INDUSTRIAL LEASE AGREEMENT
BETWEEN
MIDDLE ROAD PROPERTIES, LLC
AS LANDLORD
AND
M.J. SOFFE CO.
AS TENANT
INDUSTRIAL LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is made as of the 3rd day of
October, 2003 ("Lease Date") by and between MIDDLE ROAD PROPERTIES, LLC, a North
Carolina limited liability company ("Landlord"), and M.J. SOFFE Co., a North
Carolina corporation ("Tenant") (the words "Landlord" and "Tenant" to include
their respective legal representatives, successors and permitted assigns where
the context requires or permits).
W I T N E S S E T H:
1. Basic Lease Provisions. The following constitute the basic
provisions of this Lease:
(a) Demised Premises Address: 1030 Fort Worth Avenue
Fayetteville, North Carolina
(b) Demised Premises Square Footage: approximately 23.80 acres
(c) Building Square Footage: approximately 128,550 sq. ft.
(d) Annual Base Rent: $565,620.00
(e) Monthly Base Rent Installments: $47,135.00.
(f) Lease Commencement Date: October 3, 2003.
(g) Base Rent Commencement Date: Lease Commencement Date.
(h) Expiration Date of Initial Term: October 2, 2008.
(i) Initial Term: Five (5) years.
(j) Option Term: Five (5) years.
(k) Address for notice:
Landlord: Middle Road Properties, LLC
822 Shannon Drive
Fayetteville, NC 28305
Attn: Manager
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Tenant: M.J. Soffe Co.
One Soffe Drive
Fayetteville, NC 28305
Attn: __________________________
(l) Address for rental payments:
Middle Road Properties, LLC
822 Shannon Drive
Fayetteville, NC 28305
Attn: Manager
2. Demised Premises. For and in consideration of the rent hereinafter
reserved and the mutual covenants hereinafter contained, Landlord does hereby
lease and demise unto Tenant, and Tenant does hereby hire, lease and accept,
from Landlord all upon the terms and conditions hereinafter set forth the
following premises, referred to as the "Demised Premises", as outlined on
Exhibit A attached hereto and incorporated herein: approximately 23.80 acres
located at 1030 Fort Worth Avenue, Fayetteville, Cumberland County, North
Carolina, and the building (the "Building") and other improvements located
thereon. The Building contains approximately 128,550 square feet.
3. Term. To have and to hold the Demised Premises for a term of five
(5) years (the "Initial Term"), commencing on the Lease Commencement Date and
terminating on the Expiration Date as such dates are set forth in Section 1 (f)
and Section 1(h), respectively, as such Expiration Date may be extended by
Tenant's exercise of the Option Term (as hereinafter defined) (the Initial Term
and the Option Term, herein referred to as the "Term").
So long as there is no continuing event of default under this Lease,
either at the time of exercise or at the time the Option Term commences, Tenant
shall have the option to extend the Initial Term for an additional period of
five (5) years (the "Option Term") on the same terms, covenants and conditions
of this Lease, except that the Base Rent during the Option Term shall be
determined pursuant to Section 6 hereof. Tenant shall exercise its option, if at
all, by giving Landlord written notice thereof (the "Option Notice") at least
one hundred eighty (180) days prior to the expiration of the Initial Term.
The term "Lease Year", as used in this Lease, shall mean the 12-month
period commencing on the Lease Commencement Date, and each 12-month period
thereafter during the Term; provided, however, that if the Lease Commencement
Date is a day other than the first day of a calendar month, the first Lease Year
shall include the period between the Lease Commencement Date and the end of the
calendar month in which the Lease Commencement Date occurs and shall extend
through the end of the twelfth (12th) full calendar month following the Lease
Commencement Date.
4. Base Rent. Tenant shall pay to Landlord at the address set forth in
Section 1(l), as base rent for the Demised Premises, commencing on the Base Rent
Commencement Date and continuing throughout Initial Term in lawful money of the
United States, the annual amount set forth in Section 1(d) payable in equal
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monthly installments as set forth in Section 1(e) (the "Base Rent"), payable in
advance, without demand and without abatement, reduction, set-off or deduction,
on the first day of each calendar month during the Initial Term. If the Base
Rent Commencement Date shall fall on a day other than the first day of a
calendar month, the Base Rent shall be apportioned pro rata on a per diem basis
(i) for the period between the Base Rent Commencement Date and the first day of
the following calendar month (which pro rata payment shall be due and payable on
the Base Rent Commencement Date), and (ii) for the last partial month of the
Initial Term, if applicable. No payment by Tenant or receipt by Landlord of rent
hereunder shall be deemed to be other than on account of the amount due, and no
endorsement or statement on any check or any letter accompanying any check or
payment of rent shall be deemed an accord and satisfaction, and Landlord may
accept such check as payment without prejudice to Landlord's right to recover
the balance of such installment or payment of rent or pursue any other remedies
available to Landlord.
5. Taxes. Tenant shall at all times during the term of this Lease be
liable for and pay: (i) all ad valorem taxes assessed on the Demised Premises
and on Tenant's property located on the Demised Premises; (ii) any use taxes
payable on account of the rent and other sums paid to Landlord hereunder; and
(iii) except as otherwise provided herein, all assessments and other charges
which may be imposed, levied or assessed by any governmental authority against
or with respect to the Demised Premises including any taxes on the leasehold
interest. Upon Landlord's written request to Tenant, Tenant shall pay any or all
of such taxes (or pro-rata portion thereof) to Landlord on a monthly basis in
advance with each installment of Base Rent. If not so requested, all such taxes
and assessments described in this Section shall be paid by Tenant directly to
the applicable governmental authority prior to the time when due. Upon payment
of the taxes, Tenant shall provide Landlord with a receipt from the governmental
authority evidencing such payment.
6. Option Term Rent. The Base Rent for the Option Term Period shall be
determined as follows:
(a) Landlord and Tenant shall have fifteen (15) days after Landlord
receives the Option Notice (the "Rent Agreement Deadline") within which to agree
on the then-fair market rental value of the Demised Premises and rental
increases to the Base Rent for the Option Term. If the parties agree on the Base
Rent and rental increases for the Option Term on or prior to the Rent Agreement
Deadline, the parties shall execute an amendment to this Lease setting forth the
Base Rent and rental increases for the Option Term.
(b) If the parties are unable to agree on the Base Rent and rental
increases for the Option Term on or prior to the Rent Agreement Deadline, the
Base Rent for the Option Term shall be the then-fair market rental value of the
Demised Premises as determined in accordance with Section 6(d) and the periodic
rental increases shall be consistent with current market standards for rent
increases at that time, in amounts and at frequencies determined by the brokers
pursuant to Section 6(d).
(c) "Then-fair market rental value of the Demised Premises" means what
a landlord under no compulsion to lease the Demised Premises and a tenant under
no compulsion to lease the Demised Premises would determine as rents (including
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Base Rent and rental increases) for the Option Term, as of the commencement of
the Option Term, taking into consideration the uses permitted under this Lease,
the quality, size, design and location of the Demised Premises, and the rent for
comparable buildings located in the vicinity of Fayetteville, North Carolina.
(d) Within seven (7) days after the Rent Agreement Deadline, Landlord
and Tenant shall each select a real estate broker with at least five (5) years'
full-time commercial real estate experience in the area in which the Demised
Premises is located to appraise the then-fair market rental value of the Demised
Premises. Each party shall be responsible for the payment of any costs
associated with the selection of such party's broker, including without
limitation, any fees charged by such broker. If either Landlord or Tenant fails
to select a broker within ten (10) days after the other party has given notice
of the name of its broker, the single broker selected shall be the sole broker
and shall determine the then-fair market rental value of the Demised Premises.
If two (2) brokers are selected pursuant to this Section, they shall meet
promptly and attempt to determine the then-fair market rental value of the
Demised Premises. If the brokers are unable to agree within thirty (30) days
after the second broker has been selected (the "Broker Agreement Deadline"), the
two brokers shall attempt to select a third broker meeting the qualifications
stated in this Section within ten (10) days after the Broker Agreement Deadline.
