest respectively by individuals and corporations allowable under the laws of the State of Minnesota at the time, on all Rent and other sums due Landlord hereunder not paid within ten (10) days from the date same became due an payable. ARTICLE 26 NOTICES. All bills, statements, notices or communications, including changes of address of either party, which either party may desire or be required to give to the other shall be deemed sufficiently given or rendered if in writing and either delivered to the other party personally, sent by registered or certified mail, return receipt requested, sent by national air courier service, addressed to Tenant at the Premises: or to Landlord at the address where the last installment of Minimum Rent due hereunder was payable, or, as to either party, upon receipt of notice in accordance with this Article, to the last address furnished by such party. The time of rendition thereof or the giving of such notice or communication shall be deemed to be the time when the same is personally delivered to the other party, deposited in the mail, or delivered to the other party by a national air courier service as herein provided. 1.'-'- 63 Any notice or the return of any access cards, keys, or otherwise to be given from Tenant to Landlord must be delivered in the manner set forth above. ARTICLE 27 GENERAL. This Lease does not create the relationship of principal and agent, partnership, joint venture, or any other associate between Landlord and Tenant, the sole relationship between lessor and lessee being that of Landlord and Tenant. No waiver of any default of Tenant hereunder shall be implied from any omission by Landlord to take any action on account of such default if such default persists or is repeated, and no express waiver shall affect any default other than the default specified in the express waiver and that only for the time and breach of the same covenant, term or condition. the consent to or approval by Landlord or any act by Tenant requiring Landlord's consent or approval shall not waive or render unnecessary Landlord's consent to, or approval of, any subsequent similar act by Tenant. Each term and each provision of this Lease performable by Tenant shall be construed to be both a covenant and a condition. No action required or permitted to be taken by or on behalf of Landlord under the terms or provisions of this Lease shall be deemed to constitute an eviction or disturbance of Tenant's possession of the Premises. The submission of this Lease or a summary of some or all of its provision for examination does not constitute a reservation of, or option for, the Premises and this Lease becomes effective as a lease only after execution and delivery thereof by both Landlord and Tenant. The marginal or topical headings of the several articles, paragraphs and clauses are for convenience only and do not define, limit or construe the contents of such articles, paragraphs, and clauses. All preliminary negotiations are merged into and incorporated in this Lease. The laws of the State of Mllnesota shall govern the validity, performance; and enforcement of this Lease. In the event of nay litigation to enforce or interpret the terms hereof,> the prevailing party shall be entitled to an award oHts reasonable attorneys' fees and costs. ARTICLE 28 CORPORATE OWNERSHIP. If Tenant is a corporation and if at any time during the term of this Lease, any part or all of the corporate shares' be transferred by sale, assignment, operation of law or other disposition (except transfers by gift, bequest or inheritance to a member of the donor's family) so as to result in the loss of voting control of said corporation by the person or persons owning a majority of said corporate shares at the date of this Lease, Tenant shall notify Landlord in writing of such change. Such transfer of stock shall be deemed an assignment of this Lease under Article 19 herein and Landlord shall have all rights of approval as granted under said Article. This Article shall not apply if on the date this Lease is executed Tenant is a corporation, the outstanding common stock of which is listed on a recognized security exchange. Upon the execution of this Lease and upon each succeeding anniversary date, or at any sooner time requested by the Landlord, Tenant shall deliver to Landlord a statement, certified as being true and correct and verified by the corporate secretary, showing the name of all existing shareholders of record and the respective ownership interest as of that date. ARTICLE 29 HOLDING OVER. If the event Tenant remains in possession of the Premises after the expiration of this Lease and without the execution of a new lease, it shall, at Landlord's option, be deemed to be occupying the Premises as a tenant from month \:0 month at a Gross Rent equal to one atld one quarter ( 1-1/4) times the then existing Gross Rent paid by Tenant to Landlord in the previous twelve (12) months, and subject to all existing Gross Rent paid by Tenant to Landlord in th-e previous twelve (12) months, and subject to all of the other conditions, provisions and obligations of this Lease insofar as the same can be applicable to month-to-month tenancy cancelable by either pany upon thirty (30) days written notice to the other. ARTICLE 30 CONSENTS:BY LANDLORD. Whenever under this Lease provision is made for Tenant securing the consent or approval by Landlord, such consent or approval shall be in writing and not reasonably withheld. ARTICLE 31 NON-LIABILITY. Landlord shall not be responsible or liable to Tenant for any loss or damage that may be occasioned by or through the acts or omissions or persons occupying adjoining premises or any part of the premises adjacent to or connected with tbe Premises hereby leased or any part of the Building or any person transacting any business in the Shopping Center or present in the Shopping Center for any other purpose. Notwithstanding any contrary provision herein, if Landlord shall fail to perfonn any covenant, term or condition of this Lease required to be performed by Landlord, such judgment may be satisfied only out of the proceeds, if any, received upon execution or levy of such 15 64 judgment against the right, title and interest of Landlord in the Shopping Center and out of rents 'Or other income form such property receivable by Landlord from the sale or other disposition of all or any part of Landlord's right, title and interest in the Shopping Center, and Landlord, and the individual officers and partners of Landlord, shall not be personally liable for an deficiency. ARTICLE 32 QUIET ENJOYMENT. Landlord covenants that, subject to Tenant paying the Rent and performing all of the terms and conditions on Tenant's part to be observed and performed, Tenant may peaceably and quietly enjoy the Premises subject, nevertheless, to the terms and conditions of this Lease. ARTICLE 33 SUCCESSORS AND ASSIGNS. The terms, covenants, and conditions hereof shall be binding upon and inure to the successors in interest and permitted assigns of the parties hereto. ARTICLE 34 ESTOPPEL CERTIFICATES. Each party shall at any time and from time to time within ten (10) business days after written request from the other party execute and deliver to the requesting party :1 sworn and acknowledged estoppel certificate in form reasonably satisfactory to the requesting party certifying and stating as follows: (i) this Lease has not been modified or amended (or if modified or amended, setting forth such modifications or amendments); (ii) this Lease (as so modified or amended) is in full force and effect (or if not in fuU force and effect;the reasons thereof); (Hi) the Tenant has no offsets or defenses to its performance of the term and provisions of this Lease, including the payment of Rent (or if there are any such defenses or offsets, specifying the same); (iv) Tenant is in possession of the Premises, if such be the case; (v) if an assignment of rents or leases has been served upon Tenant by a mortgagee or prospective mortgagee, Tenant has received such assignment and agrees to be bound by the provisions thereof; and (vi) any other accurate statements reasonably required by the requesting party or its mortgagee or prospective mortgagee. ARTICLE 35 BROKERAGE. Each of the parties represents and warrants that there are no claims for brokerage commissions or finders' fees in connection with the execution of this Lease, and agrees to indemnify the other against, and hold it harmless from, all liabilities arising from any such claims (including, without limitation, the cost of counsel fees in connection therewith). ARTICLE 36 CHANGES TO SHOPPING CENTER. Landlord hereby reserves the absolute right, at any time and from time to time, (a) to withdraw from the Common Area such portions thereof as may be necessary to construct or cause to be constructed (i) additions to the existing buildings, or (ii) additional buildings; and (b) to increase the landsize of the Shopping Center, in which case Landlord shall furnish Tenant a substitute Exhibit "A". Notwithstanding the foregoing, Landlord shall not do any ofthe following without Tenant's prior consents, which shall not be unreasonably withheld: (i) reduce the parking area serving the Shopping Center below the minimum requirements of applicable law; (it) alter the Common Area, includL'1g vehicular ingress and egress thereto, in a manner that, when completed, materially adversely interferes with either the routine conduct of Tenant's business in the Premises or the visibility of . Tenant's permanent signage or visibility of premises; or (Hi) construct or place any kiosks, games, items or amusement or other structure within fifty (50) feet of the front of the Premises. Any repairs, alterations or improvements to the Common Area or the Premises which Landlord is required or'elects to perform shall be prosecuted with due diligence. ARTICLE 37 RELOCATION OF TENANT. [TIDS ARTICLE HAS BEEN INTENTI0NALL Y DELETED) ARTICLE 38 P ARnAL INVALIDITY. 1f any provision of this Lease, or the application thereof to any party or circumstances, shall be determined to be invalid, illegal or unenforceable, such determination shall not affect the validity, legality, or enforceability of any other provision of this Lease, or the application thereof to any other person or ci'rcumstance. ft.....RTICLE 39 'PRIOR OCCUPANCY. If Tenant shall occupy the Premises prior to the beginning of the term with Landlord's consent, all the provisions of this Lease shall be in full force and effect commencing at such occupancy, such occupancy shall be on the basis of a month-to-month tenancy, and Rent for such occupancy shall be paid at the rate set forth in this Lease. 16 65 ARTICLE 40 HAZARDOUS SUBSTANCES. (a) The term "Hazardous Substances," as used in this Lease, shall mean pollutants, containments, toxic or hazardous wastes or any other substances, the removal of which is required or the use of which is restricted, prohibited, or penalized by any "Environmental Law," which term shall mean any federal, state, or local law or ordinance relating to pollution or the protection of the environment. (b) Tenant hereby agrees that (i) no activity will be conducted on the Premises that will produce any Hazardous substance, except for such activities that are part of the ordinary course of Tenant's business (the "Permitted Activities"), provided said Permitted Activities are conducted in accordance. with all Environmental Laws and have been approved in advance in writing by Landlord; (ii) the Premises will not be used in any manner for the storage of any Hazardous Substances, except for the temporary storage of such materials that are used in the ordinary course or Tenant's business (the "Permitted Materials"), provided such I'ermitted Materlals are properly stored in a manner and location meeting all Environmental Laws and approved in advance in writing by Landlord; (iii) Tenant will not permit any Hazardous Substances to be brought onto the Premises, except for Permitted Materials, and if so brought or found located thereon, the same shall be immediately removed, with proper disposal, and all required cleanup procedures shall be diligently undertaken pursuant to all Environmental Laws. If, at any time during or after the term of the Lease, the Premises is found to have been contaminated by Tenant or subject to said conditions created by Tenant, or at Tenant's instance, Tenant shall indemnify and hold Landlord harmless from all claims, demands, actions, liabilities, costs, expenses, damages, and obligations of any nature, including reasonable attorneys' fees, arising from or as a result of such conditions or use of the Premises by Tenant. The foregoing indemnification and warranty shall survive the termination or expiration or this Lease. (c) To the best of Landlord's actual and not constructive knowledge, as of the Delivery Date, the Premises shall be free of all Hazardous Materiats that are not in compliance with applicable Environmental Laws. In the event that during the Lease term, Tenant discovers the existence in the Premises of Hazardous Materials other than those handled by Tenant, handled by a sublessee or Tenant or other party that has occupied any portion of the Premises after acquiring all or. any portion of Tenant's rights hereunder, or handled by another tenant or other occupant of the Shopping Center subsequentto the Commencement Date, and if such Hazardous Substances have not been handled in compliance with all applicable Environmental Laws (such hazardous materials, that have not been handled in compliance with an applicable Environmental Laws being defined as "Building Unlawful Hazardous Materials"), then Landlord's sole obligation and .responsibility to Tenant shall be (a) the commencel'.)cnt, '.;yithin sixty (60) days after Landlord receives from Tenant notice of such breach or discovery, as the case may be, and verifies the accuracy of such claim by Tenant, or a removal, encapsulation or other containment program reasonably elected by Landlord which is required by and complies with applicable Environmental Laws, and (b) the diligent prosecution of such program to completion, including any required monitoring or reporting activities, in such a manner as will make the Premises free from Building Unlawful Hazardous Materials in accordance with the standards promulgated in applicable Environmental Laws. Landlord shall indemnify Tenant from and against any claims made by, or liabilities or judgments owed to, third parties to the extent that the damages forming the basis thereof are caused by the presence, now or hereafter, of any Hazardous Materials that have been placed, stored, or generated in the Premises or the Building by Landlord. Article 41 Termination prior to ExPiration. Landlord hereby acknowledges that if the tenant has, . during the term of this lease, has operating losses in three years, the tenant may terminate the lease by giving the Landlord a notice equal to (120) one hundred twenty days. The unpaid portion of the construction costs as outlined in Exhibit "B" win be due and payable upon termination TillS LEASE is executed and delivered as of the date first above \VTltten. 17 fig s~ EXHIBIT A Depiction of Premises Depiction of Shopping Center Depiction of Shopping Center Tract EXB1BITB Landlord'~ and Tenant's Work EXHIBIT C Tenant's Signs EXHIBITS 10 _0 67 FEB-12-02 rUE 08:06 AM PALANtSAtll & ASSOC [NO FAX NO, 7635339588 ,~lN'SAMI & AS SOCIA TES (;,) \ t (;~~""., ,"',,,,,,,, \ \\~\ ] :. ' I t r' m ~! ~ \'""'~'''''~''%'"''''';'''l~~ \~\ (1 \ \ " ""} , "'" \,,_J' \ ~~\\I \ ,....~,._.... -'\ .~~~ r--:J .. 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'-, f ~ J~~ ~ 3:-.. ' ~1~: ~ .. "- ~ ""';'ic c ~Pi ! , . u . f ! .:. , , !: i~ i ' ! S1~ '0 ~~! ;~~1 I;, ~ l ~ : t1i::c7 , u 55 . I~') I.' .,.. .~ ,; \ \ ~3 ..,. ,~ > c' " ~ c ~ t)~ t.\ (;::.~.; ~~ ~~ ~~ r-" \\1:\ __, 't"twllJ'" ' ~(;r....' r \':l;i ~~"".'("~~~~'~~:;=;;;:-~*'tEL " ~ wcno; '000 -;C:C .... $' ltOrOS..j QfO. ,r.o. '. "." u~ IIJ,IC":'~" " ClO~: \ \ ~ ~ i '2 I v, i ..., e c:: -i < '" -;1. u:2: --' ~~ "'~ ::-.,... ......-= 9~~ ~~~ :i = 1 ~~.J.~ :-r~1 :> - " (j " ~. '" " ~~.- .1Il 1Il'-' 1::;;;, =- -~ ~~ ,,1Il ~=; Q~ 05 <'" o c< ~~ ~~~ ~~r.: =~~ _ i .~ - -- ~:.,o '-...,- ='-~ -,=9 ~ Vi ~~Vl 0<< ;;:~ ~~'-- -;.:. .~ ~s. 'u' T-- -:-,.t''':. :) V I, U o .....J ~.. ". IT) ~~:;;;:..~.,~ '-. ... . '. t~"""'" \;.. : l \;j '..r~~... .~~:-;:..>-.- "-. ....~ \ \ "v" :rLql:lp:Z ..... ...-~~ 70 Exhibit "B" Upon notification by the landlord that suite F -1 has been rented( per the lease rider # 1) the following work will be required to be accomplished: Landlord's Required Work . Landlord to provide a re-configured space acceptable to the tenant, by constructing a new wall, reducing the leased space to approximately 2850 square feet. A new double entry door will be added to access to the new space. . Landlord will provide one office shell of approximately 64 sq ft. in the new space. The landlord will also continue to provide access to the bathroom that will provide appropriate security for the tenant. . The cost of these changes will be paid by the Landlord, and subsequently partially reimbursed as noted under "Tenant's Required Work". Tenant's Required Work . Tenant will be required to make all required changes for phone lines and computer connections at the tenant's expense. . Tenant will be responsible for annual payments for the construction costs as follows: April 1 , 2005 April 1, 2006 April 1 , 2007 $5000.00 $5000.00 $5000.00 71 SIGN COVENANT W A TERFORD CENTER I. Exterior Si-gnage . Holiday Station Store A. Tenant shall, at landlord's option, be allowed to idenLi.fy the Premises by means of an illuminated signage located on the exterior of the building and contained wholly wii:hin the nmitations eS1ablished by landlord as follows: II One pylon sign, as described and outlined on the attached Exhibit" A", Convenience Store. ~ Building signage to be illuminated from the sofiit, by down wash lighting OntO the facia as described and out(lned on the attached Exhibit "B". This slgnage shall be placed O~~~f the pump Island conopy, bu, in no event nage be placed on the rear of the building. I J.- V'\. 0 ~ .- -\ \ND ~ \, -- II. Exterior Signage . Remaining Shopping Center Tenants A. All remaining center tenants, excluding Holiday ("Shop Tenants") shall be restricted to one sign on the exterior sign band located on the north face of the cemer. 8. Sign consuuction will be individual channel letters illuminated from a neon source contained in each letter. C. Signs shall have red or white faces with returns, silver trim and the color of landlord's sign band. logos shall be in red or white color. O. Sign wording shall be limited to Tenants name and logo. E. Location of sign shall be controlled by Landlord but mus't be located within the designated sign band area. F. Sign letters may not exceed 24-" in \leight and logo may not exceed 36" X 36". G. The length of the sign shall be the lesser of; 1} twenty five (25) feet or, 21 the 'total frontage of the tenant spece. H. No signage shall be allowed on the south side of the cemer. 1 /"/""\ /' .I .-2" r\1 ...:> ,.1,/; I /-; ,/ { ~ 7/''': :.:.....1,.: '.--- 7? ,I. pylon Signage A neW pylon sign shall be installed dir ectl'! north of the shopping centor. The pylon sign shall not exceed twentY 1201 feet in nelght and shall be consistant In design to the attached bhlbit "A" . Waterlord Shopping Can'"'. The p'llon sign may advertise the center name and the tenant nameS lexcludlng Holidayl. Total signage lor building and pylons must meet CitY of Shorewood sign ordinances tor area. A. I / B. I ,l- I C. IV. RemaininQ 'i=rees1.anding ?ad Buildings A. New tenants in these spaces sha\\ be allowed to Install signage that does Mt exceed 36" in height and must be approved by the City of ShOrewood. e. Tenants In these building may be allowed to erect no more than tWO 121 signs, provided the signs are not on the same bU\\ding face. In no event will · sign be placed on the south side of the buildings. C. Sign construction will be Ind'IV,dual channel letters illuminated from a neon source contained In each letter and shall have red 0' white fac'" D. Sign waro,ng shall be limited to Tenant' name and logo. E. Each pad site owner wl\\ be allowed to Insta\\ a pylon sign whiCh shal\ not exceed twentY 1201 feet In heigh<, <en P Olleet In width and must be app,oveo by ;:he CiW o.f ShorewoOd prior to erection. V. General ?rov\sioliS 1. Tenants sha\\ not be a\\owed ~wlndaw sigM within the premiSes. 