Exhibit 10.16


 


LEASE


THIS LEASE is made this 2nd day of August, 2004, to
commence on the completion of the building constructed on the real estate
described in paragraph 1 below, estimated to be on or about February 15, 2005,
by and between ROCKING HORSE FARM, LLC, a North Dakota limited liability
company, called “Landlord,” and TITAN MACHINERY, INC., a corporation duly
licensed to conduct business in the State of North Dakota, called “Tenant”.


For and in consideration of the rentals herein
reserved and the conditions, covenants and agreements herein contained, to be
kept, observed and performed by Tenant, Landlord does hereby lease to Tenant
the Leased Premises as described in paragraph 1 below.


The terms and conditions of this lease and the
obligations of the Landlord to proceed with the transaction contemplated herein
is contingent on the following:  (1)
Landlord negotiating and entering into a construction contract with the
builder, Olaf Anderson and Son Construction Company, with estimated
construction costs within the budget described as the estimated project cost in
paragraph 4 below, and the Landlord negotiating and entering into a loan
transaction with a lender of Landlord’s choice under terms and conditions
acceptable to the Landlord.  Landlord
shall notify Tenant on or before September 15, 2004, that the contingencies
have been satisfied.  Should the
contingencies not be satisfied by such date, the Tenant may terminate this
Lease.


1.                                       LEASED
PREMISES.


Lot 3, Block 1,
Rocking Horse Farm First Subdivision, to the City of Fargo, Cass County, North
Dakota, together with a building to be constructed on the real estate
containing approximately 12,700 leaseable square feet (“Building”) and other
improvements all as further described below and as further described in the
attached schedules;


Subject to or
otherwise benefiting from the following easements:


a.             The Landlord shall
cause to be constructed a parking lot on and adjacent to the lot line
separating Lots 2 and 3 of Rocking Horse Farm First Subdivision.  The easement is in the process of being
drafted but the tenant shall have a right of ingress and egress and the right
to park on such parking lot and the owner of Lot 2 shall have a similar
easement for ingress and egress and parking on the parking lot; and


b.              All lots in Rocking
Horse Farm First Subdivision (Lots 1 through 5) will drain through a “swale”
which will run through the center of the lots and along the lot line between
Lots 1 and 5 to a central holding pond. 
The easement is in the process of being drafted.  Lot 3, as the other lots in Rocking Horse
Farm First Subdivision, will be subject to and otherwise benefit from the
easement regarding drainage.













c.               A currently
undefined circular area around the center of the subdivision where all lots
adjoin, which area will be maintained as a common area (see Schedule 1.A.)


The easements are
subject to the approval of the Tenant, which approval will not be unreasonably
withheld.


The purpose of
this Lease is for Landlord to lease to Tenant and Tenant to lease from Landlord
the underlying real estate described above together with the built-to-suit
building to be built by the Landlord for use by the Tenant (collectively
referred to as the “Leased Premises”). 
Landlord shall be responsible for any costs and expenses associated with
the general construction of the building and basic “fit-up” as described below,
the improvements to the grounds, including location of the above-described
easements, landscaping sidewalks, and parking lot and parking lot lighting, and
the costs of providing utilities and other basic services to the Building.  Attached hereto and incorporated by reference
herein as schedules 1.A. and 1.B. are copies of the site plan and the plans and
specifications for the Building.


Landlord and
Tenant shall be separately responsible for paying the costs of “fit up” of the
Leased Premises as described in Schedule 1.C. 
Subject to review by the Tenant, it will be the Landlord’s
responsibility, along with the Landlord’s architect, to establish the interior
floor plan and to make determinations with regard to location of walls and
utility services.  The Tenant shall have
an opportunity to review such plans and to consent to the same, the consent to
not be unreasonably withheld.  The
Landlord will contract for the construction of the Building and the Landlord “fit
up” and pay for the same.


The Tenant
acknowledges that a portion of the Building will be delivered “unfinished” for
later use by the Tenant or subtenants. 
The Tenant shall be responsible for all “fit up” associated with the “unfinished”
space, although the parties agree that they will negotiate, in good faith,
regarding the Landlord paying for such fit up with a corresponding increase in
the rent.  Tenant “fit up” of the
unfinished, including floor plan and design, will be subject to the approval of
the Landlord, which approval will not be unreasonably withheld.


2.                                       USE.  Tenant shall occupy and use the Leased
Premises solely for the purposes of an office building, housing the corporate
offices of Tenant and other administrative functions related to the business of
Tenant.


3.                                       TERM.  The term of this Lease shall be for about ten
(10) years beginning approximately February 15, 2005, and ending January 31,
2015, based upon construction commencing on or about August 15, 2004.  The end date of the initial term will not be
adjusted based upon the occupancy date and commencement date of the lease term.


