EXHIBIT 10.16
SUBLEASE AGREEMENT
BETWEEN
SOUTHWIND PROPERTIES
AND
KIRKLAND'S, INC.
March 5, 2001
Duplicate Original 1 Of 2
William C. Bell, Jr.
Rainey, Kizer, Butler, Reviere & Bell, P.L.C.
P.O. Box 1147 -105 South Highland Ave.
Jackson, TN 38302-1147
(731) 423-2414
File No. 01436\51312
TABLE OF CONTENTS
1. Leased Premises/Conditions Precedent ......................................... 1
2. Construction of Improvements ................................................. 2
3. Lease Term ................................................................... 2
4. Option Terms ................................................................. 2
5. Holdover By Tenant ........................................................... 3
6. Rent ......................................................................... 4
(a) Initial Term ............................................................ 4
(b) First Option Term ....................................................... 5
(c) Second Option Term ...................................................... 5
(d) Third Option Term ....................................................... 6
(e) Proration of Rent ....................................................... 6
(f) Late Charges ............................................................ 6
7. Utilities .................................................................... 7
8. Taxes ........................................................................ 7
9. Repairs And Maintenance ...................................................... 7
(a) Maintenance and Repair Obligations ...................................... 7
(b) Default with Respect to Tenant's Repair and Maintenance Obligations ..... 8
(c) Default with Respect to Landlord's Repair and Maintenance Obligations ... 8
10. Insurance .................................................................... 9
11. Improvements ................................................................. 10
12. Damage Or Destruction To Improvements On Leased Premises ..................... 10
13. Use Of Premises .............................................................. 12
14. Condemnation ................................................................. 13
(a) Total Taking in the Event of Condemnation ............................... 13
(b) Partial Taking in the Event of Condemnation ............................. 13
15. Quiet Enjoyment .............................................................. 14
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16. Subordination Of Lease/Attornment ............................................ 14
17. Surrender Upon Termination ................................................... 15
18. Assignment And Sub-letting ................................................... 15
19. Events Of Default By Tenant And Remedies Of Landlord ......................... 15
(a) Events of Default Defined ............................................... 15
(b) Remedies on Default ..................................................... 17
(c) Effect of Termination Rights Upon Tenant's Event Of Default ............. 18
(d) No Remedy Exclusive ..................................................... 19
(e) No Additional Waiver Implied By One Waiver .............................. 19
(f) Right of Entry .......................................................... 19
(g) Notice of Default ....................................................... 20
20. Landlord Defaults And Tenant Remedies ........................................ 20
21. Tenant's Indemnity Of Landlord ............................................... 22
22. Landlord Indemnity Of Tenant ................................................. 23
23. Notices ...................................................................... 24
24. Periodic Financial Reporting By Tenant ....................................... 24
25. Environmental Requirements Of Tenant ......................................... 25
(a) Landlord's Warranty ..................................................... 25
(b) Environmental Covenants of Tenant ....................................... 25
(c) Definition of Environmental Laws ........................................ 26
(d) Definition of Hazardous Materials ....................................... 27
(e) Definition of Environmental Contamination ............................... 27
26. Environmental Requirements Of Landlord ....................................... 27
27. Expansions to Building(s) on Leased Premises ................................. 28
28. Lease Termination Rights of Tenant ........................................... 29
29. Miscellaneous ................................................................ 29
(a) Entire Agreement ........................................................ 29
(b) Recordation ............................................................. 30
(c) Binding Effect .......................................................... 30
(d) Governing Law ........................................................... 30
(e) Captions ................................................................ 30
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(f) Severability ............................................................ 30
(g) Rules Of Construction ................................................... 31
(h) Duplicate Originals ..................................................... 31
(i) Attorney's Fees ......................................................... 31
(j) Estoppel Certificate .................................................... 31
(k) No Landlord Liens ....................................................... 31
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SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT made and entered into this 5th day of March,
2001, by and between Southwind Properties, a Tennessee general partnership
("Landlord"), and Kirkland's, Inc., a Tennessee corporation ("Tenant").
RECITALS:
A. Landlord has leased the Leased Premises (defined below) from the
Industrial Development Board of the City of Jackson, Tennessee (the "IDB"),
pursuant to that certain Lease Agreement dated February 4, 2000 (the "Original
Lease"). Landlord and the IDB intend to enter into a Restated Lease Agreement
dated December __, 2000 (the "Restated Lease") upon terms acceptable to Tenant.
B. Pursuant to the Restated Lease, certain rights are granted to the
IDB and to First Tennessee Bank National Association (the "Bank), as more
particularly described in the Restated Lease.
C. Landlord desires to sublease its interest in the Leased Premises
under the Restated Lease to Tenant as provided herein.
In consideration of the parties' respective representations, covenants
and agreements herein contained, the Landlord and Tenant agree as follows:
1. LEASED PREMISES/CONDITIONS PRECEDENT. The Landlord does
hereby sublease to the Tenant, and the Tenant subleases from the Landlord, in
accordance with the terms and conditions of this Agreement, the premises
described in EXHIBIT A located in Madison County, Tennessee, in good repair at
the date of the beginning of this Lease Term, which
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shall herein be referred to as the "Leased Premises."
2. CONSTRUCTION OF IMPROVEMENTS. Prior to the commencement of
the Lease Term, Landlord, at Landlord's expense, agrees to construct those
improvements to the Leased Premises described in the scope of work attached
hereto as EXHIBIT B (the "Improvements"). Upon execution of this Lease, Landlord
and Tenant shall sign EXHIBIT B to signify their approval of the scope of work.
The dates for beginning and completing construction of the Improvements shall be
deferred for a period equal to any delay caused by reason of labor controversy,
act of God, fire, or other casualty, governmental regulations, or other causes
beyond the reasonable control of Landlord. In such event, the Commencement Date
(defined in paragraph 3) for Tenant's occupancy of the Leased Premises shall be
postponed on a day for day basis. Tenant shall have the right after Tenant takes
possession of the Leased Premises to submit to Landlord a "punch list" of
incomplete or defective construction items within the Leased Premises within
sixty (60) days after Tenant takes possession, and Landlord agrees to correct
the items on the punch list. Landlord will remain liable for any latent defects
in the Leased Premises (established by engineering and architectural experts who
have to be mutually acceptable to both parties).
3. LEASE TERM. The initial term of this Sublease Agreement
shall commence on March 15, 2001 (the "Commencement Date"); and, subject to the
Lease Termination Rights of Tenant set forth in paragraph 28 of this Lease,
shall continue until March 31, 2008 (the "Initial Term").
4. OPTION TERMS. At the expiration of the Initial Term, if
this Lease then shall be
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in full force and effect, and the Tenant shall not be in default hereunder
beyond any applicable cure period, and if Landlord is still the Lessee under the
Restated Lease, or if Landlord is the fee, simple owner of the Leased Premises,
the Tenant shall have the option to extend the term of this Sublease, upon the
same terms, provisions, and conditions provided herein, for three (3)
consecutive five (5) year terms (the "Option Terms"), with the first such Option
Term beginning as of and from the expiration of the Initial Term and the second
and third Option Terms beginning from the expiration of the extended term. Each
such Option Term must be exercised by written notice in the manner provided in
this Lease Agreement below, not less than six (6) months prior to the expiration
of the Initial Term, or the subject Option Term, as the case may be. Time is of
the essence for providing written notice not less than six (6) months prior to
the expiration of the applicable term, and failure to provide such notice shall
render any Options null and void. As used in this Lease Agreement and unless
otherwise specified, "Lease Term" shall mean the Initial Term and any Option
Terms properly exercised by Tenant. The Option Terms shall be subject to the
Lease Termination Rights of Tenant set forth in paragraph 28 of this Lease.
