Document:

subleaseagreement.htm

 

EXHIBIT 10.51

 

SUBLEASE AGREEMENT

THIS SUBLEASE AGREEMENT is entered into effective as of January 1, 2011 (the “Effective Date”), by and between NORTECH SYSTEMS INCORPORATED, a Minnesota professional corporation (“Sublessor”) and WINLAND ELECTRONICS, INC., a Minnesota corporation (“Sublessee”).

RECITALS

A.           Sublessor is the tenant under that certain Lease Agreement of even date herewith (the “Main Lease”) with Sublessee.

B.           Pursuant to the Main Lease, Sublessee has leased to Sublessor the Leased Premises (as defined in the Main Lease) its office and manufacturing facility (the “Building”) and improvements (collectively, the “Improvements”) located at 1950 Excel Drive, Mankato Minnesota, 5600, which Building and Improvements are hereinafter referred to as the “Main Lease Premises.”  The Building is a 58,000 square foot building consisting of 32,500 square feet of manufacturing space, 10,000 square feet of warehouse space and 15,500 square feet of office space.

C.           The parties mutually desire for Sublessee to sublease from Sublessor approximately 1,000 square feet of the Main Leased Premises to be designated by Sublessor and Sublessee (the “Sublease Premises”).

D.           Terms not otherwise defined herein shall have the meaning given them in the Main Lease.

PROVISIONS

In consideration of the mutual promises set forth in this Sublease Agreement and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.           Recitals.  The Recitals set forth above are incorporated into and made a substantive part of this Sublease Agreement.

2.           Main Lease.  The terms and conditions of the Main Lease, as they apply to the Sublease Premises, are incorporated into this Sublease Agreement by reference, except for those terms specifically excluded in this Sublease Agreement.  Sublessee acknowledges and agrees:

a.           That Sublessee is granted no greater or additional rights and/or privileges under this Sublease Agreement than Sublessor was granted as tenant under the Main Lease.

b.           The obligations, conditions and covenants of the Sublessee as landlord under the Main Lease shall remain the obligations, conditions and covenants of Sublessee, and Sublessor shall not be required to perform the same in the event of a default by Sublessee.

c.           Sublessor shall have all the rights and privileges of the Sublessee as landlord under the Main Lease, except Sublessor shall not be entitled to receive Rent payable under the Main Lease and except as herein otherwise specifically provided.

Sublessor and Sublessee mutually agree not to do or suffer or permit anything to be done which would result in a default under the Main Lease or cause the Main Lease to be terminated or forfeited.

3.           Sublease Premises.  Sublessor hereby subleases the Sublease Premises to Sublessee, subject to and together with the terms and conditions of this Sublease Agreement, and the applicable terms and conditions of the Main Lease.

4.           Term.  The term of this Sublease Agreement (the “Term”) shall be one (1) year commencing on the Effective Date (as defined in the Main Lease).

5.           Base Rent.  Beginning on the Effective Date (as defined in the Main Lease), Sublessee agrees to pay to Sublessor without demand, deduction or setoff, at $5.25 per square feet, or $437.50 per month.  Sublessee shall pay to Sublessor during the Term of this Sublease Agreement base monthly rent, on the fifth (5th) day of each and every month, without demand, deduction, or set-off, during the Term.  Each installment of base rent and any additional amounts due under this Sublease Agreement to be paid to Sublessor shall be paid by check, payable to the order of Sublessor (or such nominee as shall have been designated by Sublessor to receive such payment).  A pro rata portion of such monthly base rent shall be due for any partial calendar month during the Term, in proportion to the number of days of such calendar month falling within the Term.

6.           Condition of the Sublease Premises.  Sublessee agrees to accept the Sublease Premises in its as-is condition, provided that Sublessor shall use commercially reasonable efforts to enforce its rights under the Main Lease to ensure that the Sublease Premises is delivered in the condition required by the Main Lease.

