LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is made and entered into as of April 21,
1997 by and between JOSEPH E. PROCTOR (the "Landlord"), a resident of Hamilton
County, Tennessee doing business as "JEPCO Industrial Warehouses," and CULP
INC., a North Carolina corporation (the "Tenant").
B A C K G R O U N D
I. Landlord is the owner of that certain approximately 42.39 acre
parcel of land (the "Land") located at the northeastern intersection of Hamill
Road and Carondalet Avenue in Chattanooga, Hamilton County, Tennessee and more
particularly described in Exhibit A attached hereto and made a part hereof.
B. An approximately 14.7 acre portion of the Land is more particularly
described in Exhibit A-1 attached hereto (the "Leased Land"). Located on the
Land are: a building containing approximately 75,000 sq.ft. ("Building 1"), a
building containing approximately 62,500 sq.ft. ("Building 2"), a building
containing approximately 153,000 sq.ft. ("Building 3"), and related
improvements. The locations of Building 1, Building 2, and Building 3 on the
Leased Land are generally shown in Exhibit B attached hereto and made a part
hereof. In addition, Landlord will construct on the Land a building containing
approximately 27,500 sq.ft. ("Office Building") at a location reasonably
acceptable to Tenant (all such buildings are collectively referred to herein as
the "Buildings"). The Leased Land, the Buildings, and the related improvements
are collectively referred to herein as the "Premises."
C Landlord has agreed to lease the Premises to Tenant, and Tenant has
agreed to lease the Premises from Landlord, upon all of the terms set forth in
this Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, Landlord and Tenant hereby agree, for
themselves and their respective heirs, devisees, personal representatives, and
successors and assigns, as follows:
1. PREMISES LEASED. Landlord hereby leases to Tenant, and Tenant leases
from Landlord, the Premises, on the terms and conditions set forth in this
Lease. Landlord covenants, represents and warrants that the Premises will be
constructed and upfitted in accordance with the specifications set forth in
Exhibit C attached hereto and made a part hereof.
2. TERM OF LEASE. The initial term of this Lease shall be for a period
of Ten (10) years, commencing on May 1, 1998 (the "Commencement Date") and
terminating at midnight on April 30, 2008
("Initial Term").
At the end of the Initial Term, Tenant is hereby granted two (2)
successive options to extend the Term of this Lease for additional periods of
five (5) years each (each, a "Renewal Period"), provided that Tenant gives
Landlord written notice of its exercise of the option at least ninety (90) days
prior to the end of the Initial Term. If Tenant properly exercises the option(s)
for the Renewal Period(s), all terms and conditions of this Lease shall continue
in full force and effect. All references to the "Term" of this Lease shall,
unless the context shall clearly indicate a different meaning, be deemed to
constitute a reference to the properly exercised Renewal Period(s).
3. RENT. Tenant shall pay Landlord for the Premises annual rent in the
amount of Eight Hundred Sixty-Eight Thousand Eight Hundred Dollars
($868,800.00), payable in equal monthly installments of Seventy-Two Thousand
Four Hundred Dollars ($72,400.00) in advance on the first day of each calendar
month during the Term.
If the Term commences on a day other than the first day of a calendar
month, rent for the first partial month shall be prorated on a daily basis and
paid on the date of commencement. Payments of rent pursuant to this Section 3
shall be by check mailed or delivered to Landlord at the address for notices set
forth in Section 21 below.
Notwithstanding Landlord's delivery of the Premises to Tenant pursuant
to Section 5 below, Tenant's obligation to pay rent hereunder shall not commence
until the Commencement Date.
4. USE OF PREMISES. The Premises may be used by Tenant for
manufacturing, industrial, warehousing, and ancillary uses. Tenant shall comply
with all applicable laws, ordinances, rules and regulations of local, state and
federal governments, and any other public authority having jurisdiction over the
Premises.