5. HOLDOVER BY TENANT. In the event the Tenant remains in
possession of the Leased Premises beyond the expiration of the Initial Term
without properly exercising the first Option Term or if Tenant remains in
possession beyond the expiration of any validly exercised Option Term, or if
Tenant remains in possession after termination of this Lease as provided in
paragraph 29 hereof, such tenancy shall be deemed month-to-month only, with
thirty (30) days' written notice required by either party to terminate such
tenancy. Except as provided in the last sentence is this paragraph 5, the Rent
during such holdover
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tenancy shall be 125% of the amount of the Rent that was payable immediately
prior to the commencement of the holdover occupancy. Otherwise, the holdover
tenancy shall be subject to all provisions of this Lease Agreement. However, in
the event that Tenant and Landlord engage in good faith negotiations for an
extension of the term of this Lease for a period up to two (2) months after the
expiration of the Lease, then Tenant shall be obligated to pay rent in the
amount of Rent at the expiration of the preceding term for such sixty (60) day
period.
6. RENT. Subject to the provisions for increased rent for
expansion of the improvements as provided in paragraph 28, the following rent
provisions shall apply for the Leased Premises prior to any expansion:
(a) INITIAL TERM. The Tenant shall pay the Landlord
monthly rent for use of the Leased Premises during the first five (5) years and
1/2 month of the Initial Term (i.e. March 15, 2001 -- March 31, 2006) ("Years
1-5") in the amount of Sixty-Seven Thousand Six Hundred Seventy and No/100
Dollars ($67,670.00). After Years 1-5 and for the remainder of the Initial Term,
the monthly rent shall increase to Seventy One Thousand Seven Hundred Thirty and
20/100 Dollars ($71,730.20). The rent during the Initial Term (the "Initial Term
Rent") shall become due and payable in advance on the first day of each month,
without setoff rights, except as provided in paragraph 10(c). Monthly Rent shall
be prorated for the period March 15, 2001 through March 31, 2001, and shall be
$37,109.00. The Initial Term Rent shall be paid to the Landlord at the address
contained below in this Lease Agreement, until such time as the Landlord shall
notify the Tenant, in writing, of a different address to which the payment shall
be sent.
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(b) FIRST OPTION TERM. If Tenant exercises its option
for the first Option Term, the monthly rent during the first three (3) years of
the first Option Term ("Years 8-10") shall be in the amount of Seventy One
Thousand Seven Hundred Thirty and 20/100 Dollars ($71,730.20). After Years 8-10,
and for the remainder of the first Option Term, the monthly rent shall increase
to Seventy Six Thousand Thirty Four and 01/100 Dollars ($76,034.01). The rent
during the first Option Term (the "First Option Term Rent") shall become due and
payable in advance on the first day of each month, without setoff rights, except
as provided in paragraph 10(c). The First Option Term Rent shall be paid to the
Landlord at the address contained below in this Lease Agreement, until such time
as the Landlord shall notify the Tenant, in writing, of a different address to
which the payment shall be sent.
(c) SECOND OPTION TERM. If Tenant exercises its
option for the second Option Term, the monthly rent during the first three (3)
years of the second Option Term ("Years 13-15") shall be in the amount of
Seventy-Six Thousand Thirty Four and 01/100 Dollars ($76,034.01). After Years
13-15, and for the remainder of the second Option Term, the monthly rent shall
increase to Eighty Thousand Five Hundred Ninety-Six and 05/100 Dollars
($80,596.05) during the second Option Term (the "Second Option Term Rent"). The
Second Option Term Rent shall become due and payable in advance on the first day
of each month, without setoff rights, except as provided in paragraph 10(c). The
Second Option Term Rent shall be paid to the Landlord at the address contained
below in this Lease Agreement, until such time as the Landlord shall notify the
Tenant, in writing, of a different address to which the payment shall be sent.
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(d) THIRD OPTION TERM. If Tenant exercises its option
for the third Option Term, the monthly rent during the first three (3) years of
the third Option Term ("Years 18-20") shall be in the amount of Eighty Thousand
Five Hundred Ninety-Six and 05/100 Dollars ($80,596.05). After Years 18-20, and
for the remainder of the third Option Term, the monthly rent shall increase to
Eighty-Five Thousand Four Hundred Thirty-One and 82/100 Dollars ($85,431.32).
The rent payable during the third Option Term (the "Third Option Term Rent")
shall become due and payable in advance on the first day of each month, without
setoff rights, except as provided in paragraph 10(c). The Third Option Term Rent
shall be paid to the Landlord at the address contained below in this Lease
Agreement, until such time as the Landlord shall notify the Tenant, in writing,
of a different address to which the payment shall be sent. As used in this Lease
Agreement, the term "Rent" shall include the Initial Term Rent, the First Option
Term Rent, the Second Option Term Rent, and the Third Option Term Rent, unless
otherwise specified.
(e) PRORATION OF RENT. All Rent shall be prorated if
the Initial Term or any Option Term does not commence on the first (1st) day of
a calendar month or expire on the last day of a calendar month.
(f) LATE CHARGES. A late charge shall be payable in
the amount of one percent (1%) of the Rent then in effect in the event that
Tenant shall have failed to pay when due any installment of monthly Rent or
additional rent within fifteen (15) days after the due date thereof and such
failure shall have occurred two (2) times during any calendar year.
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7. UTILITIES. Tenant shall contract for all utility service
required on the Leased Premises and shall be liable for payment of all utility
services received during its occupancy of the Leased Premises.
8. TAXES. Tenant acknowledges that the Leased Premises are
owned by the IDB, and that assets owned by the Board are exempt from ad valorem
taxation in the State of Tennessee under TCA Section 7-53-305. Landlord agrees
to "pass on" to Tenant any payment in lieu of tax ("PILOT") benefits granted to
Landlord in its lease with the IDB, and Tenant agrees to make all PILOT payments
required to be made pursuant to the PILOT Program attached as EXHIBIT C, and any
and all other taxes assessed against Landlord as a lessee of the Leased Premises
from the IDB, including within such taxes to be paid by Tenant, any leasehold
taxes if such are assessed against Landlord by any taxing authority, all of such
taxes to be paid before becoming delinquent.
9. REPAIRS AND MAINTENANCE.
(a) MAINTENANCE AND REPAIR OBLIGATIONS. Landlord
shall be responsible for maintaining the roof, foundation, slab, HVAC units
(including all necessary replacements thereof), and structural walls of the
Leased Premises during the Lease Term and for repaving parking lots at the time
of the end of the useful life of the prior paving of such parking lots
("Landlord's Repair Obligations"). With the exception of Landlord's Repair
Obligations, Tenant shall at all times put, keep and maintain the Leased
Premises in good repair and appearance, including without limitation: the
landscaping; windows; plumbing and electrical systems; and routine maintenance
and patching and sealing of parking lots.
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Tenant shall promptly make all repairs and replacements (substantially
equivalent in quality and workmanship to the original work) of every kind and
nature, which may be required to be made upon or in connection with any of the
Leased Premises in order to keep and maintain the Leased Premises in as good
repair and appearance as they were as of the commencement of the Initial Term,
ordinary wear and tear excepted. Tenant shall, in all events, make all repairs
for which it is responsible hereunder promptly, and all repairs shall be done in
a good, proper, and workmanlike manner. Landlord shall, in all events, make the
Landlord repair obligations promptly, and all repairs shall be done in a good,
proper, and workmanlike manner.
(b) DEFAULT WITH RESPECT TO TENANT'S REPAIR AND MAINTENANCE
OBLIGATIONS. If Tenant shall be in default of Tenant's maintenance and repair
obligations hereunder, Landlord may, after thirty (30) days' notice to Tenant
and failure of Tenant to cure such default, but immediately upon notice in the
event of an emergency, do whatever is necessary to cure such default for the
account of and at the expense of Tenant. All actual and reasonable costs and
expenses so incurred by Landlord shall constitute additional Rent payable by
Tenant under this Lease Agreement and shall be paid with the next installment of
Rent that becomes due.