2. All permenant anO temporary signage must be approved bV the CitY 0\ st\orewood, prior 'to dIsplay. 2 ---------- ..., 73 j L . o I l;:l . o I '\S , i \ I I LJ ,w #z d .~ a ~ '>- CL. <t . o yo , aD 5 :c~ <t , co : ~: \=! z: C'\l - 5'";:::;- ~ 'N :::: III .~ .~ { j [ l @ 25 \ \ o ~\.J ;29 2 d a~ g ~ o~ 0 '5 ~2ta3z;:t :\7'.1 a I.I.J \=! u:. \=! '";:::;-';;i ~ ~ ~ ; 'co '0 ';::; \ ., .., I ,., '::: ':::\ -:-- 1\ 1\ 'co 'N "- :::: ., ~ '(.0 "N '(.0 74 V'i zG. :Jin 0::2 ~= "'~ ~111 9:3 F- II1Z F :30 <u ..... "1 ". ~ a -a ... IW.M .---.-.1 ... Cl o z I i 1.Il_~ ~'il . t: E ~ 0- a.....; E;h 00..:5 U "'!~ --~ ::;- ~~ ' o u ,~ "'0 v ca" =%- ~~i % ~ ~ <t en 5 < i7'\ u... )- c.& ~ oq" :z: I <t U >- ~z 0- 0 ~i :z: < .~ (J ..I 0 >- ~ :z: :;: g:~i 0 .1 co .... )( ! Co ! ~ .\ ~ (l'J ;: \ Ie' \~ ~r~f \~:~\ Exhibit f, ff--.J\ [t-,\ /~ .: I RIDER #1 TO LEASE AGREEMENT BETWEEN W ATERFORD CENTER LLP, LANDLORD AND CITY OF SHOREWOOD TENANT. Dated this 6 daYOf.~' 2002. RE: LANDLORD~OPhJN FOR DOWNSIZlNG The current suite occupied by the Liquor Store is referred to as Suite F consists of approximately 4500 square feet. As of April 1, 2002 the suite known as Suite F-l, consisting of approximately 1650 square feet at the Waterford Shopping Center has not been leased. Whereas Landlord wishes to retain the ability to rent Suite F-1, it is hereby agreed: No disruption of the space will occur for the period of.April1, 2002 through September 30, 2003. After September 30, 2003, should the landlord rent suite F-1 a 90-day notice shall be given to the tenant of the downsizing requirement. In the' event the downsizing does not occur during the term of this lease, the tenant will not be responsible for downsizing costs, as outlined on Exhibit "B". Upon rental of Suite F-l, Waterford Center LLP.will make arrangement to have the utilities for each suite isolated. Access to the rear entrance of Suite # F will be provided. Landlord will continue to provide access from Suite F to a bathroom that will provide adequate security for the tenant. 75 M/\R I 8 '200~ Waterford Center LLP Charles Ehlen P.O. Box 1185 St. Cloud,1v1N 56302 March 17,2003 City of Shorewood Liquor Board Attention: Bonnie Burton 5755 Country Club Rd Shorewood,1v1N 55331 Dear Ms Burton: Please be advised that we have a prospective tenant for the f650 sq ft that is at our option per your lease agreement. This would have you responsible for $15000.00 in remodeling costs. We are willing to renegotiate your lease to prevent the downsizing of your space.. It is our understanding that the' Shorewood location has been a successful operation, and feel it is an asset to our center. Downsizing may not be in your best interest. We ask that you discuss your intentions at your next board meeting. We would think that should downsizing take place, you would experience some degree of contraction remorse. Sincerely, % t(JJtctffj 1 v Charles P. Dukowitz Property Manager n CITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD. SHOREWOOO, MINNESOTA 55331-8927. (952) 474-3236 FAX (952.) 474-012.8 . www.ci.shorewood.mn.us . cityhaH@ci.shorewood.mn.us . May 30, 2003 Mr. Chuck Dukowitz, Property Manager Watertord Center, LLP p.G.Box 1185 St. Qloud, }..tl:N 56302 Re: 2002 Municipal Liquor Financial reporting Dear Chuck: As we discussed, enclosed is financial information for the period ending 12/31/2002. As you can see, gross sales for 2002 were $792,379. Therefore, based on the terms of the lease, the 2003 rental rate should be $5,007.12 per month. . The calculation. for this is as follows: base rent $4,583.33 plus 423.79 = $5,007.12 per month: (The additional monthly component is calculated as follows: $42,379 x .12/12 months.) Please contact me if you have questions or require additional information. . . Sincerely, ~ Bonnie Burton Finance Director (Jf) ~.J ?P.IN"T~J 01': P,=.CYCL=.O PAPER 77 (/ , , , ~ CITY OF Q~ ~!!2~~~S?EgRNNEsoTA55331-B927 .~~k6 ,FAX (952.) 474-Q1~8' www.ci.shorewood.mn.us' cityha\\@ci.~horewood.mn.us .. BY FAX ' , 320,;252-5889 April 5,,2004 Mr. Chuck Dukowitz, Property Manager Waterford Center, LLP : P .a.Box 1185 St.'Cloud, ~ 56302 Re: 2003 Municipal Liquor'Financial 'reporting , Dear Chuck: ." ", " . . . M we discussed; enclosed is financial' infornlatio~ for the peri ad ending 1213112003. As ' you can see, gross sales for 2003 were 1$ 841,434. Therefgre, based on the terms of the lease, the,2004 rental rate should be $5,497 .67' per month. ' The calculation for this is as follows: base r~t.$4,583.33plus $914.34 = $5,497'.67 per ,month. (The additional monthly compOnent is calcUlated as folloW s: $91,433.85 x .12/ 12 months.) ,picase contact me if you have questions or require additional inlonnation. Sincerely, , IA. 17' ' ~~ Bonnie Burton Finance Director " (J'f) Vo d ?;;\~:-;-~O Oi': ~:.CVCL=Q ?p,F~?, 78 CITY OF SHOREWOOD ": ~ .. i<'::;::::~:l) 1. <:~'<;;di 11.- ~.."::,.....~.-...--~... </ 5755 COUNTRY CLUB ROAD. SHOREWOOD, MINNESOTA 5533i -8927 · (952) 474-3236 . FAX (952) 474-0128 . www.ci.shorewood.mn.us' cityna\l@ci.shorewood,mn.us' BY FAX 320-252-5889 April 22, 2005 Waterford CenteJ;, LLP p.G.Box 1185 St. Cloud,11N 56302 Attention: Stacy Re: 2004 Munici.P~ Liquor Financial reporting Dear Stacy: 'Enclosed is financial information for the period ending 12/31/2004. As you can see, gross sales for 2004 were $857,589. Therefore, based on the terms of the lease, the 2005 rental rate should he $5,659.22 per month. The ca1c~lation for this is as follows: base rent $4,583.33 plus'$1,075.89 = $5,659.22 per month. (The ad.ditional monthly component is calcukted as follows: $107,589 x .12/12 months.) please contact me if you have questions or require additional information. Since, "r,e,lY, /1 ~~wkL Bonnie Burton Finance Director Cc: Don Swandby, Liquor Operations Director (f~ v () P?\i';TE~ C:--l P::CYc.\_=O P-~?=;:, '~G 79 ------=- CITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD. SHOREWOOD, MINNESOTA 55331-892.7. (952) 474-3236 FAX (952) 474-012.8. www.cLshorewood.mn.us . cityhal\@cLshorewood.mn.us Celebrating 50 Years t 1956. 2006 BY FAX 763-533...940:;'- q5 S h June 28, 2006 I. Mr. P. Palanisami 'WaterfordCenter, LLP . 5661 International Parkway . Minneapolis,'MN 55428 Attention: AJ:1gie Olson Re: 2005 City of Shorewood Municipal LiquorPinancial reporting Dear Ms. Olson: t' . . . Enclosed! is financial information for the period ending 12/31/2005. As you can see; gross sales for 2005 were $852,197. Therefore; based on the terms of the lease, the 2006 rental rate should be $5,605.30 per month. . .' - .' , The c~lculation for this is as follows: base rent $4,583.33 plus $1,021.97 =$5,605.30 per month; (The additional monthly component is .calculated like this: $101,197 x .12/12 months.) "We"also 9iscussed a slight overpayment we made for the Apnlrent. I understand 'lOU will send u.s an invoice for rent for th~ months of May, June and July, less the oyerpayment for April. Going forward, you saidyou will be providing us with monthly rental invoices. Please contact I1?:e if you have questions or need more information. Sin~ej y, /- c...- . AV Bonme Burton Finance Director Cc: Don Swandby, Liquor Operations Director . :$..rJS:J F:=.~i"I"7ED C) >1 P.:::C;'(C_::c ?:'.?::::=:. '0..7:7 80 JUN-28-08 MON 05:21 PM P~L~HIS~MI & ~SSOO IHO FAX NO, 76353385~o ..t.,60.d z.z.P M:ty 17,2006 Shorcwnncl Ml\T\idp~\l Liquor!;; 'Uni t F Dear Val ucd TeI1.:mt Rc; WatcrfoT(l Sh(lPpil1g (:ulltcr 19905 Hig,bway 7 Shorcwoouj MN 55331 r' . U'c',/ U'c', Thislcttor sh:..)l1 sct"victl i\~ nol i~c thllt ma.n~lg~mc.nt fot' the Watcrford ShoP'P1ng Ccntc,r hRS changed. All fc\lUN c:ot'r(:fipot1dcnCl) sh:111 be wiU, W'lterforo LLP. Please direct all fut.ure cortcspcmdcucc f:lnd tilquhcs to: .' ' 'Mr. P. Pal~nisami (Swami) WMcrford LLP 566'l 111tc:rnat.ional Parkway New Hope, MN' 55428 rb.~ 763-533-9403 Fax~763-533-9586 CcU~6'12-865-8621 E in~ti t : sw ?-1;l1i.en gin eerq~pal anis ami,co m There i.~ 110 Ch;1l1gc ill the daily opc\'atiolls, cvcryihhlg remnins the same except for the mmHl.gcmol\l :..ld<.1rch~ ,l'm1"Ull'\\!., You l'nnybe depositing H1IH0nl c11Cd~~ d1n~ctly with \3eRC01'l. Bank in th<':111a!;t, this rr..Jl\l;~1nS the S::1\\lO. Thrmk you ror YOUT cO<ll)~ri.ll'on, Sint.ercly, P. p8.1n.nlsa.mi 566"11r.tcl.'ltationa11)kwy lv\irmeapiJlis, M~ 55,~~2g 763-533-9403 (Fa\.) 763-S33-958(j Q1 JUN-26-06 MON 05:21 PM PALANISAMI & ASSOC INC FAX NO. 7635338586 p, 01/02 .....'.,ZOIl'II c.....e.... >>AP June 2<l. 2006 130nniQ Burlon Final\CC Director City of SlIol'cwooc\ Fax ~ 9S'2~.c:174..012.8 ShOf\.M(,)(,)U MLmicip~1 Liquor:; (UniL F) W Lit~d(ml Center 19905 HighWt\Y 7 Shol'GWOOt1, MN 55331 DL:ar Bonnie, Attached is t\ t.,opy of~, lcltcr that was prcviot\sly drol1tioo 0[[ al the liquot ~tore. Plc-,flSL:: note that Swar'ni Pa1ai'\1Sami. (OWl1~l') will now be handling the management of the shopping center dl:ltil1,lJ, bnck t() Murc;.h 1,200(1. All things to TCll~ain lho sal\\(1 (\XCOI'\ f()r the rl'l::\1It1gm\i0nt oudr'~ss wm now be Wntcrfol'd C('.ntcl' LLP S6611ntcmn.t\C1i,,~11)[lrkway Minl1~ap()liR, MN 55"1.7..8. Ucsidr.::s corr(,~~~pM\\.bw\.\, i'lS prG\'1mn:;1y l;t;.1tecJ; p'c~\se ~end Ill' pllytmmt.s to th.ls address. Do you l'cqniro an {nvoico fi'lOnthly? We hav~') 110t gotterl far Cl'lQugh into tl'lc paperwork to see what Y(lUr gross sah::s f~lr 200~ \('ltatcc.\. I did, howcv\::r. see a ktter fLam. you for the 2.004 Omss sale..., th~\t dctcm'\incid Y(,"J\ll' rc:nt n)l' April?'OOS thru March 2006. The ren.t th\t we received for t\pril2006 was tho sat\''tL.l us rho 1!\onin before, ~o'1 t'hink that we will be adjustIng that amot.1l'I1. as soon as Wl') can discuss thi.1.t.. Mayhe 'Y(.)U alTeady know what that amount wilt llC, Y<m 111ay conI net SwnTI11 <1t h\~ <1\ rc:o~ mll1ibcr 763~501\,~5262 or h~s cc11612-86S~8621. ll'you arc unabh~ to ttf\dl hi rtl , YOl'l rnay .....J~() lcaVll a D1c.s~~tLgl3 N question with me at 763- 504.5290. Thl'int: you 1'0\' your help. Ang1c Olson Own(;~r asslsli'lnt 5661 Intcrrnlic,!'!311'k'vvy Minn("ap()li~., 1\1'N 554.28763-533-94.03 (Fax) 763-533-9586 Q? -v u .....t...60..... C..t... z.z.p July 10, 2006 Owner and! or Manager Shorewood Liquor 19905 Hwy 7, Suite F Shorewood,1{N 55331 Hello, The management has changed for the Waterford Center. It noW takes place out of Swami Palanisami's (Co-owner) office in New Hope. We would like to have a tenant meeting to discuss all issues related to all tenants. Any individual issues will need to be discussed privately. There may have been some negative things that happened in the past or things that did not happen at all that should have and we want to address them and make sure that this is a win-win situation for all. We can also discuss the good things. I hope that you have some of those too. The meeting will take place on Friday July. 21st at 10:00 a.m. Please have someone present that can represent your store. I will have to notify you as to the exact location. It may be outside or in one of the vacant areas. Either way it will be at the shopping center. Please bring something to sit on if you do not wish to stand. Please bring a key to your exterior door to this meeting. We need to have one for each area put in the fire department lock box that is located behind the Holiday store. I have been going tbru boxes of files in the last week and want you to verify a few things to make sure that we are on the same page. 1. Your lease expires March 31, 2007. 2. You pay a monthly base rent of 4583.33. You also pay a percentage of gross sales from the previous calendar year beginning in the following April. April 2006 thru March of 2007 will have an additional cost of 1021.97 for a total of$5605.30 per month. 3. I see in your file, a "Landlord's option for Downsizing" agreement. We may be doing that this year. We will give you the proper 90 days notice. 1 have attached a form that I need f1l1ed out to make sure that our records are updated. Could you please fax it to me at our office when you have completed it. Our fax number as listed below is 763-533-9586. I am also asking for any suggestions ofreliable and not the most expensive contractors for the maintenance jobs. This would include lawn care, landscaping, snowplowing, parking lot sweeping, etc. I need to know how you know of their experiences and reliabilities. Family members are probably not a good idea. 5661 International Pk--w"y Minneapolis, MN 55428763-533-9403 (Fax) 763-533-9586 R::l .....t.'60'. a..t.r z,z.p please call me at my direct number 763-504-5290 and let me know who will be attending our meeting or to ask me any questions. Thank you for your input. Angie Olson Waterford Center LLP 56611ntemational Pk\'ry Minneapolis, MN 55428763-533-9403 (Fax) 763-533-9586 84 RETAIL LEASE AGREEl\LENT BY AND BETWEEN ../... .<>~ SHORE-WOOD VILLAGE SHOPPING CENTER. INC. A~D CITY OF SHORF-WOOD TABLE OF CONTE!'TS Page ARTICLE I LEASE SCHEDULE ........ . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . \ 1.01-1.1' LEASE SCHEDULE. .................................... .... .......... . . .... . . .' . . .' .. " 1-2 ARTICLE II RENT, OPERATING EXPENSES, SEc;uR1T'l DEPOSIT. REAL ESTATE TAXES.................. -......................................... , 2.01 M\NlMUM RENT. . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . .. . . . . . . . . . . . . . . . . . . . . . . - . . . . . . ... 3 2.02 LEASE YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . .. . - . . . . . . . . . . . . . . . . .. . . . . . . . . . . .. , 2.03 PERCENTAGERENT. ............................................. ....:.................. _' 3 a. AMOUNT. ............................ -' . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .. . . , b. SALES REPORTS. .......... _ . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . .. . . . . . . . 4 c. DEF\NlTION OF GROSS SALES. ................... - .. . . . . . . .. .. . . . . . . . . . . . . . . . . . . . 4 d. RECORDS AND BOOKS. ...:...................................................... 4 e. lNSPEGl10N AND AUDIT. .................... -............... . ......... ... .... . -" , f. CONFIDENTIAL INFORMATION. ............................................. - . . . . g. RADIUS. . . . . . . . . . . . . . . . - . . . . . . '.' . . . . . . ..' . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . h. PERCENTAGE RENT AFTER A DEFAULT. -......................................... 1. RELATIONSHIP OF THE PARTIES. ., ..... .. . .. ., . . ., . .. ........ . ..... . .. .. . .., .. . .. 2.04 OPERATING EXPENSES. ....... -' ., .., . . . . . .... . . ., . . ., - . . . ., . .., .., . . . . . .... . . . . . . . . . . .. - . 2.05 SECURITY DEPOSIT. . . . . . . . . . . . . . . . . . . ., . , . . . . . . . . . . . . . . . . . - . . . . . . . . . . . . . . . . . - . . . . . . . . . - . . . 2.06 REAL ESTATE TAXES AND ASSESSMENTS. ...... - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.07 ADDITIONAL RENT. . . . . - . - . . . . . . . . . . . . . . . . . . . . - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . . . . . . . 2.08 NO OFFSET. .............................................................................. 2.09 INTBRESTILATE FEE. ..:............................... -................................... ARTICLE Ul DEFlNlTIONS .................................................... · . . . . . . . . . . . . . . . . . . . . . . . :'.01 COMMON A'REA ............................................................ - . . . . . . . . . . . . . :'.02 EXPIRATiON DATE. ........................................................................ 3.03 FORCE MAJEURE .... - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . . . . . . . . . 3.04 INSURANCE REQUIREMENTS ................. -" . .. ... . ., .. .. .... ." .. .. . .. . . . . . .. . . . . . .. . 3.05 LANDLORD'S WOBJZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.06 MORTGAGE ., - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . . . . . . . . . . . . . . 3.07 MORTGAGEE -' . . . . . . . . . . . . . . . . . . . . . . . ., . . . . . . - . . . . . . . - . . . . . . . . . . - . - . . . . . . . . . . . . . . . . . . . . . . 3.08 PAB....~G ~A.................................................... -............. -....... 3.09 "PERSON. . ..... . ., . . . . ., . . . . . . . . - ., . - .' .., . ., . . ., . ., . . . - . . . . . . .... - . . . . . . . . . . . . . ., . . . . . . . 3.10 PRO RATA sH.ARE . - . . . . . . . - . . . . . . - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . . . . . . . . . . - . . . . . . 3_11 REPAIR. .......... - . . . . ., ., . . . . . . . . . . . . . . . . . . . -' -' . -., . . . ., . . .' - ., . . ., . . . . . . . . . . . . . ., . . . . 3.12 TENANTS AGENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . . . . . . . . . - . . . . . . - . . . . . . . . . . - . . . . . . . . . . 3_13 TENAl'ITS WO'P.JZ ......................... - . . . . . . . . . . . . . . . . . . . . . - . . . . . . . . . . . . . . . . . . - . . . . . 01:: Pa~e ARTICLE IV CONSTRUCTION OF THE DEMISED PREMISES; EFFECTIVE J?A TE . - . . . . . . . . . . - . . . . . . . . . . . . . . . . .. 8 4.01 LA1'.TDLORD'S OBLIGATION TO CONSTRUCr. ................................................. S 4.02 DELIVERY OF POSSESSION. .. .' .. .. . .. . . ., . . .,. . .. . .. . . . ., . . .., . . .... . . . - . . . . . . . . .. . .. . .. . ., 9 4.03 TENANTS WORK. .........._................................................................ 9 4.04 ACCEPTANCE OF POSSESSION. . . . . . . .... .,. . .. .. . .. . . ....... . . . . . ..... . . ., . . . . . . . . . . . . . 9 4.05 AR13ITRA TION. ............................................................................ 9 ARTICLE V EFFECTIVE DATE; MEMORANDUM OF LEASE .............. - . . . . . . . . . . . . . . . . . . . . . . - . . . . . . . . . ., 9 5.01 EFFECTIVE DATE OF LEASE. .... . ..' ..... ... .. ... . .. ., .... .. ." .... .., .. ." . . . ... . . .. . .... .. 9 5_02 SHORT FORM LEASE. . . . . . . . . . . _ . . . . . . . . . . . . . . . . . . . - . . . . . . . . . . - . . . . . . . . . . . . . . . . . . . . . . . . . . .. 10 ARTICLE VI CONDITION OF PREMISES, ALTERATIONS, SIGNS .............................. - . . . . . . . . . . . .. 10 6.01 NO REPRESENTATIONS, ETC. .............................................................. Ie 6.02 ALTERATIONS. ............................................................... -........... Ie 6.03 MECH.ANICS LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1 ( 6.04 SIGNS. ............... _ . . . . . . . . . . . . . . . . . . . - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . . . . . . . . . . . . . .. 1 ( 6.05 WSURANCE COVERING TENANTS WORK- .................................................. l' ARTICLE VII REPAIRS, COMPLIANCE, SURRENDER.............. .... ., .., .............. ...... .... . ... ... 1 7.01 REPAIRS BY LANDLORD. ....................................................... -........ 7.02 REPAIRS AND MAINTENANCE BY TENANT. ................................................ 7.03 APPROVAL BY LANDLORD OF REPAIRS. .................................................. 7.04 COtviPLlANCE. -...................................................... . . . . . . . ................... . 7.05 ELECTRICAL LINES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . . . . . . . . . . . . . . . . . . . . . . . 7.06 EMERGENCY REPAIRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.07 sUR.R.ENDER OF PREMISES. ............ - . . . . . . . . . . . . . . . . . . . - . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . ARTICLE VIIl SERVICES AND UTILITIES ..........................,.........................,.........., 8.01 UTILITIES. ..,.......,.......................,..,.. - . . . - , . - . . . , . . . , . . . . . . . . . . . . . . . . . . . . . . . 8.02 METERS. ..................................................................,.......... - . . . ARTICLE IX USE AND OPERATION .....,................................................................ 9.01 USE. ................ -........ . ...... .,. . . . .. . ., . . ., .., . ." . . -' . . ., .. .. . .. . . .. . . . . ., ., .. . . 9.02 CONTINUOUS OPERATION. .................................,...,...... -... -............... 