(A)                              OPTIONS
TO RENEW.  Provided Tenant has
complied with all of the terms and conditions of this Lease, and is not
otherwise in default Tenant shall have the option to extend this Lease for two
(2) additional terms of five (5) years each from and after the original lease
term, by giving to Landlord written notice of the



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exercise of
such option at least 120 days prior to the expiration of the original term or
any renewal term.  If the option is
exercised, this Lease shall be extended on the same terms and conditions as for
the original term, except that the monthly rental in effect at the end of the
initial lease period or any renewal term shall be increased pursuant to the
provisions described in paragraph 4 below.


Landlord shall not
be liable to Tenant for damages resulting in delays in having the Building
suitable for occupancy because of delays in construction.


4.                                       RENT.  The rent herein described and agreed to be
paid by Tenant to Landlord is based upon a total estimated project cost to
Landlord not to exceed $1,400,000, including the amount of $160,000 dollars
allocated to the underlying real estate. 
If the construction costs exceed this estimate because of the changes
requested by Titan, the rent shall increase to reflect the increased cost to
Landlord.  Increased costs due to
Landlord design or material requests shall not cause an adjustment in rent.


For years one (1)
through five (5) of the lease term, Tenant shall pay to the Landlord, at its
office or such other place designated by the Landlord, without deduction or
setoff whatsoever, an annual rent of One Hundred Thirty-One Thousand
($131,000).  The rent will be payable in
equal monthly installments of Ten Thousand Nine Hundred Sixteen and 67/100
Dollars ($10,916.67) on the first day of each month during the entire term of
the Lease.  The rent for the first month,
if occupancy is on other than the first day of the month, will be prorated for
the month and due on the occupancy date. 
The rent shall be considered delinquent on the 10th day of the month if
not paid.


The rent will be
increased for years six (6) through ten (10) commencing February 1, 2010, to an
amount equal to the lesser of two and one-half percent (2 1/2%) per year
(compounded annually) or the increase in the Consumer Price Index, as described
below, from the lease commencement (occupancy) date.  In no event shall the rent be less than the
initial rent.


On February 1,
2010, and on the 1st day of each of the five (5) year renewal
terms, Landlord shall ascertain the Consumer Price Index for all urban
consumers of the Bureau of Labor Statistics, United States Department of Labor
(or other similar governmental or institutional indexes should the Department
of Labor discontinue the same).  Landlord
shall also determine said Index for February 1, 2005.  Landlord shall determine the percentage
increase, if any, of such Index on February 1, 2010, February 1, 2015 and
February 1, 2020, as compared to the Index for February 1, 2005.  The monthly rental shall be adjusted upward
beginning on the first day of the sixth (6th) year, subject to the provisions
of the immediately-preceding paragraph. 
Rent for each of the two (2) five (5) year renewal terms will be
calculated based upon the Consumer Price Index in accordance with the preceding
sentences.  In no event shall the rent be
less than the initial rent.  The adjusted
rent shall be payable monthly as provided above.  Pending the determination of the additional
amount, if any, to be paid by Tenant, Tenant shall continue to pay the rent at
the rate previously paid until the additional amount has been determined.  The Tenant, on the first day of the month
immediately following the furnishing by Landlord to Tenant of the computation
thereof, shall pay to Landlord the



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accrued increase up to
and including the first day of the month such payment would have otherwise been
paid.


 


5.                                       COMMON
EXPENSES.


(A)                              Area
Included.  The Leased Premises shall
include the use in common with others of the parking lot described in paragraph
1.a. above and common areas and facilities which may be developed in the future
as part of the Rocking Horse Farm First Subdivision, subject to rules and
regulations for use prescribed by Landlord.


(B)                                Common
Expenses.  Landlord shall make
arrangements for the maintenance and cleaning of the exterior windows on the
Building, snow removal, yard care and cleaning, and exterior painting or
finishing of the Building.  Tenant shall
pay such expenses associated with Lot 3. 
If not separately billed to Tenant, Tenant shall monthly pay its
expenses within ten (10) days of the billing by Landlord.


6.                                       REAL
ESTATE TAXES.  Tenant shall pay all
real estate taxes and installments of special assessments levied and assessed
against the Leased Premises, including the Tenants improvements to the Leased
Premises.  The real estate taxes and
installments of special assessments shall be paid on or prior to February 15 of
each year and at no time shall the Tenant allow the real estate taxes and
installments of special assessment to become delinquent.  Landlord, upon receipt of the tax statement,
will promptly deliver the statement to Tenant. 
Upon payment of the taxes, Tenant shall provide proof of payment to
Landlord.  Real estate taxes and
installments of specials for any partial year in the lease term shall be
prorated between the parties, except Tenant shall pay all 2005 payments.


