EXHIBIT 10.24


 


TRIPLE-NET LEASE AGREEMENT


 


This LEASE AGREEMENT (this “Lease”) is entered into effective the 11th
day of March, 2005, by and among the following parties:


 


LANDLORD:                                       Sunwest
Properties II, LLC

3723 Fairview Industrial Drive SE, Suite 270

PO Box 3006

Salem, Oregon 97302-0006

EIN: 93-1272486


 


TENANT:                                              Eschelon
Telecom, Inc.

730 2nd Avenue South, Suite 900

Minneapolis, MN 55402

EIN: 41-1843131


 


Landlord leases to Tenant under the terms and conditions listed below:


 


1.             PROPERTY.  Certain
portions, aggregating approximately 11,400 square feet of rentable interior
space on the first floor and approximately 2,295 square feet rentable interior
space on the second floor which will include the “computer room”, together with
the non-exclusive right to use the outside deck area on the second level of the
building and sufficient spaces (approximately 47) in the parking lot on a first
come-first served basis, on the northwest side of the building, of the real
property known as 3723 Fairview Industrial Drive SE, Salem, Oregon, more
thoroughly described in the attached Exhibit A (the “Premises”), reserving,
however, unto Landlord the non-exclusive use of the elevator for ingress and
egress serving the remainder of the second floor of the building. Tenant may
remove, at its expense and without damage to the Premises, upon expiration of
this Lease or the last renewal term, as applicable, the property listed in the
attached Exhibit B.


 


2.             TERM.        This
Lease shall commence on the 1st day of May, 2005, (the “Commencement Date”),
and shall continue through April 30, 2006, (the “Expiration Date”), unless
earlier terminated in accordance with the provisions of this Lease.


 


3.             PAYMENT.           Tenant
shall pay lease payments in the amount of $17,120.00 per month in advance on
the first day of each month during the term of this Lease, beginning with the
first such monthly payment on May 1, 2005, and the first and last lease
payments shall be prorated if the Commencement Date is on a day other than the
first day of the month.


 


4.             TRIPLE-NET LEASE.         This is a
true triple-net lease. Tenant shall pay all costs relating to the Premises,
including but not limited to real and personal property taxes, utilities,
maintenance, repairs, interior and exterior structural repairs, interior and
exterior nonstructural repairs, interior and exterior maintenance, insurance
and all other expenses relating to the Premises.


 


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5.             SUBORDINATION.            Tenant
shall subordinate Tenant’s interest in the Premises to secured financing
obtained by Landlord in an amount not to exceed $5,361,600.00. Tenant shall
sign all necessary documents reasonably acceptable to Tenant to complete such
subordination.


 


6.             OPTION.               If
Tenant shall not be in default, Tenant has the option to renew this Lease for
two (2) successive one-year terms following expiration of the then current term
of this Lease on identical terms, exercisable on ninety (90) days prior written
notice from Tenant to Landlord, except the rent provided for in Section 3
hereof shall be increased by four percent (4%) for each renewal over the rent
for the immediately preceding term.


 


7.             NOT A PARTNER.             Landlord
is not a partner nor a joint venturer with Tenant in connection with the
business carried on under this Lease, and shall have no obligations with
respect to Tenant’s debts or other liabilities, and no interest in Tenant’s
profits.


 


8.             USE OF THE PREMISES.  The Premises
shall be used for office purposes and uses incidental thereto and for no other
purpose without the consent of Landlord, which consent may be withheld in
Landlord’s sole discretion.


 


9.             NO UNLAWFUL USE.        In
connection with the use of the Premises, the Tenant shall conform to all
applicable laws and ordinances of any public agency affecting the Premises and
their use and shall correct, at Tenant’s own expense, any failure of compliance
where such failure is by fault of Tenant or by reason of Tenant’s use. Tenant
will also refrain from any use which would be reasonably offensive to owners or
users of neighboring premises or which would tend to create a nuisance or
damage the reputation of the Premises.


 


10.          COMPLIANCE WITH LENDER OBLIGATIONS.       Landlord
may obtain a loan to be secured by Landlord’s interest in the Premises. As a
condition to the loan, Landlord’s lender may impose certain requirements
regarding the possession and use of the Premises, all of which will be
consistent with the use of the Premises for Tenant’s offices (the “Lender
Requirements”). Tenant agrees that, so long as the Lender Requirements remain
in force and do not adversely affect any right, benefit or privilege of Tenant
or increase Tenant’s obligations under this Lease in any material respect,
including, without limitation, any monetary obligations, Tenant shall possess
and use the Premises in full compliance with the Lender Requirements.