If the two brokers are unable to agree on the third broker, each broker shall
submit its good-faith appraisal in writing to both Landlord and Tenant within
thirty (30) days of the Broker Agreement Deadline. The two (2) appraisals shall
be averaged and the average shall be deemed the then-fair market rental value of
the Demised Premises. In the event the brokers are able to select such third
broker, within thirty (30) days after the selection of the third broker, a
majority of the brokers shall determine the then-fair market rental value of the
Demised Premises. If a majority of the brokers are unable to determine the
then-fair market rental value of the Demised Premises within thirty (30) days
after selection of the third broker, each broker shall submit its good-faith
appraisal in writing to both Landlord and Tenant. The three (3) appraisals shall
be averaged and the average shall be deemed the then-fair market rental value of
the Demised Premises. Notwithstanding anything to the contrary or apparently to
the contrary herein, no broker shall be selected to determine the then-fair
market value of the Demised Premises in accordance with this Section if such
broker has previously worked or acted in any capacity for either Landlord or
Tenant.
7. Option to Purchase.
(a) Grant. Landlord hereby grants to Tenant the option to purchase the
Demised Premises (the "Purchase Option"). Tenant must exercise its Purchase
Option, if at all, by written notice to Landlord at least six (6) months prior
to the expiration of the Initial Term. Such notice must state a closing date no
more than thirty (30) days after the Expiration Date of the Initial Term.
(b) Assignment. The Purchase Option may not be assigned apart from this
Lease.
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(c) Conditions. The Purchase Option is conditioned upon Tenant not
being in default at either the time of its exercise of the Purchase Option or
the time of closing of such option.
(d) Purchase Price. The purchase price is $5,250,000 and shall be paid
in cash or certified funds, as directed by Landlord, at closing.
(e) Closing. At closing, Landlord shall convey the Demised Premises to
Tenant by special warranty deed, subject to all exceptions or matters of record
at the time of closing. Landlord shall pay the cost of any transfer taxes and
its attorney's fees. Tenant shall pay recording fees and charges, its attorney's
fees and any other costs and expenses it incurs in connection herewith. At
closing, Landlord shall deliver the special warranty deed, and Tenant shall pay
the purchase price to Landlord.
8. Use of Demised Premises.
(a) During the continuation of this Lease, the Demised Premises shall
be used and occupied for storage and distribution of apparel, ancillary office
purposes and operation of a retail store and for no other purposes without the
written consent of the Landlord, which consent shall not be unreasonably
withheld, conditioned or delayed. Tenant shall not use the Demised Premises for
any purpose in violation of any law, municipal ordinance or regulation, nor
shall Tenant perform any acts or carry on any practices which may injure the
Demised Premises or the Building or be a nuisance, disturbance or menace.
(b) Tenant shall not permit liens to attach or exist against the
Demised Premises, and shall not commit any waste.
(c) The Demised Premises shall not be used for any illegal purposes.
(d) Tenant shall not in any way violate any law, ordinance or
restrictive covenant affecting the Demised Premises, and shall not in any manner
use the Demised Premises so as to cause cancellation of, prevent the use of, or
increase the rate of, the fire and extended coverage insurance policy required
hereunder. Landlord makes no (and does hereby expressly disclaim any) covenant,
representation or warranty as to the Permitted Use being allowed by or being in
compliance with any applicable laws, rules, ordinances or restrictive covenants
now or hereafter affecting the Demised Premises, and any zoning letters, copies
of zoning ordinances or other information from any governmental agency or other
third party provided to Tenant by Landlord or any of Landlord's agents or
employees shall be for informational purposes only, Tenant hereby expressly
acknowledging and agreeing that Tenant shall conduct and rely solely on its own
due diligence and investigation with respect to the compliance of the Permitted
Use with all such applicable laws, rules, ordinances and restrictive covenants
and not on any such information provided by Landlord or any of its agents or
employees. Landlord shall not voluntarily initiate any action which would cause
a change in zoning laws and ordinances applicable to the Demised Premises so as
to result in the Permitted Use being in violation of such zoning laws or
ordinances nor support any such action initiated by a third party.
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(e) In the event insurance premiums pertaining to the Demised Premises
or the Building, whether paid by Landlord or Tenant, are increased over the
least hazardous rate available due to the nature of the use of the Demised
Premises by Tenant, Tenant shall pay such additional amount as Additional Rent.
9. Insurance.
(a) Landlord shall maintain during the Term a policy or policies of
insurance insuring the Demised Premises against loss or damage due to fire and
other casualties covered within the classification of fire and extended
coverage, vandalism coverage and malicious mischief and special extended
coverage on the Building, and the Tenant shall reimburse the Landlord for the
reasonable costs of such reasonable coverage. Such coverage shall be in such
amounts as Landlord may from time to time reasonably determine. Tenant shall
neither use the Demised Premises nor permit the Demised Premises to be used or
acts to be done therein which will (i) increase the premium of any insurance
described in this subsection, but Landlord acknowledges Tenant's intended use of
the Demised Premises pursuant to Section 8 and admits that such use does not
increase the premium of any insurance described herein at the time of execution
hereof; (ii) cause a cancellation of or be in conflict with any such insurance
policies; (iii) result in a refusal by insurance companies of good standing to
insure all or any part of the Demised Premises in amounts reasonably
satisfactory to Landlord; or (iv) subject Landlord to any liability or
responsibility for injury to any person or property by reason of any operation
being conducted in the Demised Premises. If Tenant's conduct or use of the
Demised Premises causes any increase in the premium for such insurance policies,
then Tenant shall reimburse Landlord for any such increase upon demand therefor
by Landlord.
(b) Tenant covenants and agrees that from and after the Lease
Commencement Date or any earlier date upon which Tenant enters or occupies the
Demised Premises or any portion thereof, Tenant will carry and maintain, at its
sole cost and expense, the following types of insurance, in the amounts
specified and in the form hereinafter provided for:
(i) Liability insurance in the Commercial General Liability
form (including Broad Form Property Damage and Contractual Liabilities
or reasonable equivalent thereto) covering the Demised Premises and
Tenant's use thereof against claims for bodily injury or death,
property damage and product liability occurring upon, in or about the
Demised Premises, such insurance to be written on an occurrence basis
(not a claims made basis), to be in combined single limits amounts of
not less than $3,000,000.00 and to have general aggregate limits of not
less than $10,000,000.00 for each policy year. The insurance coverage
required under this Section shall, in addition, extend to any liability
of Tenant arising out of the indemnities provided for in Section 15
and, if necessary, the policy shall contain a contractual endorsement
to that effect.
(ii) Insurance covering (A) all of the items included in the
leasehold improvements constructed in the Demised Premises by or at the
expense of Landlord (collectively, the "Improvements"), including but
not limited to demising walls and the heating, ventilating and air
conditioning system and (B) Tenant's trade fixtures, merchandise and
personal property from time to time in, on or upon the Demised
Premises, in an amount not less than one hundred percent (100%) of
their full replacement value from time to time during the Term,
providing protection against perils included within the standard form
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of "Special Form" fire and casualty insurance policy, together with
insurance against sprinkler damage, vandalism and malicious mischief.
Any policy proceeds from such insurance relating to the Improvements
shall be used solely for the repair, construction and restoration or
replacement of the Improvements damaged or destroyed unless this Lease
shall cease and terminate under the provisions of Section 19.
(c) All policies of the insurance provided for in Section 9(b) shall be
issued in form reasonably acceptable to Landlord by insurance companies with a
rating of not less than "A," and financial size of not less than Class XII, in
the most current available "Best's Insurance Reports", and licensed to do
business in North Carolina. Each and every such policy:
(i) shall name Landlord, Lender (as defined in Section 23),
and any other party reasonably designated by Landlord, as an additional
insured. In addition, the coverage described in Section 9(b)(ii)(A)
relating to the Improvements shall also name Landlord as "loss payee";
(ii) shall be delivered to Landlord, in the form of an
insurance certificate reasonably acceptable to Landlord as evidence of
such policy, prior to the Lease Commencement Date and thereafter within
thirty (30) days prior to the expiration of each such policy, and, as
often as any such policy shall expire or terminate. Renewal or
additional policies shall be procured and maintained by Tenant in like
manner and to like extent;
(iii) shall contain a provision that the insurer will give to
Landlord and such other parties in interest at least thirty (30) days
notice in writing in advance of any material change, cancellation,
termination or lapse, or the effective date of any reduction in the
amounts of insurance; and
(iv) shall be written as a primary policy which does not
contribute to and is not in excess of coverage which Landlord may
carry.