7.                                       UTILITIES.  Tenant shall pay for all telephone, fuel,
electricity, gas, oil, water, sewer and other utilities used on the Leased
Premises, including utility expenses related to a drain field and water well to
be constructed on Lot 3.  If the City of
Fargo requires the connection to city water and sewer, the costs or assessments
associated with such installation shall be paid by Tenant as part of its
obligation under paragraph 6 above.


8.                                       INSURANCE.


(A)                              Tenant,
at its expense, shall carry fire and extended coverage insurance upon the
Building and any Tenant improvements to the Leased Premises in an amount equal
to the “full replacement value” and against all loss or damage customarily
included under standard “all risk” policies. 
Landlord shall be named as an additional insured and loss payee under the
policy.  Copies of the building insurance
policy and/or certificates of insurance shall be delivered to Landlord.  The building insurance policy shall require
the insurance company to notify Landlord, in writing, not less than thirty (30)
days prior to the effective cancellation date of the insurance.


(B)                              Tenant, at its own
expense, shall keep in force public liability insurance, to include commercial
general liability insurance, contractual liability insurance and personal
injury liability coverage with respect to the leased premises, with limits



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of at least
$1,000,000 for one person and $3,000,000 for more than one person injured or
killed, and at least $500,000 for property damage in any one accident, with the
Landlord named as an additional insured.  Copies of liability insurance policies or
certificates of insurance shall be delivered to Landlord.  All policies shall require the insurance
company to notify Landlord, in writing, at least thirty (30) days prior to any
cancellation of the insurance and that no act or omission of others shall avoid
coverage as to Landlord.


9.                                       WAIVER
OF SUBROGATION.  The parties release
each other from all claims for recovery for any loss or damage to any of its
property which is insured under an insurance policy to the extent of any
recovery collectible under the insurance. 
This release and waiver shall apply only when permitted by the
applicable insurance policy.


10.                                 DAMAGE
OR DESTRUCTION.  If the Building
shall be partially or totally damaged by fire, flood or other casualty so as to
become partially or totally untenable, the Building shall be rebuilt as soon as
reasonably possible at the expense of the Landlord, but only to the extent of
the insurance proceeds available.  To the
extent that portions (or all) of the Building are not useable and the Tenant’s
business is substantially interfered with, the rent and other charges due from
Tenant to Landlord shall be proportionately abated during the period of
reconstruction.


Tenant shall give
Landlord immediate notice of any damage or destruction to the Leased Premises.


11.                                 CONDEMNATION.  If any part of the Leased Premises is taken
over or condemned for a public or quasi-public use and a part remains which is
suitable for occupancy, this Lease shall, as to the parts so taken, terminate
on the date title shall vest in the condemnor and rent payable shall be
adjusted so Tenant shall pay only that portion of the rent as the value of the
part remaining bears to the value of the entire Leased Premises at the date of
condemnation.


The parties shall
cooperate in applying for and in prosecuting any claim for condemnation
award.  The award, after deducting all
expenses, including attorney’s fees, shall be divided, and Tenant shall be
entitled to that portion of the award which would be awarded for its leasehold
interest and expenses for moving its fixtures and property.


12.                                 ASSIGNMENT.  Tenant shall not assign, sublet or mortgage
this Lease or any right hereunder without prior written consent of
Landlord.  Subletting space to a related
or commonly owned company is authorized without Landlord consent.  If assignment or subletting is permitted,
Tenant shall continue to be liable for the rent and performance of all
covenants in the Lease.  Neither this
Lease nor any right hereunder shall be assignable by operation of law,
including bankruptcy or other law relating to debtors, and no trustee,
receiver, sheriff, creditor or purchaser at judicial sale, or any officer of
any court shall acquire any right under this Lease or to the possession or use
of the Leased Premises or any part thereof without the prior written consent of
Landlord.  If this Lease or the Leased
Premises or any interest therein is levied on by any legal process against
Tenant,



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at the option of Landlord, the Landlord may terminate the Lease on not
less than ninety (90) days notice to Tenant.


13.                                 REPAIRS
AND MAINTENANCE.  To the extent the
insurance procured by the Tenant does not cover damage or repair, Landlord
shall be responsible for keeping the foundation, exterior walls and roof of the
Building in good repair.  Tenant shall
keep the HVAC, plumbing and electrical systems in good repair.  Specialized plumbing, electrical,
communication or HVAC equipment or systems included in Leased Premises shall be
the responsibility of the Tenant.


Subject to the
provisions of paragraph 5 above, Tenant, at its cost, shall keep all portions
of the Leased Premises clean, maintained and in good repair, including the
parking lot described in paragraph 1(a) above, plumbing, doors, windows,
hardware, glazing, including all necessary replacements, interior painting,
floor covering and normal wear and tear items.