7.           Insurance.  Sublessee shall maintain with respect to the Sublease Premises all insurance required to be maintained by Sublessor, as tenant, pursuant to the Main Lease .  The insurance policies maintained by Sublessee shall be subject to all provisions of the Main Lease to the extent applicable thereto.

8.           Indemnification; Waiver of Claims.  Sublessee agrees that it will indemnify and hold Sublessor and Sublessee (to the extent relating to the Sublease Premises) forever harmless as provided in the Main Lease, which indemnification and hold harmless shall also include any and all responsibility or liability which Sublessor may incur by virtue of this Sublease Agreement arising out of any failure of Sublessee in any respect to comply with and perform the requirements and provisions of the Main Lease as they relate to the Sublease Premises (except as expressly excepted in this Sublease Agreement) or this Sublease Agreement.

9.           Transfers.  Sublessee shall not assign or pledge this Sublease, further sublease all or any portion of the Sublease Premises, or otherwise transfer this Sublease or the Sublease Premises, without compliance with all requirements of the Main Lease.

10.           Alterations and Improvements.  Sublessee shall not make any alterations and improvements to the Sublease Premises without Sublessor’s prior written consent and full compliance with the terms and conditions of the Main Lease.

11.           Repair and Maintenance.  Sublessee shall at its own cost and expense repair and maintain all of the Sublease Premises in full compliance with the terms and conditions of the Main Lease.

12.           Default.  If any one or more of the following events occurs, Sublessee shall be deemed to be in default under this Sublease Agreement:

a.           Sublessee fails to pay, when due, any installment of Rent, for which Sublessee is responsible under this Sublease Agreement.

b.           Sublessee fails to keep, observe or perform any of the other non-monetary terms, covenants and conditions herein to be kept, observed and performed by Sublessee under this Sublease Agreement; provided, however, that Sublessee shall have five (5) days less than any applicable cure period under the Main Lease within which to cure the default in question.

If Sublessee is in default under any provision of this Sublease Agreement, Sublessor shall be entitled to exercise any and all of the rights and remedies provided to the Sublessee as landlord under the Main Lease, or otherwise available to lessors and/or sublessors under Minnesota law in the event of a default by a lessee and/or sublessee.

13.           Notices.  Sublessor shall immediately forward to the Sublessee copies of all billings, reports, written statements or notices received by Sublessor from Owner as landlord under the Main Lease to the extent related to the Sublease Premises.  Sublessee shall forward to Sublessor all reports and written statements required under the Main Lease in connection with the Sublease Premises or actions taken by Sublessee at least ten (10) days prior to the date such reports or written statements are due under the Main Lease.  Any notice which one party wishes or is required to give to the other party will be regarded as effective if in writing and delivered to such party in the manner provided under the Main Lease, addressed to the post-office address furnished by such party.

14.           Relationship of the Parties.  Nothing contained in this Sublease Agreement shall be deemed or construed by the parties, or by a third party, to create the relationship of principal and agent or of partnership or joint venture or of any association whatsoever between Sublessor and Sublessee.  It is hereby expressly understood and agreed that neither the method of computation of Rent, or any other provisions contained in this Sublease Agreement, nor any act or acts of the parties hereto, shall be deemed to create any relationship between Sublessor and Sublessee other than the relationship of Sublessor and Sublessee.

15.           Invalidity.  If any one or more of the provisions of this Sublease Agreement are adjudicated to be void or invalid, then the remaining provisions of this Sublease Agreement shall remain in full force and effect insofar as such remaining provisions are capable of execution.  Each covenant and agreement on the part of one party is understood and agreed to constitute an essential part of the consideration for each covenant and agreement on the part of the other party.

16.           Conditions.  This Sublease shall at all times be considered to be dependent on the existence of the Main Lease.  Any termination of the Main Lease shall result in an automatic termination of this Sublease Agreement, and neither party to this Sublease Agreement shall have any liability or responsibility to the other, except:  (i) for such liability as shall have accrued prior to such termination; and (ii) to whatever extent Sublessor is liable to the Sublessee under the Main Lease in the event the Main Lease is cancelled or terminated because of Sublessee’s actions, Sublessee shall remain liable to Sublessor.