(c) DEFAULT WITH RESPECT TO LANDLORD'S REPAIR AND MAINTENANCE
OBLIGATIONS. If Landlord shall be in default of Landlord's Repair Obligations
hereunder after notice to Landlord of the Repair obligations, and a reasonable
opportunity to complete such Repair Obligations, Tenant may, after thirty (30)
days notice to Landlord of Landlord's failure to make such repairs within a
reasonable time, but immediately upon notice in the event of
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an emergency, do whatever is reasonably necessary to cure such default at the
expense of Landlord. If Landlord does not pay the cost and expenses so incurred
by Tenant within thirty (30) days after invoiced by Tenant, Tenant shall have
the right to offset such amount against its rent obligations hereunder.
10. INSURANCE. Landlord shall maintain fire and extended coverage
insurance and earthquake coverage on the building and appurtenances located on
the Leased Premises with the replacement cost endorsement, in accordance with
comparable industry standards, with a financially responsible insurer duly
authorized to do business in the State of Tennessee. The costs of and premiums
thereof shall be charged to and paid to Landlord by the Tenant as additional
rent. Tenant shall, at Tenant's expense, obtain and keep in force during the
Lease Term, commercial general liability insurance coverage with limits of not
less than $2,000,000 per occurrence for bodily injury and property damage,
insuring both Landlord and Tenant against liability arising out of Tenant's use
and occupancy of the Leased Premises and all areas appurtenant thereto. All such
liability policies shall name Tenant as the insured party, and Landlord and
Landlord's designated mortgagees as additional insureds. The Tenant shall
furnish the Landlord with a certificate from the insurance companies indicating
the issuance of the required liability insurance coverage required in this
paragraph. Landlord may, but shall not be obligated, to maintain tune element
insurance coverage (loss of rents) covering the loss of rental income for a
period chosen by Landlord that may occur as a result of loss or damage to the
building(s) located on the Leased Premises.
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11. IMPROVEMENTS. Tenant agrees that it will not make any alterations
to the Leased Premises that would diminish the value of the Leased Premises,
after giving consideration to the completed alteration, without Landlord's prior
written consent. Any alterations by Tenant, at Tenant's expense, the cost of
which (per alteration or group of related alterations) exceeds One Hundred
Thousand and No/100 Dollars ($100,000.00) shall be deemed a "Significant
Alteration." All Significant Alterations shall require Landlord's prior written
consent. Prior to making any Significant Alterations, Tenant shall submit
written plans and specifications for such work to Landlord and shall obtain
Landlord's prior written consent to the same. Tenant may make alterations other
than Significant Alterations or alterations that would not diminish the value of
the Leased Premises without the prior written consent of Landlord. Any
alterations or additions will be at Tenant's expense and will remain a portion
of the Leased Premises upon expiration of the rights of Tenant under this Lease.
Trade fixtures and other equipment owned by the Tenant and installed on or
within the Leased Premises by Tenant shall remain as personal property, and may
be removed upon termination of the Lease, but only upon the condition that any
repairs necessary due to removal of such trade fixtures or equipment be made by
Tenant at its own expense.
12. DAMAGE OR DESTRUCTION TO IMPROVEMENTS ON LEASED PREMISES. Except as
provided in the next two (2) grammatical paragraphs of this paragraph 12, if the
improvements on the Leased Premises (excluding the parking lot, lights,
landscaping, and fences) are damaged or destroyed by fire or other casualty
insured under the fire and extended casualty insurance policy applicable to the
Leased Premises (the "Casualty"), the
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insurance proceeds from such policy shall be used to repair and/or restore the
Leased Premises to substantially the condition it was in immediately prior to
the Casualty within one hundred eighty (180) days following the date of
Landlord's receipt of the insurance proceeds.
However, if the Casualty renders the improvements on the Leased
Premises untenantable, in the reasonable opinion of Tenant, and the estimated
time for restoration thereof exceeds one hundred-eighty (180) days from the
date of the Landlord's receipt of the insurance proceeds, then Tenant may
terminate this Lease Agreement by the delivery of written notice to the Landlord
within fifteen (15) days following the date on which Landlord notifies Tenant of
the estimated time for restoration. Landlord must provide that estimate to
Tenant within sixty (60) days following its receipt of the insurance proceeds.
Further, (i) if there are less than three (3) years remaining in the
existing term of this Lease (whether the Initial Term or any option Term) at the
time of any Casualty; and (ii) if Tenant does not provide written notice to
Landlord within thirty (30) days of the date of the Casualty that it is waiving
its Termination Rights as set forth in paragraph 28 for a period of five (5)
years from the date of completion of the repairs or restoration of the Leased
Premises; and (iii) if the Casualty renders the improvements on the Leased
Premises untenantable, in the reasonable opinion of Landlord; and (iv) if Tenant
does not exercise the next renewal Option Term, then Landlord shall have no
obligation to repair or restore the Leased Premises, and Landlord may terminate
this Lease Agreement by the delivery of written notice to Tenant within sixty
(60) days following the date of the Casualty, unless Tenant exercises the next
renewal Option Term at such time and waives its
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Termination Rights for such five (5) year period as described above at such
time. If Tenant exercises the next renewal Option and waives its Termination
Rights before such sixty (60) day period, Landlord shall be obligated to repair
and restore the Leased Premises to substantially the condition it was in
immediately prior to the Casualty.
The obligation to repair or restore the Leased Premises shall not
exceed the scope of the original construction of the improvements on the Leased
Premises. If the Lease is not terminated, Tenant shall replace and/or restore
its furniture, equipment and trade fixtures.
Rent payable under this Lease Agreement shall be abated proportionately
according to the floor area of the building improvements on the Leased Premises
which is usable by the Tenant, and such abatement shall continue for the period
commencing with such damage or destruction and ending with the completion of
such work of repair and/or reconstruction of the Leased Premises as provided
herein. Landlord shall be entitled to receive the proceeds payable in respect of
any time element insurance that Landlord maintains in accordance with the terms
of this Lease Agreement.
13. USE OF PREMISES. The Tenant agrees that the Leased Premises are to
be used solely and exclusively for storage, warehouse, and distribution, with
appropriate offices for the management of such distribution center, unless
otherwise consented to in writing in advance by Landlord, in its sole and
absolute discretion. Further, Tenant agrees: (i) to use and occupy the Leased
Premises in a careful, safe, proper and lawful manner; and (ii) not to permit
any unlawful nuisance, trade or custom, or condition thereon; and (iii) not to
commit any waste upon, or do any damage to the Leased Premises, ordinary wear
and tear excepted. Further Tenant agrees that it shall not bring or knowingly
allow any
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hazardous materials or hazardous substances (as defined by the state of
Tennessee statutes and United States of America statutes) to be brought onto the
Leased Premises, unless done in accordance with applicable laws for hazardous
materials or substances.
14. CONDEMNATION.
(a) TOTAL TAKING IN THE EVENT OF CONDEMNATION. In the event of a
"taking" of all or a substantial part of the Leased Premises (defined as greater
than one-half of the usable floor space of the building improvements on the
Leased Premises) by any governmental authority under eminent domain proceedings,
this Lease shall terminate on the date when the Leased Premises shall be so
taken, and the rent shall be abated as of that date. No part of any award for
the property and improvements shall belong to the Tenant. However, the Tenant
shall have the right to make a separate claim with the condemning authority for
the value of the Tenant's leasehold interest and/or moving or relocation
expenses; provided, however, that such separate claim shall not reduce or
adversely affect the amount of the Landlord's award.