The Leased
Premises shall not be altered or changed from the plans and specifications
attached hereto and incorporated by reference herein as Schedule 1.B. without
the prior written consent of the Landlord, which consent shall not be
unreasonably withheld.  “Fit-up” of the
unfinished areas of the Building shall be the sole responsibility of the
Tenant, and the design and materials used are subject to Landlord approval.


14.                                 ENVIRONMENTAL.  Tenant shall take all necessary precautions
to not allow the deposit or placing of hazardous substances and to immediately
remove any hazardous materials from the Leased Premises.


Tenant shall at
all times conform to city, county, state and federal guidelines relating to the
presence or disposal of hazardous substances, including the maintenance,
control and disposal of such hazardous substances.  For purposes of this Lease Agreement,
hazardous substances means hazardous waste, toxic substances and such other
materials as may be defined as hazardous by state and federal ordinance,
statute or regulation.  Tenant shall
defend, at Tenant’s expense, and at all times indemnify and hold Landlord
harmless from any such lien, claim, action, or demand, by any governmental
agency or third party for damages, remedial or otherwise, resulting from the
presence, release or disposal of any hazardous substance located on or
generated from the Leased Premises.  In
the event the Landlord becomes aware of any such claim and the Landlord so
notifies the Tenant, the Tenant shall have a reasonable period of time under
the circumstances to cure the default resulting from Tenant’s breach of this
provision.


15.                                 INDEMNITY.  Tenant shall hold Landlord harmless and free
from all liability and claims for damages by reason of any injury to any
persons, including Tenant, or property, including Tenant’s, and occurring
during Tenant’s occupation of the Leased Premises.  Tenant shall indemnify and save Landlord
harmless from all liability, loss, costs, attorney’s fees and obligations
arising out of such claims.


16.                                 LANDLORD’S
ACCESS.  Landlord may enter upon the
Leased Premises and Tenant improvements of the Leased Premises at any
reasonable times to inspect the same.



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Landlord shall not
unreasonably interfere with Tenant’s business, nor shall Tenant be entitled to
any abatement of rent by reason of the exercise by Landlord of any rights
hereunder.


 


17.                                 NOTICES.  Any notice required or desired to be given by
either party shall be deemed given if left at the address of the party,
delivered (with proof of delivery) by facsimile or electronic mail, or
deposited in the United States Post Office for certified mail, return receipt
requested, postage prepaid, at the following:


	
  

  	
  To the Landlord:

  	
  Rocking Horse Farm, LLC

  
	
   

  	
   

  	
  Attn: Ken
  Promersberger

  
	
   

  	
   

  	
  4838 Rocking
  Horse Circle

  
	
   

  	
   

  	
  Fargo, ND 58104

  
	
   

  	
   

  	
  Ph: 701-492-9194

  
	
   

  	
   

  	
  Fax:
  701-277-4611

  
	
   

  	
   

  	
  E-mail:
  ken@promersberger.com

  
	
   

  	
   

  	
   

  
	
   

  	
  To the Tenant:

  	
  Titan Machinery, Inc.

  
	
   

  	
   

  	
  Attn: Ted O.
  Christianson, CFO

  
	
   

  	
   

  	
  4645 8th Avenue
  SW, Suite 1

  
	
   

  	
   

  	
  PO Box 10818

  
	
   

  	
   

  	
  Fargo, ND 58106

  
	
   

  	
   

  	
  Ph: 701-356-0141

  
	
   

  	
   

  	
  Fax:
  701-356-0139

  
	
   

  	
   

  	
  E-mail:
  ted.christianson@titanmachinery.com

  



 


18.                                 SIGNS
AND COVENANTS.  Tenant may, at its
own expense, install a sign on the gate at the entrance to the parking lot,
which design may be submitted by Landlord or, if not, subject to Landlord
approval.  Tenant acknowledges that
Landlord desires to maintain a common theme regarding properties in the
development and Tenant’s signage will be required to comply with Landlord’s
intentions.  Upon termination of the
Lease, all signage will be removed by Tenant, at its expense.


Tenant has advised
that it proposes to locate an antique tractor on the grounds of the Leased
Premises.  Landlord consents to the same,
subject to final approval of the Landlord regarding location and the form of
the installation.  If placed on the
Leased Premises, the tractor shall be kept in good, presentable condition.


Landlord is in the
process of developing covenants and restrictions affecting Rocking Horse Farm
First Subdivision.  Tenant agrees to
comply with all such covenants and restrictions once adopted by Landlord,
provided such covenants and restrictions are applicable to all other tenants or
owners of Lots 1 through 5 in Rocking Horse Farm First Subdivision.