9.03 STORE OPERATIONS. ..............,.......,... .. . ... -" ... ."... ...... ., -' .. . .. -.' ........ . 9.04 RESTRICTIONS ON TENANTS ACITVlTIES AT SHOPPING CENTER, . . - . - . . . . . . . . . . . . . . . . . , . . . . . . 0.05 INSURANCE RATE. ................ .., ........ .......... -...... ..... . .. . .... -.. .,. . .. . . .., . 9.06 RESTRICTIONS ON OTIIER STORES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Q~ Pa~e ARTICLE X TRANSFER OF INTEREST, PRlORlTY OF LIEN.. . . .., . . . . . .: . . . . . . . . .., .,. . .-. . . . .., . .. . . . . . - ." 14 10.01 ASSIGNMENT OR SUBLEASE BY TENANT. ..,...............,............................... 14- a. SUBLEASE. . . . ., . . .., ..... ., . ., . . .. . . . . . . .. . . . ' . . . . ., . . ... . .. .., . . . . . . . . . . . . . . . . . . . .. 14 b. ASSIGNMENT. .......................... ......... ., . .. ............. ............ .,.... 1:\. 10.02 SUBORDINATION. ........................................................................ 15 10.03 ATTORNMENT. .............................. ......... ., .................... .... .... ...... 16 10.04 TRANSFER OF LANDLORD'S INTEREST. .. . . . . . . ., . .... .. . . . . . . .... ...... . . . . .. . .. . . . . . . . . ... 16 10.05 MORTGAGEE'S RIGHTS. ...... .., . . . ., ., . . . . . . . . . . . . . . . . . . . . . ., ....... . . . . . . . . . . . . ., . .. . . .. 16 ARTICLE XI COMMON AREA AND SHOPPING CENTER ................................................... 16 11.01 USE OF C0Nfiv10N AREAS...... _......... . ......... . -. . . . -., ......... -.... ..... . ., .. ., . . ... 16 11.02 LANDLORD'S RlGETS. ................................. -..... -..... -...................... 16 11.03 LICENSE Nl]1vffiERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 17 11.04 LANDLORD'S OBLIGATION WITH RESPECf TO PARKING AREA. .. . . .... . . . . . . . . - . .. . . . . . . . . .. 17 11.05 PROMOTION; MERCHANTS ASSOCIATION. .. . .. .., .,. .. . . . . ... -.. ....... ., .., .. . ... ... .. . .. 17 11.06 ADVERTISING. .... . .... .............. ., ., . . ...... ., .. . .., . ..... . -.,. . .., .., ., .. ., . .. . .. .. 17 ARTICLE XII DESTRUCTION AND FIRE INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 17 12.01 RENT ABATEMENT. ..................... _ . . . . . . . . . . . . . . . . . . . . . . . ., . . . . . . . . . . . . . . . . . . . . . .. 17 12.02 OPTION TO CANCEL. ........................................... - . . . . . . . - . . . . . . . . . . . . . . . . .. 18 12.03 OBLIGATION TO REBUILD- ............................................................ -.. 18 12.04 WAIVER OF SUBROGATION. .............................................................. 18 12.05 RlGlITS OF MORTGAGEE. ., . . . _ . . . . . . . . .. . . . . . _ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. l~ ARTICLE XIII CONDEMNATION........ _.......................... -" -................................. 1: 13.01 DEFINlTIONS. .......... _ ., . .. ., . :.. . _ . . . . . . . . . .,. . . . . . . . . . . .. . . . .... . . . . . . . . . ., . . . . . . . . .. 1 a. AWARD ........................................................................ 1 b. TAKING .... . . . . . . . . . . . . . . . . . . . . . . . . . . . - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1 c. TAKING DATE......................... _.,. .,....................-.... -." ....... 1 13.02 TOTAL OR SUBSTANTIAL TAKING OF DEMISED PREMISES. ....... -. ." .. .. . . . . . . . . . . . . . . .. ., 1 13.03 ABATEMENT AND RESTORATION. -......... -..... -............... -........................ 13.04 TAKING FOR TEWORARYUSE............ -................ -................................ 13.05 DISPOSITION OF AWARDS. ............... . . .. . . .. . .. . . . . . . . .. . . .. . .. . .. . . . . . . . . .. . . . . . . .. . ARTICLE XIV INDEMNITY AND LIABILITY . .. . . . . .. .. . . . . .. .. .. . . . . . . . . . .. . .. .. . .. . .. . .. . . . . . .. . . . . . . . .. 14.01 IlIDEMNlFICATlON. ........... ., ..... . . . . . .., ., . . . . . . . . . . ...... .., . . . . . .,. . . . . . - . .. . . .... 14.02 RELEASE OF LANDLORD. .. .. .. .. .. . .. . .. .. .. . . . . . . . . . . . .. .. .. . .. .. . .. . . .. . . . . . . . . .. . - - . . . 14.03 TENANT'S INSURANCE. . . . . . . . . . . . . . . . . . . . . . . - . . . . . . . . . . . . . . .'. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.04 PLATE GLASS INSURANcE- ............................................................... 14.05 GENERAL PROVISIONS WITH RESPECT TO INSURANCE. .. , . . .. . .. . .. .. .. . . . .. . . .. . . . . . . . . .. . 14.06 INABILITY TO PERFOFM. ............... . . .. . .. .. .. . .. . .. . . .. . .. . .. .. . .. . . . . .. .. . . .. . . .. .. 14.07 BROKERAGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . . . . . . . . . . . . . . . - . . . . . . . . . . . . . . . . . . . . . . ARTICLE y:y COVENANT OF QUIET ENJOYMENT .... . - . . . . . . . . . . . . . . . . . . . - - . . . . . . . . . . . . . . . . . . . . . . . . - . . . 87 Pae,:e ARTICLE XVI DEFAULTS; REMEDIES ................................................................... 21 16.01 D EF A UL TS. . . . . . . . . . . . _ . . _ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 21 16.02 REMEDIES. .............................................................. . . . . . . . . . . . . . . . .. 21 16.03 DEFAULT BY LANDLORD. ................................................................ 23 16.04 LANDLORD'S RlGHTTO PERFORM FOR ACCOUNT OF TENANT. .............................. 23 16.05 ADDITIONAL REMEDIES, WAIVERS, ETC. _..... _........................ .... -.............. 23 ARTICLE XVII TENANT INFORMATION ..........................,.................. - . . . . . . . . . . . . . . . . . .. 24 17.01 TENANTS CERTIFICATE. ................. _ . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . - 24 17.02 FINANCIAL rNFORMATION. .. . .. ...... ..... ..... ., .................. . . .. . .. -... .. .. .. ..... 24 17.03 CONFIDENTIAL INFORMATION. ......................................... . - . . - . . . - . . . . . . . .. 24 ARTICLE XVIII RIGID OF ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . . . . - . . - . . . . . . . . . . . . . . . . .. 24 18.01 EN'TRY. ......................... _. ., .... .. .. . . . .,. .,. . . . . -.. ...... . - . -. ., .. . . . . .. . . .,. .. 24 18.02 EASEMENT FOR PIPES. .................... _ . . . . . . . . . . . . - . . . . . . . . . . . . . . . . . . . . . . . . . - . . . - . .. 25 ARTICLE XIX INTERPRETATION~ NOTICES; MISCELLANEOUS ............................................ 25 19.01 INTERPRETATION. ................................................................. -. ., -. 25 19.02 CO'tvWUNICATI01-tS.,..... . . _ . . . . . . . . . . . . . . . . . . . . . . . . . '.' - . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . .. 25 19.03 SUCCESSORS AND ASSIGNS. ........................................... . .. . ...... . .. .. .... - ~ 19.04 RESPONSIBILrrY OF TENANf. . . . . . . . . . . . . . . . . . . .. . . . ., . . . . . . . . . . . . . . . . . - . . . . . . . . . . . - . . . . . . 19.05 LlABILrrY OF LANDLORD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . . . . . . - . . . . . . . . . . . . . . . . -. 26 19.06 GOVERNING LAW. ... _ . . . . . . . . . . . . . . . _ . . . . . _ . . . . . . . . . . . . - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 26 19.07 GUARAN1Y. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . . . . . . . . . - ., . . . . . . . . . . . . . . . . . . . . . . . . .. 2E 19.08 EXECUTION AND DELIVERY REQUIRED..................... ... -..... . . ..... .... . ...... .. . .. 2E The submission of this document for examination does not constitute an option or offer to lease space at the property. Thi: document shall have not binding effect on the parties unless executed by the landlord and the tenant and a funy executed cop: is delivered to the tenant. 88 SHOPPING CENTER LEASE THIS LEASE dated Julv 17, 1998, is by and between Shorewood VillaQ:e ShopoinQ: Center. Inc. ("Landlord") and GD' of Shorewood, a Minnesota municipal con;>oration ("Tenant"). In consideration of the mutual promises and covenants contained herein, Landlord and Tenant hereby agree with each other as follows: ARTICLE 1 LEASE SCHEDULE The following provisions and definitions shall be applicable to this Lease: 1.01 DEMISED PREMISES. That portion of the Shopping Center (defmed herein) situated as set forth on Exhibit A, containing approximately 3.990 square feet including any alterations, additions or repairs made thereto. 1.02 TERM. The Term of this Lease shall begin on the Commen.cement Date, and shall end on the Expiration Date (herein the "Term"), unless terminated earlier as provided herein. 1.03 COMMENCEMENT DATE. The date upon which the Term of this Lease begins is referred to as the "Commencement Date" and shall be retroactive to January L 19.:n.. . 1.04 EXPIRATION DATE. If the Co""",",,<e.M.ot DM" i> lh: f." d") of 0 e>>l,:,,:~~ ."':.': ::~ ~ ::: " .. I t 6fthe. eaknd~~ moath i:n .....h1.e.h th_ COm1"l.'l:~fie.e.m~nt Date. e~e;llr3. The termination date shall be December 31,2001. (See Section 3.02) 1.05 RENT. Dollars (: a. MINIMUM RENT. Minimum Rent shall be payable at the annual rate of See Exhibit D See Exhibit D) in equal monthly installments of See Exhibit D Dollars ($ See Exhibit D) per month. . (See Section 2.01) b. PERCENTAGE RENT. N/A % (the "Percentage Rent Rate") of gross sales in excess of$ N/A (the "Bre2 Point") per Lease Year, during the Term. (See Section 2.03) 1.06 SECURITY DEPOSIT. $ N/A. (See Section 2_05) 1.07 TENANT'S GUARANTOR(S). N/A. (See Section 19.07) 89 ,.(. -..... 1.08 USE. a. PERMlTIED USES. Tenant shall use the Demises Premises solely for the purpose of conducting operating the business of retail municipalliouor store. (See Section 9.01) b. TENANTS BUSINESS NAME. Shorewood Liquor. (See Section 9.02) c. RADIUS. n/a. (See Section 9.06) 1.09 SHOPPING CENTER. Shorewood Vi1la~e Shopping Centerlocated at 23730 Highwav 7. Shore\'.'ood 55331 , State of Minnesota, and consisting of the property legally described on Exhibit B. 1.10 BROKER. Towle Real Estate Company. (See Section 14.07) 1.11 NOTICE ADDRESSES. a. LANDLORD'S NOTICE ADDRESS: Shorewood Village Shopping Center. Inc. c/o Towle Real Estate Company 330 Second Avenue South. Suite 800 Minneapolis. MN 55401 b. TENANTS NOTICE ADDRESS: Shorewood Liquor Shorewood Village Shopping Center 23730 Highway 7 Shorewood. MN 55331 (See Section 19_02) 1.12 PRO RATA SHARE_ A percentage as defmed in Section 3.10. (See Section 3.10) 1.13 LIST OF EXHIBITS. The following Exhibits are attached to and made a part of this Lease: A - Site Plan B - Legal Description C - Landlord's Work D - Other Provisions 2 90 ARTICLE II RENT, OPERATING EXPENSES, SECURITY DEPOSIT, REAL EST ATE TAXES 2.01 MINIMUM RENT. a. The annual rate of Minimum Rent shall be as set forth in subsection l.OS(a). Tenant hereby covenants and agrees to pay the Minimum Rent. Minimum Rent shall be paid in equal consecutive monthly. installments of one-twelfth (1/12) of such annual rate. The fIrst monthly installment shall be due on the Commencement Date, except that any payment made pursuant to Section 2.01(b) shall be applied to such [LIst month's Minimum Rent. Each subsequent installment shall be due on the first day of each month during the Tenn of this Lease next ensuing after the Commencement Date. If the Commencement Date is not the first day o[ any month, Minimum Rent [or the first month of the T~rm shall be one-thirtieth of a monthly rent installment for each day of ilie period [rom the Commencement Date to the last day of the month in which the Commencement Date occurs. If the Expiration Date shall not be the last day of a month, Minimum Rent for the month in which the Expiration Date occurs shall be one-thirtieth of a monilily rent installment for each day of the period from the first day of that month to the Expiration Date. Minimum Rent shall be paid without notice or demand, and shall be paid to Landlord without any deduction, offset, counterclaim or reduction whatsoever, at the office of Towle Real Estate Company, Special Dep'.Jsit Services, Box 11-0071, Minneapolis, Minnesota 55486 or at an address designated by Landlord from time to time. b. Upon the execution of this Lease TeIlBIlt shall pay Landlord an amount equal to one month's Minimum Rent Such amount shall be held by Landlord, without interest, pending the completion of Landlord's Work and Tenant's Work., if any, and shan be applied on the Commencement Date to the first month's Minimum Rent due under this Lease. 2.02 LEASE YEAR. The first Lease Year shan commence on the Commencement Date or, if t..'1e Commencement Date is not the first day of a month, then on the first day of the first month following the Commencement Date. Each Lease Year other than the first Lease Year shall connnence on the date next following the expiration of the previoUS Lease Year and shall continue for a period of one (1) full year therefrom ex.cept the last Lease Year, which shall end . on the Expiration Date. 2.03 PERCENTAGE RENT. ": _ ~=.,~.~:~~IlC"audf.- R<"':::''::'',~ ':~; ~~~:; =;SE~~~;;;t~~~~2~~.:.u~=E ~~d.::~_:==.~glhe 6<"f;='::' ;::==~~~. ;:;.~~, :?~~=~~=~~~;iE~;;;~:=r~?i~ ~r:~~~:'ii;~"" ~~~c?;'g~,~~;;~:;;;~?:?J::2,=::: ::::=:::::: ~,=~,.rt <!lie fu"dCh Leose .~. or. ~::::::= =: =:~ ;: ::"~";,:::' ~::; ';;~~'~: T,u~ the om,"'" ,f 'uch. ~'~'~~;';~~~::7 ~:~:;: ~~~~~::; h . r ,I e , pre" lded. Te.na:nt ha3 fully pcrfoITtled: !lolt of ll:s ell'.er ebhgfl:aens \:l:r.d:er fue befl:se ~. ~==. ;~",OVidclo Lad<llo,d, ~,.mufifta~~~S)~' ~~..:::f == ::::~g~:;: ;~~i~~ ~~~=::: ~:' -~ P,:c:::=~~~i:e ~:~::i:: ~=;~ ~...i;le to lMdl'~:;;;"';'" of"^",, "'"'-' fe, that portie: ~c ;;~ = : =;:;;.~~;: P::' ~fTenlJ:fit, a:r.d certified fr3 aEcuratc by a:r. m:{kpenderd: certified ptlbl:ie. ace.militant. 3 91 :' e. DEfINITION or cr,-oss Sf..LES. "C.03S 3ales", for pllrp0se3 ",fthis LeJ.3e, h<:.reb) i3 defJ:nd to me-an the cntd:e amount of 3ale3 of all n.erehane.i3c or 3er, ie<:'3 of e\ cry 30ft ,\ hJ.l'3oeH,r 301d c. rendered in, UpOll, about or resulti %'0\" tLc Dcmi3ed rren.i3es, ahd sh:>ll n.can :>11 3ak3, rceeipt3 and re\'enllCS, in any f0ffh and from an) alld all sour, "". hat30e ..er, diIcetly or indiIeetly rceei .cd b) Ten:mt as a n:.sult of this Lease. The foregaing deflniti{lfi shall be applicable ft.:.gardks3 of \,hether 3Lleh sale.s.' receipts G: w, CllUCS arc produccd or rc::.ci ",cd b~ ;ClW:l'.t\ or b) an;. CO~~~t~~~~~c_~~ :~~~_~. of Tc..ant, or b) aG} otLer bU3lnc3s assoclatcs ofTcl,a!.L 1l,c f0rq~,olhb dcfinlt.on sha.l bc app,leabL "tetLer such sules, f'Ceeipt.3, er re, etlues be e.,.idcheed by cash, check, credit, credit card., cl,Jrgc aceou!.t, exchange or othcrY\ ise, and each sale or SC(\ ice upon i:r.sl:fillr.(cnl'3 or credit shall be treated as a sale or scryice for the fullprlec in the n.onth during \\ Uch 3UC}. 3alc or scr. ice s1.all be n,adc, irrespceti. e 0 f tl,e tirhc when Tenant s1.all rcce1"'e. payment and without rescrve or deduction for tl'\J.bilit) or fJi~ut'c to e:olket. II. J.ddition to tLc forq;oil,g, b} ..J.)' of c.<.al"plc al.d root by w:iy oflin,itatiCft, gross sales 31.a11 tt,d.ldc wmn,isslofls, n:'lltals, pcrccllt3.ge, royaltiu, 0; erv.rites, bin or mad,3.I,disc ceftificat'Cs, all e.rcdit an.d cart) ing eL3.f);CS, 5.:l\cS a.,d s<::.r, ieC3 to cr"plo::, c.:S, 3ub tel,3.1,ts, eor,ees3ioldiircs or" cl.dot3, saks "herc orders Oll",il,:lt<::. J.t.d/Of arc 3.cecpted it. the Del"isd rrcl..iscs but deli.el)' or perfooL13.f\ec tL:::.r.::afis Ihadc fro,,, Of at al.::, pbce olh<::.r tL3.l1 the leased pr<:.."iscs, sales PUfSUIl.l<t to lH3.il, tcle~t'apL, tclcpl.Ol,e or othcr S11..i13.r orders rccci .cd or filled at or in the Demiscd rrcrniscs, and sale3 by m:::.J.t',S efmecbr.icul, 3clf opcratcd \lr1'l't1te7rt~~ Dcdue:tccl fron. "gro3s 3alcs" sl,ll.11 be amounts efrefund3, alle"ll.f\e<::.s mack on mcre.handise. claimed to be ddccti\'c or .:.l:ll'3ati:.3fll.etory, or di3eounts to Cl:l:3t'Om'Crs. provided they ha', e b-ee.n included in gr033 3ll.1e3 pw,'iously during the applie.ablc Lc.ll.se Ye:ar. and pro', ided further that if :mch re.funcl:3, allowanee.s or discounts arc in the form of credits to custome.r3 ::mch cre.dltJ :man be inch1dcd in gross saks whcn tlsed. Cr03S saks 3hall not incluoc excha.ngc of merchll:l:l.dise. bch..een locations, if Te.nant has more than onc.loeatien, where stich exchMlges axe made solely for the operation of Tenll:l.t's bU3iness and not for the pw:pose of coroumn'tll:ting a sale which b:a3 bce.n me:de. at, in, upon, abeut or fron. the Demisc.d rrcrnhes, merehandisc returned to YCndOr3, marmfaeturer3, or shippen, sale3 off:i:x.Ime3, eqwpmcnt and. properly ",hich is net stock in!Tack., provid-cd such sa-les arc not prohibited by the terms ofthi3 ~e, all Stm'l:3 area. credio rccd..ed in 3Cttl:cmcnt of claim3 for 1033 or da:m1tgc to me::.rchandi3c, and amount of MY 3aks or U3e tftx imposed by Il:l:l)' f'Cd.era!, sl:1l.tc, mtmicipal or goyemmcntt1.lauthority direct!) tipon s111<:3 or U3C, proyid:e.d the a:rnt)unt thereof is a.dded to the se.Uing price, the Ilmount thereof i3 cxprC3s1y charged 1':0 thc e~temcr, a specific record is made !rt the time of each 3:ll.k of the Il:l"l'l.ount of such tl:I:x, and the amount lhcrcof paid. 0 ._~ to the appropriatt:. tftxmg authority. No franchise or eapire.l steck mx ana. no income: or similar tax. bascd tlpon ir.eoff profit3, as 3uch, 3haU be: deducted from gross 3alcs in any cvcnt v,'hat3oc'.cr_ d. RECOIillS AND nOOKS. Tcrtll:l:l:t 3hf..B. irutfJl in the Demised Premises only Cll:3h rcgist'Cf3 with pcmtMCnt men.Of), which 3hall be 00:liz.cd. by Tenant to rceora al1salC3, vihcthcr fer e!l:3h or credit, at the time each sale i3 ma.a.e. Tenant shall kcep at the Demised. rrcmise:.s or at its principal office:., true:. and correct boob and rceor& in whic.h shall be:. recorded all gross 3ab, Me. v, hich shall be: prepared in aeeordm.e;e:. with gencrall) accepted aecOtmting prindp1.e3. "Do~ ~~ ~~~~~", for p.....p03e:S of thi.1 uasc, 3hall mcludc, but not be l:imited t'O, the rollo',. ing. boob ef aecount main-tftincd. in ae~~ ~'i_~ gene..all) acccpted ace:ounMg principles. all f-cderal, state MId loeal t:B:x returns ofT<:.nant relating t-e ~c~~.:: ~r.oo3 sa!cs, Ell; sales, 1:1se or gross receipts ta,x. retuJ:ro, Mid such othcr records ll:3 would be cXllIl"..mcd n.orm.a.Uy by an indq:cndcnt o::.rttfiee public Il.eemmtftnt i:a pcrf-e,rming ce.rtifi.ed a1:1d:it3 of the bU3mcss eOn61:lctt:.d in or from the Dembcd r~~~~::-:.r ~::~~:: ef tkte:.rrninillg gros3 sale3. fJl elcl1 registers a:nd all boob and reeorib of'I'ellant shall be ope.n to examination, i.n.spcctio! and. al:l.a1t by uS3or, or by it:s duly au-th-erired representative, at aU rcasenabk times. All boob and recor<b shall be retainc( b) T~nant f'Br examination f'Or a period of at lcll:3t three (3) )e:ars folle'.ving the end of thc Leasc Ye:ar to .,.,.hieh sueh book arid record3 or other infomlation rclfrt:cs in whole:. or in part.. e. lNSrECTlOl! AND AUDIT, In the event Lan.dlord is not 3ati3ne.d with an)' monthly statcmcnt of groc sale.3, We)' qUfrrtcdy sre.te.mellt of gross sale3, any fl:fl1l.l:lal stfl:t'Cmcnt of gros3 3aks or any eertifieati.ol5. by said certified publi act:Qi:lntfrnts, Landlord or its duly al:lthmi:zcd reprC3cnre.ti-, e shall have the, right within three (3) years from the date. of ddive;: of 31ii:.h doeumcllt, 011 cach oe:.e!l:3iol5., to commcne.c a speeialaudit of TenMt's boob a:nd reeor& pertai:n:ing to gross slil, co', crca thereby> 1:1pon fivc (5) d.Et),s' prior writtell notict: to Te:.ll:!l::ld. T<:.nitllt shall pay, on dc.ma:nd, itllY deficiency ill rcrecnta~ Refit 3how'l1 to be. due by such a:ud1t. If the aet.uB.l amoUnt of gross S:ale3 for a particular year is dde.r:mined by such audit bc m e.Xi:.eS3 of one hundred t....o percent (102%) of the amount sho"om. on the stfl:t'CIDcnt of gross salcs for 3uch period 3ubmit:~ b) Te.f.ant, TenMt shall pay for the eost of the audit, itlld, m additio.., La1l3.1ord, at Lall.d.1orc.'s option, may terminate thi3 Lc:::. 4: 92 on t.::.a (10) d:ij s' notic.::. to Te.ha:nt of Landlord's dcction to do S6 U, tLe. cvcnt su.::.h dcficicfiC) is thc rcsu:t of pUrfoscfu: undcrsta.tcn,cnts of gross saks 6!5. thc part of Tcnant. e,"".;,.,~ :~~~,,:~~ ~~~:'~:~:''';'::,';:;:~:: ~;;~~,':l; ~;o:~~;:: :~:;:~,:,L;~;~~~:te\~=~ premiscs. f., o~~~~~~~~ IHFOIlM.'