(d) The minimum limits of policies of insurance required of Tenant
under this Lease shall in no event limit the liability of Tenant under this
Lease. In the event that Tenant shall fail to carry and maintain the insurance
coverages set forth in this Section, Landlord may upon thirty (30) days prior
written notice to Tenant (unless such coverages will lapse in which event no
such notice shall be necessary) procure such policies of insurance and Tenant
shall promptly reimburse Landlord therefor.
(e) Landlord and Tenant hereby waive any rights each may have against
the other on account of any loss or damage occasioned to Landlord or Tenant, as
the case may be, their respective property, the Demised Premises, its contents
or to the other portions of the Building, arising from any risk covered by
"Special Form" fire and extended coverage insurance of the type and amount
required to be carried hereunder, provided that such waiver does not invalidate
such policies or prohibit recovery thereunder. The parties hereto shall cause
their respective insurance companies insuring the property of either Landlord or
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Tenant against any such loss, to waive any right of subrogation that such
insurers may have against Landlord or Tenant, as the case may be.
10. Utilities. During the Term, Tenant shall promptly arrange for and
pay as billed to Tenant all rents and charges for water and sewer services and
all costs and charges for gas, steam, electricity, fuel, light, power,
telephone, heat and any other utility or service used or consumed in or
servicing the Demised Premises and all other costs and expenses involved in the
care, management and use thereof as charged by the applicable utility companies.
Tenant's obligation for payment of all utilities shall commence on the earlier
of the Lease Commencement Date or the date of Tenant's actual occupancy of all
or any portion of the Demised Premises, including any period of occupancy prior
to the Lease Commencement Date, regardless of whether or not Tenant conducts
business operations during such period of occupancy. If Tenant fails to pay any
utility bills or charges, Landlord may, at its option, pay the same and in such
event, the amount of such payment, together with interest thereon at the
Interest Rate as defined in Section 30 from the date of such payment by
Landlord, will be added to Tenant's next due payment as Additional Rent.
11. Maintenance and Repairs.
(a) Landlord shall have no obligation to maintain any portion of the
Demised Premises, it being the intention of the parties that this be an absolute
net lease. Tenant shall, at its sole cost and expense, maintain the Demised
Premises in good condition and repair during the term of this Lease. Tenant
shall be obligated to maintain all of the interior and exterior of the
improvements comprising the Demised Premises, including but not limited to, the
plumbing, heating, electrical wiring, well pump, air conditioning and other
mechanical systems in such improvements, all interior and exterior painting and
decorating, the roof and all other structural components of such improvements.
Tenant shall also perform all maintenance of the grounds comprising the Demised
Premises, including but not limited to, trimming the shrubs, mowing the grass
and cleaning and repairing all parking lots and driveways located on the Demised
Premises. All such repairs, restorations, and replacements will be in quality
and class equal to the original work or installations and the Demised Premises
shall be kept in a neat and orderly manner. Tenant shall deliver the Demised
Premises to Landlord at the expiration or earlier termination of this Lease in
as good condition as of the effective date of this Lease, normal wear and tear
and damage by casualty excepted. During the Term, Tenant shall maintain in full
force and effect a service contract for the maintenance of the heating,
ventilation and air conditioning systems with an entity reasonably acceptable to
Landlord. Tenant shall deliver to Landlord (i) a copy of said service contract
prior to the Lease Commencement Date, and (ii) thereafter, a copy of a renewal
or substitute service contract within thirty (30) days prior to the expiration
of the existing service contract. In the event Landlord, its employees,
contractors or agents causes any damage to the Demised Premises, Landlord shall
promptly repair such damage in a good and workmanlike manner at Landlord's sole
cost and expense.
(b) Landlord shall have no obligation of any maintenance or repair
including but not limited to any maintenance or repair required because of the
act or negligence of Tenant or any of Tenant's subsidiaries or affiliates, or
any of Tenant's or such subsidiaries' or affiliates' agents, contractors,
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employees, licensees or invitees (collectively, "Tenant's Affiliates"), the cost
of which shall be the responsibility of Tenant.
(c) Unless the same is caused solely by the gross negligence of
Landlord, its employees or agents, and is not covered by the insurance required
to be carried by Tenant pursuant to the terms of this Lease, Landlord shall not
be liable to Tenant or to any other person for any damage occasioned by failure
in any utility system or by the bursting or leaking of any vessel or pipe in or
about the Demised Premises, or for any damage occasioned by water coming into
the Demised Premises or arising from the acts or negligence of occupants of
adjacent property or the public.
12. Tenant's Personal Property. All of Tenant's personal property in
the Demised Premises shall be and remain at Tenant's sole risk. Landlord, its
agents, employees and contractors, shall not be liable for, and Tenant hereby
releases Landlord from, any and all liability for theft thereof or any damage
thereto occasioned by any act of God or by any acts, omissions or negligence of
any persons.
13. Tenant's Fixtures. Tenant shall have the right to install in the
Demised Premises trade fixtures required by Tenant or used by it in its
business, and if installed by Tenant, to remove any or all such trade fixtures
from time to time during and prior to termination or expiration of this Lease,
provided no uncured Event of Default, as defined in Section 21, then exists;
provided, however, that Tenant shall repair and restore any damage or injury to
the Demised Premises (to the condition in which the Demised Premises existed
prior to such installation) caused by the installation and/or removal of any
such trade fixtures.
14. Signs. No sign, advertisement or notice shall be inscribed,
painted, affixed, or displayed on the windows or exterior walls of the Demised
Premises or on any public area of the Building, except in such places, numbers,
sizes, colors and styles as are approved in advance in writing by Landlord,
which approval shall not be unreasonably withheld, conditioned or delayed, and
which conform to all applicable laws, ordinances, or covenants affecting the
Demised Premises. Any and all signs installed or constructed by or on behalf of
Tenant pursuant hereto shall be installed, maintained and removed by Tenant at
Tenant's sole cost and expense.
15. Indemnity. Tenant shall defend Landlord from and against any and
all actions against Landlord, any partner, trustee, stockholder, member,
manager, officer, director, employee or beneficiary of Landlord, holders of
mortgages on the Demised Premises and any other party having an interest in the
Demised Premises (herein, the "LANDLORD INDEMNIFIED PARTIES") with respect to,
and shall pay, protect, indemnify and save harmless, to the extent permitted by
law, all Landlord Indemnified Parties from and against, any and all liabilities,
losses, damages, costs, expenses (including reasonable attorneys' fees and
expenses), causes of action, suits, claims, demands or judgments of any nature
arising from (i) bodily injury to or death of any person, or damage to or loss
of tangible property, on or about the Demised Premises or on adjoining
sidewalks, streets or ways, or connected with the use, condition or occupancy of
any part thereof and not caused by the gross negligence or willful misconduct of
any Landlord Indemnified Party, or (ii) any negligent act, omission or willful
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misconduct of Tenant or its respective agents, contractors, licensees,
sublessees or invitees, or (iii) any uncured breach by Tenant of its obligations
under this Lease. Notwithstanding anything to the contrary or apparently to the
contrary herein, Tenant shall have no obligation to indemnify the holders of
mortgages on the Demised Premises in their role as holders of mortgages (but
shall have the obligation if the holder has succeeded to the interest of
Landlord) for any uncured breach by Tenant of its obligations under this Lease
as referenced in (iii) above.