5. POSSESSION. Landlord shall deliver possession of the Premises to
Tenant based on the following schedule:
Building On or Before
Building 1 December 1, 1997
Building 2 December 1, 1997
Building 3 October 1, 1997
Office Building January 1, 1998
Landlord shall deliver possession any and all remaining portions of the Premises
on or before January 1, 1998.
Notwithstanding the schedule set forth in this Section 5,
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Landlord agrees that upon the execution of this Lease, Tenant shall have access
to the Premises (including the Buildings) in order to install such electrical
and plumbing systems (including piping) and equipment that Tenant shall require;
provided, however, that Tenant shall not unreasonably disturb existing tenants,
if any, in any Building; provided, further, that Tenant shall not unreasonably
disturb the construction and upfitting to be performed by Landlord in accordance
with the specifications set forth in Exhibit C attached hereto.
6. ALTERATIONS AND IMPROVEMENTS. Tenant may make alterations or
improvements in or to the Premises only with the Landlord's consent, which shall
not be unreasonably withheld or delayed. Tenant agrees not to permit any
mechanic's or materialman's lien to be filed against the Premises for work
claimed to have been done for, or materials claimed to have been furnished to,
Tenant, and if any such lien is filed, it shall be promptly discharged by
Tenant.
7. FIXTURES AND PERSONAL PROPERTY. All trade fixtures, equipment or
other personal property installed in or attached to the Premises by or at the
expense of Tenant shall be and remain the property of Tenant, and Tenant shall
have the right to remove the same at any time during the Term; provided,
however, that Tenant shall not remove any such fixture or personal property if
the removal will cause substantial damage to the Premises; provided, further,
that if Tenant is permitted to remove any such fixture or personal property,
then Tenant shall repair any damage to the Premises caused by such removal to
Landlord's reasonable satisfaction.
8. TAXES. Tenant shall pay prior to delinquency all real estate,
personalty and ad valorem taxes and assessments imposed or assessed upon the
Premises, including any taxes or assessments imposed or assessed upon Tenant's
stock or merchandise, furniture, fixtures, equipment, supplies or other personal
property situated within the Premises. Landlord shall deliver to Tenant, within
thirty (30) days' of receipt, any real estate tax bills received by Landlord
pertaining to the Premises, and Tenant shall pay the taxes as provided above;
provided, however, the failure of Landlord to deliver any such tax bill shall
not relieve Tenant of the obligation of taxes hereunder. Within thirty (30) days
of its payment of all taxes and assessments imposed or assessed upon the
Premises, Tenant shall furnish Landlord with evidence of such payment.
Notwithstanding the foregoing, Tenant shall not be deemed in default for
nonpayment of taxes if it is in good faith contesting the validity or amount
thereof in compliance with all applicable laws, and the enforcement of any lien
therefor is suspended or stayed during such contest, and Landlord agrees to
cooperate with Tenant in any such contest. Taxes for the year in which the Term
commences or expires (or otherwise terminates) shall be prorated.
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Notwithstanding Landlord's delivery of the Premises to Tenant pursuant
to Section 5 above, Tenant's obligation to pay taxes hereunder shall not
commence until the Commencement Date.
9. MAINTENANCE AND REPAIR. Landlord shall maintain and repair the
structural portions of the Buildings (including foundations, roofs and exterior
walls), except for any damage due to Tenant's misconduct or negligence. Tenant
shall maintain and repair all other portions of the Premises, except for
ordinary wear and tear and damage due to casualties, and except for any damage
due to Landlord's misconduct or negligence. Landlord agrees to cooperate with
Tenant to exercise any rights which Landlord may have with respect to any
warranties, guaranties, and similar rights relating to any portion of the
Premises (e.g. HVAC systems). Landlord shall be responsible for any structural
alteration of the Premises required to comply with legal requirements, and
Tenant shall be responsible for any non-structural alteration for this purpose.
10. UTILITIES. Tenant shall pay all charges for utilities used on the
Premises, including but not limited to electricity, gas, water, sewer, air
conditioning and heat.