(b) PARTIAL TAKING IN THE EVENT OF CONDEMNATION. If any part of the
Leased Premises (being less than a substantial part) of the Leased Premises
shall be taken as aforesaid, and such partial taking shall render that portion
not so taken unsuitable for the business of the Tenant as reasonably determined
by Tenant, then this Lease shall terminate as set forth in subparagraph (a)
above. If such partial taking is not sufficiently extensive to render the Leased
Premises unsuitable for the business of the Tenant as reasonably determined by
Tenant, then this Lease shall continue in effect except that the monthly rental
payment shall be reduced in the same proportion that floor space of any
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building improvements so taken bears as to the original floor space leased. Upon
receipt of the award in condemnation, Landlord shall make all necessary repairs
or alterations so as to constitute the Leased Premises a complete architectural
unit. However, in no event shall the Landlord be required to spend for such work
an amount in excess of the net amount received free and clear by Landlord's
damages for the part of the Leased Premises so taken.
Tenant shall not be entitled to and expressly waives any claims or any
condemnation or other award for such taking, whether whole or partial, and
whether for diminution in value of the leasehold or to the fee, or otherwise;
except that the Tenant shall have the right, to the extent permitted by law, and
provided by the same shall not reduce the Landlord's award, to claim from the
condemnor, but not the Landlord, such compensation as may be recoverable by
Tenant in its own right for the damage to the Tenant's business.
15. QUIET ENJOYMENT. Landlord covenants that it is seized of the Leased
Premises and has the full right to enter into this Lease Agreement, and that the
Tenant shall have the quiet and peaceful possession of the Leased Premises
during the Lease Term, as against lawful acts of third parties and as against
the acts of all parties claiming title to, or right to possession of the Leased
Premises.
16. SUBORDINATION OF LEASE/ATTORNMENT. This Lease shall be subordinate
to the rights of the IDB under the Restated Lease. Tenant shall enter into a
subordination, nondisturbance, and attornment agreement in a form acceptable to
Bank and Tenant. Further, this Lease shall be subordinate to any renewal,
amendment, or modification of the Restated Lease to the extent that such
amendment or modification does not change
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Tenant's right of quiet enjoyment of the Leased Premises in accordance with the
terms hereof.
17. SURRENDER UPON TERMINATION. At the expiration of the Lease Term or
Option Terms, or any holdover tenancy, or after termination of the Lease because
of Tenant's Termination Rights set forth in paragraph 28 hereof, as the case
may be, Tenant shall surrender the Leased Premises in as good a condition as it
was at the beginning of the Lease Term, reasonable use and wear and tear and
damages by casualty or the elements excepted. At such expiration, the Tenant
shall have the right to remove any fixtures or equipment owned by it, provided,
however, that in so doing, the Tenant shall repair, at its expense, any damage
caused by such removal.
18. ASSIGNMENT AND SUB-LETTING. Tenant shall not have the right to
assign or sub-let the Leased Premises without the prior written consent of
Landlord, such consent not to be unreasonably delayed or withheld.
19. EVENTS OF DEFAULT TENANT AND REMEDIES OF LANDLORD.
(a) EVENTS OF DEFAULT DEFINED. The following shall be "Events of
Default" under this Lease Agreement and the term "Events of Default" or
"Default" shall mean, whenever they are used in this Lease Agreement, any one or
more of the following events:
(1) Delinquency in the due and punctual payment of any Rent,
additional Rent, or additional payment under this Lease
Agreement when such Rent or additional payment shall become
payable, and such default shall continue for ten (10) days
after payment is due; provided, however, that for the two
delinquent payments for any calendar year (January -
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December) Landlord must give written notice of non-payment,
and Tenant shall have ten (10) days from the date of delivery
of such notice before a default hereunder;.
(2) Delinquency by the Tenant in the performance or compliance
with any of the conditions or covenants contained in this
Lease Agreement, other than payment of Rent or additional
payments, for a period of thirty (30) days after written
notice thereof from the Landlord to the Tenant, except for any
default not susceptible of being cured within such thirty (30)
day period, in which event the time permitted to the Tenant to
cure such default shall be extended for so long as shall be
reasonably necessary to cure such default, provided the Tenant
commences promptly and proceeds diligently to cure such
default, and provided further that such period of time shall
not be so extended as to jeopardize the interest of the
Landlord in this Lease Agreement or the Leased Premises or so
as to subject the Landlord or the Tenant to any civil or
criminal liabilities.
(3) The filing by the Tenant of a voluntary petition in
bankruptcy, or adjudication of the Tenant as a bankrupt, or
assignment, partial or general, by the Tenant for the benefit
of its creditors, or the entry by the Tenant into an agreement
of composition with creditors, or the approval by a court of
competent jurisdiction of a petition applicable to the Tenant
in any proceeding for their reorganization instituted under
the provisions of the general bankruptcy act, as amended, or
under any similar act
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which may hereafter be enacted.
(4) The assignment or sub-letting of the Leased Premises in
violation of this Lease Agreement.
(5) Contravention of the use restriction provision contained in
this Lease Agreement and continues for thirty (30) days after
notice by Landlord.
(b) REMEDIES ON DEFAULT. Whenever any Event of Default referred to
herein shall have occurred, the Landlord may take any one or more of the
following remedial steps:
(1) Landlord may re-enter and take possession of the Leased
Premises without terminating this Lease Agreement, and
sublease the Leased Premises for the account of the Tenant,
holding the Tenant liable for the difference in the rent and
other amounts payable by such Subtenant in such subleasing and
the rents and other amounts payable by the Tenant hereunder.
(2) In the event of payment default hereunder, Landlord may
terminate this Lease Agreement and demand and collect from
Tenant as damages the discounted present value (determined
based on then commercially reasonable rates) of the entire
unpaid balance of Rent for balance of the Lease Term that
remains as of the effective date of termination.
(3) Landlord may terminate this Lease Agreement and exclude the
Tenant from possession of the Leased Premises and may Lease
the Leased Premises to another for the account of the Tenant,
holding the Tenant
17
liable for all rent and other payments due up to the effective
date of such leasing and for the excess, if any, of the Rent
and other amounts payable by the Tenant under this Lease
Agreement had the Lease Term or any renewal thereof not have
been terminated over the rents and other amounts which are
payable by such new Tenant under such new lease.
(4) The remedies herein specified are to be exercised by the
Landlord in pursuance of the availability of these remedies as
provided for under the laws of the State of Tennessee; and in
pursuance of these laws the Landlord may take whatever action
at law and equity is available in the enforcement of these
remedies, and otherwise as may appear necessary or desirable
to collect rents due, or to become due, or to enforce specific
performance and observation of any obligation, agreement or
covenant of the Tenant under this Lease Agreement.
(c) EFFECT OF TERMINATION RIGHTS UPON TENANT'S EVENT OF DEFAULT.
If an Event of Default occurs as to Tenant, Tenant shall have
the option of terminating the Lease as provided in paragraph
28. However, in order to prevent all available remedies to
Landlord, Tenant must complete the following within thirty
(30) days of Landlord's notice of its intent to exercise its
remedies:
(1) cure the Event of Default; and
(2) give the Notice of Intent to Terminate six (6) months before
the desired termination date required in paragraph 28, or
alternatively pay
18
the rent that would be due during the succeeding six (6)
months after Notice of Intent to Terminate; and
(3) pay the Lease Termination Fee set forth in paragraph 28.
(d) NO REMEDY EXCLUSIVE. No remedy herein conferred upon or reserved to
the Landlord is intended to be exclusive of any other available remedy or
remedies, but each and every remedy shall be cumulative and alternative and
shall be in addition to every other remedy given under this Lease Agreement, now
or hereafter existing at law or in equity or by statute, unless Tenant takes the
actions permitted in subparagraph (c) above. No delay or omission to exercise
any right or power shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time as often as may be deemed
expedient. In order to entitle the Landlord to exercise any remedy reserved to
them in this paragraph, it shall not be necessary to give any notice other than
such notice as may be herein expressly required, or as required by law.
(e) NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the event any
agreement contained in this Lease Agreement should be breached and thereafter
waived, such waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder.