Landlord shall defend Tenant from and against all actions against
Tenant, any partner, trustee, stockholder, member, manager, officer, director,
employee, lender or beneficiary of Tenant (herein, the "TENANT INDEMNIFIED
PARTIES") with respect to, and shall pay, protect, indemnify and save harmless,
to the extent permitted by law, all Tenant Indemnified Parties from and against,
any and all liabilities, losses, damages, costs, expenses (including reasonable
attorneys' fees and expenses), causes of action, suits, claims, demands or
judgments of any nature arising from (i) any grossly negligent act or omission
or willful misconduct of Landlord or its agents, contractors, licensees,
sublessees or invitees with respect to this Lease, or (ii) any uncured breach by
Landlord of its obligations under this Lease. The provisions of this section
shall survive the expiration or earlier termination of this Lease with respect
to any damage, injury or death occurring before such expiration or termination.
Notwithstanding anything to the contrary or apparently to the contrary herein,
Landlord shall have no obligation to indemnify the holders of leasehold
mortgages on the Demised Premises in their role as holders of leasehold
mortgages (but shall have the obligation if the holder has succeeded to the
interest of Tenant) for any uncured breach by Landlord of its obligations under
this Lease as referenced in (ii) above.
16. Governmental Regulations. Tenant shall promptly comply throughout
the Term, at Tenant's sole cost and expense, with all present and future laws,
ordinances, orders, rules, regulations or requirements of all federal, state and
municipal governments and appropriate departments, commissions, boards and
officers thereof (collectively, "Governmental Requirements") relating to (a) all
or any part of the Demised Premises, and (b) the use or manner of use of the
Demised Premises. Tenant shall also observe and comply with the requirements of
all policies of public liability, fire and other policies of insurance at any
time in force with respect to the Demised Premises. Without limiting the
foregoing, if as a result of one or more Governmental Requirements it is
necessary, from time to time during the Term, to perform an alteration or
modification of the Demised Premises (a "Code Modification") that is made
necessary as a result of the specific use being made by Tenant of the Demised
Premises, then such Code Modification shall be the sole and exclusive
responsibility of Tenant in all respects; any such Code Modification shall be
promptly performed by Tenant at its expense in accordance with the applicable
Governmental Requirement and with Section 18 hereof. Tenant shall promptly send
to Landlord a copy of any written notice received by Tenant requiring a Code
Modification.
17. Environmental Matters.
(a) For purposes of this Lease:
(i) "Contamination" as used herein means the presence of or
release of Hazardous Substances (as hereinafter defined) into any
environmental media from, upon, within, below, into or on any portion
of the Demised Premises or the Building so as to require remediation,
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cleanup or investigation under any applicable Environmental Law (as
hereinafter defined).
(ii) "Environmental Laws" as used herein means all federal,
state, and local laws, regulations, orders, permits, ordinances or
other requirements, which exist now or as may exist hereafter,
concerning protection of human health, safety and the environment, all
as may be amended from time to time.
(iii) "Hazardous Substances" as used herein means any
hazardous or toxic substance, material, chemical, pollutant,
contaminant or waste as those terms are defined by any applicable
Environmental Laws, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601
et seq. ("CERCLA") and the Resource Conservation and Recovery Act, 42
U.S.C. 6901 et seq. ("RCRA") and any solid wastes, polychlorinated
biphenyls, urea formaldehyde, asbestos, radioactive materials, radon,
explosives, petroleum products and oil.
(b) Landlord represents that, except as revealed to Tenant in writing
by Landlord, to Landlord's actual knowledge, Landlord has not treated, stored or
disposed of any Hazardous Substances upon or within the Demised Premises, nor,
to Landlord's actual knowledge, has any predecessor owner of the Demised
Premises. Landlord further represents and warrants that, to the best of its
knowledge, the Demised Premises is not contaminated with Hazardous Substances as
of the date hereof.
(c) Tenant covenants that all its activities, and the activities of
Tenant's Affiliates (as defined in Section 11(b)), on the Demised Premises or
the Building during the Term will be conducted in compliance with Environmental
Laws. Tenant warrants that it is currently in compliance with all applicable
Environmental Laws and that there are no pending or threatened notices of
deficiency, notices of violation, orders, or judicial or administrative actions
involving alleged violations by Tenant of any Environmental Laws. Tenant, at
Tenant's sole cost and expense, shall be responsible for obtaining all permits
or licenses or approvals under Environmental Laws necessary for Tenant's
operation of its business on the Demised Premises and shall make all
notifications and registrations required by any applicable Environmental Laws.
Tenant, at Tenant's sole cost and expense, shall at all times comply with the
terms and conditions of all such permits, licenses, approvals, notifications and
registrations and with any other applicable Environmental Laws. Tenant warrants
that it has obtained all such permits, licenses or approvals and made all such
notifications and registrations required by any applicable Environmental Laws
necessary for Tenant's operation of its business on the Demised Premises or will
obtain such permits, licenses or approvals within thirty (30) days of the Lease
Commencement Date or as required by law.
(d) Tenant shall not cause any Hazardous Substances to be brought upon
or used in or about the Demised Premises or the Building without the prior
written consent of Landlord, which consent shall not be unreasonably withheld,
conditioned or delayed; provided, however, that the consent of Landlord shall
not be required for the use at the Demised Premises of cleaning supplies, toner
for photocopying machines and other similar materials, in containers and
quantities reasonably necessary for and consistent with normal and ordinary use
by Tenant in the routine operation or maintenance of Tenant's office equipment
11
or in the routine janitorial service, cleaning and maintenance for the Demised
Premises. For purposes of this Section, Landlord shall be deemed to have
reasonably withheld consent if Landlord determines that the presence of such
Hazardous Substance within the Demised Premises could result in a risk of harm
to person or property or otherwise negatively affect the value or marketability
of the Building.
(e) Tenant shall not cause or permit the release of any Hazardous
Substances by Tenant or Tenant's Affiliates into any environmental media such as
air, water or land, or into or on the Demised Premises or the Building in any
manner that violates any Environmental Laws. If such release shall occur, Tenant
shall (i) take all steps necessary to contain and control such release and any
associated Contamination, (ii) clean up or otherwise remedy such release and any
associated Contamination to the extent required by, and take any and all other
actions required under, applicable Environmental Laws and (iii) notify and keep
Landlord informed of such release and response.
(f) Regardless of any consents granted by Landlord pursuant to Section
17(d) allowing Hazardous Substances upon the Demised Premises, Tenant shall
under no circumstances whatsoever cause or permit (i) any activity on the
Demised Premises which would cause the Demised Premises to become subject to
regulation as a hazardous waste treatment, storage or disposal facility under
RCRA or the regulations promulgated thereunder, (ii) the discharge of Hazardous
Substances into the storm sewer system serving the Demised Premises or (iii) the
installation of any underground storage tank or underground piping on or under
the Demised Premises.
(g) From and after Commencement Date, Tenant shall and hereby does
indemnify Landlord and hold Landlord harmless from and against any and all
expense, loss, and liability suffered by Landlord (except to the extent that
such expenses, losses, and liabilities arise out of Landlord's own gross
negligence or willful act), by reason of the storage, generation, release,
handling, treatment, transportation, disposal, or arrangement for transportation
or disposal, of any Hazardous Substances (whether accidental, intentional, or
negligent) by Tenant or Tenant's Affiliates or by reason of Tenant's breach of
any of the provisions of this Section. Such expenses, losses and liabilities
shall include, without limitation, (i) any and all reasonable expenses that
Landlord may incur to comply with any Environmental Laws; (ii) any and all
reasonable costs that Landlord may incur in studying or remedying any
Contamination at or arising from the Demised Premises or the Building; (iii) any
and all reasonable costs that Landlord may incur in studying, removing,
disposing or otherwise addressing any Hazardous Substances; (iv) any and all
fines, penalties or other sanctions assessed upon Landlord; and (v) any and all
reasonable legal and professional fees and costs incurred by Landlord in
connection with the foregoing. The indemnity contained herein shall survive the
expiration or earlier termination of this Lease.
18. Tenant Alterations and Additions.
(a) Tenant shall not make or permit to be made any alterations,
improvements or additions to the Demised Premises without first obtaining on
each occasion Landlord's prior written consent (which consent Landlord agrees
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not to unreasonably withhold, condition or delay). Landlord may require that
Tenant submit plans and specifications to Landlord, for Landlord's approval or
disapproval, which approval shall not be unreasonably withheld, conditioned or
delayed. All alterations, improvements or additions shall be performed in
accordance with all legal requirements applicable thereto and in a good and
workmanlike manner with first-class materials. Tenant shall maintain and shall
require its contractors to maintain insurance reasonably satisfactory to
Landlord during the construction of any alterations, improvements or additions.