 


11.          TENANT RESPONSIBILITY.           The
Premises are being leased in an “as is” condition and Landlord shall not be
liable for repairs or maintenance of the Premises or other charges. Landlord
shall not bear any responsibility for any costs, tax, fee or other expense
relating to the Premises since this is a true triple-net lease and all such
costs, fees, taxes and expenses shall be paid by Tenant, including but not
limited to real and personal property taxes; utility costs; costs of repair and
maintenance of the roof and gutters, exterior walls (including painting),
bearing walls, structural members, and foundation; repair of sidewalks,
driveways, curbs and parking areas; repair and maintenance of water, sewage,
gas and electrical services; repair of the heating and air conditioning system,
including ordinary maintenance; repair of interior walls, ceilings, doors and
windows and related hardware, light fixtures, switches, and wiring and
plumbing; any repairs necessitated by the negligence of Tenant, its agents,
employees


 


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and
invitees; and any repairs or alterations required under Tenant’s obligation to
comply with laws and regulations as set forth above, with the right to offset
rent hereunder for Landlord’s share of such costs, as reasonably approved by
Landlord. To the extent any of Tenant’s obligations pursuant to this paragraph
are a part of obligations of the property of which the Premises are a part,
Landlord and Tenant shall divide the costs pro-rata on the basis of Tenant’s
occupancy as a percentage of the rentable space in the entire building.


 


12.          RIGHT OF INSPECTION. Landlord shall
have the right to inspect the Premises at any reasonable time or times upon
reasonable notice to determine the necessity of repairs.


 


13.          ALTERATIONS. Tenant shall make
no improvements or alterations on the Premises without first obtaining Landlord’s
written consent, which consent shall not be unreasonably withheld, conditioned
or delayed. All improvements and alterations performed on the Premises by
either Landlord or Tenant shall be the property of Landlord when installed
unless the applicable Landlord’s consent provides otherwise.


 


14.          TENANT’S INSURANCE. Tenant shall pay Landlord
Tenant’s pro-rata share for Landlord to maintain a standard fire and hazard
insurance policy covering any improvements to the property of which the
Premises are a part, which policy shall consist of property insurance providing
a limit equal to the full insurable value naming Landlord and Tenant as
insureds. In addition, Tenant shall maintain liability insurance, which policy
shall consist of a general liability policy with a limit of no less than
$1,000,000 per occurrence, protecting both Landlord and Tenant against any
claim, loss or liability arising out of or relating to any activity of Tenant
upon the Premises, or any condition of the Premises in the possession or under
the control of Tenant, including any such claim, loss or liability which may be
caused or contributed to in whole or in part by Landlord’s own negligence or
failure to effect any repair or maintenance required by this Lease, and Tenant
shall also indemnify and defend Landlord from any such claim. Each shall obtain
from its respective insurance carrier waivers of subrogation against the other
party, agents, employees and, as to Tenant, invitees. The liability policy
shall also contain a provision requiring thirty (30) days’ written notice to
Landlord prior to any change or cancellation of such insurance.


 


15.          LIABILITY AND INDEMNITY.        Except
with respect to activities for which Landlord may be responsible, Tenant shall
pay as due all claims for work done on and for services rendered or material
furnished to the Premises and shall keep the Premises free from any liens. If
Tenant fails to pay any such claims or to discharge any Iien, Landlord may do
so and collect the cost, together with interest at the rate of twelve percent
(12%) per annum from the date of expenditure by Landlord until paid, as
additional rent. Such action by Landlord shall not constitute a waiver of any
right or remedy which Landlord may have on account of Tenant’s default. Tenant
may withhold payment of any claim in connection with a good-faith dispute over
the obligation to pay, so long as Landlord’s property interests are not
jeopardized. Tenant shall indemnify and defend Landlord from any claim, loss or
liability arising out of or related to any activity of Tenant on the Premises
or any condition of the Premises. Landlord shall have no liability to Tenant
for any loss or damage caused by third parties not under Landlord’s control or
direction or by any condition of the Premises, except latent defects.


 


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16.          DAMAGE AND DESTRUCTION.    If
the Premises are partly damaged, but not destroyed, the Premises shall be
repaired by Landlord at Tenant’s expense. Repairs shall be accomplished with
all reasonable dispatch subject to interruptions and delays from matters beyond
the control of Landlord and Tenant. All repairs shall be done in such a way as
to interfere as little as reasonably possible with the use of the Premises by
Tenant. Tenant shall have no right to an abatement of rent nor any claim
against Landlord for any inconvenience resulting from Landlord’s activities
performed in conformance with the requirement of this provision, however Tenant
shall be entitled to an equitable abatement of rent with respect to any portion
of the Premises damaged or unavailable for Tenant’s use.