17.           Successors and Assigns.  This Sublease Agreement and all covenants and agreements contained herein shall be binding upon and inure to the benefit of the respective successors and assigns of the parties to this Sublease Agreement, subject to the restrictions imposed under this Sublease Agreement and the Main Lease relating to transfers.

18.           Non-Waiver.  A party’s failure to insist upon strict performance of any covenant of this Sublease Agreement or to exercise any option or right herein contained shall not be a waiver or relinquishment for the failure of such covenant, right or option, but the same shall remain in full force and effect.  Sublessor is specifically authorized to accept a partial payment of Rent or any other sum payable by Sublessee hereunder (no matter how such payment may be labeled or conditionally delivered) without such acceptance being deemed a waiver of the balance of the amount owed.

19.           General.  This Sublease Agreement shall be construed under the laws of the State of Minnesota.  Except as otherwise provided herein, no subsequent alteration, amendment, change or addition to this Sublease Agreement shall be binding upon the parties unless reduced to writing and signed by both parties.  This Sublease Agreement may be separately executed as counterparts which shall be then read together and enforced.

  

  

  

IN WITNESS TO THIS SUBLEASE AGREEMENT, the parties have executed this Sublease Agreement effective as of the day and year first above-written.

SUBLESSOR:                                                                NORTECH SYSTEMS INCORPORATED

By:  /s/  Michael J. Degan                                                              

Its:  President and Chief Executive Officer                                                                

SUBLESSEE:                                                                WINLAND ELECTRONCIS, INC.

By:  /s/ Thomas J. de Petra                                                                

Its:  President and Chief Executive Officermfgagreement.htm

EXHIBIT 10.52

 

MANUFACTURING AGREEMENT

between

Winland Electronics, Inc.

and

Nortech Systems Incorporated

Dated as of January 1, 2011

  

  

  

MANUFACTURING AGREEMENT

 

This Manufacturing Agreement (the “Agreement”) is entered into by and between Winland Electronics, Inc. (“Seller”), a Minnesota corporation, and Nortech Systems Incorporated (“Buyer”), a Minnesota corporation, as of January 1, 2011.

 

BACKGROUND

 

Contemporaneously herewith, Buyer and Seller have entered into an Asset Purchase Agreement, dated as of the same date (the “APA”), pursuant to which the Buyer will purchase certain assets of Seller in connection with its Electronics Manufacturing Services business.  For a period of time after the closing of the APA, the parties have agreed that, pursuant to the terms hereof, Buyer will manufacture certain products for Seller related to Seller’s proprietary monitoring devices (the “Products”).

 

Now, then, for good and valuable consideration, receipt of which is hereby acknowledged, the parties do hereby agree as follows:

 

1. Term.  The term begins on the date hereof and continues in effect until July 1, 2011 (the “Term”).  After the expiration of the Term, Buyer and Seller will negotiate in good faith for additional Terms, upon conditions mutually agreeable to Buyer and Seller.

 

2. Seller’s Manufacturing Commitment.  During the Term of this Agreement:

 

(a)           Buyer shall manufacture all of Seller’s requirements relating to the Products pursuant to the Buyer’s forecasts as provided in Section 4 to this Agreement;

 

(b)           Buyer shall handle all manufacturing responsibilities for the Products, including ordering raw materials, production and packaging.  Seller and Buyer shall work together during the Term of this Agreement to determine what type of packaging the Products will have.  Seller shall assume responsibility for marketing, invoicing its customers and collections; and

 

(c)           Buyer shall warehouse, at its expense and pursuant to a Lease Agreement of even date herewith, all Products purchased by Seller to be shipped at a later date.