11. INSURANCE. Tenant shall, during the Term, obtain and maintain in
force the following policies of insurance:
(a) Casualty insurance on the Buildings covering all
casualties included under standard insurance industry practices within
the classification "Fire and Lightening, Extended Coverage, Vandalism
and Malicious Mischief" in an amount equal to not less than one hundred
percent (100%) of the replacement value of each Building (including the
fixtures). Notwithstanding Landlord's delivery of the Premises to
Tenant pursuant to Section 5 above, Tenant's obligation under this
Section 11(a) shall not commence until the Commencement Date;
(b) Casualty insurance on Tenant's property (including
fixtures, leasehold improvements and equipment) located in the
Premises; and
(c) Comprehensive public liability insurance covering death,
bodily injury and property damage in the amount of at least Two Million
and No/100 Dollars ($2,000,000.00) per occurrence/aggregate. Tenant's
liability insurance shall name Landlord as an additional insured and
shall include contractual liability consistent with standard ISO
provisions. Tenant's obligation under this Section 11(b) shall commence
upon its taking possession of any Building under Section 5 above.
12. TENANT DEFAULT. If Tenant continues in default in the payment of
rent or other sum of money becoming due under this
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Lease for a period of fifteen (15) days after written notice of such default has
been given to Tenant, or if Tenant defaults in the performance of any other of
the terms, conditions or covenants contained in this Lease (including but not
limited to the obligation to pay taxes and to maintain insurance) and does not
remedy such default within twenty (20) days after written notice of such default
has been given to Tenant (or such longer period of time, not to exceed sixty
(60) days, as may be reasonably necessary to cure such breach if such breach is
not susceptible of being cured within twenty (20) days; provided, however, that
Tenant shall act diligently and in good faith to cure such breach), or if Tenant
becomes bankrupt or insolvent, or files any debtor proceedings, or files in any
court pursuant to any statute, either of the United States or any State a
petition in bankruptcy or insolvency or for reorganization, or files or has
filed against it a petition for the appointment of a receiver or trustee for all
or substantially all of the assets of Tenant and such petition is not vacated or
set aside within sixty (60) days, or if Tenant makes an assignment for the
benefit of creditors, or petitions for or enters into an arrangement, then in
any event Landlord shall have the right to terminate and cancel this Lease. In
the event of any termination by Landlord, whether before or after reentry,
Landlord may recover from Tenant damages permitted under applicable law and
pursuant to Tenant's obligations hereunder. Landlord will make reasonable
efforts to mitigate damages.
13. LANDLORD DEFAULT. In the event of a breach of an obligation,
representation, warranty or covenant of Landlord under this Lease, which breach
has not been cured within twenty (20) days (or such longer period of time, not
to exceed sixty (60) days, as may be reasonably necessary to cure such breach if
such breach is not susceptible of being cured within twenty (20) days; provided,
however, that Landlord shall act diligently and in good faith to cure such
breach) after notice from Tenant to Landlord, Tenant shall have the right, at
its election then or thereafter in addition to and not in lieu of any other
remedy Tenant may have hereunder, or at law or in equity, to (a) cure of such
breach and offset the cost against rent due; (b) sue for and receive any damages
sustained by Tenant as a result of said breach by Landlord; or (c) terminate
this Lease.
14. DAMAGE BY CASUALTY OR FIRE. Tenant shall promptly notify Landlord
of any damage to the Premises caused by fire or other casualty.
(a) If any Building is rendered substantially untenantable by
fire or other casualty, either Landlord or Tenant may elect, by giving
the other party written notice within thirty (30) days of the fire or
casualty, to terminate this Lease with respect to the damaged
Building(s) as of the date of the casualty.