Upon completion of the alteration, improvement or addition it shall become part
of the Demised Premises and the property of Landlord without payment therefor by
Landlord and shall be surrendered to Landlord upon the expiration or earlier
termination of this Lease.
(b) To the extent permitted by law, all of Tenant's contracts and
subcontracts for such Tenant's Changes shall provide that no lien shall attach
to or be claimed against the Demised Premises or any interest therein other than
Tenant's leasehold interest in the Demised Premises, and that all subcontracts
let thereunder shall contain the same provision. Whether or not Tenant furnishes
the foregoing, Tenant agrees to hold Landlord harmless against all liens, claims
and liabilities of every kind, nature and description which may arise out of or
in any way be connected with such work. Tenant shall not permit the Demised
Premises to become subject to any mechanics', laborers' or materialmen's lien on
account of labor, material or services furnished to Tenant or claimed to have
been furnished to Tenant in connection with work of any character performed or
claimed to have been performed for the Demised Premises by, or at the direction
or sufferance of Tenant and if any such liens are filed against the Demised
Premises, Tenant shall promptly discharge the same; provided, however, that
Tenant shall have the right to contest, in good faith and with reasonable
diligence, the validity of any such lien or claimed lien if Tenant shall give to
Landlord, within fifteen (15) days after Tenant receives notice of said lien,
such security as may be reasonably satisfactory to Landlord to assure payment
thereof and to prevent any sale, foreclosure, or forfeiture of Landlord's
interest in the Demised Premises by reason of non-payment thereof; provided
further that on final determination of the lien or claim for lien, Tenant shall
immediately pay any judgment rendered, with all proper costs and charges, and
shall have the lien released and any judgment satisfied. If Tenant fails to post
such security or does not diligently contest such lien, Landlord may, without
investigation of the validity of the lien claim, discharge such lien and Tenant
shall reimburse Landlord upon demand for final costs and expenses incurred in
connection therewith, which expenses shall include any reasonable attorneys'
fees, paralegals' fees and any and all costs associated therewith, including
litigation through all trial and appellate levels and any costs in posting bond
to effect a discharge or release of the lien. Nothing contained in this Lease
shall be construed as a consent on the part of Landlord to subject the Demised
Premises to liability under any lien law now or hereafter existing of the state
in which the Demised Premises are located.
19. Fire and Other Casualty. In the event the Demised Premises are
damaged by fire or other casualty insured by Landlord, Landlord agrees to
promptly restore and repair the Demised Premises at Landlord's expense,
including the Improvements to be insured by Tenant but only to the extent of (i)
Landlord's net insurance proceeds therefore, after deduction of any costs of
collection including, but not limited to, attorneys' fees and architects' fees,
and (ii) the proceeds from the insurance required to be carried by Tenant on the
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Improvements. Notwithstanding the foregoing, in the event that the Demised
Premises are (i) in the reasonable opinion of Landlord, so destroyed that they
cannot be repaired or rebuilt within two hundred forty (240) days after the date
of such damage; or (ii) destroyed by a casualty which is not covered by
Landlord's insurance, or if such casualty is covered by Landlord's insurance but
Lender or other party entitled to insurance proceeds fails to make such proceeds
available to Landlord in an amount sufficient for restoration of the Demised
Premises, then Landlord shall give written notice to Tenant of such
determination (the "Determination Notice") within sixty (60) days of such
casualty. Either Landlord or Tenant may terminate and cancel this Lease
effective as of the date of such casualty by giving written notice to the other
party within thirty (30) days after Tenant's receipt of the Determination
Notice. Upon the giving of such termination notice, all obligations hereunder
with respect to periods from and after the effective date of termination shall
thereupon cease and terminate. If no such termination notice is given, Landlord
shall, to the extent of the available insurance proceeds, make such repair or
restoration of the Demised Premises to the approximate condition existing prior
to such casualty, promptly and in such manner as not to unreasonably interfere
with Tenant's use and occupancy of the Demised Premises (if Tenant is still
occupying the Demised Premises). Base Rent shall proportionately abate during
the time that the Demised Premises or any part thereof are unusable by reason of
any such damage thereto. The charges of any architect or engineer employed by
Landlord to pass upon any plans and specifications and to supervise and approve
any construction, or for any services rendered by the architect or engineer to
Landlord as contemplated by any of the provisions of this Lease, will be paid
from the insurance proceeds as a cost of the repair or rebuilding. The fees of
the architect or engineer will be those that are customarily paid for comparable
services. Rent will not abate pending the repairs or rebuilding except to the
extent to which Landlord receives a net sum as proceeds of rent insurance, if
any.
20. Condemnation.
(a) If all of the Demised Premises is taken or condemned for a public
or quasi-public use, or if a material portion of the Demised Premises is taken
or condemned for a public or quasi-public use and the remaining portion thereof
is not usable by Tenant for the purposes for which it was used immediately
before the taking or condemnation, this Lease shall terminate as of the earlier
of the date title to the condemned real estate vests in the condemnor or the
date on which Tenant is deprived of possession of the Demised Premises. In such
event, the Base Rent herein reserved and other sums payable hereunder shall be
apportioned and paid in full by Tenant to Landlord to that date, all Base Rent
and other sums payable hereunder prepaid for periods beyond that date shall
forthwith be repaid by Landlord to Tenant, and neither party shall thereafter
have any liability hereunder, except that any obligation or liability of either
party, actual or contingent, under this Lease which has accrued on or prior to
such termination date shall survive.
(b) If only part of the Demised Premises is taken or condemned for a
public or quasi-public use and this Lease does not terminate pursuant to Section
21(a), Landlord shall, to the extent of the award it receives, restore the
Demised Premises to a condition and to a size as nearly comparable as reasonably
possible to the condition and size thereof immediately prior to the taking, and
there shall be an equitable adjustment to the Base Rent based on the actual loss
of use of the Demised Premises suffered by Tenant from the taking.
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(c) Landlord shall be entitled to receive the entire award in any
proceeding with respect to any taking provided for in this Section, without
deduction therefrom for any estate vested in Tenant by this Lease, and Tenant
shall receive no part of such award. Nothing herein contained shall be deemed to
prohibit Tenant from making a separate claim, against the condemnor, to the
extent permitted by law, for the value of Tenant's moveable trade fixtures,
machinery and moving expenses, provided that the making of such claim shall not
and does not adversely affect or diminish Landlord's award.
(d) If this Lease ends according to subsection 20(a), the condemnation
award will be paid in the order in this subparagraph to the extent it is
sufficient:
(i) First, Landlord will be reimbursed for its reasonable,
actually incurred attorneys' fees, appraisal fees, and other reasonable
costs actually incurred in prosecuting the claim for the award;
(ii) Second, Landlord will be paid for lost Rent and the value
of the reversion as of the ending date;
(iii) Third, Tenant will be paid for its reasonable attorneys'
fees actually incurred, other reasonable, actually incurred costs
incurred in connection with its claim for the award and its adjusted
book value as of the date of the taking of its improvements (excluding
trade fixtures) made to the Demised Premises. In computing its adjusted
book value, improvements will be conclusively presumed to have been
depreciated or amortized for federal income tax purposes over their
useful lives with a reasonable salvage value;
(iv) Fourth, the balance will be divided equally between
Landlord and Tenant.