 

3. Purchase of Raw Materials and Finished Goods.

 

(a)           Upon termination of this Agreement, Seller or any successor to Seller’s business after the consummation of the APA by merger or acquisition or by divestiture or spin-off (the “Seller’s Successor”) shall be required to purchase all unused raw materials intended by Buyer to be used or consumed in the production of the Products and owned by Buyer at such time, provided that such raw materials meet applicable specifications and represents raw materials consistent with current Bills of Material for the Products.  The purchase price for such raw materials shall be Buyer’s standard cost, and shall be fully explained and documented to Seller’s or Seller’s Successor’s satisfaction.

 

(b)           Upon termination of this Agreement, Seller or Seller’s Successor shall be required to purchase all or some of Buyer’s finished goods or work in progress inventory of Products at the applicable Transfer Prices (as defined below).

 

4. Forecast and Ordering Procedures.  Each month Seller shall provide a forecast, setting forth its good faith estimate of the quantities of each Product for which it will place orders in the following thirty (30) days.  Such forecast is for the convenience of the parties and shall not be considered a binding obligation to purchase Products.

 

Seller shall place orders by submitting a binding purchase order.  Upon acceptance of such purchase order, Buyer shall be committed to sell the Product set forth in such purchase order to Seller.  Buyer agrees to accept such purchase order, subject to the terms of this Agreement, when submitted by Seller.  To the extent any terms set forth in the purchase order or the acceptance are inconsistent with the terms of this Agreement, the terms of this Agreement shall control.  The completion date specified in the purchase order shall be applicable, provided, however, that (a) such date shall be no earlier than thirty (30) days after submission of the purchase order, provided that Buyer shall use commercially reasonable efforts to deliver Products earlier than thirty (30) days after submission of the applicable purchase order if requested by Seller, and (b) Seller shall use its commercially reasonable efforts to aggregate purchases for maximum manufacturing efficiency.

 

As soon as practicable after the date of this Agreement Buyer and Seller shall work together to determine a minimum quantity amount of Product which Seller shall be required to purchase from Buyer (the “Minimum Quantity Amount”).  Once such Minimum Quantity Amount is established, in order for Seller to secure the Transfer Price (as defined below) as set forth in Section 6, Seller must purchase from Buyer a minimum of twenty-five percent (25%) of the Minimum Quantity Amount during each three (3) month period after the Minimum Quantity Amount is established and a minimum of one hundred percent (100%) of the Minimum Quantity Amount during each twelve (12) month period after the Minimum Quantity Amount is established.

 

5. Transfer Price.  Subject to the Minimum Quantity Amount requirements set forth in Section 4, the transfer price for the Products (the “Transfer Price”) during the Term of this Agreement shall be Buyer’s current standard manufacturing costs (fully burdened) plus a mark-up equal to (a) five percent (5%) during the six (6) months after the date of this Agreement, (b) seven percent (7%) during the sixth through the ninth (9) months after the date of this Agreement, and (c) ten percent (10%) during the ninth through the twelfth months after the date of this Agreement.

 

6. Payment Terms.  Payment shall be net thirty (30) days from the date of invoice, which invoice shall be dated the date of shipment.

 

7. Specifications.  Seller shall submit, as part of its purchase order, the specifications for the applicable Products, which shall be the same as the historical specifications for the Products previously manufactured by Buyer.

 

8. Insurance Certificate.  Purchaser will procure and maintain, at its own expense, for the Term of the Agreement, and for five (5) years thereafter if written on a claims made or occurrence reported form, the types of insurance specified below:  (a) Workers’ Compensation accordance with applicable statutory requirements; (b) Employer’s Liability with a limit of liability in an amount of not less than $500,000; (c) Commercial General Liability including premises operations, products & completed operations, blanket contractual liability, personal injury and advertising injury including fire legal liability for bodily injury and property damage in an amount not less than $1,000,000 per occurrence and  $2,000,000 in the aggregate; and (d) Excess Liability including products liability with a combined single limit in an amount of not less than $10,000,000 per occurrence and in the aggregate.