 


17.          CONDEMNATION.            If all
of the Premises or such portions of the Premises as may be required for the
reasonable use of the Premises are taken by eminent domain, this Lease shall
automatically terminate as of the date Tenant is required to vacate the Premises,
and rent shall be paid to that date.


 


In the event of condemnation of a part of the Premises not required for
the reasonable use of the Premises, then this Lease shall continue in full
force and effect and rent due shall be equitably reduced based on the
proportion by which the Premises are reduced, such rent reduction to be
effective as of the date possession of such portion is delivered to the
condemning authority. Landlord reserves all rights to damages to the Premises
for any taking by eminent domain, and Tenant hereby assigns to Landlord any
right Tenant may have to such damages or award. Tenant shall make no claim
against Landlord for damages for termination of Tenant’s leasehold interest or
interference with Tenant’s business. Tenant shall have the right, however, to
claim and seek recovery from the condemning authority as compensation for any
loss to which Tenant may be put for Tenant’s moving expenses and for the
interruption of or damage to Tenant’s business; provided, however, that such
damages may be claimed only if they are awarded separately in the eminent
domain proceeding and not as part of the damages recoverable by Landlord.


 


18.          ASSIGNMENT OR SUBLEASE.      No
part of the Premises may be assigned, mortgaged or subleased nor may a right of
use of any portion of the Premises be conferred by Tenant upon any third person
by any other means, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld, conditioned or delayed. This
provision shall apply to all transfers by operation of law, any sale of a
controlling interest in Tenant, or any transfers to and by trustees in
bankruptcy, receivers, administrators, executors and legatees. No consent shall
be required in connection with an assignment to an affiliate of Tenant, or in
connection with the sale of all or substantially all of Tenant’s assets. No
consent in one instance shall prevent the provision from applying to a
subsequent instance. Landlord shall consent to a transaction covered by this
provision when withholding such consent would be unreasonable in the
circumstances. Notwithstanding anything contained in the foregoing to the
contrary, any assignment or subletting pursuant to this Section 18 shall be
permitted only so long as Tenant remains liable under this Lease.


 


19.          ESTOPPEL CERTIFICATE.              Either
party will, within twenty (20) days after notice from the other, execute and
deliver to the other party a certificate stating whether or not this Lease has
been modified and is in full force and effect and specifying any modifications
or alleged breaches by the other party. The certificate shall also state the
amount of monthly base


 


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rent,
the dates to which rent has been paid in advance or the amount of any unpaid
rent. The certificate shall be conclusive upon the party of whom the
certificate was requested that the Lease is in full force and effect and has
not been modified except as may be represented by the party giving the
certificate.


 


20.          DEFAULT.            Each of
the following shall constitute a default under this Lease: (a) failure of
Tenant to pay any rent or other charge within ten (10) days after it is due;
(b) failure of Tenant to comply with any term or condition or fulfill any
obligation of this Lease (other than the payment of rent or other charges)
within thirty (30) days after written notice by Landlord specifying the nature
of the default with reasonable particularity, or, if Tenant is unable to comply
with such term or condition or to fulfill such obligation within such thirty
(30) day period, if Tenant fails to commence to comply with such term or
condition or fulfill such obligation within such thirty (30) day period and
thereafter diligently pursue same to completion ; and (c) insolvency of Tenant;
an assignment by Tenant for the benefit of creditors; the filing by Tenant of a
voluntary petition in bankruptcy; an adjudication that Tenant is bankrupt or
the appointment of a receiver of the properties of Tenant; the filing of any
involuntary petition of bankruptcy and failure of Tenant to secure a dismissal
of the petition within sixty (60) days after filing; attachment of or the
levying of execution on the leasehold interest and failure of Tenant to secure
discharge of the attachment or release of the levy of execution within thirty
(30) days.


 


21.          REMEDIES ON DEFAULT.               In
the event of a default beyond applicable notice and grace periods, this Lease
may be terminated at the option of Landlord by notice in writing to Tenant. If
this Lease is not terminated by election of Landlord or otherwise, Landlord
shall be entitled to recover damages from Tenant for the default. If this Lease
is terminated, Tenant’s liability to Landlord for damages shall survive such
termination, and Landlord may reenter and take possession of the Premises.
Following reentry or abandonment, Landlord may relet the Premises and in that
connection may make any suitable alterations or refurbish the Premises, or
both, as deemed necessary or desirable by Landlord. Landlord may relet the Premises
for a term longer or shorter than the term of this Lease, upon any reasonable
terms and conditions, including the granting of some rent—free occupancy or
other rent concession. Notwithstanding anything contained in the foregoing to
the contrary, Landlord shall be obligated to mitigate its damages in connection
with the exercise of any remedies hereunder.