21. Tenant's Default.
(a) The occurrence of any one or more of the following events shall
constitute an "Event of Default" of Tenant under this Lease:
(i) if Tenant fails to pay Base Rent hereunder and such
failure shall continue for more than five (5) days after the date it is
due;
(ii) if Tenant fails to pay any other amount due hereunder and
such failure shall continue for more than five (5) days after Landlord
gives written notice to Tenant of such failure;
(iii) if Tenant fails to pay Base Rent on time more than three
(3) times in any period of twelve (12) months, notwithstanding that
such payments have been made within the applicable cure period;
(iv) if Tenant permits a lien to attach to the Demised
Premises in violation of the terms hereof which is not released within
fifteen (15) days after filing;
15
(v) if Tenant fails to maintain in force all policies of
insurance required by this Lease and such failure shall continue for
more than ten (10) days after Tenant receives written notice of such
failure;
(vi) if any petition is filed by or against Tenant under any
present or future section or chapter of the Bankruptcy Code, or under
any similar law or statute of the United States or any state thereof
(which, in the case of an involuntary proceeding, is not permanently
discharged, dismissed, stayed, or vacated, as the case may be, within
sixty (60) days of commencement), or if any order for relief shall be
entered against Tenant or any guarantor of this Lease in any such
proceedings;
(vii) if Tenant becomes insolvent or makes a transfer in fraud
of creditors or makes an assignment for the benefit of creditors;
(viii) if a receiver, custodian, or trustee is appointed for
the Demised Premises or for all or substantially all of the assets of
Tenant, which appointment is not vacated within sixty (60) days
following the date of such appointment; or
(ix) if Tenant fails to perform or observe any other term of
this Lease and such failure shall continue for more than thirty (30)
days after Landlord gives Tenant written notice of such failure, or, if
such failure cannot be corrected within such thirty (30) day period, if
Tenant does not commence to correct such default within said thirty
(30) day period and thereafter diligently prosecute the correction of
same to completion within a reasonable time.
(b) Upon the occurrence of any one or more Events of Default, Landlord
may, at Landlord's option, without any demand or notice whatsoever (except as
expressly required in this Section):
(i) Terminate this Lease by giving Tenant notice of
termination, in which event this Lease shall expire and terminate on
the date specified in such notice of termination and all rights of
Tenant under this Lease and in and to the Demised Premises shall
terminate. Tenant shall remain liable for all obligations under this
Lease arising up to the date of such termination, and Tenant shall
surrender the Demised Premises to Landlord on the date specified in
such notice; or
(ii) Terminate this Lease as provided in Section 21(b)(i)
hereof and recover from Tenant all damages Landlord may incur by reason
of Tenant's default, including, without limitation, an amount which, at
the date of such termination, is calculated as follows: (1) the value
of the excess, if any, of (A) the Base Rent and all other sums which
would have been payable hereunder by Tenant for the period commencing
with the day following the date of such termination and ending with the
Expiration Date had this Lease not been terminated (the "Remaining
Term"), less (B) the aggregate reasonable rental value of the Demised
Premises for the Remaining Term (which excess, if any, shall be
discounted to present value at the "Treasury Yield" as defined below
for the Remaining Term); plus (2) the costs of recovering possession of
the Demised Premises and all other expenses incurred by Landlord due to
Tenant's default, including, without limitation, reasonable attorney's
fees; plus (3) the unpaid Base Rent earned as of the date of
16
termination plus any interest and late fees due hereunder, plus other
sums of money and damages owing on the date of termination by Tenant to
Landlord under this Lease or in connection with the Demised Premises.
The amount as calculated above shall be deemed immediately due and
payable. The payment of the amount calculated in subparagraph (ii)(1)
shall not be deemed a penalty but shall merely constitute payment of
liquidated damages, it being understood and acknowledged by Landlord
and Tenant that actual damages to Landlord are extremely difficult, if
not impossible, to ascertain. "Treasury Yield" shall mean the rate of
return in percent per annum of Treasury Constant Maturities for the
length of time specified as published in document H.l5(519) (presently
published by the Board of Governors of the U.S. Federal Reserve System
titled "Federal Reserve Statistical Release") for the calendar week
immediately preceding the calendar week in which the termination
occurs. If the rate of return of Treasury Constant Maturities for the
calendar week in question is not published on or before the business
day preceding the date of the Treasury Yield in question is to become
effective, then the Treasury Yield shall be based upon the rate of
return of Treasury Constant Maturities for the length of time specified
for the most recent calendar week for which such publication has
occurred. If no rate of return for Treasury Constant Maturities is
published for the specific length of time specified, the Treasury Yield
for such length of time shall be the weighted average of the rates of
return of Treasury Constant Maturities most nearly corresponding to the
length of the applicable period specified. If the publishing of the
rate of return of Treasury Constant Maturities is ever discontinued,
then the Treasury Yield shall be based upon the index which is
published by the Board of Governors of the U.S. Federal Reserve System
in replacement thereof or, if no such replacement index is published,
the index which, in Landlord's reasonable determination, most nearly
corresponds to the rate of return of Treasury Constant Maturities. In
determining the aggregate reasonable rental value pursuant to
subparagraph (ii)(l)(B) above, the parties hereby agree that, at the
time Landlord seeks to enforce this remedy, all relevant factors should
be considered, including, but not limited to, (a) the length of time
remaining in the Remaining Term, (b) the then current market conditions
in the general area in which the Building is located, (c) the
likelihood of reletting the Demised Premises for a period of time equal
to the Remaining Term, (d) the net effective rental rates then being
obtained by landlords for similar type space of similar size in similar
type buildings in the general area in which the Building is located,
(e) the vacancy levels in the general area in which the Building is
located, (f) current levels of new construction that will be completed
during the Remaining Term and how this construction will likely affect
vacancy rates and rental rates and (g) inflation; or
(iii) Without terminating this Lease, declare immediately due
and payable the sum of the following: (1) the present value (calculated
using the "Treasury Yield") of all Base Rent due and coming due under
this Lease for the entire Remaining Term (as if by the terms of this
Lease they were payable in advance), plus (2) the cost of recovering
and reletting the Demised Premises and all other expenses incurred by
Landlord in connection with Tenant's default, plus (3) any unpaid Base
Rent and other rentals, charges, assessments and other sums owing by
Tenant to Landlord under this Lease or in connection with the Demised
Premises as of the date this provision is invoked by Landlord, plus (4)
interest on all such amounts from the date due at the Interest Rate (as
hereinafter defined), and Landlord may immediately proceed to distrain,
collect, or bring action for such sum, or may file a proof of claim in
any bankruptcy or insolvency proceedings to enforce payment thereof;
provided, however, that such payment shall not be deemed a penalty or
liquidated damages, but shall merely constitute payment in advance of
all Base Rent payable hereunder throughout the Term, and provided
17
further, however, that upon Landlord receiving such payment, Tenant
shall be entitled to receive a credit from Landlord of all rents
received by Landlord from other assignees, tenants and subtenants on
account of said Demised Premises during the remainder of the Term
(provided that the monies to which Tenant shall so become entitled
shall in no event exceed the entire amount actually paid by Tenant to
Landlord pursuant to this subsection (iii)), less all costs, expenses
and reasonable attorneys' fees of Landlord incurred but not yet
reimbursed by Tenant in connection with recovering and reletting the
Demised Premises; or
(iv) Without terminating this Lease, in its own name but as
agent for Tenant, enter into and upon and take possession of the
Demised Premises or any part thereof and any property remaining in the
Demised Premises may be removed and stored in a warehouse or elsewhere
at the cost of, and for the account of, Tenant for a period of thirty
(30) days without Landlord being deemed guilty of trespass or becoming
liable for any loss or damage which may be occasioned thereby unless
caused by Landlord's gross negligence. After such thirty (30) day
period the property shall become the property of the Landlord.
Thereafter, Landlord may, but shall not be obligated to, lease to a
third party the Demised Premises or any portion thereof as the agent of
Tenant upon such terms and conditions as Landlord may deem necessary or
desirable in order to relet the Demised Premises. The remainder of any
rentals received by Landlord from such reletting, after the payment of
any indebtedness due hereunder from Tenant to Landlord, and the payment
of any costs and expenses of such reletting, shall be held by Landlord
to the extent of and for application in payment of future rent owed by
Tenant, if any, as the same may become due and payable hereunder. If
such rentals received from such reletting shall at any time or from
time to time be less than sufficient to pay to Landlord the entire sums
then due from Tenant hereunder, Tenant shall pay any such deficiency to
Landlord. Notwithstanding any such reletting without termination,
Landlord may at any time thereafter elect to terminate this Lease for
any such previous default provided same has not been cured; or
(v) Without terminating this Lease, and with or without notice
to Tenant, enter into and upon the Demised Premises and, without being
liable for prosecution or any claim for damages therefore, maintain the
Demised Premises and repair or replace any damages thereto or do
anything or make any payment for which Tenant is responsible hereunder.