 

Purchaser shall include Seller and its subsidiaries, affiliates, directors, officers, employees and agents as additional insureds with respect to Commercial General Liability, Commercial Automobile Liability and Excess Liability but only as their interest may appear in this Agreement or in the APA.  Prior to commencement of services, Purchaser shall furnish to Seller certificates of insurance evidencing the insurance coverages stated above and shall require at least thirty (30) days written notice to Seller prior to any cancellation, non-renewal or material change in said coverage.  In the case of cancellation, non-renewal or material change in said coverage, Seller shall promptly provide to Purchaser with a new certificate of insurance evidencing that the coverage meets the requirements in this Section 8.  Purchaser agrees that its insurance shall act as primary and noncontributory from any other valid and collectible insurance maintained by Seller.  Purchaser may, at its option, satisfy, in whole or in part, its obligation under this Section 8 through its self- insurance program.

 

9. Confidential Information.  The parties acknowledge that during the Term hereof each party may provide confidential information to the other related to such party and to the Products, including trade secrets, manufacturing information, marketing information or financial information.  Each party shall take commercially reasonable steps to maintain the confidentiality of such information.  Information shall not be deemed confidential if it is in the public domain through no fault of either party, the information is required to be disclosed pursuant to a court order or other compulsory process or the information is in the hands of a third party who is under no obligation to either party to maintain the confidentiality of such information.  Each party will use the same degree of care with respect to its obligations hereunder as it employs with its own information of a confidential nature.

 

10. Force Majeure.  If either party is unable to perform its obligations, either in whole or in part, under this Agreement as a result of acts of God; acts of public enemy; civil strife; wars declared or undeclared; embargoes; fires; explosions; floods; shortages of energy; orders by any governmental entity or by any other supervening authority, the affected party will use its commercially reasonable effort to find an alternative in order to alleviate the force majeure condition and meet its obligations under this Agreement, and if such commercially reasonable efforts do not result in the elimination of the force majeure condition, be excused from its performance during the event to the extent that the party is prevented or delayed hereunder.  If such event lasts for more than one hundred twenty (120) days, the party whose performance is not affected by the force majeure condition shall have the option of being excused, without further obligation from the performance of the Agreement or any obligation hereunder.  This clause shall not apply to the payment obligations of Seller.

 

11.           Termination.  Either party shall be entitled to terminate its obligations hereunder, without liability, upon material breach of the obligations by the other party or the bankruptcy or insolvency of the other party provided that the terminating party shall provide sixty (60) days’ written notice and opportunity to cure to the other party.

 

12.           Purchase Order Terms.  Buyer warrants for a period of one (1) year from the date of shipment, that the Products manufactured by Buyer pursuant to this Agreement shall conform to the applicable specifications.  During the warranty period, Seller at its option may reject and return at Buyer’s expense any Products that fail to conform to the requirements hereof.  Upon such rejection, Buyer shall replace such Products, or if no such replacement Products are available, credit Seller’s account for such rejected Products.  Buyer shall indemnify and hold Buyer harmless from any costs, expenses, damages and the like incurred by Seller or any third party arising from (i) any breach of Buyer’s obligations hereunder, or (ii) any negligent or willful misconduct of Buyer.  Seller shall indemnify and hold Buyer harmless from any costs, expenses, damages and the like arising from (i) any breach of Seller’s obligations hereunder, or (ii) any negligent or willful misconduct of Buyer.  The parties shall provide notice of indemnification claims and conduct the defense of any such claims in accordance with the procedures specified in the APA.

 

NOTWITHSTANDING THE FOREGOING, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, EXCEPT TO THE EXTENT THAT SUCH INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES HAVE BEEN REQUIRED TO BE PAID TO THIRD PARTIES.

 

                      13.           Assignment; No Third Party Beneficiaries.  Neither this Agreement nor any of the rights or obligations hereunder may be assigned by either party without the prior written consent of the other party.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, and no other person shall have any right, benefit or obligation under this Agreement, as a third party beneficiary or otherwise.