.TImL Lalld:ord sL:i1l1,olel all.saks fig,ure.s EU.~ ;[~l~~~~ _~!~~~.~~i~~ ~~~~il~~i~ i:'" Te..'"" ,c, , '," n "enee exe'e'" n,,) b, "cec,'"'' ,) f::~" ~:~:~~":~ :~;::d;~~' '~::~:: ~:' ~;c, b) HI COl.llcctlOI. \\ 1tJ.. pr6spc.::.tbC fil,al.e.lll~ or pr03p<:.ctl, c S:l.;e.~ or. t:~c ~hOPPI!l6 Ccnter or a lc:iSC vf tLc Dcn.iscd Prcl"iscs, c) "itl. rcspcct to ta.{ proccdil.gs, and d) pu.rs\:lant to all) lq,al !"-cquirclnettts-: s. n,,:,DIUS. TCl.ant ackr.o\, lcdg,cs tl,:it pUfSU.ll.llt to SCCtiOl, 9.0G or tl.c L::JSc, Te.I.S.!'".t :,as ll.f,fccd tLat I,citLcr ::: =;;:;':::~;~: "~~~;;;;' ";',,'i) 0' ,.doe"i, . ': ", ie:",' " ~oe"~..~ ~~"'eHto'" "c"'rtn."., "ioJ ,i, , ""c. " '"' ~ e I = 'u,u\.. 10 the ",e ",,,fico u' S"t.M lJ'~ 0) ,f H.C :~::c, ~n :"0 gnt': ::~: ~ ~': u._. " __." '8,eeo to "cee' Pe"c"mg' Rea' ": ' portic" of th< :""i<I~~'~:::= <e;, i'g ;HhHkmi,"oft P,c.,';,,, to ;::~ ~;~~. ~=.:~c;: <h" u Tc~ "ola,,, the P,": ">0,,, of Scc'G~ 9,0. of the L<"<. '" ,em"'" '0 ,II o'\-.e, e' C, 5ufrnt te thi1 L~a3e ana fUl)' iliacr th~~~ ~l ~~l~ ~~e.~ =: :t an~~ ::~ stNe, departmeat y, ithin a store, stnletw'c or sit-<:. n ithin the Rad:i:w, Tenant will Pll) Pcrccnl:il.ge D..cnt thereon, ~nd all of the provi:3iero of !hi:! Le8.:3e and any Rider thereto shill be a:pplicabk thereto. ;. ~r:~7~.;;~.RD~ AYlER:. D~F NvTTOJT. Sincc.LaMlemi ~ft3 atrc~~~~~:~~ a ~r~~~~~ ~~;~:~~~ E;;.:~~~::,:=;;:~::::~~~::~~~~G~~;:;~~!~~ :FE~ES~dloeodOn",~reeO(,,~~:"~'1:';'T~ ;;;::::E= t1 5 m. an) ~e '{Cf4 Jhfrl:l be deemed to be the a/cragc of ::renan~'s ~oss sales dl:u'mg a:l of tt-.( Lease Y cars preceding the LCa3e YeM in v. hieh the D efauk occW'f'ea . . . ;. ~~;~~~~: OF TIE r l:RTIES. Net\'. aMtimding thc fact tllftt ~ p~~~ ~ ~~ ~~~;~:=~o ~ ~:= ~ or .Loll <om'" of'f~;~ :~~c,:~=~~::= :: . cl.lord fUld te.rrtlnt, md La1.'ldlord sb1.Ul not under fUl) circwnstftrl:ee.3 'of; deemed t-o be a partner or joi~ venturer efTenant. 2.04 OPERATING EXPENSES. a. Each month during the Term of this Lease and any eY.tension or renewal hereof, TeD..:lllt shall pay in advanc together with payment of Minimum Rent, one-twelfth (1/12) of Tenant's Pro Rata Share of all annual "Operating Expenses as defIned herein. Within ninety (90) days of the end of each calendar ye?I (or as soon thereafter as reasonz,bly possibl during the term of this Lease or any extensions or renewals hereof, Landlord shall furnish to Tenant a certificate of the actu above enumerated costs incurred by Landtord during the preceding calendar year, at which time an appropriate adjustme will be made between Landlord and Tenant if such certified fIgures differ from the 'estimated payment made by Tena throughout the preceding calendar year. b. The term "Operating Expenses" is defIDed to mean imd include all costs and expenses necessary, reasonal or appropriate, as determined by Landlord, incurred by Landlord or its managing agent in operating, owning, rnanagil equipping, policing, protecting, lighting, repairing, replacing and maintaining the Shopping Center, the building and structw the roof, structural components and Common Areas. Such costs and expenses shalt include, but not be limited to: maintain the mall area (if any) and other Common Areas; cleaning; fire protection; snow, ice and trash Iemova~ striping and restip and sealing; resurfacing or replacing of the Parking Areas; costs and expenses of planting, cutting, trimming, replanting · replacing lawns, flowers and landscaping; all signs including traffic control and identification signs; water and sewage char: 5 93 costs of heating and air conditioning, electricity and other utilities; premiums for liability, property damage, loss of rents, [lIe and workmen's compensation insurance; wages; unemployment taxes; social security taxes; personal property taxes; .. supplies; management fees; attorney's and accouo.tant's fees incurred for services relating to the operation or managemen the Shopping Center, or the Common Areas; engineer's fees; fees for required licenses and permits; supplies; operation of loud speakers, public address systems and other equipment supplying music or souo.d to the Cornmon Areas; and all other costs of operation of the Shopping Center including Cj.ny portion of capital expenditures or improvements made to the Shopping Center that shall be amortized in any given year_ Provided, however, Operating Expenses shall not include payments of principal and interest on any mortgages or other encumbrances on the Shoppi.ng Center. c. If the first month of the Term of this Lease consists of less than a full calendar month, then the installment of Operating Expenses shall be apportioned for the number of days that occur during the Term. 2.05 SECURITY DEPOSIT. a. TCllant shal~ deposit ,,'itl. LaI,dlord the sun, designated as Security Deposit in Seet:oIi L~\lrity for tl.c fJll iH,d faitLful perforn1ancc by Tenant of all oblif',atiohs of Tenant under thi3 Lea3c or ii, connection H itl, this Lea3e. IfTwa.nt is in "Default" (as defrncd in Section 16.01), Lfil'ldlord may use, appl) or retLl.i.n all or frI.y part of the Security Depostt f'Or the paynlCfit of (I) MY Minimum. Rent or art) other sum of money ...h:ich Tent!.nt ""5.:3 obligated to pay but did not pay, (ii) any Sl:ln". cxpended by Landlord on. Tenant's behalf in accordance ., ith thc pro',ision3 of !hi:! Le8:3c, or (iii) any sum. ",'hieh Landlord may expclld or be required to expend 8:3 !I. reStl.lt of Ten ant's Default, including an) d!l:ml\.gcs or deficiency in the relctting of thc Demised Prcntl3<:.s in !l:Ccordanee .....ith Scction 16.02. If all or an.y pt)rtlon of the Sceunt)' Deposit h so wed, Tena:nt will immediately, upon dcmli:l'.l:'d, pay to Landlord the amount 30 used to r<:.store the Security Deposit to its original amount. The 113C, application or retention of the Scctlrity Deposit or an) portion thw;of by Landlord. shall not pre....ent La:nd1orcl. from exerehing any other tight or ren.t:.dy pro ,idcd f'0r under this uase or at law ilIl.d shall not lirnit any recovery to Vlhich Landlord J:l:my be cntitled otherwise. b. The SccUrity Dcposit 3ha1l bear no intcrC3t l[legally pcrmi5:3ib1c, Landlord shall bc entitled tel eomm.in~ 1 . the Security Deposit with Landlord's other funoo. e. If TCM::rlt shall comply with all of ~ pro, bio!13 of thi3 uasc, the Sceurity Deposit or any balance thereof shall be returned to Tena:n:t "ithin thirty (30) days after thc Expiration Date or upon a1'.l:)' latcr date. after .vhieh Tenant ha3 vacated the Demisca. rrcmhes. In thc abscnee of c-(idcnce satisfactory to Landlord of any assignmcnt of the rigl.t to reeei </c the Security Deposit or the rem.aining balanec thcreof, La:ndlord may return the Sceunrj Deposit to the original Tenant, regardless of one or morc a3signmenb of Tenant's mtcre3t in the Scctl::l'ity Dcposit In such c. vent, upon the return. of tt,c Seeurit) Deposit (or balance thereof) tl) the original Tenant, Landlord shall be completely rdic .cd ofliability .vith respect to the Se.eurity Deposit. d. ill the event of a trll:n3fcr of Landlord's intw;.st in the Demised rrc.m:i:3es, Landlord shall ha IC the right to trM.3fcr the Seeurit) Deposit to the trM.3fc.rce of L!:tl'1dlord's interc3t. In such e v'en.H':;endlord shall be dcerr.cd relcaJed b J Tenant from all liability for the fCrum of the Seeurit). Dep03it; a:nd Tenant agrees to look seId/ t(} the transfw::: fJr 6: r~ili7TI of the Security Deposit e. The Security Dcposit shall not be mortgaged, assigned or encumbered by Tenant. No Mortgagee shall bc liable. f0r the rcllit!'. of the Security Deposit 2.06 REAL ESTATE TAXES AND ASSESSMENTS. Tenant shall, each year during the Term of this Lease or any extensions or renewals thereof, pay its Pro Rata Share of the amouo.t, if any, of the general real estate taxes and installments 0: special assessments due and payable with respect to the Shopping Center in such year. Such payment by Tenant shall be paid in equa monthly instillments representing 1/12 of the taxes and installments of special assessments due and payable in any such year, providec that upon Landlord's receipt of the tax statement for any tax year, Landlord shall send to Tenant a statement for, and Tenant shal promptly pay, any amount due for any monthly periods occurring within such tax year prior to the date Landlord receives such ta: 6 94 statement if such amount exceeds the payments made by Tenant for such monthly periods. All payments made by Tenant under this Section shall be treated as payments of Additional Rent and shall be made together with monthly payments of Minimum Rent. If the Commencement Date occurs other than the fIrst day ofa calendar year, then Tenant shall pay a fraction of Tenant's Pro Rata Share of the real estate taxes and installments of special assessments due and payable in the year in which the commencement date occurs, the numerator of such fraction being the number of days from the Commencement Date through the last day of the calendar year, and the denominator of which fraction will be three hundred and sixty-fIve (365)_ Sirrularly, if the Expiration Date should occur on a date other than the last day of a calendar year, Tenant agrees to pay a fraction of Tenant's Pro Rata Share of the real estate tax.es and installments of special assessments due and payable in the year in which the Expiration Date occurs, ~e numerator of sGid fraction being the nwnber of days elapsed from January 1 of such year to. and including the Expiration Date, and the denominator of which fraction will be three hundred and sixty-five (365). Tenant understands that there may be more than one (1) tax statement covering said Shopping Center and that Tenant's Pro Rata Share of the real estate taxes and installments of special assessments will be detem1ined by multiplying the total real estate taxes and installments due by Tenant's Pro Rata Share. 2.07 ADDITIONAL RENT. Wherever it is provided in this Lease that Tenant is required to make payment to Landlord, such payment shall be deemed to be Additional Rent and all remedies applicable to the nonpayment of rent shall be applicable thereto. 2.08 NO OFFSET. Minimum Rent, Percentage Rent and Additional Rent shall be paid without set off or deduction whatsoever. Any claims not released hereunder which Tenant may have against Landlord may be pursued only in an independent action against Landlord, subject to Section 19.05. 2.09 INTEREST/LA TE FEE. All payments required to be paid by Tenant under the provisions of this Lease shall bear interest at a rate of either: (a) eighteen percent (18%) per annum if Tenant is a corporation, or (b) the highest rate allowed by Minn. Stat. 9 334.011, if Tenant is other than a corporation. Interest shall begin to accrue five (5) days after the first council meeting afthe month the due date of ~a_:-. payrn.cnt and continue until the date actually paid by Tenant. Tenant hereby agrees to pay sud interest to Landlord. Tenant agrees that in addition to interest and all other amounts due to Landlord hereunder, Tenant will pa) Landlord a "late fee" equal to five percent (5%) of any payment which has not been paid within five (5) days after the first counci meeting of the month 11:3 due dat~, without notice or demand. . ARTICLE ill DEFINITIONS As used in this Lease, the following words and phrases have the following meanings: 3.01 COM:M:ON AREA shall consist of all parts of the Shopping Center and surrounding areas not under leas exclusively to Tenant or to other tenants, and include, but are not limited to, parking areas, access roads and facilities, driveway: sidewalks and other wal1cways, stairways, lounge areas, hallways, elevators, loading and/or delivery areas, malls (ifany), landscape areas, and such other areas and improvements provided for common use and benefit. 3.02 EXPIRATION DATE. That date stated in Section 1.04 above, or if the term of this Lease is extended I if this Lease is renewed, the Expiration Date shall be the last day of the term as so extended or renewed. If this Lease is canceled I terminated prior to the originally fixed Expiration Date, then the Expiration Date shall be the date on which this Lease is so cancelt or terminated_ But if this Lease is canceled or terminated prior to the originally fixed Expiration Date by reason of Tenant's Defau Tenant's liability under the provisions of this Lease shall continue until the date the Term of this Lease would have expired had f cancellation or termination not occurred. 3.03 FORCE MAJEURE means any period of delay which arises from or through: Acts of God; stril~, contractor delays; shortages or unavailability oflabar or materials; lockouts, or labor difficulty; explosion; sabotage; pending arbitrati proceedings under Section 4.05; accident; riot or ci0J commotion; act of war; fire or other casualty; legal requirements; delays calli by Tenant; and, other causes beyond the reasonable control of Landlord. 7 ~!i 3.04 INSURANCE REQUIREMENTS means the applicable provisions of the insurance policy carried by Landlord covering the Demised Premises, the Shopping Center or any part of either; all requirements of the issuer of any such pol; - .. and the applicable regulations and other requirements of the National Board of Fire Underwriters, any applicable local board 0 underwriters, and any other body exercising a similar function. 3.05 LANDLORD'S WORK means the construction and other work designated as Landlord's Work, if any, in Exhibit C. 3.06 MORTGAGE means any mortgage, deed to secure debt, trust indenture, or deed of trust which may now or later encumber or be a lien upon the Demised P,-emises, the Shopping Center, the real property of which the Shopping Center fomls a part, or Landlord's interest in any of them; and any renewals, modifications, consolidations, replacements and extensions of any instrument referred to in this Section. 3.07 MORTGAGEE means the holder of any Mortgage. 3.08 PARKING AREA means the portions of the Shopping Center which are designated as such by Landlord from time to time. 3.09 PERSON means an individual, fiduciary, estate, trust, partnership, finn, association, corporation or other organization, or authority. 3.10 PRO RATA SHARE means a fraction, expressed as a percentage, the numerator ofwmch fraction is the total square footage of the main floor of the Demised Premises, and the denominator of which fraction is the gross leasable area of the main floor of the Shopping Center, exclusive of common areas, as such gross leasable area may exist or change from time to time. Square footage for all purposes under this Lease shall be computed on the measurement of the outside face of exterior walls and the centerline of interior demising walls. If for any reason the foregoing calculation of Pro Rata Share does not fairly and equitably require Tenant to pay its proportionate share of Operating Expenses, real estate taxes, special assessments or other costs, then Landlord may, at Landlord's option, calculate Tenant's fair and equitable share of such amounts and Tenant agrees to pay the same in the m provided in Sections 2.04, 2.06, and 2.07. 3.11 REPAIR includes the words "replacement and restoration," "replacement or restoration," "replace anc restore, II or "replace or restore," as the case may be. 3_12 TENANTS AGENTS includes Tenant's employees, servants, licensees, tenants, subtenants, assignees contractors, heirs, successors,legatees, and devisees and Tenant's Guarantor. 3.13 TENANTS WORK means any construction, installations and other work perfonned at the Demised Premise by Tenant, at its sole cost, pursuant to plans and specifications approved by Landlord, necessary for Tenant's use and occupancy of th Demised Premises (other than Landlord's Work). ARTICLE IV CONSTRUCTION OF THE DEMISED PREMISES; EFFECTIVE DATE 4.01 LANDLORD'S OBLIGATION TO CONSTRUCT'. a. Attached to this Lease as Exhibit C is a description of Landlord's Work, if any, which includes all tl improvements to the Demised Premises which the Landlord has agreed to perform at its expense, subject to the conditio I hereof and to delays or impossibility of performance caused by Force Majeure_ All of Landlord's Work shall be perform" in accordance with Exhibit C in a good and workmanlike manner, utilizing new and first-grade materials; shall be conformity with all applicable federal, state and local laws, ordinance, regulations, building codes, and fire regulations; ax shall comply with any applicable insurance requirements. 8 96 b. Landlord's Work may vary from the requirements of Exhibit C if the variance is required by the circumstances or good construction practices, the building permit or applicable legal requirements; or if the variance is nonsubstantial. Any disagreement between Landlord and Tenant as to whether such changes are nonsubstantial shall be resolved in accordance with the provisions of Section 4.05. As to changes which require Tenant's approval, such approval shall not be withheld unreasonably, and any disagreement between Landlord and Tenant as to whether or not such approval is being withheld unreasonably shall be resolved in accordance with the provisions of Section 4.05. 4.02 DELIVERY OF POSSESSION. Landlord hereby leases to T~nant, and Tenant hereby rents from Landlord, the Demised Premises. Delivery of possession shall be deemed to have occurred on the date that Landlord's Work, ifany, shall have been substantiatly completed to the extent necessary to allow Tenant to commence Tenant's Work, as determined by Landlord. 4.03 TENANTS WORK. All of Tenant's Work, ifany, shall be perfoffiled in accordance with good construction practices, all applicable legal and insurance requirements and any Tenant Design Construction Manual for the Shopping Center. Tenant shall indemnify Landlord [rom and hold Landlord harmless against any and all liabilities, damages, losses, liens, mechanic's liens, foreclosures, injury, suits, actions, claims of any nature whatsoever, including aU attorneys fees, arising out of Tenant's Work. 4.04 ACCEPTANCE OF POSSESSION. Within ten (10) days after Delivery of Possession, Tenant shall give Landlord written notice of any alleged defects in Landlord's Work and of any alieged variances of Landlorcrs Work from the requirements of this Lease_ Any defect or variance not so set forth shall be deemed waived by Tenant. If Tenant shall fail to give such notice, it shall waive all rights with respect to such defects or variances; Upon the expiration of the ten (10) day period., the Demised Premises shall be conclusively deemed. to have been accepted by Tenant, subject to the defects or variances set forth in the notice, which defects or variances Landlord will promptly rectify to the extent the same are not in compliance with the terms of this Lease. At any time after the expiration of the ten (10) day period., upon request of Landlord, Tenant shall execute a certificate certifying that the Demised Premises were accepted in accordance with the foregoing. . 4.05 ARBITRATION. Any matter which is specifically set forth in this Lease to be resolved in accordance with the provisions of this Section shall be determined by binding arbitration as follows: On ten (10) days' written notice by either party to the other, each shall designate an arbitrator, and a third arbitrator shall be selected. by the two so designated. All arbitrators selected under this paragraph shall have at least five (5) years'. experience in leasing commercial space. If either party fails to designate an arbitrator within ten (10) days following notice, or upon the inability or failure of the two arbitrators to agree upon a third within ten (10) days following their designation., said selection shall be made by the judge then sitting at special term in the District Court of Hennepin County, Minnesota upon notice to all parties. Each party shall be entitled to be represented by counsel in the arbitration proceedings. The difference or dispute shall be settled in accordance with the Uniform AIbitration Act, and the Rules of the American AIbitration Association shall govern_ The decision of a majority of the arbitrators, signed and acknowledged, shall be final and binding upon Lessor and Tenant. To the extent feasible, such decision shall be made within thirty (30) days of the appointment of the third arbitrator. The costs and expenses of the arbitrators, the fees of the arbitrators, and all attorneys' fees and costs incurred, shall be paid by the losing party in the arbitration proceeding, and the definition of "losing party" shall be a proper subject of the arbi.tration proceeding. ARTICLE V EFFECTIVE DATE; MEMORA"lDUM OF LEASE 5.01 EFFECTIVE DATE OF LEASE. This Lease shall be binding upon the parties effective as of the date 0 execution indicated above. At the earlier of the entry into the Demised Premises by Tenant to make any measurements or inspect the same, or the Delivery of Possession, as provided in Section 4.02, all of the terms and conditions of this Lease shall be in full force ane effect and all of Ten ant's obligations under this Lease shall be applicable, except for Tenant's obligations to pay Minimum Rent or an; other charges Tenant is required to pay Landlord under this Lease (v-;hich obligations to pay shall commence on the Commencemen Date). 