(f) RIGHT OF ENTRY. Landlord and/or its representatives, may enter the
Leased Premises at any reasonable time, before or after default by Tenant, for
purposes including without limitation taking possession after default,
inspecting the Leased Premises, performing any work which the Landlord may elect
to undertake made necessary by reason of the Tenant's default under the terms of
this Lease Agreement,
19
exhibiting the Leased Premises for sale or posting any appropriate notices,
including those pertaining to availability for leasing during the last six (6)
months of any term if Tenant has not exercised the next Option Term. Such right
of entry may be exercised by the Landlord or its representatives without the
same constituting an eviction of the Tenant in whole or in part.
Notwithstanding the foregoing, if Tenant is not in default hereunder,
Landlord shall give reasonable notice to Tenant before entering the Leased
Premises (provided that no notice shall be required in the event of an
emergency). Landlord agrees that it will not materially interfere with Tenant's
use of the Leased Premises, and Landlord agrees to repair any damage it causes
as a result of such activity.
(g) NOTICE OF DEFAULT. Tenant shall give written notice to IDB of
any alleged default by Landlord.
20. LANDLORD DEFAULTS AND TENANT REMEDIES. Any one or more of the
following shall constitute a default by the Landlord:
(a) if Landlord is adjudicated bankrupt or insolvent and such
adjudication is not vacated within thirty (30) days from the
date of such adjudication;
(b) the admission in writing by Landlord of its inability to pay
its debts when due;
(c) the appointment of a receiver or trustee for the business or
property of Landlord, unless such appointment is vacated
within ninety (90) days after its entry;
(d) Landlord making an assignment for the benefit of its
creditors;
(e) the failure of Landlord to pay any amounts due to Tenant
within thirty (30) days after written notice from Tenant that
the same is due; or
20
(f) the failure by Landlord to cure any failure to perform or
observe any of its covenants under this Lease within sixty
(60) days after written notice thereof from Tenant, unless
such failure is of such nature that it cannot be cured within
such sixty (60) day period, in which case Landlord shall have
such additional time as is necessary to cure so long as
Landlord commences the curing within such sixty (60) day
period and thereafter diligently pursues the curing.
Upon any occurrence of any default by Landlord, Tenant shall have the
right to sue for damages, or specific performance, or other remedies it may have
at law or in equity. Upon the occurrence of any default by Landlord, in addition
to notice to the IDB and to Landlord, Tenant agrees to also give notice to the
holder of any mortgage (the "Mortgage Holder") on the Leased Premises, to the
extent Tenant shall have received written notice of any such Mortgage Holder.
Tenant agrees that such Mortgage Holder shall have sixty (60) days after written
notice thereof from Tenant to cure such default, unless such failure or default
is of such nature that it cannot be cured within such sixty (60) day period, in
which case the Mortgage Holder shall have such additional time to cure so long
as Mortgage Holder commences the curing within such sixty (60) days and
thereafter diligently pursues the curing. In addition, Tenant may cure
Landlord's default and offset the reasonable expense thereof against rent
thereafter accruing. Finally, if in Tenant's reasonable business judgment,
Landlord's default materially interferes with Tenant's use of the Leased
Premises ("Landlord's Material Default"); and if Tenant reasonably determines
that it is impractical for Tenant to attempt to cure such default and offset the
cost thereof against rent, and if the original written notice of default in this
paragraph 20 to Landlord indicated that the default was a Landlord Material
Default, then Tenant shall have the right to terminate this Lease with no
further liability to Landlord (except for sums already due prior
21
to the termination), and exercise any other legal or equitable right or remedy
it may have if Landlord does not cure the Landlord Material Default within the
time allowed.
21. TENANT'S INDEMNITY OF LANDLORD. Unless caused by the negligence or
willful misconduct of Landlord, its agents, contractors, or employees, the
Tenant shall indemnify the Landlord against all claims, actions, damages,
liabilities and expenses, including reasonable attorney's fees and other
professional fees incurred by the Landlord as a result of:
(a) Failure of the Tenant to perform any covenant required to be
performed by the Tenant hereunder; and
(b) Any accident, occurrence, injury or damage which shall happen
in or on the Leased Premises, or resulting from the operation of Tenant's
business; and
(c) The failure to comply with any requirements of any governmental
authorities; and
(d) Any mechanics' lien, security agreement or mortgage filed, with
regard to the Leased Premises, and equipment therein, or any materials used to
repair or alteration of the Leased Premises incurred by Tenant. In the event any
mechanics or materialmen's, or other liens shall be filed against the Leased
Premises or any improvements or appurtenances thereon by reason of or arising
out of any labor or material services furnished or alleged to have been
furnished to or for the Tenant at or on the Leased Premises, the Tenant shall,
within thirty (30) days after written notice from the Landlord, pay or bond the
same or procure the discharge thereof in such manner as may be provided by law
or cause other acts to be done which will provide reasonable assurance that the
22
Leased Premises shall not be sold to satisfy any such lien. The Tenant shall
defend, on behalf of the Landlord, at the expense of Tenant, any action, suit or
proceeding which may be brought for the enforcement of any such lien or liens or
similar claims against the Leased Premises, and the Tenant shall pay any damage
and discharge any judgment entered thereon and save harmless the Landlord from
any claim or damage resulting therefrom. Notwithstanding the foregoing, Landlord
shall be responsible for any materialmen's or mechanic's liens filed against the
Leased Premises in connection with any of Landlord's work (including without
limitation the work described on EXHIBIT B hereto), and any work in fulfillment
of Landlord's repair obligations under this Lease;
(e) Any environmental contamination to the Leased Premises, caused
by Tenant, its agents, employees, contractors, or invitees.
(f) Tenant's indemnity shall not include the intentional or
negligent acts or omissions of Landlord, its officers, agents, contractors, or
employees.
(g) Tenant's indemnity obligations under this paragraph 22 shall
survive the termination of this Lease with respect to any occurrence that arose
or took place prior to such termination.
22. LANDLORD INDEMNITY OF TENANT. Landlord shall indemnify the Tenant
against any and all claims, actions, damages, liability, and expenses, including
reasonable attorney's fees and other professional fees, in connection with any
accident, occurrence, injury, or damage which shall happen in or on the Leased
Premises as a result of the negligence or intentional misconduct of Landlord,
its officers, agents, contractors, or employees. Notwithstanding the foregoing,
Landlord's indemnity shall not include the
23
intentional or negligent acts or omissions of Tenant, its officers, agents,
contractors, employees, or licensees. Landlord's indemnity obligations under
this paragraph 23 shall survive the termination of the Lease with respect to any
such occurrence that took place prior to such termination.
23. NOTICES. All notices hereunder shall be in writing and shall be
delivered in person or sent by certified mail or overnight courier service or
sent by facsimile transmission to the address or facsimile numbers of the
parties shown below. Notice shall be effective upon delivery when received by
the party to whom delivered and shall be effective two (2) days after mailing
and one (1) day after overnight courier when deposited with the United States
Postal Service, or an overnight courier service, respectively. If such notice is
sent by facsimile, such notice shall be deemed received by the recipient upon
receipt by the sender of an acknowledgment or transmission report generated by
the machine from which the facsimile was sent indicating that the facsimile was
sent in its entirety to the recipient's facsimile number.
LANDLORD: TENANT: IDB
- --------- ------- ---
Southwind Properties Kirkland's, Inc. Industrial Development Board
529 Old Hickory Blvd. 805 North Parkway of the City of Jackson
Jackson, TN 38305 Jackson, TN 38305 c/o General Counsel
Fax No. (731) 661-0195 ATTN: General Counsel 312 East Lafayette
Fax No. (731) 664-9345 Jackson, TN 33301
Fax No. (731) 424-0562
24. PERIODIC FINANCIAL REPORTING BY TENANT. During the Lease Term, and
Option Terms, if applicable, Tenant shall provide to Landlord, annually, within
thirty (30) days of request by Landlord, copies of all financial statements,
including at least Tenant's Annual
24
Profit and Loss Statement and Annual Balance Sheet, required to be furnished by
Landlord to Landlord's primary lender, or requested by any potential purchaser
of the Leased Premises. The form of such statements shall be as customarily
prepared by Tenant. Landlord agrees to keep all financial statements
confidential and request Landlord's lender and any potential purchaser do the
same.