19.                                 QUIET
POSSESSION.  Tenant, upon paying the
rent and performing the agreements of this Lease, shall peaceably and quietly
have, hold and enjoy the Leased Premises for the specified term.



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20.                                 LIENS.  Tenant shall not permit any mechanic’s or
other lien to stand against Landlord’s property arising out of any act or
omission of Tenant.  Tenant may contest
the validity or amount of any lien if Tenant gives Landlord security required
by Landlord to ensure payment or prevent any forfeiture of the property.  Tenant shall have all liens released or
judgments satisfied at Tenant’s expense.


21.                                 SUBORDINATION.  This Lease and all rights of Tenant hereunder
shall be subject and subordinate to the lien of any and all mortgages that may
now or hereafter affect the Leased Premises or any part thereof, and to any or
all renewals, modifications or extensions of any such mortgages.  Tenant shall, on demand, execute, acknowledge
and deliver to Landlord, without expense to Landlord, any and all instruments
that may be necessary or proper to subordinate this Lease and all rights
therein to the lien of any such mortgage or mortgages, and each renewal,
modification or extension, and if Tenant shall fail at any time to execute,
acknowledge and deliver any such subordination instrument, Landlord, in
addition to any other remedies available in consequence thereof, may execute,
acknowledge and deliver the same as Tenant’s attorney-in-fact and in Tenant’s
name.  Tenant hereby irrevocably makes,
constitutes and appoints Landlord, its successors and assigns, its attorney in
fact for that purpose.


22.                                 BANKING.  Tenant acknowledges that Landlord will
procure financing to construct the Building and other improvements on the
underlying real estate of the Leased Premises. 
Landlord’s lender has required that Tenant, as the sole occupier of the
Building provide audited financial statements, including a balance sheet and
income or profit and loss statements, on an annual basis.  Tenant represents that its financial
statements are audited by the company’s accountant and that within ten (10)
days following delivery of the audited financial statements to Tenant by
accountant, Tenant shall cause the same to be delivered to Landlord or Landlord’s
designee.  In no event shall the audited
financial statement be delivered later than the 1st day of July of each year.


23.                                 REQUIREMENTS
OF PUBLIC AUTHORITY.  Tenant shall
comply with all covenants and restrictions of record, and all laws, ordinances
and regulations of governmental authority which affect the Leased Premises,
Building, improvements, business or use thereof.  Tenant shall obtain, at its own expense, all
licenses and permits necessary for Tenant’s business.


24.                                 DEFAULT.  If Tenant shall fail to pay the rent when due
or defaults in any provisions of this Lease, or if Tenant shall make an
assignment for the benefit of creditors, enter bankruptcy, receivership or
insolvency, Landlord may, at its election, give notice to Tenant in writing of
its intention to terminate the Lease. 
Tenant shall have ten (10) days after notice is sent to cure any default
arising out of its failure to pay rent and shall have thirty (30) days after
notice is sent to cure any other default. 
If default continues thereafter, Landlord may declare the term ended and
re-enter the Leased Premises without a forfeiture of rents to become due
hereunder, either with or without process of law, and to remove the Tenant and
all persons on the Leased Premises, using force as may be necessary to
repossess and enjoy the Leased Premises without prejudice to any other remedy
which might be available.  Landlord may
re-rent at a price and terms as Landlord determines, and receive the rent
applying it to payment of the rent due under



 8
 









this Lease, after all expenses of re-rental, including advertising,
rental commissions, decorating, repairs and maintenance.  Tenant shall pay any deficiency and remain
liable for failure to comply with all terms and conditions of the Lease.  Landlord may, but is not obligated to, make
payments or to keep covenants required of Tenant under this Lease.  All expenses of Landlord in so doing shall be
additional rent and paid by Tenant to Landlord. 
All of Landlord’s remedies are cumulative and pursuit of any remedy
shall not be an election of remedies. 
Landlord shall have all remedies allowed by law and this Lease.


If Landlord is in
default under this Lease, Landlord shall have thirty (30) days time to cure the
default after written notice specifying the default to Landlord by Tenant.  If the default cannot be cured within thirty
(30) days but Landlord is proceeding in good faith to cure the default, the
cure period will be extended for so long as Landlord continues the process of
cure.


25.                                 OPTION
TO PURCHASE.  Provided Tenant is not
in default under the Lease, Landlord hereby gives and grants to Tenant and/or
Dealer Sites, LLC, (provided that Meyer Family Limited Partnership and Adam
Smith Income Partners, LLC, own voting control of Dealer Sites, LLC) the option
of purchasing the Leased Premises under the terms and conditions that follow:


(A)                              Tenant’s
option to purchase shall come into effect at the end of the 6th year of the
initial term of this Lease (January 31, 2011). 
If Tenant intends to exercise the option immediately following the
expiration of the 6th year, pursuant to the provisions below, Tenant would give
Landlord notice of its exercise of the option on or prior to August 1, 2010,
with a contemplated closing on or following January 31, 2011.  Unless otherwise agreed to between the
parties, Tenant’s option to purchase the property is an annual option with the
closing contemplated to be on or following the last day of each year of the
lease term from and after the expiration of the initial six years of the lease.