9 97 5.02 SHORT FOR1'vi LEASE. Upon request of Landlord or Landlord's mortgagee, Landlord and Tenant shall execute a short form lease or memorandum of lease in proper form for recording, setting forth the Corrunencement Date and ,,--' provision of this Lease other than Article II or Sections 1.05 and 1.12. Tenant shall not have the right to record this Lease in any pl records. ARTICLE VI CONDITION OF PREr\'lISES, ALTERATIONS, SIGNS 6.01 NO REPRESENTATIONS, ETC. Landlord has made ho representations, covenants or warranties with respect of the Demised Premises except as expressly set forth in this Lease. 6.02 ALTERATIONS. Tenant m:J.Y not make any alterations to the Demised Premises without the prior written consent of the Landlord, which consent shall not be unreasonably withheld. If Landlord grants consent, the alterations shall be performed in a good and workmanlike manner in accordance with all applicable legal requirements, InsuranceRequirements, pursuant to plans and specifications approved by Landlord and other conditions which Landlord shall impose on such work. 6.03 MECHANICS LIENS. If any mechanic's or materialman's lien is filed against the Demised Premises or the Shopping Center as a result of any work or act of Tenant, Tenant shall discharge the lien within twenty (20) days after the filing of the lien. If Tenant shall fail to discharge the lien, Landlord may, but shall not be obligated to, bond or pay the lienor claim for the account of Tenant without inquiring into the validity thereof. In such event, the Tenant shall promptly reimburse Landlord the amount so advanced or the costs and expenses of such bond. Upon completion of any repair, alteration or other work performed by Tenant or its agents and contractors to the Demised Premises, Tenant shall provide Landlord with copies of lien waivers from each contractor or agent who performed work or supplied materials relative to such work. 6.04 SIGNS. a.. Tenant shall, at its expense, promptly install and maintain a sign affIxed to the exterior of the Demised Premises. Tenanrs sign shall be subject to (1) the written approval of Landlord as to dimensions, material, content, lce: and design; (ii) applicable legal requirements; (iii) Insurance Requirements; and (iv) the sign criteria forthe Shopping Cel.we attached hereto as Exhibit "E". Tenant shall obtain and pay for all permits and licenses required in connection with a sign. Copies of all permits and licenses shall be delivered to Landlord within a reasonable time after they are issued. b. If Landlord shall deem it necessary to remove any sign in order to paint or to make repairs, alterations 01 improvements to the Demised Premises, Landlord shall have the right to do so. Tenant shall not have the right to maintair or install any other signs at the Shopping Center or the Demised Premises. In the event that the exterior of the Shoppinf Center is substantially renovated Tenant shall install such new sign to conform to new sign criteria. 6.05 INSURANCE COVERING TENANTS WORK. Tenant shall not make any alterations, repairs 0 installations, or perform any other work to the Demised Premises (including Tenant's Work) unless prior to the comrr:encement of th work Tenant shall obtain (and during the performance of the work keep in force) public liability and worker's compensation insurnnc to cover every contractor to be employed, and naming Landlord and any mortgagee as an additional insured. The policies shall b noncancellable without ten days' notice to Landlord. Coverage limits shall be reasonably satisfactory to Landlord. Prior to th commencement of the work., Tenant shall deliver duplicate originals or certificates of the insurance policies to Landlord. . 10 98 ARTICLE VII REP AIRS, COMPLIANCE, SURRENDER 7.01 REP AIRS BY LANDLORD. Upon reasonable notice from Tenant, Landlord shall make necessary repairs to the structural components of the roof, foundation., exterior walls and any load-bearing interior walls of the Demised Premises. However, Landlord shall not be required to make any repairs to windows, plate glass, doors and any fixtures and appurtenances composed of glass. Landlord shall not be required to repair any damage caused by any act, omission or negligence of Tenant, Tenant's Agents or Tenant's customers. All ex.penses incurred by Landlord in making such repa~rs shall be deem~d to be Operating Expenses hereunder, and will be subject to reimbursement pursuant to Section 2.04. 7.02 REF AIRS Al'.'D '!\.1AlNTENANCE BY TENANT. Exceptfor the repairs Landlord is specifically obligated to make under Section 7.01. Tenant shall make all other repairs to the Demised Premises which are necessary or desirable to keep the Demised Premises in good order and rep,?-ir and in an attractive, safe, dry and tenantable condition. Without limiting the generality of the foregoing, Tenant is specifically required to make repairs a) to the portion of any pipes, lines, ducts, wires or conduits contained within the Demised Premises; b} to windows, plate glass, doors and any fixtures or appurtenances composed of glass, floor coverings, ceilings and wall coverings; c) to Tenant's sign; d) to any heating or air conditioning equipment servicing the Demised Premises; and e) to the Demised Premises or the Shopping Center when repairS to the same are necessitated by any act or omission of Tenant, Tenant's Agents or Tenant's customers or the faiiure of Tenant to perform its obligations under this Lease. Tenant shall keep the Demised Premises in a clean and sanitary condition and free from vermin and escaping offensive odors. With respect to the heating, ventilation, and air conditioning equipment aild systerns,Tenant, at its expense, shall maintain this equipment throughout the Term of this Lease. a conl:mc~ciany u:mlll 3Cr. ice. contract, llnd furnish c', ide-nee thcrcof(and. rcncVl'ab) to Landlord upon Landl"Ord'3 requcst. 7.03 APPROVAL BY LANDLORD OF REPAIRS. With respect to any repair required or permitted to be performed by Tenant under any provision of this Lease, Tenant shall give notice to Landlord before any work is performed. Except in the event of an emergency, all plans and specifications with respect to repairs shall be subject to the prior written approval of Landlord. No repair shall be commenced until plans and specifications therefor shall have been submitted to and approved by Landlord., which approval shall not be unreasonably withheld. After approval of the plans and specifications, the work shall then be commenced promptly, performed in accordance with the approved plans and specifications, and prosecuted diligently to completion. 7.04 CO:M:PLIANCE. Tenant shall observe and comply promptly with all present and future legal requirements and Insuranc'e Requirements relating to or affecting'the Demised Premises, or any sign of Tenant, or the use and occupancy of the Demised Premises, including, but not limited to, laws, regulations, codes~ and rules relating to the use, storage or release of any hazardous or toxic wastes or substances, asbestos, petroleum products or any other harmful productions ("Hazardous Wastes"). 7.05 ELECTRICAL LINES. If Tenant installs any electrical equipment that overloads the lines in the Demised Premises or the Shopping Center, Landlord may require Tenant to make whatever changes to the lines as may be necessary to render the same in good order and repair, and in compliance with all Insurance Requirements and applicable legal requirements. 7.06 EMERGENCY REPAIRS. If in an emergency it shall become necessary to make promptly the repairs OJ replacements required to be made by Tenant, Landlord may reenter the Demised Premises and proceed forthwith to have the repair~ or replacements made and pay the cost thereof. Wit.1.in thirty (30) days after Landlord renders a bill therefor, Tenant shall reimburs( Landlord for the cost of making the repairs. 7.07 SURRENDER OF PREMISES. On the Expiration Date, Tenant shall quit and surrender the Demise, Premises broom clean and in good condition and repair. At Landlord's option, all alterations, fixtures, trade fixtures, installation; additions and improvements which may have been made in or attached on or to the Demised Premises shall either remain in th Demised Premises and shall become the property of Landlord or shall be removed by Tenant, at its sole cost and expense, and Terral shall repair any damage to the Demised Premises caused thereby. 11 99 ARTICLE VIII SERVICES AND UTILITIES 8.01 Uill...lTIES. Tenant shall pay when due all charges for electricity, heat, air conditioning, water, gas, fuel, sewage usage, garbage disposal, refuse removal, telephone and any other utility service furnished to the Demised Premises from and after the Delivery of Possession until the Expiration Date, or earlier termination of this Lease. If one or more of the foregoing utilities are not separately metered to the Demised Premises, then Tenant agrees to pay its Pro Rata Share of such utilities, or such other equitable proportion if required by the circumstances. 8.02 METERS. Tenant shall keep any gas, water and electric meter(s) installed for the Demised Premises or any other meter(s) measuring the gas or water volume and electric current consumed at the Demised Premises in good order and repair. ARTICLE IX USE AND OPERATION 9.0 I USE. Tenant shall use the Demised Premises solely for the uses designated as Permitted Uses in subsection 1.08(a). Tenant shall not use, permit or suffer the use of the Demised Premises for any other purposes whatsoever, or for any illegal purpose. All uses not specifically granted herein are reserved to Lessor and other tenants in the shopping center, but Tenant's use shall be non-exclusive. 9.02 CONTINUOUS OPERATION. a. Tenant shall conduct its business in the Demised Premises continuously on all days and at all hours during which the Shopping Center is open. b. Tenant shall operate its store as a typical operation as presently conducted in the vicinity in which the Demised Premises are located or in the locality closest to the Shopping Center in which such operation is conducted. c. Tenant shall use its best efforts to achieve a maximum sales volume in the Demised Premises. d. l.08(b). Tenant shall conduct its business under the name designated as Tenant's Business Name in subsection 9.03 STORE OPERATIONS. a. Tenant shall use for office, clerical or other nonselling purposes only such space in the Demised Premises as is reasonably required for Tenant's business therein, and shall not perform any office, storage or clerical function h'1 the Demised Premises for any other store. In no cvcnlshall m.ore than 10% ofthc fleer Mca be 113cd for offiec, clcrieal or othc, tlOrulclli:ng pUrp03C3. b. Tenant shall pay before deli.t1quency any and all taxes, assessments and public charges levied, assessed 0: imposed upon Ten~t's business or upon Tenant's fixtures, furnishings or equipment in the Demised Premises. c. Tenant shall pay when and as due all license fees, permit fees and charges of a similar nature for the conduc by Tenant of any business or undertaking authorized hereunder to be conducted in the Demised Premises. d. Tenant shall keep and maintain in good order, condition and repair any loading platform, truck door andJc truck maneuvering space therefor which is used by Tenant or to which Tenant has the right of use notwithstanding the fac that the same may be deemed to be a portion of the Common fuea. 12 100 e. Tenant agrees (i) not to permit the accumulation (unless concealed in metal containers) or burning of any rubbish or garbage in, on or about any part of the Shopping Center, and (ii) if Landlord shall so request, not to permit any garbage or rubbish to be collected or disposed of from the Demised Premises except by Landlord or its designee, and.; (iii) if Landlord shall so request, to remove all trash to a designated trash room or area. f. Tenant shall observe all reasonable roles and regulations established by Landlord from time to time for the Shopping Center, provided Tenant shall be given at least five (5) days' notice thereof. 9.04 RESTRlCTIONS ON TENANTS ACTIVITIES AT SHOPPING CENTER. a. Tenant shall not use the sidewalk adjacent to or any other space outside the Demised Premises for display, sale or any other similar undertaking. b. Tenant shall not use any advertising medium which may be heard outside the Demised Premises. c. Tenant shall not use the plumbing facilities of the Demised Premises for any purpose other than that for which they were constructed. Tenant shall not dispose of any substances in such facilities which may clog, erode or damage the plumbing pipes, lines or conduits of the Shopping Center whether through the utilization. o~" garbage disposal" units or otherwise. If Tenant uses the Demised Premises for the sale, preparation or service of food for on-premises consumption., Tenant shall install any grease traps that may be necessary or desirable to prevent the accumulation of grease or other wastes in the plumbing facilities servicing the Demised Premises. But notwithstanding anything to the contrary, the foregoing shall not be deemed to permit Tenant to use the Demised Premises as provided in the preceding sentence unless such use is specified in subsection 1.08(a). d. Tenant shall not place a load on any floor exceeding the floor load per square foot which such floor wa~ designed to carry. e. Tenant shall not use the roof of the Demised Premises for any purpose. Tenant shall not use exterior wall: of t.~e Demised Premises except that Tenant may maintain a sign in accordance with Section 6.04; f. Ne coin or token operated vendirig machine or similar device for the sale of any merchandise or service (including pay lockers, pay toilets, scales, amusement devices and machines for the sale of beverages, foods, candy; cigarette or other commodities) may only Lbe operated-in within the confines of the Demised Premises. g. Tenant shall not use any forklift truck, tow trucker any other machine for handling freight except as rna be approved in writing by the Landlord. h. No auction, fIre or banlauptcy sales may be conducted within the Demised Premises without the previ01 written consent of Landlord. i. Tenant shall not use the malls, sidewalks adjacent to the Demised Premises or other Common Areas on tJ Shopping Center site for business purposes without the prior written consent of Landlord. j. Tenant shall keep the doors and displays windows of the Demised Premises clean and shall keep the sar electrically lighted during such periods of time as windows throughout a major portion of the Shopping Center developm( are kept lighted, and for this purpose shall install and maintain a mechanical time-clock. k. Tcr.ant shall fiot pfr3te. !l:nY 3igns to any portion e.f the:. De:miscd rrcrn:i.3e3, or di3play 81.)' sig,fi.3 attiichcd ;;: :'~: 0' wifucl ll=e (3) f:et of the Ie",e lac of lilio-Bu"i3ed Pee"';'" wi:holl' ob",;"mg L=~rie', wri, ;;;; ~.,: . ,dlc,d ,boy have the nglrt. '" Landl",d'3 ,ole o;,,,,cnon. to 'e~u"e T :"'-~':::=c ::~~ :=:.::- ' ~;~"; : f ~e c~',""on "" cf the Shopp":-g Ce"'" fun< ~ not ~ kcrping wi~-~ ,;,:,:~:_i:. ~~ ~~~ Cente, ~ oB e lICu by TCfiafit shall be ll1dle:.atcd l:l'l pllmS and 3pccifica'a.oI13 to be SUBlfiittcd to L8i.l.eHelfCl: ffir appro-vaL 13 101 '. ..... L Tenant shall not perform any act or carry on any practice which may injure the Demised Premises or any other part of the Shopping Center, or cause any offensive odors or loud noise (including the use ofloudspeakers), or const a nuis.ance or menace to any other occupant or other persons in the Shopping Center, and in no event shall any noises or ou~. 0 be emitted from the Demised Premises. m. Tenant shall at all times fully and adequately heat and/or air condition (as the ci.rcumstances require) the Demi.sed Premises and shall not draw any heat or air conditioning from the enclosed mall if any. 9.05 INSURANCE RATE. Tenant shall comply with all Insurance Requirements relating to or affecting the Demised Fremises. If the insurance premiums that would have been applicable for the Permitted Uses as a result of any failure by Tenant to comply with Insurance Requirements, or as a result of or in connection with the use to which the Demised Premises arc put by Tenant, Tenant shan reimburse Landlord for the excess. The reimbursement shall be made within ten (10) days after Landlord renders a bill therefor. For the purpose of this section, any finding or schedule of a fire insurance r;,.ling organization having jurisdiction over the Demised Fremises or the Shopping Center shall be deemed to be conclusive. 9.06 RESTlUcnONS ON OTHER STORES. !.s used in tl,is scction the tcrm ".Radius" nleims t1.c area frow tile Demised rtC.misC3 located ....ithin the distance noted in Scction 1.08(e). Di3tanee shall be cOfiiptlted on II :3trai];ht linc radial fronl 1.1.c eenter of 1"1..:. Demi3cd rrCntl3c3. TcnlU'l.t agreC3 (i:n3ofar!l.3 and t-o the cxtcnt it lawfully may so agrec) that cluring the Tern, neither Tenant, Tcaant'.'J ,Agents, any Tenant's GUllrantor nur an) affiliatcA parent or 3ub3idiary cOniplU'l.ic3 or cr.titics, directly or indirectly, VI ill O"tVl:l., kll:Se or ope;mt;; Mother 3t-orc, dcpartm.cnt Hit:hic. a 3tore, or M) 3trueture or .'lite for remil bU3ine33 ....itl.in the Radil:l3 3intilar to the U3C 3pecificd in scetion L08(a). ARTICLE X TRANSFER OF INTEREST, PRIORITY OF LIEN 10.Q1 ASSIGNMENT OR SUBLEASE BY TENANT. a. SUBLEASE. Since Landlord wishes the party in possession of the Demised Premises to be bOUl Landlord by direct privity of contract, Tenant may not sublease the whole or any part of the Demised Premises without the prior written approval of Landlord, which approval may be withheld in Landlord's sole and absolute discretion. b. ASSIGNMENT. Tenant may not, voluntarily or by operation oflaw, assign, mortgage, pledge or otherwise transfer this Lease without the prior written consent of Landlord. If Tenant is a corporation, then any transfer of this Lease by merger, consolidatio'n or liquidation, or any change in ownership of the shares of voting stock shall constitute an assignmen' of this Lease, and, as such., shall require the prior written consent of Landlord. If Tenant is a partnership, any transfer assignment Or sale of a partnership interest, or any change in the partners comprising Tenant, shall constitute an assignmen of this Lease, and, as such., shall require the prior written consent of Landlord. The prior written consent of Landlord to any such proposed assignment or transfer shall not be withheh unreasonably, if all of the followin~ conditions are met: (l) The proposed assignee ~ a net worth at least equal to Tenant and Tenant's Guarantor(s) (if any) as 0 the date of signing this Lease, or the date of the proposed assignment, whichever is greater; (2) The proposed assignee is creditworthy considering the obligations to be assumed under the Lease; (3) The proposed assignee bas experience and expertise in operating a retail business similar to that bein conducted in the Demised Premises; 14 102 (4) The use of the Demised Premises will comply with Section 1.08(a), and., in addition, the proposed assignee's use will not conflict with Landlord's current or projected tenant mix of the Center or with exclusive uses granted or to be granted to any other tenant(s) of the Shopping Center, (5) Tenant and Tenant's Guarantor(s) (if any) acknowledge in writing that they will remain liable for the performance of all obligations pursuant to the Lease; (6) Tenant, Tenant's Guarantor{s) (if any) and the proposed fLSsignee agree in. a written Amendment to the Lease, in form and substance acceptable to Landlord, that the'Minimum Rent, as of the effective date of such assignment shall become the grc:ltest of the following: (i) The Minimum Rent then applicable; (ii) The average of the sum of the annual Minimum Rent and annual Fcrcentage Rent (if any), payable for the last t\vo (2) Lease Years (or shorter period, if so required) immediately prior to the Lease Year of the proposed assigning; or (iii) The prevailing market rate determined by Landlord for Minimum Rent for similar space in the Center at the time of the Assignment. (7) No Default by Tenant shaH be in existence at the time of the request for consent If Tenant desires to assign the Lease, it shaH so notify Landlord in writing at least thirty (30) days prior to the proposed effective date of the assignment Tenant shall provide Landlord with: a copy of the proposed assignment, fmancial information, bank references and fmancial statements of the proposed assignee; a copy of the agreements referenced in subsections (b X5) and (b X6) above; and, such further information as Landlord might request concerning the proposed assignee. Withir fifteen (15) days after Landlord's receipt of all required information concerning the proposed assignee, and the satisfaction of all oj the conditions specified in subsections (b)( 1) through (b )(7) above, Landlord shall have the following options: (1) To cancel this LeaS( and upon such cancellation, all parties shall be released from liability hereunder and Tenant will immediately vacate the Demisec Premises; (2) To consent to the proposed assignment; or (3) To refuse to consent if reasonable grounds exist therefore; PROVIDEI THAT IF TIlE CONDITIONS SPECIFIED IN SUBSECITONS (b)(l) THROUGH (b)(7) ARE NOT SATISFIED, LANDLORD': CONSENT TO THE PROPOSED ASSIGNMENT MAY BE WITHHOLD OR GRANTED IN ITS SOLE AND ABSOL1TIl DISCRETION. 