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(b) If (i) any Building is damaged by fire or other casualty
but is not rendered substantially untenantable, or (ii) any Building is
damaged by fire or other casualty and is rendered substantially
untenantable, but this Lease is not terminated pursuant to subsection
(a) above, then Landlord shall, upon receipt of the insurance proceeds,
promptly and diligently repair and restore the damaged portions (other
than any leasehold improvements and personal property installed by
Tenant), to substantially the same condition as existed immediately
prior to the casualty. Tenant shall disburse the insurance proceeds to
Landlord as the restoration work progresses, upon the written request
of Landlord accompanied by such affidavits, invoices and lien waivers
as would be required by a prudent construction lender. Upon completion
of the restoration work, and the receipt by Tenant of a certificate of
substantial completion signed by Landlord and the supervising
architect, and certificates of occupancy issued by the appropriate
governmental authorities, the remainder of the insurance proceeds shall
be disbursed to Tenant. Rent shall abate during any such period of
damage or repair. Notwithstanding the foregoing, if the damage occurs
during the last twelve (12) months of the Term, then either party
hereto shall have the right to terminate this Lease with respect to the
damaged Building(s) as of the date of the casualty by giving written
notice of termination to the other party within thirty (30) days after
the fire or casualty.
15. CONDEMNATION.
(a) In this Lease, the following terms shall have the meanings
set forth herein:
(i) "Condemnation" shall mean the actual or constructive
taking by a governmental or quasi-governmental authority
by means of eminent domain, condemnation, or deed or
agreement in lieu thereof, or otherwise.
(ii) "Building Space" shall mean space in a Building.
(iii) "Non-Building Space" shall mean space other than
Building Space.
(iv) "Major Condemnation" shall mean (A) the
Condem-nation of any part of the Building Space IF AND
ONLY IF Tenant reasonably determines that such
Condemnation will materially affect Tenant's operations
at the Premises, or (B) a Condemnation of the
Non-Building Space which either denies Tenant direct
access to all state maintained roads adjacent to the
Premises for more than thirty (30) days or
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reduces the number of parking spaces in the Premises to
ten percent (10%) less than the number of spaces required
at the time of issuance of the building permit for
construction of the Building Improvements.
(v) "Minor Condemnation" shall mean any Condemnation
other than a Major Condemnation.
(b) If, at any time during the Term, a Major Condemnation
shall occur, Tenant shall have the option to cancel this Lease upon
written notice to Landlord within sixty (60) days after the occurrence
of the Major Condemnation, and upon such notification this Lease shall
terminate and expire, and rent and all charges due under this Lease
shall be apportioned and paid to the later of (i) the date of
termination or (ii) the last day of occupancy by Tenant.
(c) In the event of the occurrence of a Minor Condemnation or
a major Condemnation not resulting in a cancellation of this Lease,
rent and all charges due under this Lease shall be reduced (i) pro rata
based on the square footage of space taken (in the event of
Condemnation of Building Space) or (ii) pro rata based on the area of
Land taken (in the event of Condemnation of Non-Building Space IF AND
ONLY IF Tenant reasonably determines that such Condemnation will
materially affect Tenant's operations at the Premises).
(d) The proceeds of any condemnation award for the Premises
shall be the property of Landlord, but the proceeds of any condemnation
award for the leasehold interest and the improvements located on the
Premises that have been installed by Tenant shall be the property of
Tenant. Landlord shall have no interest in any award to Tenant for
relocation expenses or for the taking of Tenant's fixtures or other
personal property within the Premises.
(e) In the event of a Condemnation not resulting in the
termination of this Lease, Landlord shall proceed with reasonable
diligence to repair and restore the Premises as nearly as possible to
its condition immediately prior to the Condemnation. Rent shall abate
during any such period of repair and restoration on a pro rata basis as
set forth in subsection (c) above.
16. SURRENDER OF PREMISES. Tenant shall, upon the expiration or other
termination of the Term, surrender the Premises to Landlord in good order,
condition and state of repair, excepting ordinary wear and tear; and damage due
to fire or other casualty.