 


22.          LANDLORD’S RIGHT TO CURE.  If
Tenant fails to perform any obligation under this Lease, Landlord shall have
the option to do so after twenty (20) days’ written notice to Tenant. All of
Landlord’s expenditures to correct the default shall be reimbursed by Tenant on
demand with interest at the rate of twelve percent (12%) per annum from the
date of expenditure by Landlord.


 


23.          WAIVER.              Waiver
by either party of strict performance of any provision of this Lease shall not
be a waiver of the party’s right to require strict performance of the same
provision in the future, or of any other provision.


 


24.          SURRENDER AT EXPIRATION.     Upon
expiration of this Lease term or the last renewal term or earlier termination
on account of default, Tenant shall deliver all keys and surrender possession
of the Premises in good condition and broom clean, reasonable wear and tear
excepted.


 


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25.          CONSTRUCTION.             This
Lease shall be construed and governed by the laws of the State of Oregon.


 


26.          DISPUTE RESOLUTION.  In the event
there is any dispute between or among the parties to this Lease relating in any
way to this Lease, the parties must mediate any such dispute before commencing
any legal action. No party to this Lease can bring legal action or demand
mandatory arbitration against another party to this Lease without first
participating in mediation, unless one party refuses to submit to mediation and
legal action is brought to specifically enforce this mandatory mediation
provision of this Lease. If the parties cannot agree upon the person to act as
a mediator, then the U.S. Arbitration and Mediation Service in Portland, Oregon,
shall select a person to act as the mediator. The mediator’s charges and
expenses shall be split by the parties on a 50/50 basis. Mediation fees and
costs do not include each party’s attorney fees and costs. Each party shall be
responsible for its own attorney fees and costs at mediation. Should the
dispute not be resolved by mediation, the parties agree to submit any dispute
arising between the parties relating in any way to this Lease to binding
arbitration with the U.S. Arbitration and Mediation Service in Portland,
Oregon, and shall utilize such Service’s rules of procedure. If the parties
cannot agree upon an individual to act as the arbitrator, then the U.S.
Arbitration and Mediation Service in Portland, Oregon, shall select a person to
act as the arbitrator. The standard used by the arbitrator in resolving
disputes will be reasonable business practices in similar business, taking into
account tax implications. If the dispute goes to arbitration, the prevailing
party shall be entitled to its attorney fees and costs incurred in the
arbitration process. The decision of an arbitrator shall be final and not
subject to any appeal and shall be enforceable in a court of competent
jurisdiction.


 


The parties have executed this Lease, in duplicate, as of the day and
year first set forth in the opening paragraph above.


 


	
  LANDLORD:

  	
  SUNWEST PROPERTIES II, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jon M. Harder

  	
   

  
	
   

  	
   

  	
  Jon M. Harder, Manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Darryl E. Fisher

  	
   

  
	
   

  	
   

  	
  Darryl E. Fisher, Manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eric W. Jacobsen

  	
   

  
	
   

  	
   

  	
  Eric W. Jacobsen, Manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Wallace Gutzler

  	
   

  
	
   

  	
   

  	
  J. Wallace Gutzler, Manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TENANT:

  	
  ESCHELON TELECOM, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mike Donahue

  	
   

  
	
   

  	
   

  	
  Mike Donahue

  
	
   

  	
   

  	
  Vice President of Finance

  



 


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EXHIBIT A


 


Description of Premises


 


The real
property upon which the Premises are located is described as follows:


 


LOT 8,
FAIRVIEW INDUSTRIAL PARK – PHASE II, AS RECORDED IN VOLUME 41, PAGE 18, BOOK OF
TOWN PLATS FOR MARION COUNTY, AND ADDITIONALLY REFERENCED IN REEL 1208, PAGE
70, IN THE CITY OF SALEM, COUNTY OF MARION, STATE OF OREGON.


 


The following
three pages consist of depictions of the:


 


1.             First floor of the building;


2.             Second floor of the building; and


3.             Parking lot.


 


Highlighted in
yellow are:


 


1.             Tenant’s approximately 11,400
square feet of space on the first floor;


2.             Tenant’s approximately 2,295 square
feet of space on the second floor; and


3.             Parking spaces for Tenant’s primary
use.


 


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EXHIBIT A - 1


 





 


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EXHIBIT A - 2


 





 


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EXHIBIT A - 3


 





 


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EXHIBIT B


 


Property to be retained by Tenant


 


1.                                       Generator mounted on concrete
slab on the northwest side of the building.


 


2.                                       Automatic transfer switch and
transformer located mounted in storage area.


 


3.                                       Ladder tray bolted to ceiling
and three telecommunications racks bolted to the floor in the data center.


 


4.                                       All other personal property
items, not including those attached to the building as fixtures, that Tenant
has upon the Premises on the Commencement Date or places upon the Premises
during the term of this Lease.


 


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