25. ENVIRONMENTAL REQUIREMENTS OF TENANT.
(a) LANDLORD'S WARRANTY. Landlord warrants that to Landlord's
knowledge, the Leased Premises are not in violation of any Environmental Laws.
(b) ENVIRONMENTAL COVENANTS OF TENANT. Throughout the Tenant's
occupancy of the Leased Premises, Tenant agrees to comply with all requirements
of Environmental Laws relating to air quality, water quality, solid waste
disposal, hazardous waste disposal, hazardous or toxic substances, and the
protection of health and environment. Further, Tenant immediately shall notify
Landlord should Tenant become aware of:
(i) any hazardous substance or other environmental
problems or liability with respect to the Leased
Premises; or
(ii) any lien, action, or notice of environmental problems
with respect to Tenant's business or with respect to
the Leased Premises.
Tenant shall at its own cost and expense, take all action as shall be necessary
for the "cleanup" of any environmental contamination to the Leased Premises
caused by Tenant, its agents, employees, contractors, or invitees, including all
removal and remedial action in accordance with all applicable Environmental
Laws. Further, Tenant shall pay or cause
25
to be paid at its own expense all clean up, administrative, and enforcement cost
of all applicable governmental agencies which may be asserted against the Leased
Premises with respect to any environmental contamination caused by Tenant. All
costs, including without limitation, those costs set forth above, damages,
liabilities, claims, and expenses (including reasonable attorney's fees and
expenses) which are incurred by Landlord with respect to environmental
contamination caused by Tenant, without the requirement of waiting for the
ultimate outcome of any litigation, claim, or other proceedings, shall be paid
by Tenant to Landlord, as incurred, within ten (10) days after notice from
Landlord, itemizing the amount incurred to the date of such notice. Tenant shall
provide Landlord with copies of all environmental permits from any governmental
agency or organization as to Tenant's storage, processing, or locating of
Hazardous Materials on or about the Leased Premises.
Notwithstanding anything herein to the contrary, Tenant shall not be
responsible for any Hazardous Materials in or environmental contamination to the
Leased Premises that exists prior to Tenant's possession of the Leased Premises.
(c) DEFINITION OF ENVIRONMENTAL LAWS. The term "Environmental Law"
means any and all federal, state, regional, county, or local laws, statutes,
rules, regulations or ordinances; and any state, regional, county or local
statute, law, rule, regulation or ordinance relating to public health, safety or
the discharges, emissions, or disposal to air, water, land or groundwater, to
the withdrawal or use of groundwater, to the use, handling or disposal or
polychlorinated biphenyls (PCBs), asbestos, or urea formaldehyde, to the
treatment, storage, disposal or management of Hazardous Materials, to exposure
to
26
Hazardous Materials, to the transportation, storage, disposal, management or
release or gaseous or liquid substances, and any regulation, order,
injunction, judgment, declaration, notice or demand issues thereunder.
(d) DEFINITION OF HAZARDOUS MATERIALS. The term "Hazardous
Materials" means any hazardous, toxic or dangerous materials, substances,
chemicals, waste or pollutants that is from time to time defined by pursuant to
or is regulated under any of the Environmental Laws, including without
limitation, asbestos, PCBs petroleum derivatives or by-products, other
hydrocarbons, including without limitation any material, substances, pollutants
or wastes that are defined as a hazardous waste under RCRA or defined as a
hazardous substance under CERCLA.
(e) DEFINITION OF ENVIRONMENTAL CONTAMINATION. The term
"Environmental Contamination" shall be defined by applicable federal and state
cleanup standards.
26. ENVIRONMENTAL REQUIREMENTS OF LANDLORD. In the event any
environmental survey, assessment, or inspection is required for any construction
permit, Landlord shall be responsible for the cost of such survey, assessment,
or inspection. Landlord shall remove any existing known Hazardous Materials from
the Leased Premises prior to delivery of possession thereto to Tenant. Landlord
has provided Tenant with a Phase I Environmental Assessment of the Leased
Premises at the time of the execution of this Lease, and Landlord agrees to
indemnity Tenant from any and all claims, actions, liens, demands, costs,
damages, expenses, fines, and judgments (including legal costs and attorneys
fees) as a result of any conditions identified in the Phase I Environmental
Assessment.
27
27. EXPANSIONS TO BUILDING(S) ON LEASED PREMISES. Upon written request
from Tenant (the "Expansion Notice") received by Landlord at any time prior to
the expiration of the Initial Term, and provided that Tenant exercises its
option to renew for the first Option Term, Landlord agrees, at Landlord's
expense, to use diligent, good faith efforts to develop schematic plans and
specifications for an addition to the building(s) on the Leased Premises (the
"Expansion") that are satisfactory to Tenant, The plans and specifications for
the Expansion must, in all events, be consistent with and must not exceed plans
and specifications for a normal and customary, non-airconditioned, typical
distribution/warehouse center. Landlord and Tenant must agree upon the plans and
specifications for the Expansion. The additional rent payable by Tenant for the
Expansion shall range between Two and 68/100 Dollars ($2.68) per square foot and
Three and 00/100 Dollars ($3.00) per square foot. The rental amount for the
Expansion shall be agreed upon by Landlord and Tenant prior to the commencement
of construction of the Expansion, and be subject to the six percent (6%)
increases in rent from the previous rent amount at every time the rent in
paragraph 6 increases, i.e., 5 years, 10 years, 15 years after the beginning of
the Initial Term. (For example, if an Extension occurs in year 3 of the Initial
Term, and the rent is agreed upon at $2.80 per square foot, the rent for the
Expansion will increase to $2.97 per square foot in year 5 of the Initial Term,
even though it is only 2 years after the Expansion. The next rent increase will
occur in year 10 of the Lease (during the first Option Term). Upon the agreement
of Landlord and Tenant as to the plans and specifications for the Expansion and
the rental amount to be paid therefor, the parties shall execute an addendum to
this Lease setting forth relevant terms relating
28
to the Expansion.
28. LEASE TERMINATION RIGHTS OF TENANT. The Tenant shall have the right
during the Initial Term, and any Option Terms (provided no expansion has begun)
to terminate the Lease by giving not less than six (6) months written advance
notice to Landlord ("Notice Of Intent To Terminate") of the desired termination
date, and paying a lease termination fee as a condition precedent to the
termination of the Lease equivalent to what the rent would be for the next
twelve (12) months after the desired termination date ("Lease Termination Fee"),
payable in cash to Landlord at the time of the Lease termination ("Termination
Rights") and as a condition precedent to the Lease termination.
At any time after an Expansion Notice, as defined in paragraph 27, the
Lease Termination Rights would continue to apply. However, the Lease Termination
Fee shall change and would be equivalent to what the rent would be for the next
eighteen (18) months after the desired termination date, payable in cash to
Landlord at the time of the Lease termination and as a condition precedent to
the Lease termination.
29. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Lease Agreement contains the entire
agreement and understanding between the parties. There are no oral
understandings, terms or conditions and no party hereto has relied upon any
representations, express or implied, not contained in this Lease Agreement. This
Lease Agreement cannot be changed or supplemented orally, but only by an
agreement in writing and signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.
29
(b) RECORDATION. Landlord or Tenant may record a Short Form Lease,
at the expense of whomever wants to record such instrument.
(c) BINDING EFFECT. All covenants, conditions and obligations
contained herein or implied by law shall be binding upon the Landlord, the
Tenant, their heirs, successors, legal representatives and assigns; provided,
however, in the event of a sale of the Leased Premises, Landlord shall be
personally relieved of all obligations hereunder and the Tenant bound to such
new owner as a Landlord.