17. WAIVER. The failure of either party to exercise any of
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its rights or to insist upon the strict performance of any of the terms of this
Lease shall not constitute a waiver by such party, and the exercise by either
party of any right expressly provided in this Lease shall not be a waiver of any
other right of that party.
18. ASSIGNMENT, MORTGAGE, AND SUBLETTING. Tenant may not assign this
Lease or sublet the Premises or any part thereof except with the prior consent
of Landlord, which consent shall not be unreasonably withheld or delayed;
provided, that, Landlord may require the proposed assignee to execute a written
agreement to evidence its assumption of Tenant's obligations hereunder. In the
event of any assignment, Tenant shall not be relieved of its obligations
hereunder unless Landlord's consent so stated.
19. WARRANTIES AND QUIET ENJOYMENT. Landlord represents and warrants
that he owns the Premises in fee simple, that he has the right to enter into
this Lease of the Premises, that Tenant's anticipated uses of the Premises as
set forth in Section 4 above is permitted under applicable laws and private
restrictions, if any, and that upon Tenant paying the rent and other amounts
provided in this Lease and observing and performing the terms, covenants, and
conditions hereof, Tenant may have quiet and uninterrupted enjoyment and
possession of the Premises during the Term.
20. INDEMNIFICATION; WAIVER OF SUBROGATION.
(a) Tenant agrees to pay and to protect, defend, indemnify,
and hold harmless Landlord from and against all liability, damages, and
costs (including but not limited to reasonable attorney's fees actually
incurred) from causes of action, suits, claims, demands, and judgments
arising out of Tenant's actions or negligence in connection with its
occupancy of the Premises.
(b) Notwithstanding anything else to the contrary contained in
this Lease, Tenant shall not be responsible or liable to Landlord for
any event, act or omission to the extent covered by insurance required
to be obtained and actually maintained by Tenant with respect to the
Premises and its use and occupancy thereof or the proceeds of any other
insurance obtained and maintained by Tenant with respect to the
Premises and its use and occupancy thereof.
21. NOTICES. All notices required or permitted to be given by any party
hereto upon any other party shall be deemed given if such notice is personally
delivered or deposited in the United States mail, registered or certified mail,
return receipt requested, postage prepaid, and addressed as follows:
To Landlord: Mr. Joseph E. Proctor
P.O. Box 72702
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42nd and Devine
Chattanooga, Tennessee 37407
with a Fred Hanzelik, Esq.
copy to: Hanzelik and Associates
Chattanooga Bank Building, Suite 500
737 Market Street
Chattanooga, Tennessee 37402
To Tenant: Culp, Inc.
P.O. Box 2686
101 South Main Street
High Point, North Carolina 27261-2686
Attn: Mr. Franklin N. Saxon
with a Robinson, Bradshaw & Hinson, P.A.
copy to: 1900 Independence Center
101 North Tryon Street
Charlotte, North Carolina 28246
Attn: Henry H. Ralston, Esq.
Either party may change its address by giving the other party written notice of
the new address in the manner specified above not less than fifteen (15) days
before the effective date of the change.
22. SECURITY DEPOSIT. As security for the performance of its
obligations under this Lease, Tenant, upon its execution of this Lease, has paid
to Landlord a security deposit ("Security Deposit") in the amount of
Seventy-Five Thousand Dollars ($75,000.00). The Security Deposit may be applied
by Landlord to cure any default (beyond any applicable cure period) of Tenant
under this Lease, and upon notice by Landlord of such application, Tenant shall
replenish the Security Deposit in full by promptly paying to Landlord the amount
so applied. Within forty-five (45) days after the termination of this Lease
(other than a wrongful termination by Tenant), Landlord shall return to Tenant
the balance, if any, of the Security Deposit.
23. HOLDING OVER. If Tenant retains possession of the Premises or any
part thereof after the expiration or other termination of this Lease, Tenant's
holding over shall constitute a renewal of this Lease for a period of one (1)
year on the same terms and conditions hereof.