(B)                                The
option shall expire, unless sooner exercised, on January 31, 2015, provided the
Lease is still in full force and effect. 
However, should Tenant exercise its option to renew the lease, this
option to purchase shall continue for so long as the lease is in full force and
effect.


(C)                                The
option may be exercised by Tenant by delivering to Landlord, not later than
August 1 of the year immediately preceding the closing date a written notice
stating that Tenant exercises the option and fixing a date for conveyance of
the Premises (Date of Closing), which date shall be on or following January 31
of the year following the notice unless otherwise agreed to by Landlord.  With the option notice, Tenant shall deliver
to Landlord earnest money of Twenty Thousand Dollars ($20,000).


(D)                               If
the option is duly exercised as provided above, Landlord agrees to sell to
Tenant and Tenant agrees to purchase from Landlord the Premises for the price
of One Million Four Hundred Thousand Dollars ($1,400,000), plus the amount of



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construction costs associated with Tenant-requested changes, if any,
and the later costs incurred by Landlord, if any, to “fit up” the unfinished
space (the “base price”), plus the following:


(1)                                  The
increase in the Consumer Price Index as calculated pursuant to ¶ 4 above
off the base price above described, but in no event shall the increase be less
than three percent (3%) compounded annually from and after the lease
commencement date or greater than four percent (4%), again compounded annually;
and


(2)                                  any
prepayment penalties or other costs incurred by Landlord to pay the mortgage
note at closing.


Monthly rentals
paid shall not be credited against the purchase price and shall continue to be
paid until closing.


(E)                                 Within
thirty (30) days following receipt by Landlord of notice of Tenant’s election
to exercise this option, Landlord shall deliver to Tenant an Abstract of Title
showing good and marketable title, free and clear of all liens and encumbrances,
taxes and special assessments, except installments of special assessments or
assessments for special improvements which have not been certified to the
County Auditor or Treasurer for collection. 
The abstract will be continued by the Tenant, at Landlord’s
expense.  If the abstract contains
evidence of mortgages against the Leased Premises, Landlord shall deliver to
Tenant, a statement from the mortgagee describing the balances due and owing as
of the proposed Date of Closing, including an estimate of the expenses
described in subparagraph (2) above. 
Tenant shall have thirty (30) days in which to give written notification
to Landlord of any objections Tenant has to the title or any such objections
shall be deemed waived.


At closing, Tenant
shall deliver to Landlord the purchase price, less customary credits, payable
in cash or by check certifying such funds. 
Landlord shall deliver to Tenant good and sufficient warranty deed,
together with documents indicating the satisfaction of any mortgages.


(F)                                 If
an association is to be established for the owners of property in Rocking Horse
Farm First Subdivision, Tenant will be a member of the owner association.


26.                                 RIGHT
OF FIRST REFUSAL.  In the event
Tenant exercises the option and does purchase the Leased Premises from the
Landlord pursuant to the provisions of paragraph 25 above, Tenant will grant to
Landlord or the owner will expressly reserve a right of first refusal to
repurchase the Leased Premises in the event Tenant intends to sell the same.  Upon receiving a bona fide offer, an offer
Tenant intends to accept, Tenant shall notify Landlord of such offer, together
with the terms of payment.  The Landlord
may, within thirty (30) days following notification from Tenant, notify Tenant,
in writing, of its intent to repurchase the Leased Premises pursuant to the
terms of the notification given by Tenant.



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27.                                 NONWAIVER.  No waiver by a party of any breach by the
other of its obligations hereunder shall be a waiver of any other subsequent or
continuing breach.  Forbearance by a
party to seek a remedy for any breach by the other shall not be a waiver of its
rights or remedies with respect to the breach, or the required time of payment
of rent or performance of a party’s obligations.


28.                                 HOLDING
OVER.  If Tenant shall continue to
occupy the Leased Premises after termination of this Lease, such occupancy
shall create a tenancy at will only and shall not be a renewal of this
Lease.  Tenant shall pay rent for the
Leased Premises at the same rate per month as under the last preceding tenancy.


29.                                 SURRENDER.  At the termination of this Lease for any
reason, Tenant shall quit and surrender the Leased Premises in as good
condition as when received, reasonable wear and tear or causes beyond Tenant’s
control excepted.


Tenant shall
remove its fixtures, equipment, signage and property installed by Tenant and
shall repair all damages caused by removal.