 

           14.           Notices.  All notices and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given: (i) when received if personally delivered; (ii) the day after being sent, if sent for next-day delivery within the United States by recognized overnight delivery service (e.g., Federal Express); and (iii) upon receipt, if sent by certified or registered mail, return receipt requested.  In each case notice shall be sent to the following address or to such other place and with such other copies as either party may designate as to itself by notice to the other:

 

	
If to Seller, addressed to:

	  	
If to Buyer, addressed to:

	
Winland Electronics, Inc.

1950 Excel Drive

Mankato, MN 56001

Attention:  Chief Executive Officer

	  	
Nortech Systems Incorporated

1120 Wayzata Boulevard East, #201

Wayzata, MN 55391

Attention:  Michael J. Degan

	
With copies (which shall not constitute notice hereunder) to:

 

	  	
With a copy (which shall not constitute

notice hereunder) to:

	
Fredrikson & Byron, P.A.

200 South Sixth Street, Suite 4000

Minneapolis, MN 55419

Attention:  Thomas F. Steichen, Esq.

 

	  	
Bert Gross

7201 Metro Boulevard

Edina, MN 55439

15.           Choice of Law.  This Agreement shall be construed and interpreted in accordance with the internal laws of the State of Minnesota, except with respect to matters of law concerning the internal affairs of any business entity which is a party to this Agreement, and as to those matters the law of the jurisdiction under which the relevant business entity derives its powers shall govern.

 

                      16.           Entire Agreement; Amendments and Waivers.  This Agreement and the APA, together with all exhibits and schedules hereto and thereto constitute the entire agreement between the parties pertaining to the subject matter hereof and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties with respect to such subject matter.  No amendment, modification or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby.  No waiver of any of the provisions of this Agreement shall be deemed a waiver of any other provision hereof, nor shall any such waiver constitute a continuing waiver unless expressly provided in such waiver.

 

                      17.           Counterparts; Deemed Originals.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  A facsimile or emailed .pdf file signature page shall be deemed an original.

 

                      18.           Expenses.  Whether or not a closing occurs, each party hereto shall pay its own legal, accounting, out-of-pocket and other expenses incident to the negotiation and execution of, and closing under, this Agreement.

 

                      19.           Invalidity.  In the event that any of the provisions contained in this Agreement shall be held to be invalid, illegal or unenforceable in any respect, then, to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement.

 

                      20.           Cumulative Remedies.  Except as otherwise specifically provided in this Agreement or in the APA, all rights and remedies of either party hereto are cumulative of each other and of every other right or remedy such party may otherwise have at law or in equity, so that the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies.

 

                      21.           Captions.  The captions contained in this Agreement in no way define, limit or extend any provision of this Agreement.

 

                      22.           Further Assurances.  The parties shall cooperate reasonably with each other and with their respective representatives in connection with any steps required to be taken as part of their respective obligations under this Agreement, and shall each (a) furnish upon request such further information; (b) execute and deliver such documents; and (c) do such other acts and things, in each case as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the transactions contemplated herein.

 

23.           Relationship.  This Agreement does not make either party the employee or agent of the other for any purpose whatsoever.  Neither party is granted any right or authority to assume or to create any obligation or responsibility, express or implied, on behalf of or in the name of the other party.  In fulfilling its obligations pursuant to this Agreement, each party shall be acting as an independent contractor.

 

24.           No Strict Construction.  The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any Person.

 

  

  

  

Dated this 1st day of January, 2011.

 

WINLAND ELECTRONICS, INC.

By:        /s/  Thomas J. de Petra                                                    

Name:   Thomas J. de Petra

Title:     President and Chief Executive Officer

NORTECH SYSTEMS INCORPORATED

By:        /s/  Michael J. Degan                                                             

Name:   Michael J. Degan

Title:     President and Chief Executive Officer

(Signature Page to Manufacturing Agreement)

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