24. EARLY TERMINATION. Tenant acknowledges that Landlord has or will
have expended significant effort and expenses to induce Tenant to enter into
this Lease for the Premises, and both Landlord and Tenant contemplate that
Tenant will lease the Premises for at least ten (10) years. In the event that
this Lease for the Premises shall be terminated for any reason (except due to
Landlord's default hereunder) prior to the expiration of the Initial Term,
Tenant agrees to pay to Landlord an early
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termination fee calculated in accordance with the following formula:
Number of months remaining
in the Initial Term X One Million Dollars
--------------------------- ($1,000,000.00)
120 (12 months per year X
10 years of Initial Term)
25. SEVERABILITY. If any of the terms and conditions of this Lease, or
the application thereof, shall to any extent be held invalid or unenforceable,
the remaining terms and conditions of this Lease, shall not be affected thereby,
and shall continue to be binding upon the parties hereto.
26. RIGHT OF FIRST REFUSAL. An approximately 2.8 acre portion of the
Land (the "Option Land") is more particularly described in Exhibit A-2 attached
hereto and is marked in blue on Exhibit B attached hereto. If, at any time
during the Term, Landlord constructs one or more buildings on the Option Land,
and intends to make an offer to lease such premises to a third party, Landlord
shall first give Tenant written notice of the square footage, availability date
and terms of the offer Landlord intends to make. Tenant shall have thirty (30)
days after receipt of any such notice to elect to lease all or any portion of
such space on the terms offered. If Tenant rejects any such offer, or fails to
respond to any such offer within said thirty (30) day period, Landlord shall be
free to lease the offered space upon the same terms and conditions as those
contained in Landlord's notice. If Landlord changes the terms and conditions on
which Landlord is offering any such space, Landlord shall resubmit such offer to
Tenant, which shall have thirty (30) days in which to accept any new offer. If
Tenant accepts any such offer, the space offered shall be added to the Premises
at the rental set forth in Landlord's offer on the same terms and conditions set
forth in Landlord's offer. In the event Tenant leases such space, Tenant's
obligation to pay rent on such space shall commence upon delivery of said space
finished as specified in Landlord's offer.
27. MEMORANDUM OF LEASE. Upon either party's request, Landlord and
Tenant shall execute a memorandum of this Lease in the form attached hereto as
Exhibit D to be recorded in the Hamilton County Register's Office.
28. GOVERNING LAW. This Lease shall be governed by and construed in
accordance with the laws of the State of Tennessee.
29. ATTORNEY'S FEES. If either Landlord or Tenant shall engage legal
counsel for the enforcement of any of the terms of this Lease, the defaulting
party shall be responsible for and shall promptly pay to the prevailing party
reasonable attorney's fees and other expenses, including without limitation,
court costs and fees, actually incurred by the prevailing party as a result of
the default.
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30. MODIFICATION. This Lease sets forth the promises, agreements,
conditions and understandings between Landlord and Tenant relative to the
Premises. No subsequent alterations, amendments, charges or additions to this
Lease shall be effective against either party unless reduced to writing and
executed by Landlord and Tenant.
[Balance of page left intentionally blank.]
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IN WITNESS WHEREOF, the parties hereto have cause this Lease to be duly
executed as of the date first above written.
LANDLORD: ____________________________
JOSEPH E. PROCTOR
TENANT: CULP, INC., a North Carolina corporation
By: _______________________
Its: _______________________
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Exhibit A
to Lease Agreement
Legal Description of Land
All that certain parcel of land located in Hamilton County, Tennessee
and more particularly described as follows:
BEING all of Lot No. 1 as shown on that Corrective Plat Part of East
End Land Company's Addition No. 1 as recorded in Plat Book 46 at Page 174 of the
Hamilton County Register's Office; and
BEING all of Tract 1 and Tract 2 as shown on that map of Mercer
Reynolds Resubdivision of the Old East End Land Co. Add. as recorded in Plat
Book 29 at Page 25 of the Hamilton County Register's Office.