30.                                 OBLIGATION
OF PARTIES.  The agreements in this
Lease shall be binding upon and enforceable by the parties, their heirs, representatives,
successors and assigns.


31.                                 RELATIONSHIP
OF PARTIES.  Nothing contained in
this Lease or any act or omission of the parties shall be construed to create a
relationship of principal and agent, partnership, joint venture or association
or any relationship between the parties other than the relationship of Landlord
and Tenant.


32.                                 GOVERNING
LAW.  This Lease covers property in
North Dakota and shall be construed according to North Dakota law.  Invalidity of any provision of this Lease
shall not affect the validity of any other provision.


The parties have
signed this Lease the day and year first written above.


 


	
  

  	
  ROCKING HORSE FARM, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Ken Promersberger

  
	
   

  	
   

  	
  Ken Promersberger

  
	
   

  	
   

  	
  Its: President

  
	
   

  	
   

  	
  Landlord

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TITAN MACHINERY, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Ted O. Christianson

  
	
   

  	
   

  	
  Ted O. Christianson

  
	
   

  	
   

  	
  Its: Chief
  Financial Officer

  
	
   

  	
   

  	
  Tenant

  



 



 11
 









STATE OF NORTH DAKOTA


 


COUNTY OF CASS


The foregoing instrument was acknowledged to before me
this 2nd day of August, 2004, by Ken Promersberger the President of Rocking
Horse Farm, LLC, a North Dakota limited liability company, who executed the
same for and on behalf of the limited liability company.


 


	
  

  	
  /s/ Timothy R.
  Meyer

  
	
   

  	
  Notary Public

  



 


 


STATE OF NORTH DAKOTA


COUNTY OF CASS


The foregoing instrument was acknowledged to before me
this 2nd day of August, 2004, by Ted O. Christianson, the Chief Financial
Officer of Titan Machinery, Inc., a corporation, who executed the same for and
on behalf of the corporation.


 


	
  

  	
  /s/ Timothy R.
  Meyer

  
	
   

  	
  Notary Public

  



 


GUARANTY


In order to induce Landlord to enter into this Lease
with Tenant, David Meyer, and in consideration thereof, personally does hereby
unconditionally guaranty to Landlord that Tenant willfully and promptly pay and
discharge all its present and future obligations to Landlord under the
above-described Lease and under each and every modification, amendment and
renewal thereof, and does further unconditionally guarantee the prompt payment
when due of any and all monies agreed to be paid to Landlord by Tenant under
the Lease, irrespective of any invalidity thereof or the unenforceability
thereof.  I further agree to pay on
demand all sums due or to become due from and all losses, costs, reasonable
attorneys’ fees or expenses which may be suffered or incurred by Landlord by
reason of Tenant’s default or default of the undersigned.


Notwithstanding the above, the undersigned’s guaranty
will be limited to the rental payments and other financial obligation (i.e.
real estate taxes, insurance and common expenses) due and payable by the Tenant
during the first five (5) years of initial lease term.


 


	
  

  	
  /s/ David Meyer

  
	
   

  	
  David Meyer

  



 



 12
 









Schedule 1.A.


 


See attached site
plan.



 13
 









Schedule 1.B.


 


See attached
Building plans and specifications.



 14
 









Schedule 1.C.


 


Landlord
construction and “fit up” responsibilities


1.             Building structure,
roof, doors and windows


2.             Parking lot and
lighting


3.             Sidewalks


4.             Landscaping


5.             Utility services to
building


6.             Window coverings
(blinds)


7.             Interior walls,
taped and painted


8.             Floor coverings


9.             Building HVAC
systems


10.           Basic lighting
fixtures


11.           Basic electrical
systems


12.           Kitchen cabinets and
bathroom counters


13.           Bathroom fixtures


14.           Dumpster/transformer
enclosure


15.           Entrance gate(s)


16.           Emergency lighting
system


17.           Security system


18.           Water well


19.           Septic system/drain
field


 


Tenant “fit up”
responsibilities


1.             Special computer
HVAC requirements


2.             Telephone system


3.             Computer cabling
system, including internet


4.             Kitchen appliances


5.             Signage (interior
and exterior)


6.             Pads for antique
farm equipment


7.             Workroom millwork


8.             Reception
counter/snack bar


9.             Coat hooks/racks



 15
 









 


Schedule 5.B.