Tenant shall reimburse Landlord immediately upon demand for any
reasonable expenses which Landlord incurs in thus effecting Tenant's
compliance under this Lease and Landlord shall not be liable to Tenant
for any damages with respect thereto; or
(vi) Without liability to Tenant or any other party and
without constituting a constructive or actual eviction, suspend or
discontinue furnishing or rendering to Tenant any property, material,
labor, utilities or other service, wherever Landlord is obligated to
furnish or render the same so long as an Event of Default exists under
this Lease; or
(vii) With or without terminating this Lease, allow the
Demised Premises to remain unoccupied and collect rent from Tenant as
it comes due; or
(viii) Pursue such other remedies as are available at law or
equity.
18
(c) If this Lease shall terminate as a result of or while there exists
an uncured Event of Default hereunder, any funds of Tenant held by Landlord may
be applied by Landlord to any damages payable by Tenant (whether provided for
herein or by law) as a result of such termination or uncured Event of Default.
(d) Neither the commencement of any action or proceeding, nor the
settlement thereof, nor entry of judgment thereon shall bar Landlord from
bringing subsequent actions or proceedings from time to time, nor shall the
failure to include in any action or proceeding any sum or sums then due be a bar
to the maintenance of any subsequent actions or proceedings for the recovery of
such sum or sums so omitted.
(e) No agreement to accept a surrender of the Demised Premises and no
act or omission by Landlord or Landlord's agents during the Term shall
constitute an acceptance or surrender of the Demised Premises unless made in
writing and signed by Landlord. No re-entry or taking possession of the Demised
Premises by Landlord shall constitute an election by Landlord to terminate this
Lease unless a written notice of such intention is given to Tenant. No provision
of this Lease shall be deemed to have been waived by either party unless such
waiver is in writing and signed by the party making such waiver. Landlord's
acceptance of Base Rent in full or in part following an Event of Default
hereunder shall not be construed as a waiver of such Event of Default. No custom
or practice which may grow up between the parties in connection with the terms
of this Lease shall be construed to waive or lessen either party's right to
insist upon strict performance of the terms of this Lease, without a written
notice thereof to the other party.
(f) If an Event of Default shall occur, Tenant shall pay to Landlord,
on demand, all expenses incurred by Landlord as a result thereof, including
reasonable attorneys' fees, court costs and expenses actually incurred.
22. Landlord's Right of Entry. Tenant agrees to permit Landlord and the
authorized representatives of Landlord and of Lender to enter upon the Demised
Premises at all reasonable times for the purposes of inspecting the Demised
Premises and Tenant's compliance with this Lease, and making any necessary
repairs thereto; provided that, except in the case of an emergency, Landlord or
Lender, as the case may be, shall give Tenant reasonable prior notice of
Landlord's or Lender's intended entry upon the Demised Premises. Nothing herein
shall imply any duty upon the part of Landlord to do any work required of Tenant
hereunder, and the performance thereof by Landlord shall not constitute a waiver
of Tenant's default in failing to perform it. Landlord shall not be liable for
inconvenience, annoyance, disturbance or other damage to Tenant by reason of
making such repairs or the performance of such work in the Demised Premises or
on account of bringing materials, supplies and equipment into or through the
Demised Premises during the course thereof except to the extent caused by the
gross negligence of Landlord, and the obligations of Tenant under this Lease
shall not thereby be affected; provided, however, that Landlord shall use
reasonable efforts not to disturb or otherwise interfere with Tenant's
operations in the Demised Premises in making such repairs or performing such
work. Landlord also shall have the right to enter the Demised Premises at all
reasonable times to exhibit the Demised Premises to any prospective purchaser,
mortgagee or tenant thereof.
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23. Lender's Rights.
(a) For purposes of this Lease:
(x) "Lender" as used herein means the holder of a Mortgage;
(xi) "Mortgage" as used herein means any or all mortgages,
deeds to secure debt, deeds of trust or other instruments in the nature
thereof which may now or hereafter affect or encumber Landlord's title
to the Demised Premises, and any amendments, modifications, extensions
or renewals thereof.
(b) This Lease and all rights of Tenant hereunder are and shall be
subject and subordinate to the lien and security title of any Mortgage. Tenant
recognizes and acknowledges the right of Lender to foreclose or exercise the
power of sale against the Demised Premises under any Mortgage. In the event
Lender exercises its right to foreclose or proceed with the power of sale
against the Demised Premises, Tenant shall be allowed to remain in possession of
the Demised Premises provided Tenant is not in default hereunder.
(c) Tenant shall, in confirmation of the subordination set forth in
Section 23(b) and notwithstanding the fact that such subordination is
self-operative, and no further instrument or subordination shall be necessary,
upon demand, at any time or times, execute, acknowledge, and deliver to Landlord
or to Lender any and all instruments requested by either of them to evidence
such subordination.
(d) At any time during the Term, Lender may, by written notice to
Tenant, make this Lease superior to the lien of its Mortgage. If requested by
Lender, Tenant shall, upon demand, at any time or times, execute, acknowledge,
and deliver to Lender, any and all instruments that may be necessary to make
this Lease superior to the lien of any Mortgage.
(e) If Lender (or Lender's nominee, or other purchaser at foreclosure)
shall hereafter succeed to the rights of Landlord under this Lease, whether
through possession or foreclosure action or delivery of a new lease, Tenant
shall, if requested by such successor, attorn to and recognize such successor as
Tenant's landlord under this Lease without change in the terms and provisions of
this Lease and shall promptly execute and deliver any instrument that may be
necessary to evidence such attornment, provided that such successor shall not be
bound by (i) any payment of Base Rent for more than one month in advance, except
prepayments in the nature of security for the performance by Tenant of its
obligations under this Lease, (ii) any provision of any amendment to the Lease
to which Lender has not consented if entered into after Lender's interest in the
Demised Premises arose, (iii) the defaults of any prior landlord under this
Lease, or (iv) any offset rights arising out of the defaults of any prior
landlord under this Lease. Upon such attornment, this Lease shall continue in
full force and effect as a direct lease between each successor landlord and
Tenant, subject to all of the terms, covenants and conditions of this Lease.
(f) In the event there is a Mortgage at any time during the Term,
Landlord shall use reasonable efforts to cause the Lender to enter into a
20
subordination, nondisturbance and attornment agreement with Tenant reasonably
satisfactory to Tenant and consistent with this Section.
24. Estoppel Certificate and Financial Statement. Landlord and Tenant
agree, at any time, and from time to time, within fifteen (15) days after
receipt of written request of the other, to execute, acknowledge and deliver a
statement in writing in recordable form to the requesting party and/or its
designee certifying that: (i) this Lease is unmodified and in full force and
effect (or, if there have been modifications, that the same is in full force and
effect, as modified), (ii) the dates to which Base Rent and other charges have
been paid, (iii) whether or not, to the best of its knowledge, there exists any
failure by the requesting party to perform any term, covenant or condition
contained in this Lease, and, if so, specifying each such failure, (iv) (if such
be the case) Tenant has unconditionally accepted the Demised Premises and is
conducting its business therein, and (v) and as to such additional matters as
may be reasonably requested, it being intended that any such statement delivered
pursuant hereto may be relied upon by the requesting party and by any purchaser
of title to the Demised Premises or by any mortgagee or any assignee thereof or
any party to any sale-leaseback of the Demised Premises, or the landlord under a
ground lease affecting the Demised Premises.