10.02 SUBORDINATION. a. At Landlord's election., this Lease shall be subordinate to the lien of any present or future Mortgag irrespective of the time of execution or the time of recording of the Mortgage. From time to time, Landlord may, witho notice to Tenant, elect that this Lease be subordinate to the lien of any Mortgage. The exercise of any of the elections provid, in this section shall not exhaust Landlord's right to elect differently thereafter from time to time. However, at any time who the Demised Premises are encumbered by a Mortgage, Landlord may not exercise either election without the consent of t Mortgagee. b. Upon Landlord's request, from time to time, Tenant shall (1) confIrm in writing and in recordable form tl this Lease is so subordinate to the lien of any Mortgage and/or (ii) execute an instnunent making this Lease subordinate the lien of any Mortgage, in a form as may be required by any applicable Mortgagee. lS 103 1 0.03 ATTORNMENT. If the Demised Premises or the Shopping Center is encumbered by a Mortgage and the Mortgage is foreclosed, or if the Demised Premises or Shopping Center is sold pursuant to foreclosure or by reason of a default un a Mortgage, the following shall apply notwithstanding the foreclosure, the sale or the default: (I) Tenant shall not disaffmn this Le_ or any of its obligations under this Lease; and, (ii) at the request of the applicable Mortgagee or purchaser at the foreclosure or sale, Tenant shall attorn to the Mortgagee or purchaser. 10.04 TRANSFER OF LANDLORD'S INTEREST. The term "Landlord" as used in this Lease means only the owner for the time being or the Mortgagee in possession for the time being of the Demis~d Premises. Each time the Demised Premises are sold, the selling Landlord shall be released of a1l obligations and liability under this Lease. 10.05 MORTGAGEE'S RlGHTS. If Landlord shall notify Tenant that the Demised Premises or the Shopping Center is encumbered by a Mortgage, and shall notify Tenant of the name and address of the mortgagee, the following shall apply, notwithstanding anything to the contrary: If any Mortgagee shall perform any obligation that Landlord is required to perform under this Lease, the perfom1ance by the Mortgagee shall be deemed to be performance on behalf of the Landlord insofar as Tenant is concerned, and the performance shall be accepted by Tenant as if performed by the Landlord. ARTICLE Xl COMMON AREA AND SHOPPING CENTER 11.Ol USE OF COMMON AREAS. Landlord hereby grants to Tenant the following privileges to use portions of the Common Area during the Term of this Lease. These privileges may be exercised in common with Landlord and other tenants of the Shopping Center, and any designee of Landlord, and subject to Landlord's rules and regulations: a. Tenant is hereby granted the nonexclusive license to permit its customers to use the sidewalks and customer Parking Areas designated by Landlord from time to time. Tenant is hereby granted the nonexclusive license to permit its employees to use the sidewalks and employee Parking Areas designated by Landlord from time to time. The rights to the use of the Parking Areas by Tenant's customers and employees shall be limited to the right to pass by foot and to parking pas~" ~": and maneuvering ofvebicles. The rights to the use of the sidewalks shall be limited to the right to pass by foot b. Tenant is hereby granted the nonexclusive privilege to permit its employees and customers to use the entrance and exit ways designated by Landlord from time to time for access to the Demised Premises through appropriat( entrances and exits designated by Landlord. 11.02 LANDLORD'S liGHTS. Notwithstanding anything to the contrary, Landlord shall have the following right with respect to the Common Area: a. Landlord may close all or any portion of the Common Area temporarily to discourage noncustomer use b. Landlord may prohibit parking or passage of motor vebicles in areas previously designated for parking c passage. c. Landlord may erect additional buildings on the Common Area or above the Demised Premises, or chan! the location of buildings or other structures to any location in the Shopping Center including the Common Area. Upc erection or change of location, the portion of the Shopping Center upon which buildings or structures have been erected sh: no longer be deemed to be a part of the Common Area. d. The Landlord reserves the right at any time, and from time to time, to construct and lease kiosks on any p of the Shopping Center (including but not limited to, the interior common areas, the sidewalks and the parking lot). If 1 Landlord chooses to build a kiosk on a common area of tile Shopping Center, upon the commencement of construction, : space devoted to the kiosk will no longer be considered a common area of the Shopping Center. 16 104 11.03 LICENSE NUMBERS. Landlord shall have the right, from time to time, to prohibit and/or restrict the use of Parking Areas by Tenant, Tenant's Agents and Tenant's employees to specific parking places or areas. In order to implement the foregoing, Tenant shall furnish Landlord with the license numbers of any vehicle owned or operated by Tenant and Tenant's employees promptly after each request therefor by Landlord- If any vehicles are parked in violation of Landlord's designated restrictions, Landlord shall have the right to have any such vehicle towed at Tenant's sole ex.pense. 11.04 LANDLORD'S OJ3LlGATIONWITH RESPECT TO PARKING AREA. Landlord shall keep the Farking Area properly paved and in good order and repair throughout the Teml. Landlord shal.l keep the Parking Area properly drained and shall provide painted stripes to designate parking space. Within a reasonable time after a snowfall ends, Landlord shall commence to remove accumulated snow and ice from the.Parking Area; and Landlord shall diligently prosecute the removal so that, to the extent practicable, the Parking Area shall be reasonably free of snow and ice. Landlord may deposit accumulated ice and snow on portions or the Common Area as may be necessary under the circumstances. lf any ice cannot be removed with reasonable effort on the part of Landlord, it will be sufficient for Landlord to spread sand or other abrasive substances over the ice. 11.05 PROMOT10N; MERCHANTS ASSOCIATION. Tenant shall fully cooperate with the other occupants of the Shopping Center in promoting the. use of such trade names and slogans as may be adopted for said development and in ail promotional and advertising campaigns. and ih tLi3 eOl.'l:h<x.tielfi, fit tLe re'iue3t of LalLolerd, join and n1ll.iI1te.i1. rr.e.mbe.r3hip in tli.c =' ':':':" :; =:.: T~' j';', ..0 ~<opo""'''''tG ,~:::f th~ ~ ~::::=':,~:::~.:.;;: ~= :i'=~.. ~v~::;;, ':::~,.;: ll) .gIG" ~.. Lan<ile.. ,!hat ~WM> ~~ ,~:~~ :';"<l<.M -~ '.i: :::'~:.~ ':~ ~k<eh>"" "",oe","'" ,." -;,;;;::;;tGd b) ~.a ... Ow ~.~ "; ~ ~: ==::';;,e: :;: ~ :: : ' , .;::.~ ~ Mo,d>oob' (o"o~bo,:' Lo.>dlo;<: ~.~':~ :~~=:"~::::: = ~ (;:~~ =:: == ;;;;:;~ "ghb..o ,..,.d.., .~"'; ~~ ~~'=' = ~~':',:; = ~~ ~\:;':.";:.::'~...::~:= ~u~:Ii~~~ :. ~~.L;:~ :~~~.:;, :,:~,~:::::t:':"o~ ~~~: E: ?!h~~iS~~=Lan&ocifu,.~~,,~,:~;rE:;=2:~~~ ='~:=~ :,::;= the w' M1)= o[th. opo""'o:' ~[":' ~e=: :-::=:::;: :::':;::; = :~:,~";;:';.~ =,::~:(..;'~~''")' "bi'"" ...e.. ,,01> ~ ~: ' "::~t'; =. "fU~ 7~-;:: ~~;: ~::::~: :: ~ ;;.;;v~""d ., the [0"' " m.f, "nte..o)of ~ 6-:=' ~:::::::.S. ~ :=:'l ~:: ~~ =:::: :.L~';:~~:::" ~"";~= ~~:.~b::;;ot:.,C~~~~ ~:'~=~~~~~~~: di"t,,,.d.ue.' of !he Mad..,,,' 'd3oe..tio. (0', if.... w.. ,,-d, the Cu,' ~b:.~n;:i: :;: = :::::r. :::::; :.~ ;;:; be. acljtl3tc.d e:'.e.r) ye.llr thcreafte.r. 11.06 ADVERTISING. All Tenant's advertising in the metropolitan St. Paul-Minneapolis area shall set forth tb name and address of the Shopping Center. Tenant shall not use the name of the Shopping Center in any confusing, derogatory ( misleading manner, and upon the termination of this Lease, Tenant shall not use the name of or any trademark or service mark, if an: associated with the Shopping Center. ARTICLE XII DESTRUCTION AND FIRE INSURANCE 12.0 1 RENT ABATEMENT. If all or any portion of the Demised Premises is damaged by fire or casualty cover by extended coverage insurance not caused by the fault or neglect of Tenant or Tenant's Agents, llI1d this Lease is not terminat pursuant to any provisions of this Lease, the following shall apply: Rent shall abate from the date of the occurrence in the proporti that the area of the portion of the Demised Premises rendered unusable for the Permitted Uses bears to the entire area of the Dem.[, Premises. The abatement shall continue until the Demised Premises, or the portion thereof which shall have been clarnaged., shall rebuilt or repaired. If the fIre or other casualty is caused by the fault or neglect of Tenant or Tenanes Agents, rent shall not abate 17 105 12.02 OPTION TO CANCEL. This Lease shall not be canceled as a result of flIe or casualty except as follows: Landlord shall have the option to cancel this Lease ifall or a substantial portion of the Shopping Center or the Demised Premises sha" be damaged by fIre or casualty. This option may be exercised upon giving notice of cancellation to Tenant within ni:ncty (90) SU. (60) days following the occurrence. Tenant hereby waives all rights to cancel this Lease by reason of damage to the Demised Premises as a result of fIre or other casualty pursuant to any presently existing or hereafter enacted statute or other law. 12.03 OBLIGA nON TO REBUILD. If all or any portion of the I?emised Premises is damaged by fIre or other casualty insurable under a standard flIe insurance policy with standard extended coverage endorsement, and this Lease is not terminated, Landlord shall repair or rebuild the Demised Premises or such portion to its or their condition inunediately prior to the occurrence but only to include the tenant improvements originally included in Landlord's Work. Tenant will, at its sole expense, complete all items of Tenant's Work. The repa ir or rebuilding shall be conunenced within a reasonable time after the occurrence, subject to Force Majeure. Landlord shall not be obligated to expend any sums for repair or rebuilding which are greater than the proceeds of any insurance policy actually received by Landlord and made available to Landlord by any mortgagee. 12.04 WAIVER OF SUBROGA nON. Landlord and Tenant hereby release each other and each other's officers, directors., employees and agents from liability or responsibility for any loss or damage to property covered by valid and collectible fIre insurance with standard extended coverage endorsement This release shall apply not only to liability and responsibility of the parties to each other, but shall also extend to liability and responsibility for anyone claiming through or under the parties by way of subrogation or otherwise. This release shall apply even if the fire or other casualty shall have been caused by the fault or negligence of a party or anyone for whom a party may be responsible. However, this release shall apply only with respect to loss or damage actually recovered from an insurance company. This release shall not apply to loss or damage of property of a party unless the loss or damage occurs during the times the fire or extended coverage insurance policies of a party contain a clause or endorsement to the effect that any release shall not adversely affect or impair the policies or prejudice the right of the party to recover thereunder. Landlord and Tenant each agree that any fIre and extended coverage insurance policies covering the Demised Premises or their contents shall include this clause or endorsement. 12.05 RIGHTS OF MORTGAGEE. Tenant acknowledges that the rights of the Landlord with respect to the of any insurance proceeds paid as a result of any casualty is subject to the rights of any Mortgagee. ARTICLE xm CONDEMNATION 13.01 DEFil'UnONS. As used in this Lease, the following words have the following meanings: a. AWARD means the award for or proceeds of any Taking less all expenses in connection therewith including attorneys' reasonable fees. b. TAK.mG means the taking of, or damage to, the Demised Premises or the Shopping Center or any portion thereof, as the case may be, as the result of the exercise of any power of eminent domain, condemnation or purchase uncleI threat thereof or in lieu thereof. c. TAK.mG DATE means the date on which the condemning authority shall take physical possession of the Demised Premises or the Shopping Center or any portion thereof as the case may be. 13.02 TOTAL OR SUBSTANTIAL T.A.'fClliG OF DEM1SED PREMISES. If all of the Demised Premises sha~ be taken, ex.cept for a Taking for temporary use, this Lease shall be canceled automatically as of the Taking Date. If a part of th Shopping Center or the Demised Premises shall be taken, Landlord shall have the option to cancel this Lease. The option to canc( may be exercised within six (6) months of the Taking Date by giving Tenant notice that the option has been exercised. l8 106 . 13.03 ABATEMENT AND RESTORATION. If all or a portion of the Demised Premises shall be taken, except for a Taking for temporary use, and this Lease shall not be canceled under section 13.02, the following shall apply: Minimum Rent shall be reduced in the proportion that the area so taken bears to the entire area of the Demised Premises. Landlord shall restore the remaining portion of the Demised Premises to the extent practical, to render it reasonably suitable for the Permitted Uses. Landlord shall not be obligated to expend an amount greater than the Award for the restoration actually received by Landlord and made available to Landlord by any mortgagee. 13.04 TAKING FOR TEMPORARY USE. If there is a Taking of the Demised Premises for temporary use, this Lease shaH continue in full force a"d et'fect, and Temm~ shall continue to comply with Tenant's obligations under this Lease, except to the extent compliance shan be rendered impossible or impracticable by reason of the Taking. 13.05 DISPOSITION OF AWARDS. All Awards arising from a total or partial Taking of the Demised Premises or of Tenant's leasehold interest awarded to landlord or Tenant shall belong to and be the propert.y or landlord without any participation by Tenant. Tenant hereby waives any rights it may have with respect to the loss of its leasehold interest in this Lease and the Demised Premises as a result of a Taking. Tenant shall have the rig'11t to make its separate claim for its unamortized costs of leasehold improvements to the extent paid for by Tenant, its fixtures and moving expenses, all to the extent such claims are allowable and do not diminish any A ward made or to be made to Landlord. ARTICLE XIV INDEMNITY AND LIABILITY 14.0 1 INDE~lFICA TION. Tenant shall indemnify and save hannless Landlord against all liabilities, damages, claims, fines, penalties, costs and other expenses, including, an attorneys' fees, which may be imposed upon., incurred by, or asserted against Landlord by reason of an of the following: a) any use or condition of the Demised. Premises or any part thereof; b) any personal injury or property damage occurring on the Demised Premises; c) any negligence on the part ofTena:nt, its agents, contractors, licensees or invitees; d) any failure to comply with any requirement of any governmental authority; e) any prosecution or defense of any suit or other proceeding in discharging the Demised Premises or any part thereof from any liens, judgments or encumbrances created upon or against the same or against Tenan~s leasehold estate; f) any proceedings in obtaining possession of the Demised Premises after the termination of this Lease by forfeiture or otherwise; g) any litigation commenced by or against Tenant to which Landlord is made a party without any fault on the part of Landlord; h) any response costs, other damages, and expenses (including attorney's fees) which may be imposed upon, incurred by or . asserted against Landlord by reason of the use, release, threatened release .or disposal 01 Hazardous Wastes (as defined in Section 7.04) at the Demised Premises; and i) any failure on the part of Tenant to perform or compl) with any covenant or agreement required to be performed or complied with by Tenant hereunder. 14.02 RELEASE OF LANDLORD. All property of any kind that may be on or at the Demised Premises shall b at the sole risk of Ten ant or those claiming through or under Tenant. Unless directly caused by the tortiously intentional conduct c willful and wanton negligence of Landlord, Landlord shall not be liable to Tenant or to any other person or entity and Tenant hereb releases and waives all claims dueto any of the following: a) damage; loss or injury, either to person or persons; b) loss of prop en sustained by Tenant, or by any other person, persons or entities in or upon the Demised Premises or the Shopping Center; c) equipmer fixtures, appliances or machinery in or upon the Demised Premises being or becoming out of repair or defective; d) the happening I any accident, however occurring; e) any act or neglect of Ten ant, or any other tenant or occupant of the Shopping Center or of any oth person., persons or entities; f) water, snow, rain, backing up of water mains or sewers, frost, stearn, sewage, illuminating gas, sewer g, odors, electricity or electric current, bursting, stoppage or leaking of pipes, radiators, plumbing, sinks and fixtures in or about t Demised Premises or the Shopping Center; g) the use or misuse of any instrumentality or agency in or connected with the Demis Premises or the Shopping Center, or h) any nuisance made or suffered in, on or at the Demised Premises. 