Estimate of Annual
Expenses


for Titan Building


 


	
  1.  Real estate property taxes

  	
   

  	
  $

  	
  24,000

  	
   

  
	
  2.  Special assessments (asphalt road surfacing
  only)

  	
   

  	
  2,600

  	
   

  
	
  3.  Property (building) insurance

  	
   

  	
  6,000

  	
   

  
	
  4.  Heat/electricity

  	
   

  	
  9,000

  	
   

  
	
  5.  Yard (lawn) and snow removal

  	
   

  	
  5,500

  	
   

  
	
  6.  Security system

  	
   

  	
  200

  	
   

  
	
  7.  Maintenance, including parking lot

  	
   

  	
  1,000

  	
   

  
	
  8.  Window cleaning

  	
   

  	
  500

  	
   

  
	
  9.  Waste management

  	
   

  	
  700

  	
   

  
	
  10.  Rug clean/rental

  	
   

  	
  700

  	
   

  
	
  11.  Water/sewer (currently)

  	
   

  	
  0

  	
   

  
	
  12.  Janitorial

  	
   

  	
  unknown

  	
   

  
	
  

  	
   

  	
  $

  	
  50,300

  	
   

  



 


	
  [approximately $4.00 per
  square foot]

  	
   

  



 



 16














ADDENDUM
NO. 1 TO LEASE


THIS ADDENDUM is made and entered into this 13th day
of September, 2005, to be in all things effective March 11, 2005, by and
between ROCKING HORSE FARM, LLC, a North Dakota limited liability company (“Landlord”)
and TITAN MACHINERY, INC., a corporation duly licensed to conduct business in
the State of North Dakota (“Tenant”).


WHEREAS, Landlord and Tenant entered into a Lease
Agreement dated August 2, 2004, which Lease contemplated the construction of a
building on the Leased Premises, as defined in the Lease; and


WHEREAS, the Building has been completed; and


WHEREAS, there were cost overruns because of changes
requested by Tenant totaling $77,642 and, pursuant to paragraph 4 of the Lease,
the parties have determined that the rent shall be adjusted as herein
described.


NOW, THEREFORE, in consideration of the Lease, the
construction of the Building and the Tenant’s occupancy of the same, and for
other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:


1.  Where the
terms of this Addendum are inconsistent with the terms and conditions of the
Lease, the terms and conditions of this Addendum shall apply.


2.  The Tenant
acknowledges that Landlord has arranged for financing the cost overruns and
incurred additional out-of-pocket bank costs and expenses in arranging for such
financing in the approximate amount of $294. 
This amount has been added to the cost overruns in calculating the new
monthly rent.


3.  Paragraph 3
with regard to the Term is clarified for the sole purposes of the parties
agreeing that the lease commencement date is March 11, 2005.  The expiration date of the original ten (10)
year term remains as January 31, 2015.


4.  The
following terms shall apply with regard to the rent described in paragraph 4 of
the Lease:


(a)  Tenant
commenced paying rent in the amount of $10,916.67 per month on April 1,
2005.  Tenant also paid Landlord for the
prorated rent for the period from and after March 11, 2005.  Tenant has timely paid all other monthly rent
payments through the rent payment paid September 1, 2005.


(b)  For years
one (1) through five (5) of the initial ten (10) year lease term, the rent, to
cover the construction cost overruns and additional costs described above, shall
be adjusted upward to a monthly rent installment of $12,563.01 per month.


(c)  Upon
execution of this Addendum No. 1, Tenant has caused to be paid to Landlord the
sum of $11,524.38 representing the “make-up” rent for the increase described in












subparagraph (b) above for the months of March 2005 through September
2005.  Commencing on October 1, 2005, and
each month thereafter through the rent due February 1, 2010, the monthly rent
obligation shall be $12,563.01.


(d)  Commencing
with the rent payment due March 1, 2010, and for the remaining five (5) years
of the initial (10) year term, the rent will be adjusted upward pursuant to the
provisions of paragraph 4, but based on a base rent for the initial five (5)
years of $10,916.67.


5.  Paragraph
25(D) of the Lease shall continue to reflect a purchase price of $1,400,000
upon which Tenant’s option to purchase shall be based.  The purchase price will be adjusted annually
pursuant to paragraph 25(D)(1) and (2).


6.  Except as
amended, qualified or explained in this Addendum No. 1, the terms and
conditions of the August 2, 2004 lease, shall remain in full force and effect.


7.  This
Agreement shall be binding upon the respective successors and assigns of the
parties hereto.


	
  ROCKING HORSE FARM, LLC

  	
  TITAN MACHINERY, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Ken
  Promersberger

  	
   

  	
  By:

  	
  /s/ Ted O. Christianson

  
	
     Its:  President

  	
     Its:  Chief
  Financial Officer

  
					



 


ACKNOWLEDGEMENT


The undersigned, David Meyer, the guarantor of Tenant’s
obligations under the Lease, consents to the above-described Addendum No. 1 and
confirms and acknowledges that his unconditional guaranty remains in full force
and effect for the first five (5) years of the initial lease term.


	
   

  	
  /s/ David Meyer

  
	
   

  	
  David Meyer

  



 



 2