(d) GOVERNING LAW. This Lease Agreement is prepared and entered
into with the intention that the laws of the State of Tennessee shall govern its
construction.
(e) CAPTIONS. The captions or headings in this Lease Agreement are
for convenience only and in no way define, limit or describe the scope or intent
of any provision of this Lease Agreement.
(f) SEVERABILITY. If any clause, paragraph or part of this Lease
Agreement, for any reason, should be finally adjudged by any court of competent
jurisdiction to be unconstitutional or invalid, such judgment shall not affect,
impair or invalidate the remainder of this Lease Agreement but shall be confined
in its operation to the clause, sentence, paragraph or any part thereof directly
involved in the controversy in which such judgment has been rendered. The
unconstitutionality, invalidity or ineffectiveness of any one or more provisions
or covenants contained in this Lease Agreement shall not relieve the Tenant from
liability to make the payments of Rent provided for in this Lease Agreement.
30
(g) RULES OF CONSTRUCTION. The normal rules of construction which
require the terms of an Agreement to be construed most strictly against the
drafter of such Agreement are hereby waived since each party has been
represented by counsel or has had the opportunity to be represented by counsel
in the drafting and negotiations of this Agreement.
(h) DUPLICATE ORIGINALS. This Lease Agreement may be executed in
one or more counterparts, each of which should be deemed an original, but all of
which together shall constitute but one and the same instrument.
(i) ATTORNEY'S FEES. In the event of any dispute or claim arising
out of the terms and provisions of this Agreement, the parties agree that the
prevailing party in any court proceeding shall be entitled to recover, in
addition to any award made in such proceeding, from the non-prevailing party,
the prevailing party's reasonable attorney's fees.
(j) ESTOPPEL CERTIFICATE. Tenant shall at any time upon not less
than thirty (30) days' prior written notice from Landlord, execute and deliver
to Landlord a statement in writing certifying that: (i) this Lease is unmodified
and is in full force and effect and the date to which Rent or other payments are
paid in advance; (ii) to Tenant's knowledge, there are not any uncured defaults
by Landlord under this Lease, or specifying any defaults if any such defaults
are claimed; and (iii) any such other information as may reasonably be required
by Landlord.
(k) NO LANDLORD LIENS. Landlord hereby waives and releases any
Landlord's liens it might have in Tenant's personal property located on the
Leased Premises.
31
IN WITNESS WHEREOF, the parties have executed this Lease Agreement,
effective the day and date first shown above deemed an original, but all of
which together shall constitute but one and the same instrument.
SEPARATE SIGNATURE PAGES
32
SIGNATURE PAGE 1 OF 2
LANDLORD:
SOUTHWIND PROPERTIES
By: /s/ Larry P. Becker
-----------------------------
Title: Managing Partner
-----------------------
STATE OF TENNESSEE :
COUNTY OF MADISON :
Personally appeared before me Larry P. Becker, with whom I am personally
acquainted, and who acknowledged that he/she executed the within instrument for
the purposes therein contained, and who further acknowledged that he/she is the
Managing Partner of SOUTHWIND PROPERTIES, a Tennessee General Partnership, and
is authorized by said partnership to execute this instrument on its behalf.
Witness my hand, at office this the 2nd day of March, 2001.
/s/ Teresa Sanders
--------------------------------
Notary Public
My Commission Expires: [MY COMM. EXPIRES DEC. 17, 2001 STAMP].
[TERESA SANDERS NOTARY STAMP]
33
SIGNATURE PAGE 2 OF 2
TENANT:
KIRKLAND'S, INC.
By: /s/ Robert E. Anderson
-----------------------------
Title: President
-----------------------
STATE OF TENNESSEE :
COUNTY OF MADISON :
Personally appeared before me Robert E. Anderson, with whom I am
personally acquainted, and who acknowledged that he/she executed the within
instrument for the purposes therein contained, and who further acknowledged that
he/she is the President of KIRKLAND'S, INC., a Tennessee Corporation, and is
authorized by said corporation to execute this instrument on its behalf.
Witness my hand, at office this the 6th day of March, 2001.
/s/ Teresa A. Riley
--------------------------------
Notary Public
My Commission Expires: April 24, 2001.
[TERESA A. RILEY NOTARY STAMP]
34
EXHIBIT C
PAYMENT IN LIEU OF TAX SUMMARY
[OCTOBER 18, 2000]
1. DEFINITIONS. For purposes of this summary, the following terms or
phrases shall have the meanings assigned in this paragraph:
(a) "Base Period" means the time period beginning January 1, 2001
and ending June 30, 2010.
(b) "Board" means the Industrial Development Board of the City of
Jackson.
(c) "Company" means Kirkland's, Inc., a corporation organized under
the laws of the State of Tennessee.
(d) "Company Site" means (1) the Southwind Property, (2) a Phase III
Qualified Existing Facility, (3) a Phase IV Qualified Existing Facility, or (4)
any other warehouse or distribution facility constructed after January 1, 2001
on the Phase-III Land or the Phase IV Land and, with respect to each of the
foregoing, either owned by the Company or leased by the Company (as Lessee) for
purposes of conducting the Company's business operations.
(e) "Equipment" means all industrial machinery and equipment
purchased by the Company and installed by the Company at a Company Site during
the Base Period.
(f) "Equipment Component" means the aggregate items of Equipment
installed during any single calendar year during the Base Period.
(g) "Headquarters Facility" means a new office headquarters building
which will serve as the principal executive offices of the Company to be
constructed on any site in Jackson, Tennessee during the Base Period.
(h) "Phase I Project" means the Southwind Property.
(i) "Phase II Project" means collectively the Southwind Property
together with the Southwind Building Addition.
(j) "Phase III Improvements" means a proposed warehouse or
distribution facility, or facilities, and related building improvements to be
constructed on the Phase III Land by or for the benefit of the Company and used
exclusively by the Company in conducting its business operations.
(k) "Phase III Land" means that certain unimproved parcel of land
presently owned by Madison County, Tennessee consisting of approximately 22.02
acres which lies immediately north of and contiguous to the Southwind Property.
(l) "Phase III Project" means collectively the Phase III Land and
Phase III Improvements, or, in the alternative, a Phase III Qualified Existing
Facility.
(m) "Phase III Qualified Existing Facility" means a pre-existing
building facility in Madison County, Tennessee acquired by the Company or leased
exclusively by the Company (as Lessee), and used exclusively by the Company in
conducting its business operations, subject, however, to the conditions set
forth, in Section 4 hereof.
(n) "Phase III Existing Facility Notice" means written notice from
the Company to the Board given at least forty-five (45) days prior to the date
that the Company intends to acquire or occupy a Phase III Qualified Existing
Facility.
(o) "Phase IV Improvements" means a distribution facility to be
constructed by or for the benefit of the Company on the Phase IV Land to be used
exclusively by the Company in conducting its business operations.
(p) "Phase IV Land" means that certain unimproved parcel of land
owned by Madison County, Tennessee consisting of approximately 35 acres off of
Bobrick Drive in Jackson, Tennessee and in a northwesterly direction from the
existing Bobrick plant facility.
(q) "Phase IV Project" means collectively the Phase IV Land and
Phase IV Improvements, or in the alternative, a Phase IV Qualified Existing
Facility.
(r) "Phase IV Qualified Existing Facility" means a pre-existing
building facility in Madison County, Tennessee, acquired by the Company or
leased exclusively by the Company (as Lessee), and used exclusively by the
Company in conducting its business operations, subject, however, to the
conditions set forth in Section 6 hereof.
(s) "Phase IV Existing Facility Notice" means written notice from
the Company to the Board given at least forty-five (45) days prior to the date
that the Company intends to acquire or occupy a Phase IV Qualified Existing
Facility.