14.03 TENANTS INSURANCE. a. Tenant shall provide and maintain a comprehensive policy of liability insurance with respect to the Delli Premises. Landlord, Shorewood Village Shopping Center, Inc., its managernentfirm, Towle Real Estate Company, and other designee of Landlord shall be named as additional insured. The liability insurance policy shall name Landlord 19 1 n7 management fIrm., Tenant., any Mortgagee and any other designee of Landlord as insured against any liability which arises from any occurrence on or about the Demised Premises or any appurtenance of the Demised Premises, or which arises frorr any of the Claims indicated in Section 14.01 against which Tenant is required to indemnify the Landlord. The policy is be written by a good and solvent insurance company satisfactory to Landlord. The coverage li.rn.its of the policy shall be at least $1,000,000 with respect to anyone person., at least $1,500,000 with respect to anyone accident., and at least $1,000,000 with respect to property damage. b. Tenant shall provide and maintain a fire insurance policy ~ith standard extended coverage endorsement insuring its imp"rovements, betterments, fixtures, equipment and personal property at replacement cost. 14.04 PLATE GLASS INSURANCE. Tenant shall keep all plate glass of the Demised Premises irlsured against all risks for the benefit of Landlord and Tenant in amounts and with a company satisfactory to Landlord. 14.05 GENERAL PROVlS10NS WITH RESPECT TO INSURANCE. a. On or before Teni1nt enters the Demised Premises for any reason, and before a~y insurance policy shall expire, Tenant shall deliver to Landlord the policy or a renewal thereof, as the case may be, together with evidence of payment of applicable premiums. Any insurance required to be carried under this Lease may be carried under a blanket policy covering the Demised Premises and other locations of Ten ant. If Tenant includes the Demised Premises in blanket coverage, Tenant may deliver to Landlord a duplicate original of the blanket insurance policy or a certificate evidencing such insurance instead of the original of the policy. b. AU insurance policies required to be carried under this Lease by or on behalf of Tenant shall provide (and any certificate evidencing the existence of any insurance policies shall certify) that: unless Landlord shall be given ten (10) days' written notice of any cancellation or failure to renew. or material change to the policies, as the case may be (I) the insurance shall not be canceled and shall continue in full force and effect, (ii) the insurance carrier shall not fail to renew the insurance policies for any reason, and (iii) no material change may be made in an insurance policy. As used in this Lease, the term "insurance policy" shall include any extensions or renewals of an insurance policy. 14.06 INABILITY TO PERFORM. a. If Landlord fails to perform any of its obligations under this ~e as a result of Force Majeure, Landlorc shall not be liable for loss or damage for the failure and Tenant shall not be released from any of its obligations under thi: Lease. " b. If Landlord is delayed or prevented from performing any of its obligations as a result of Force Majeure the period of delay or prevention shall be added to the time herein provided for the performance of any such obligation. 14.07 . BROKERAGE. Tenant represents that there was no broker (other than the person designated as Broker: Sect:on 1.09) instrumental in consummating this Lease, and that no conversations or prior negotiations were had with any broker (oth than the Broker) concerning the renting of the Demised Premises. Tenant shall hold Landlord harmless against any claims f brokerage commission or compensation arising out of any conversations or negotiations hadby Tenant with any broker (other th: the Broker). ARTICLE XV COVENANT OF QUIET ENJOYMENT l5.01 Landlord covenants that if Tenant pays the Minimum Rent., Additional Rent and all other charges provi( for in this Lease, performs all of its obligations provided for under this Lease, and observes all of the other provisions of this Lee Tenant shall peaceably and quietly enjoy the Demised Premises in accordance with the terms of this Lease without any interrup1 2.0 1ns:l or disturbance from Landlord. Landlord shall not be responsible or liable for the actions of third parties, including other tenants in the Center. ARTICLE XVI DEFAULTS; RErYlliDIES 16.01 DEF AUL TS. Each of the following events shall constitute a Default: a. If an event of insolvency should occur. Each of the following events shaH be regarded as events of insolvency: (i) If Tenant or any Tenant's Guarantor shall make an assignment for the bcncfit of creditors. (ii) If Tenant or any Tenant's Guarantor shall file or acquiesce to a pClition in any court (whether or not pursuant to any statute of the United States or of any state) in any bankruptcy, reorganization, co mpo sition, ex.tension, arrangement or insolvency proceedings. (iii) If Tenant or any Tenant's Guarantor shall make an application in any such proceedings for, or acquiesce to, the appointment of a trustee or receiver for it or all or any portion of its property. (iv) If any petition shall be filed against Tenant or any Tenant's Guarantor to which neither of them acquiesce in any court (whether or not pursuant to any statute of the United States or any state) in any bankruptcy, reorganization, composition., extension, arrangement or insolvency proceedings and the proceedings shall not be dismissed, discontinued or vacated within sixty (60) days. (v) If Tenant or any Tenant's Guarantor shall be adjudicated a bankrupt or if any petition referred to in clause (iv) shall be approved by any court. (vi) If, in any proceeding pUISuant to the application of any person other th.ali Tenant or Tenant's Guarantor to which neither of them acquiesce, a receiver or trustee shall be appointed tor Tenant or Tenant's Guarantor, or for all or any portion of the property of either, and the receivership or trusteeship shall not be set aside within sixty (60) . days after such appointment. b. If Tenant shall vacate the Demised Premises. c. If Tenant shall refuse to take possession of the Demised Premises on the Commencement Date or shal permit the Demised Premises to remain unoccupi~d and unattended. d. lfTenant shall cease to conduct its business in the Demised Premises at the times and in the manner requirel hereunder. e. If Tenant shall fail to pay any installment of Minimum Rent, Additional Rent, Percentage Rent (if any) ( any other charge required to be paid by Tenant under this Lease within five (5) days after the same shall become due ar payable. f. If Tenant shall fail to perform or observe any of its other obligations under this Lease for a period of ten (1 days after written notice to Tenant. 16.02 REMEDIES. 21 109 " ". a. Upon the occurrence of a Default as.defmed above Landlord may elect either (i) to cancel and terminate this Lease, and this Lease shall not be treated as an asset ofTellallt's bankruptcy estate, and such termination will not relea Tenant from liability for all amounts as provided in subsection c) hereof; or, (ii) to terminate Tenant's right to possession om) without canceling, terminating or releasing Tenant's continued liability as set forth in subsection b). Notwithstanding t.~e fact that initially Landlord elects under clause (ii) to terminate Tenant's right to possession only, Landlord shall have the continuing right to cancel and terminate this Lease by giving three (3) days written notice to Tenant of such further election, and shall have the right to pursue auy remedy at law or in equity that may be available to Landlord. b. In the event of election under clause (a) (ii) to terminate Tenant's right to possession only, Landlord may, at Landlord's option, enter into the Demised Premises and take and hold possession thereof, without such entry into possession tC11l1inating this Lease constituting an acceptance of surrender, or releasing Tenant in whole or in part from Tenaut's obligation to pay a II amounts hereunder for the full stated Teml, or any then effective Renewal Tem1. Upon such reentry, Landlord may remove ail persons and property from the Demised Premises and such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Tenant, without becoming liable for any loss or damage which may be occasioned thereby, Such reentry may be conducted in any lawful manner. Upon and after entry into possession without termination of the Lease, Landlord may, but is not obligated to, relet the Demised Premises, or any part thereof, to anyone other than the Tenant, for such time and upon such terms as Landlord, in Landlord's sole discretion, shall determine. Landlord may make alterations and repairs, and redecorate the Demised Premises to the extent deemed by Landlord necessary or desirable. Whether or not Landlord re-enters the Demised Premises, upon the election by Landlord to terminate Tenant's right to possession; Tenant shall be liable to Landlord as follows: (1) For all attomeys' fees incurred by Landlord by reason of Ten ant's Default or in connection with exercising any remedy hereunder; (2) For the unpaid installments ofMinirnwn Rent, Additional Rent, Percentage Rent and other unpaid sums which were due prior to such termination of right to possession, including interest and late payment fees, which sums shall be payable immediately; (3) For the installments of Minimum Rent, Additional Rent, Percentage Rent and other sums falling due pursuant to the provisions of this Lease for the periods after termination of Tenant's right to possession during which the Demised Premises remain vacant, including interest, which sums shall be payable as they become due hereunder; (4) For all expenses incurred in redecorating, remodeling and releasing the Demised Premises, including leasing commissions, attorneys' fees, costs of alterations, repairs and redecorating, which shall be payable by Tenant as they are incurred by Landlord; and (5) While the Demised Premises are subject to any new lease or leases made pursuant to this subsection (b) for the amount by which the monthly installments payable under such new lease or leases is less than the monthly installment for all charges payable pursuant to this Lease, which deficiencies shall be payable monthly, c. Notwithstanding Landlord's initial election to terminate Tenant's right to possession only, ane notwithstanding any reletting without termination, Landlord, at any time thereafter, may elect to terminate this Lease, and te recover from Tenant (and Tenant agrees to pay), in lieu of the amounts which would thereafter be payabkpursuant to th, foregoing subsection (b), but not in lieu of any amounts accruing prior thereto, as damages for loss of the bargain and not a a penalty, the following amounts: (1) The amount by which the rental value of the portion of the Term (or then effective Renewal Term., : applicable) nnexpired at the time of such election is less than an amount equal to the nnpaid Minimum Ren Additional Rent and all additional charges due in the Lease Year in which such election occurs multiplied by tt Lease Years remaining in the original Term (or such Renewal Term). 22 110 ", (2) All expenses incurred by Landlord as a result of Tenant's Default including, without limitation, leasing commi.ssions, attorneys' fees, all expenses of alternation, repairs and redecorating. (3) Interest on all of the foregoi.ng, as provided herein. (4) All other incidental and consequential damages incurred or suffered by Landlord directly or indirectly as a result of Ten ant's Default. Such amounts shall be due to Landlord as of the time Landlord makes said election, notwithstanding that the Term had not expired. If Landlord, after such reentry, leases said Demised Premises, then the rent payable under such new lease shall be conclusive evidence of the rental value of said unexpired portion of said Tern1. If this Lease shall be terminated by reason of the bankruptcy or insolvency of Ten ant, Lessor shall be entitled to recover from Tenant or Tenant's bankruptcy estate, as damages for loss of the bargain and not as a penalty, the amount detennined by this subsection (c). d. or in equity. Mention in this Lease of any particular remedy shall not preclude Landlord from any other- remedy, in law e. Tenant hereby expressly waives any and all rights of redemption granted by or under the present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of the Demised Premises, by reason of violation by Tenant of any of the covenants and conditions of this Lease or otherwise. 16.03 DEFAULT BY LANDLORD. If Landlord shaU default in the performance of any of the terms or provisions of this Lease, Tenant shall promptly so notify Landlord in writing. If Landlord shall fail to cure such default within thirty (30) days after receipt of such notice, or if the default is of such character as to require more than thirty (30) days to cure, and Landlord shall fail to commence to do so within thirty (3Q) days after receipt of such notice and thereafter diligently proceed to cure such default, then in either event, Tenant may cure such default and any reasonable and actual expenses paid by Tenant shall be paid by Landlord tc Tenant within ten (10) days after a statement therefor is rendered.. Tenant shall have no right to set off or deduct any such amount.! from any Minimum Rent, Additional Rent or other amount due hereunder. 16.04 LANDLORD'S RIGHT TO PERFORM FOR ACCOUNT OF TENANT. If Tenant shall be in Default unde this Lease, Landlord may cure the Default at any time for the account and at the expense of Tenant. If Landlord cures a Default 0 the part of Tenant, Tenant shall reimburse Landlord for any amount expended by Landlord in connection with the cure upon demanc 16.05 ADDmONAL REMEDIES, WAIVERS, ETC. a. In addition to all other remedies granted to Landlord hereunder, upon the occurrence of a default specifi< in Section l6.0 1 (d), Landlord may obtain equitable relief by way of specific performance and/or temporary and perrnane injunctions requiring Tenant to continue to conduct its business in the Demised Premises at the times and in the manr required hereunder. b. The rights and remedies of Landlord set forth herein shall be in addition to any other right and remedy n and hereafter provided by law. All. rights and remedies shall be cumulative and not exclusive of each other. Landlord n exercise its rights and remedies at any times, in any order, to any extent, and as often as Landlord deems advisable with regard to whether the exercise of one right or remedy precedes, concurs with or succeeds the exercise of another. c. A single or partial exercise of a right or remedy shall not preclude a further exercise thereof, or the exer of another right or remedy from time to time. d. No delay or omission by Landlord in exercising a right or remedy shall exhaust or impair the sarr constitute a waiver of, or acquiescence to, a Default. 23 1 'j 1 e. No waiver of a Default shall extend to or affect any other Default or impair any right or remedy with respect thereto. No action or inaction by Landlord shall constitute a waiver of a Default. The acceptance by Landlord of al'. Minimum Rent, Additional Rent, Fercentage Rent or other amounts, whether partial or full payment shall not constitute waiver 0 f any other Defaults. The acceptance of any Minimum Rent, Additional Rent or Percentage Rent from any third party shall not constitute a waiver of any of the restrictions of Section 10.01 hereof. No waiver of a Default shall be effective against Landlord unless the same is in writing and is duly executed by an authorized representative of Landlord.. ARTICLE XVII TENANT INFORMA TIO]\; 17.01 TENANTS CERTIFICATE. Within ten (10) days after each rcquest by Landlord, Tcnant shall deliver a certificate to La.ndlord. The certificate shall be in writing, shall be acknowledged, and shall be in proper form for recording. The certificate shall be executed by Tenant if Tenant is an individual proprietorship, by a general partner of Tenant if Tenant is :1 partnership, or by the president or a vice president if Tenant is a corporation. Each certificate shall be certified to Landlord, any Mortgagee, any assignee of any Mortgagee, any purchaser, or any other person specified by Landlord. Each certificate shall contain the following information certified by the person executing it on behalf of Tenant: (I) Whether or not Tenant is in possession of the Demised Premises; (ii) Whether or not this Lease is unmodified and in full force and effect. (If there has been a modification of this Lease, the certificate shall state whether this Lease is in full force and effect as modified) and whether Landlord is in default under this Lease in any respect; (iv) Whether or not there are then any claims defenses against the enforcement of any right or remedy of Landlord, or any duty or obligation of Tenant (and if so, specify the same); (v) the dates, if any, to which any rent or charges have been paid in advance; and (vi) any other information reasonably requested by Landlord. 17.02 ~:;:~ A.L Il"rrORMATION. Terumt sh.e:l:l provide t-e Lantll6rd 'VI ithin te:;n (10) aa) 3 aft~~~~ ~~~~:::ct :::fr~ .::":~.:::: ::.~~ == :;;:~;~" ;'"~~"~',fr..~,~~::: ~~;::d~~=::~ ~~~~:..~:sc.~;:;: ;;\1 !h'o"oe \0 ~ond~~ ~~;~;:';:S:,:~?E;e~ ~ncd~ II I r r pnnelpal of tenent and ecrtlftcG. a3 accurate b) an tndepcndeot eemfied pttbhe aeeountal'l.t :~~: ~~~~~: after :tlC3t thcrefor by Lanalord Of ~ pro3pcetiy~~a~~~r ::~~~ ~r :: l=:, '~~;:e~~~~ :~~;:=,Z:.~; T,_, ;~3t~e~ ~;:=~ ~e~':~=~ ~~';b~;~O';; ~~~~;;dL; r:~.;,e[=t~:~;;;;;;;~p::a ~:;;::~~,;:; =~;::::' ;::::; ::: 3haU Le " "1''' eo b, T.::...~ '::0 ::::::' :~~~~::: :=:~::~='" ,.. h' ,. ~. t thc 5tfl.tcrncnt raid) pre3e:;nt3 the financIal eondltlOfi e{Tenant fr.3 of the datE stated. 17 .03 CONFIDENTIAL INFORMATION. Landlord shall hold any fInancial information obtained from Tenant' records in strict confidence except as may be necessary (a) for the enforcement of Landlord's rights under this Lease, (b) inconnectio: with prospective fInancing or prospective sales of the Shopping Center or a lease of the Demised Premises, ( c)with respect to ta proceedings, and (d) pursuant to any legal requirements. ARTICLE XVIII RIGHT OF ACCESS l8.0 1 ENTRY. During any reasonable time before and after the Commencement Date, Landlord may enter up< the Demised Premises, any portion thereof and any appurtenance thereto (with men and materials, if required) for any of the followu purposes without constituting a construction eviction: a) inspecting the Demised Premises; b) making any repairs, replacements alterations which Landlord may be required to perform under this Lease, or which Landlord may deem desirable for the Demis Premises and c) showing the Demised Premises to prospective purchasers or lessees. 24 112 18.02 EASEMENT FOR PIPES. Tenant shall permit Landlord to erect, use, maintain and repair pi.pes, cables, conduits, plumbing, vents and wires in, to and through the Demised Premises as often and to the extent that Landlord may.now or hereafter deem to be necessary or appropriate for the proper operation and maintenance of the Shopping Center. ARTICLE XIX INTERPRETATION; NOTICES; MISCELLA~EOUS 19.01 INTERPRETATION. a. Exhibits A. B. C D and E are attached to this Lease. They shall be considcrcd a part of this Lease. b. Any references in this Lease to "subtenants" or "licensees" shall not be deemed to imply that any subtenants or licensees are permitted under this Lease. Any references in this lease to any extensions or renewals of the Term of this Lease or to any period during which Tenant may be in possession after the Expiration Date shall not be deemed to imply that any extension or renewal of the Term of this Lease is contemplated or that Tenant shall be permitted to remain in possession after the expiration of the Term of this Lease. c. If any provision of this Lease or the application of any provision of this Lease to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Lease, or the application of such provision to persons or circumstances other than those to which it is invalid or unenforceable, shall not be affected thereby; and each provision 01 this Lease shall be valid and be enforced to the fullest extent permitted by law. d. The captions and headings used throughout this Lease are for convenience of reference only and shall no affect the interpretation of this Lease. e. This Lease has been executed in several counterparts; but the counterparts shall constitute but one and th same instrument. 19.02 COMJ:vfUN1CA nONS. No notice, request, consent, approval, waiver or other communication under th: Lease shall be effective unless the.same is in writing and is mailed by registered or certified mail, or overnight courier, postage prepai( addressed as follows: a. Ifintended for Landlord, a communication shall be effective three (3) days after it is sent if mailed to tl address designated as Landlord's Notice Address in Section 1.10, with appropriate copy, or to such other address as Landlo designates by giving notice to Tenant, and b. If intended for Tenant, a communication shall be effective three (3) days after it is sent if mailed to t address designated as Tenanes Notice Address in Section 1.10 or such other address as Tenant shall designate by giving not thereof to Landlord. 19.03 SUCCESSORS AND ASSIGNS. Except as otherwise provided, this Lease shall bind and inure to the ben of the parties and their respective successors, representatives, heirs and assigns subject to Secticn 1 0.0 1. 19.04 RESPONSIBILITI OF TENANT. Any restriction on or requirement imposed upon Tenant under this Le shall be deemed to extend to Tenant's Guarantor, Tenant's concessionaires and licensees; and it shall be Tenant's obligation to C8 the foregoirlg persons to comply with the restrictions and requirements. 25 i 13 19.05 LLA.BILITY OF LANDLORD. Landlord and its officers or partners shall have absolutely no personal liability with respect to any provision of this Lease or any obligation or liability arising from this Lease. Tenant shall look solely aD" exclusively to Landlord's interest in the Shopping Center for the satisfaction of any judgment or remedies of Ten ant. 19.06 GOVERNING LAW. This Lease shall be govemed by and construed according to the laws of the State of Minnesota. 19.07 GUARANTY. All of Tenant's obligations under this Lease Agreement are secured by the Guaranty executed by Tenant's Guarantor(s) as specified in Section 1.07 hereof. 19.08 EXECUTION AND DELIVERY REQUIRED. ll\is document shall have no binding effect on the parties unless executed by the landlord and the tenant and a fully ex.ecuted copy if delivered to the tenant. To evidence their agreement to the foregoing the panics have duly executed this Lease the date first indicated abovL:. LANDLORD: By ~ Its Its By Its Hd m ~Y\ "} b t-v--r.Lfty ("" swood\liquor.lse. 26 114 .. EXHIBIT A 0 rn-.Jrn-l :$;:0 FLOOR PLAN ." 00'>00 o n' .,,2! zgz~ rn ::r (f) ~~ )>-n)>r '""{JC> :r: s:~~~ :;:00.. CD CD ZZl1m ffi~ en 0 ..... ..... en 0 0):> I NN o. :::0 c:cCD enmm' rnO 0 (.>w t;;)>()m ZC m NN en < mCfl -I() :;:0 N 00 mz-I -- ::r m 0) ~ --l~ Z -{ ):> ClPJ ()) wN Cm-l m::l ~ WW m:;:om Z::s C) 0 (f) (") mQ 0 C) 0 0 :;:0- 0 C os: )>0 0 -l lJ r""(' 0 N 0 :r: )> ~s: (;.) z P- - -t -< z s: CJ1 < P- C) C) - m z:r:r :;:0 z-r mQ')> en :r: G) ~~m )>~ Ol-tO 01 m ~- ~"-' c...:> Z -...... (..) 0...... U' ~ -I <.1'10 ..., m ;0 623730 3.990 SF 123720 1.056 SF 1.154 SF 123714 3.378 SF 123680 592 SF R23670 2.458 Sf 873660 1.752 SF ....., .....- -0> ...., 0...... 00"> <:) (j")O ...., 0_ -CT> ....., Cl'>(...< <:> en ....., (j) 0 ...., "'0 C :c -0 ;;0 o o :c \ ::E ,...., ~ ~ ~ -..... ';::; \ 8::;: ~~ Gl x r- o n ^ 115 o o x EXHIBIT B LEGAL DESCRIPTION AI\ of Lot '172 and that part or Lots 170 and 171 lying south of the Westerly extension of the North line of Lot 172, and that part of Lot 173, Auditor's Subdivision No. 135, Hennepin County, Minnesota, lying Northerly of the Northerly right of way line of State Highway No.7 EXCEPT the East 50 feet of said Lot 173 as measured at right angles from the East line of said Lot 173. Also that part of the East 30 feet of vacated vvoodruff Avenue lying North of State Highway No.7 and South of a line drawn from the Southwest corner of Lot 171, Auditor's Subdivision No. "\ 35. to the most Southerly point of Lot 'II, Linden Park. subject to easement for public records, but including any portion of said East '/z of Woodruff Avenue to be vacated at ;3 future date, according to the plat thereof on file and of record in the office of the Register of Deeds, in and for Hennepin County. Minnesota. 11 S Tenant accepts premises in "as-is" condition. EXHIBIT C LANDLORD'S WORK 117 EXHIBIT D OTHER PROVISIONS Base Rent Tenant shall pay Landlord on or before the 1st day of each month, base rent according to the following schedule: Rent Monthly Annual p.s.f. Rcnt Rcnt January 1, 1997 - December 31, 1997 January 1,1998 -December31, 1998 January 1, 1999 - December 31, 1999 January 1, 2000 - December 31, 2000 January 1, 2001 - December 31, 2001 $ 6.00 $ 7.00 S 8.00 S 9.00 S10.00 51,995.00 S2,327.50' S2,660.00 S2,99:2.50 53,325.50 523,940.00 527,930.00 S31,920.00 535,910.00 S39,900.00 Tenant shall pay it's prorala share of all operating expenses. Earl\' Termination Should the City of Shorewood decide to discontinue operation of all its municipal liquor stores during the tem1 of this Lease, Tenant shall have the option to terminate this Lease provided Tenant gives Landlord at least ~four (4) months advance written notice of its intention to do so. Potential Shoppin~ Center Renovation In the event that Landlord elects to renovate the shopping center, Tenant agrees to pay additional rent of an amount not to exceed $665.00. LANDLORD TENA'l\TT Its By / J By Its By Dated Its /~cJ V'r/~Y) ,'Q+taj.oy , Dated 118 EXHIBIT E SIGNAGE CRITERIA Tenant agrees to conform with the signage established by the Landlord. Tenant is responsible for the installation and maintenance of its own exterior signage. Tenant must also comply with the local and municipal rules and regulations relating to signage. 119 . IMI -. .'I ;-Uc:. I U L:. 1 U' 1 , VVLLlt':'I\>.J IV(iL.L. lO(lf\ I\V, v'JL U..JL. v \ v-.J L I V'- Amendment f.) To Le:tSe Dolted July :1.7,1998 By and Be.t:>yeen Snore'wood Viltage Shopping Cent~r, Inc" as Landlord And City of Shorewood, a Minnesota munidp::i.l corpor:.'1tion, as Temmt I THIS A1YlEl'''DMENT TO LEASE :.s entC:Ted into and made as of this 28'h day of:NovembE:T, 200 1, by and between SI1.0revl'OOC1 Vi\htg.~ Shopping Center, lur.::.. <IS l,,;mdlord and City Qf ShorewoO(I, a Minnesota municipal corporati.on, as Ten:lnt. \VJTh""ESSETH; WHEREAS, Landlord and Tell:mt ttave heretofore entered into II certain lease dated Jut)' 17, 1998 (the: "Lease"), containing ;;.pproxin1:;1.tely 3,990 sql.\arc feet of ce-rtain teased premises atShorewood Village Shopping Center, located at 23730 Highway 7) Shorewood, Minn.esota 5533 t (1-1;,(: "Premises"), up<ln terms and conditioIlS descn'bed in said Lease; ?oDd WRE"REAS, Landlord and Tenant desire to amend said Lease as described below; NOW THEREFORE. in consid<:ration oftne rents received-and of the covenants and agreements herein set forth, i.ris ngrcC:Q thot the Lease be hereby o.mer~ded from and after the dat(~ ne,enf a.s followS: Premises The ~remises, consisting of approximately 3,990 rentable square feet. shaH be taken in "as.is" condition.. ~ Tl1e Term of the Le<:\5C shat! be c:xtc:nded for a period of one <.1) year commencing January 1,2002 apd tennmating Decen1.ber 31, ~002. l\liniLnuxn Rel}!, Tenant shall pay Landlord on or before the first day of each month, minimum monthly rent cfS3,491.Z-S; or $10.50 per square foot. Opern!il1~.:.sP(lnses Tenant sball continue to pay its pro-rata share of operating expensc:S (5.52% - CAM and 13.98% - "-Mall). Exec'Utiou llnd Delivery Required TIlis document shall have no binding effect on the parties unless eKccutcd by the landlord ~d the tenant and a fully executed copy is delivered to the tenant. . - . EltcC-Pt as is nereinabove set forth, aU terms, provisions and covenants of the Lease s1-);;I.11 remain unchanged and in full force and effect. IN WITNESS \VHEREOF, the parties hereto have duly ex.ecuted this Amendment #1 as of the date and year flrst above written. Date:; lis G\-N ~\s1r~y i () 5 \ ()1,. I{) 7- By Hs 1 120 . ll"i l ',J I I I,,,,H':... t UL j" V' 1. I '.J''-' I....l....... .I. L-I \."-' . 'v : 11...1...... Ciy~ ";ho(qwood ......st::;;~4~r~\.....'-l Z6-- -9; (..... .- 01. 03:40p r=\ ;:-,. ct\ \::-~~ r\ ~ 17 \"~:- \'~' ,', , D f::~':~~\\ ,,':\ December 6. 2 ~\ ,,':C 10 2001 \~J v 1^ Fr SIMILE 952-474-0128 ;;.;p~:~~:X~~~~~~g!~i0:~t~~~~~m '.':iCOl..LreB:$i;'i , ''T'O:':~1'I'';.'I::'''':''; '3.::~"'::...L, f"".,L(;~:'~<"-~ :~i;~~'.'::", "~:;"CC , ,,,,:.:.:~~:'~: 6.:-:" .::.... .. ;:.. '.. 'I .:.':......: ~;~~;::;~~~t:~e. :~.~~ B""'1t~~E' AprnA"'",,^l. . RESEARCH . p"""",~'rf Mp......c;;MCN":' Ms. BOI1l'1\e: Burton fiJ:mD.ce Director City of Shorewood 5155 o.').unlry Club Road ShorewliOd, MN 55331 Colliers Towle Raa\ Esute E.de:~ Prrurie Office Suit.c 260 \ I09SViklng Drive Eden Prairie, MN 55344 R"" supplemental Letter to Amendment #1 S{wrewood Village Shoppi7fg Center Pir~ct:9S1f943-238S Fax: 95-'21943-2339 , www.c.oHierstow\e..<::om DC'i.\l" BO)lnle: Ln a,klit1onlo the tem1S in Amendment #1 tu Lea&e dated November 28, 2001, it is a.greed that: t. During t.he one-yea.r eX\CD.sion term or Amendment #l to Lease, thi'.:i Amendment <;:,m be amended to a five-year extensioIl term (which wm include the existing one yetrJ. extension term). Terms to be negotiated by both p8.liies. 2. If the term is Olnendcd. to a five~ye:ar extension., Landlord shall provide a reasonable t<ma,nt improvement allowance; amount to be negotiated at that time. 3. If Landlord decides to cie-man the sh.opping center, landlo~d has the option of e:>-.."tcnding Ttlt:.laut's demi.sing walls to th.~ front of the center. 'Tenmt agrees to lease the addi:tion~\ ~quare foota.g.e: UIlder the same terms and oondi.ti.ons of the tease. Tenao.l shall pay additional rent for this expansion. to be negotiated. Should you ha.ve al'tY questions, please contact"our office all9S2) 943-2385. Sincerely, Copy 10: Ed Engler David Schwebel , ' '2Aa ()j'[iC;d "' l!>e Am~ Wro~.1-Ilddl;'l:-:.tt,' Ail'k>. md Grrlt1>r'Asn 121 r.i"C:::l loreuJood r hi, !'\U, .::J::.JC:: U JO::: U I Jj 95f:474C''8 r I U"i 1"'.2 nn~-;.:('-UC: lUt iO; it) Ol. 03:39p vULLltK.~ IUWLt. l \. t, CITY Of SHOREWOOD 5755 COUNl"RY ClU8 .ROAD . SHORE'WOOD, MINNESOTA 5533- \ -8927' (952) 4-71i.32~{fj FA-X (IlS::!.} dTd.-O \ 213' WWw.ci.S~O;~wood.mn.\.ls..;:it..r.21:tWcLshomwcod.mn.u5 BY i"&X (612} 347-9389 (952) 943-2385 December 14,2001 Mr. "Ed Engler Colliers Towle Real 'Esta1C 330 Second A "\IC. SO. Mtnlleapolis, MN 55401 Re: Sho~ewOO<3. Plaza Leas!;; Agreement for City ofShor~wood Municipal Liquor Store Dear Ed: The Sh.?l'ewood Cily Council. at their December 10.200 [ meeting, approved the Shorewood plaza lc:?tsc proposal as recommended by Ule Liquor Comm\ttec. Specifically. th.ey approved the terms included in the draft proposal Amendment #1 and the Sllpplementallettcr to Amendment #1 d;,1ted December 7,2001. (Sce a.tl;ached copies.) p1ea..c:;e proceed with preparation of the tease documents that incorporate the above points and forward the document to my attention for review by the City Attorney. . Thank yoU for yow: courtesy and ptoI'llpt consideration. We took fOITvard to a continued good working rela.tionship with you. at Sborewood Plaz.a. Please feel free to contact me if you h<l.ve questions or comments. Sincerely, C1TY Of SflOREWOOD BOUJ)ie: Burton Finance Director Cc: Timothy J. Keane, City Attor:ney Craig W. DawsOn, City Admi.ni.strator Don Swand'oy, Liquor Operations Director ~ . ~ ~ ~P.l"T~O CN oo;;CYClEn PM""Ei' 122 TOWLE REAL" ES'l'A:.l.'j:<; . "'t:::J .....v... 01110/03 ]l:.:-~ FAX 6q.-l47~89_.. . 01/10/2003 FRI kO:04 FAX \4]002(002. nee 1? 02 03~~2p :it.l:\ ShoJ"'euJOOd 95;::.lt7'\Ol~8 p.(;. "menu-mCll( ::#~ 1'" 1.Jll'li~ p~(ca JUlY 11, 19911 B~' ~ad Bfh'ret:.u . 5b.Q~e'\'l'aOd Vil\ut;I/.ShO!l~il'\tCent~r, '{1~,\ a~ t.JndlQrl1 {\Illl Citt of ~horl!,,"*Qt!, i Minl1~:;1JUl. n\lltl\cip!\ ~Qrp.QifttIC!l, as 't~nil\( 'l' Li. LS'.'\,l\'U:NIJl">'\.l~~TrO 1.g,,4,Sl:;: i~ C!lL~roil.I.M~' "I'd tn\1de: aJ Q-r If, i:,. pl1~'! c./[)ecMbet / 0 1.. by :l.nd OMwet:<\ 5norcwoc (1 Y1Ua~\l SilQ~l",lIt C-'IlHf, \n t" :1.$ \.o.rv;l\Qrd l ;11\ CIty Q r Sil(jr~"'ood, 4 MillQ~\Q\:l, p:\lltltcj~~\ .;cryl)r';I.\\Ut:., 0.:;: Ten:u\t. W\11~;;;$5ETR; WH'ARSAS, I..llml\Qrd and T~nU\1 l\Q1/(d\~('\:\Qfol: e1\ttr~c;I irlt(j Jl. e~~1A ltas~ ~\i!:Ii J"u)' 17, \ 9Q'iI (Lh~ 1'1..ell.$l!."J, CUl\ll:ltl1\!\g ;lppro)o;ili':t\~b' ::'.'l'l\l ~~~re t<:t:;( Qrl:~\(\ \t::l.$~\ i'retni:l~S cl. Shtlre..,nxx~ Vl~c ShopP'"li Cen\tr, lo~td 11\ 1:; 1 )Q H.\g.\\\",~~'1. SJ\[;l~\lJ<1bd., MlM"'~,:l :U:;31 CUlt: n'pn:'m~"'I. \1;1Q'(> \~ and ccndrnQTI& c1.",,='b:~ \n >'Old J."e;l!.~: llt\d WHERE},.S, U.M\\Oid and 'nnMI d~ltt \0 ~eM\ &-altl 1..~1\.'"l \l.:t de-~n"'acd 0/:$1\\". N\l'W Tl-ral!f.EfO'Rt., itll:.tlnsidc.n~\or. ~fthtmntn l~Nl\'~o al\~ a1 the ~O'lcn~,l\tS ~d ;),~'\"m\l::1\ts h~reln ~Gr [(\\'11\, \\ i! a~/::~tl I!-<AI the. t.~Q b..l\tl1l'elJ',f WT1o.nOed f'r~m \l.nQ. ~r"tJ;l.t thr. d.:l'l"c \:l~reQr u \I:l\lo....~ .t!:!tiI is,S! i\'!! p~mis~~. ootlOls{ll\r. -:l('\\PilCQ;...'iltl,lll.:h' ~,S90 n:nt;J.b\~ :m,I,lil.ll: \'~Cl., s\1~l' bll t:1JI."" In "il.~-\...;" e~l'\di\iL'ln. nrm "i'h.: 1"Mt'\ \I\' U\e \"t::UI\ r,r..al! bit e::<.\e~t\~d ran petiOll ~f <:Ill': (l) -:-<:1\1 ~omtlll;>n.:il1~ J\IfIU~ l! lOO?W11i ~cm. :!\l\Clnll'. nl!eem~l?>r 'J l,100}. Mlni"'lOJ!l.~nt 'ien:\\,U\'IG\I ~Il}' \.D.lI4(NQ,jl\ lit be-n,rtS thQ r'1"o\,d:1rot ~:\c'r rM;lI'tl11, minImum t'lIQl'Icn\,:' rel'lt QtS~,~ ~\ ,l~i $\" 5 I C,SO p~nq\lull foot. \ O\le~flll\\1!. "E:1:P~!15e5 i~l\~n\ sMll !:01\~inut (Il \1:\'1 iJ; prO'!'1'.lll fhor.:. o~ opcraut\!!, I~:;.~es (5.5~% ..Ct\.\'t\ lltIcl rUs%. M~U1. ~l!e\\t\Q\1 \lIad tllltln1:Yl~Il\l'ctl i\\is Iloe\lli'len\ sh~lIl\~ve 1\0 'I\htiin~ elle:.\ on I.b.e p:!l"lt~ unl~ e~~Q\nllQ b)' \he \.mdll;lrd UlQ Ihe \~\'I.;llV aDd ~ r\lll~' >:;W;I./\ed C-l:\pY ,~ delh.!r1!d \0 th~ WI"":, . . t:.xee?l;lS islvm:lnfl\love SlIt (Urln. ~ll '~rm~. ~rQ\I\sions :\1$\ IlbvCr.al'l!.!.Orth~ \.~l(. \h;lll ~rt\~ lJlw.n'ilX1/lt:C \\l\6 \fI NIl fQt\e ~~ 1:k'fe-:\, \1'4 Wl't~ESS WH.:~R:E.\Ht. UI~ 1la1t1r.:1o nllre'O) ba'Yc dul}" t:/!:t:lJl:etl lh~ ;.,me\ldmel\'\f.~ I:lfth~ 4a\~ and. ~ I:::lf \'\r~l 1l.$Q",t wril\t:~. . 1\.5 :.. e:.. \..r..NTlt..ORD: $\1.;11'1:\619 vl fl>y Its ~ate D;1\~ -Jf8G1 123 ," " ~. \. ' ; i!': //''':':''' r -:-. l: \;. ! r" Amendment #3 To Lease Dated July 17,1998 By and Between C Shorewood Village Shopping Center, Inc., as Landlord And City of Shorewood, a Minnesota municipal corporation, as nO .-- -.----.. THIS !lMENDMENT TO LEASE is entered into aoo made as of lhi, 23"'day Oflo1~~OO between.. ~_. .- Shorewood Village Shoppmg Center, Inc., as Landlord and CIty of Shorewood, a MInnesota mumcqral~~lpl1~on, as - Tenant. ),~ <.I AUG 2 6 2003 WITNESSETH: WHEREAS, Landlord and Tenant have heretofore entered into a certain lease da~ed July 17, 1998 (the "Lease"), containing approximately 3,990 square feet of certain leased premises at Shorewood.Village Shopping Center, located at 23730 Highway 7, Shorewood, Minnesota 55331 (the "Premises"), upon terms and conditions described in said Lease; and WllEREAS, Landlord and Tenant entered into an Amendment #1 dated November 28, 2001, extendi.ng Tenant's Lease for a period of one year, and: WHEREAS, Landlord and Tenant entered into an Amendment #2 dated December 12,2002, extending Tenant's Lease for a period of one year, and: WHEREAS, Landlord and Tenant desire to amend said Lease as -described below: NOW THEREFORE, in consideration of the rents received and of the covenants and agreements herein set forth, it is a!rreed that the Lease be hereby amended from and after the date hereof as follows: Cl Premises The premises shall be relocated to 23670 Highway 7 (defined herein) situated as set forth on Exhibit A, containing approximately 4.388 square feet including any alterations, additions or repairs made thereto. Term The Term of the Lease is extended for a period of flve (5) years commencing November 1,2003 and terminating October 31, 2008. Minimum Rent Tenant shall pay Landlord on or before the first day of each month, minimum monthly rent base rent according to the followin cr Cl schedule: November 1, 2003 - October 31, 2004 November 1,2004 -October 31,2005 November 1,2005 - October 3l, 2006 November 1,2006 - October 31, 2007 November 1,2007 - October 31, 2008 Rent P.s.f. $ 9.60 $12.50 $13.00 $13.50 $14.00 Monthly Rent $3,510.40 $4.570.83 $4,753.67 $4,936.50 $5,119.33 Annual ~ $42,124.80 $54,850.00 $57,044.00 $59,238.00 $61,432.00 Operating Expenses Effective November 1,2003, Tenant shall pay its new pro rata share of operating expenses (15.37% - Mall and 6,07% - CAM). Tenants pro-rata share will be adjusted in the event of expansion. or contraction of the shopping center", 1 124 Amendment #3 to Lease City of Shorewood Page Two Landlord's worJs Prior to the start of Tenant Work, Landlord shall, at Landlord sole cost and ex.pense, shall remove all interior walls including demising waUs between spaces (to indude one 6 foot section of left hand portion of the interior brick wall) and remove carpet. Tenant Impro"ement Allowance Construction A.llowance for Tenant's Work. Provided Tenant is not in default under any of the terms and conditions contained herein, Landlord shall reimburse Tenant for a portion of the cost of Tenant's Work within the Premises, in the amount and manner hereinafter provided. The amount of such reimbursement shall hereinafter be refened to as "Tenant's Allowance" " It is understood and agreed that Tenant's Allowance shall be a reimbursement for a portion of the actual costs incurred by Tenant to complete Tenant's Work within the Premises as detailed in the plans and specifications therefore to be approved by Landlord. Tenant's Allowance shall be Thirty Thousand and nol100ths Dollars ($30,000.00) Landlord shall pay Tenant's Allowance tei T~mant when Tenant has opened forbus1ness in the Premises, paid the Minimum Rent and Additional Rent for the first month of the Term of this Lease and furnished to Landlord the following: .,. Copies of paid invoices documenting the actual cost incurTed by Tenant to complete Tenant's Work within the Premises; .,. The affidavit of the general contractor stating that (i) Tenant's Work has been fully completed in accordance with the plans and specifications approved by Landlord, subjeCt, however, to Landlord's verification thereof and (i1) all subcontractors, laborers and material supplies have been paid in full; , }- A wavier of lien, with respect to the Premises, executed by every subcontractor; laborer and material supplier engaged in or supplying labor or materials; and .,. A certificate of use and occupancy for the Premises issued by the appropriate governmental authority. Notwithstanding anything to the contrary contained herein, Landlord reserves the right to offset against Tenant's Allowance a':l.Y delinquent amounts due to Landlord by Tenant accrued hereunder. In the event this Lease shall be terminated for any reason prior to the naturaL expiration of the initial Term of the Lease, Tenant shall pay to Landlord the unamortized portion of 'Tenant's Allowance, said amortization to be compl:ted usinglhe "straight-line" method of generally accepted accounting practices. Tenant agrees that Tenant's Work within the Premises and an other work undertaken by Tenant in the Premises shall be . ~erfunned in a first-class and workmanlike manner and all equipment. fixtures and installation shall be new and in usable condition on the Commencement Date. Tenant's notion to Terminate Should tenant operate its business at a loss during any consecutive three (3) year period during this five (5) year term, Tenant may terminate the Lease by giving Landlord 120 days advance written notice, but not earlier than July 1,2006. If tenant exercises its option to terminate the Lease, tenant shall pay the unamortized tenant improvement allowance and unamortized leasing commission. Payment shall be amortized with an imputed interest rate of 8% and paid at the same time notice is gi Vell. ..., I 125 Amendment #3 to Lease City of Shorewood Page Three Options With the exception of this document, any and all options added to the Lease, Exhibit or Rider to the Lease, either expressed or implied, wil1 be extinguished with this amendment. Execution and Delivery Required This document shall have no binding effect on the parties unless executed by the landlord and the tenant and a fully executed copy is delivered to the tenant. Except as is hereinabove set forth, aU terms, provisions and covenants of the Lease shall remain unchanged and in full force and effect. IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment #2 as of the date and year flISt above written. LANDLORD: By Its Date ..., .J 126 TENANT: By .f' Its Date