(t) "PILOT" means payments to the City of Jackson, Tennessee and
Madison County, Tennessee in lieu of ad valorem taxes ordinarily assessable
against the Equipment and the Phase I Project, Phase II Project, Phase III
Project, and Phase IV Project and/or Headquarters Facility, as applicable.
(u) "Southwind" means Southwind Properties, a Tennessee partnership.
(v) "Southwind Building" means the building structure situated on
the Southwind Property as of the date hereof, consisting of approximately
303,000 square feet.
(w) "Southwind Building Addition" means a proposed addition to the
Southwind Building, consisting of a minimum addition of 50,000 square feet and
having a minimum cost of $1,000,000.00.
(x) "Southwind Property" means that certain parcel of land owned by
the Board consisting of approximately 28 acres and currently leased to Southwind
by the Board pursuant to Lease Agreement dated February 4, 2000.
2. PHASE I AND PHASE II PROJECT - PILOT. If Southwind Building is acquired
by the Company or leased exclusively by the Company (as Lessee) and used
exclusively by the Company in conducting its business operations no later than
June 30, 2002, then the PILOT incentive for the Phase I Project will be based
upon the following PILOT schedule:
(a) PHASE I PILOT.
YEAR PILOT PERCENTAGE
- ---- ----------------
1 Year of Occupancy by the Company 0%
2 25%
3 25%
4 25%
5 25%
6 25%
7 25%
8 25%
9 25%
10 25%
11 25%
12 25%
13 25%
14 25%
15 25%
(b) PHASE II PILOT. If the Southwind Building Addition is completed
and occupied exclusively by the Company on or prior to June 30, 2005, then the
PILOT schedule for the Phase II Project shall be revised and shall be as
follows:
YEAR PILOT PERCENTAGE
- ---- ----------------
1 Year of Completion of Southwind Building Addition 25%
2 25%
3 25%
4 25%
5 25%
6 25%
7 25%
8 25%
9 25%
10 25%
11 25%
12 25%
13 25%
14 25%
15 25%
3. PHASE III PROJECT - PILOT. The PILOT incentive for the Phase III
Project will be based upon the size of the Phase III Improvements as follows:
(a) If on or prior to June 30, 2006, there exist Phase III
Improvements having minimum square footage of 75,000 square feet (the "First
Phase III Improvement"), the PILOT incentive for the Phase III Project will be
based upon the following PILOT schedule:
YEAR PILOT PERCENTAGE
- ---- ----------------
1 Year of Completion of the First Phase III Improvement 25%
2 25%
3 25%
4 25%
5 25%
6 25%
7 25%
8 25%
9 25%
10 25%
11 25%
12 25%
13 25%
14 25%
15 25%
(b) If by June 30, 2008, there is constructed additional facilities
added to the First Phase III Improvements, with such additions being in a
minimum square footage of 100,000 square feet (the Second Phase III
Improvements), then the PILOT incentive shall be revised for the Phase III
Project as follows:
YEAR PILOT PERCENTAGE
- ---- ----------------
1 Year of Completion of the Second Phase III Improvements 25%
2 25%
3 25%
4 25%
5 25%
6 25%
7 25%
8 25%
9 25%
10 25%
11 25%
12 25%
13 25%
14 25%
15 25%
(c) If by June 30, 2009, there is constructed additional facilities,
to be added to the First Phase III Improvements and Second Phase III
Improvements, with such additions having a minimum square footage of 100,000
square feet (the "Third Phase III Improvements"), then, in such event the PILOT
schedule for the Phase III Project shall be revised and shall be as follows:
YEAR PILOT PERCENTAGE
- ---- ----------------
1 Year of Completion of the Third Phase III Improvements 25%
2 25%
3 25%
4 25%
5 25%
6 25%
7 25%
8 25%
9 25%
10 25%
11 25%
12 25%
13 25%
14 25%
15 25%
4. PHASE III PROJECT - PILOT FOR PHASE III QUALIFIED EXISTING FACILITY. If
the Phase III Project consists of a Phase III Qualified Existing Facility, the
following PILOT incentives for a Phase III Qualified Existing Facility shall be
granted upon satisfaction of the following conditions:
(a) The Board shall have received the Phase III Existing Facility
Notice;
(b) The Phase II Project shall, as of the date of the Phase III
Existing Facility Notice, have minimum additional building improvements of
50,000 square feet;
(c) No portion of the Phase I Project, Phase II Project, or Phase
III Project, or other facility occupied by the Company located in Madison
County, Tennessee, will be vacated by the Company as the result of the Company's
proposed occupancy of the Phase III Qualified Existing Facility;
(d) The Phase III Qualified Existing Facility shall not have been
previously owned by or occupied by, or leased to the Company; and
(e) The number of Company employees will increase as a result of the
Company's occupancy of the Phase III Qualified Existing Facility.
YEAR PILOT PERCENTAGE
- ---- ----------------
1 Year of Occupancy of Phase III Qualified Existing Facility 25%
2 25%
3 25%
4 25%
5 25%
6 25%
7 25%
8 25%
9 25%
10 25%
11 25%
12 25%
13 25%
14 25%
15 25%
5. PHASE IV PROJECT - PILOT. If Phase IV Improvements are constructed on
the Phase IV Land on or prior to June 30, 2010, with the Phase IV Improvements
having a minimum square footage of 100,000 square feet, then the PILOT incentive
for the Phase IV Project will be based upon the following PILOT schedule:
YEAR PILOT PERCENTAGE
- ---- ----------------
1 Year of Completion of Phase IV Improvement 25%
2 25%
3 25%
4 25%
5 25%
6 25%
7 25%
8 25%
9 25%
10 25%
11 25%
12 25%
13 25%
14 25%
15 25%
6. PHASE IV PROJECT - PILOT FOR PHASE IV QUALIFIED EXISTING FACILITY. If
the Phase IV Project consists of a Phase IV Qualified Existing Facility, the
following PILOT incentives for a Phase IV Qualified Existing Facility shall be
granted upon satisfaction of the following conditions:
(a) The Board shall have received the Phase IV Existing Facility
Notice;
(b) The Phase III Project shall, as of the date of the Phase IV
Existing Facility Notice, have minimum building improvements of 100,000 square
feet;
(c) No portion of the Phase I Project, Phase II Project or Phase III
Project, or other facility occupied by the Company located in Madison County,
Tennessee will be vacated by the Company as the result of the Company's proposed
occupancy of the Phase IV Qualified Existing Facility;
(d) The Phase IV Qualified Existing Facility shall not have been
previously owned by or occupied by, or leased to the Company; and
(e) The number of Company employees will increase as a result of the
Company's occupancy of the Phase IV Qualified Existing Facility.
YEAR PILOT PERCENTAGE
- ---- ----------------
1 Year of Occupancy of Phase IV Qualified Existing Facility 25%
2 25%
3 25%
4 25%
5 25%
6 25%
7 25%
8 25%
9 25%
10 25%
11 25%
12 25%
13 25%
14 25%
15 25%
7. EQUIPMENT - PILOT. For each Equipment Component installed on a Company
Site, the PILOT schedule for such Equipment Component shall be as follows:
YEAR PILOT PERCENTAGE
- ---- ----------------
1 Year of Installation of Equipment Component 0%
2 0%
3 0%
4 0%
5 0%
6 35%
7 35%
8 55%
9 55%
10 75%
11 75%
12 90%
13 90%
14 90%
15 100%
8. HEADQUARTERS FACILITY - PILOT. In the event there is constructed a
Headquarters Facility, the PILOT schedule for the Headquarters Facility shall be
as follows:
YEAR PILOT PERCENTAGE
1 Year of Completion of Headquarters Facility 0%
2 0%
3 0%
4 0%
5 0%
6 35%
7 35%
8 55%
9 55%
10 75%
11 75%
12 90%
13 90%
14 90%
15 100%