25. Landlord Liability. No owner of the Demised Premises, whether or
not named herein, shall have liability hereunder after it ceases to hold title
to the Demised Premises (except for matters occurring during the period that
said owner owns the Demised Premises) provided that such successor owner has
assumed the obligations of Landlord under this Lease. Neither Landlord nor any
officer, director, shareholder, partner or principal of Landlord, whether
disclosed or undisclosed, shall be under any personal liability with respect to
any of the provisions of this Lease. IN THE EVENT LANDLORD IS IN BREACH OR
DEFAULT WITH RESPECT TO LANDLORD'S OBLIGATIONS OR OTHERWISE UNDER THIS LEASE,
TENANT SHALL LOOK SOLELY TO THE EQUITY OF LANDLORD IN THE LAND AND BUILDING FOR
THE SATISFACTION OF TENANT'S REMEDIES. IT IS EXPRESSLY UNDERSTOOD AND AGREED
THAT LANDLORD'S LIABILITY UNDER THE TERMS, COVENANTS, CONDITIONS, WARRANTIES AND
OBLIGATIONS OF THIS LEASE SHALL IN NO EVENT EXCEED LANDLORD'S EQUITY INTEREST IN
THE BUILDING.
26. Notices. Any notice required or permitted to be given or served by
either party to this Lease shall be deemed given when made in writing, and
either (i) personally delivered, (ii) deposited with the United States Postal
Service, postage prepaid, by registered or certified mail, return receipt
requested, or (iii) delivered by licensed overnight delivery service providing
proof of delivery, properly addressed to the address set forth in Section 1(k)
(as the same may be changed by giving written notice of the aforesaid in
accordance with this Section). If any notice mailed is properly addressed with
appropriate postage but returned for any reason, such notice shall be deemed to
be effective notice and to be given on the date of mailing.
27. Brokers. Tenant represents and warrants to Landlord that Tenant has
not engaged or had any conversations or negotiations with any broker, finder or
other third party concerning the leasing of the Demised Premises to Tenant who
would be entitled to any commission or fee based on the execution of this Lease.
Tenant hereby indemnifies Landlord against and from any claims for any brokerage
commissions and all costs, expenses and liabilities in connection therewith,
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including, without limitation, reasonable attorneys' fees and expenses, for any
breach of the foregoing. The foregoing indemnification shall survive the
termination of this Lease for any reason.
28. Assignment and Subleasing.
(a) Tenant may not assign, mortgage, pledge, encumber or otherwise
transfer this Lease, or any interest hereunder, or sublet the Demised Premises,
in whole or in part, without on each occasion first obtaining the prior express
written consent of Landlord, which consent Landlord shall not unreasonably
withhold, condition or delay. For purposes of this Section, by way of example
and not limitation, Landlord shall be deemed to have reasonably withheld consent
if Landlord determines (i) that the prospective assignee or subtenant is not of
a reasonable financial strength in Landlord's reasonable opinion, (ii) that the
prospective assignee or subtenant has a poor business reputation, or (iii) that
the proposed use of the Demised Premises by such prospective assignee or
subtenant (including, without limitation, a use involving the use or handling of
Hazardous Substances) will negatively affect the value or marketability of the
Building or the Demised Premises.
(b) Notwithstanding Section 28(a) above, provided that there then
exists no Event of Default under this Lease which remains uncured, Tenant shall
have the right, upon thirty (30) days' prior written notice to Landlord but
without Landlord's prior consent, (i) to sublet all or part of the Demised
Premises to any related entity which controls Tenant, is controlled by Tenant or
is under common control with Tenant; or (ii) to assign this Lease to a successor
entity into which or with which Tenant is merged or consolidated or which
acquired substantially all of Tenant's assets and property, provided that such
successor entity assumes substantially all of the obligations and liabilities of
Tenant (including, without limitation, all of those obligations of Tenant
arising under this Lease) and, after such transaction, shall have assets,
capitalization, tangible net worth and creditworthiness at least equal to the
assets, capitalization, tangible net worth and creditworthiness of Tenant as of
the Lease Date and/or the date of assignment or subleasing as determined by
generally accepted accounting principles. For the purpose hereof, (i) "control"
shall mean ownership of not less than fifty percent (50%) of all the voting
stock or legal and equitable interest in such entity, and (ii) "tangible net
worth" shall mean the excess of the value of tangible assets (i.e. assets
excluding those which are intangible such as goodwill, patents and trademarks)
over liabilities. Any sublease or assignment pursuant to and in compliance with
this subsection (b) shall be referred to herein as a "Related Assignment". With
respect to any Related Assignment, Tenant shall provide in its notice to
Landlord such information as may be reasonably required by Landlord to determine
that the requirements of this subsection (b) have been satisfied.
(c) Except with respect to a Related Assignment, if Tenant desires to
assign this Lease or sublet the Demised Premises or any part thereof, Tenant
shall give Landlord written notice no later than thirty (30) days in advance of
the proposed effective date of any proposed assignment or sublease, specifying
(i) the name and business of the proposed assignee or sublessee, (ii) the amount
and location of the space within the Demised Premises proposed to be subleased,
(iii) the proposed effective date and duration of the assignment or subletting
and (iv) the proposed rent or consideration to be paid to Tenant by such
assignee or sublessee. Tenant shall promptly supply Landlord with financial
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statements and other information as Landlord may reasonably request to evaluate
the proposed assignment or sublease. Landlord shall have a period of thirty (30)
days following receipt of such notice and other information requested by
Landlord within which to notify Tenant in writing that Landlord elects: (i) to
terminate this Lease as to the space so affected as of the proposed effective
date set forth in Tenant's notice, in which event Tenant shall be relieved of
all further obligations hereunder as to such space, except for obligations which
expressly survive the termination hereof; or (ii) to permit Tenant to assign or
sublet such space; provided, however, that, if the rent rate agreed upon between
Tenant and its proposed subtenant or assignee is greater than the rent rate that
Tenant must pay Landlord hereunder for that portion of the Demised Premises, or
if any consideration shall be promised to or received by Tenant in connection
with such proposed assignment or sublease (in addition to rent), then one half
(1/2) of such excess rent and other consideration (after payment of brokerage
commissions, attorneys' fees and other disbursements reasonably incurred by
Tenant for such assignment and subletting if acceptable evidence of such
disbursements is delivered to Landlord) shall be considered additional rent (the
"Additional Rent") owed by Tenant to Landlord, and shall be paid by Tenant to
Landlord, in the case of excess rent, in the same manner that Tenant pays Base
Rent and, in the case of any other consideration, within ten (10) business days
after receipt thereof by Tenant; or (iii) to refuse, in Landlord's reasonable
discretion (taking into account all relevant factors including, without
limitation, the factors set forth in Section 28(a) above), to consent to
Tenant's assignment or subleasing of such space and to continue this Lease in
full force and effect as to the entire Demised Premises. If Landlord should fail
to notify Tenant in writing of such election within the aforesaid thirty (30)
day period, Landlord shall be deemed to have elected option (iii) above. Tenant
agrees to reimburse Landlord for reasonable legal fees and any other reasonable
costs incurred by Landlord in connection with any requested assignment or
subletting, and such payments shall not be deducted from the Additional Rent
owed to Landlord pursuant to subsection (ii) above. Tenant shall deliver to
Landlord copies of all documents executed in connection with any permitted
assignment or subletting, which documents shall be in form and substance
reasonably satisfactory to Landlord and which shall require such assignee to
assume performance of all terms of this Lease on Tenant's part to be performed.
(d) No acceptance by Landlord of any rent or any other sum of money
from any assignee, sublessee or other category of transferee shall be deemed to
constitute Landlord's consent to any assignment, sublease, or transfer.
Permitted subtenants or assignees shall become liable directly to Landlord for
all obligations of Tenant hereunder, without, however, relieving Tenant of any
of its liability hereunder. No such assignment, subletting, occupancy or
collection shall be deemed the acceptance of the assignee, tenant or occupant,
as Tenant, or a release of Tenant from the further performance by Tenant of
Tenant's obligations under this Lease. Any assignment or sublease consented to
by Landlord shall not relieve Tenant (or its assignee) from obtaining Landlord's
consent to any subsequent assignment or sublease.
29. Termination or Expiration.
(a) No termination of this Lease prior to the normal ending thereof, by
lapse of time or otherwise, shall affect Landlord's right to collect rent for
the period prior to termination thereof.
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(b) At the expiration or earlier termination of the Term of this Lease,
Tenant shall surrender the Demised Premises and all improvements, alterations
and additions thereto, and keys therefor to Landlord, clean and neat, and in the
same condition as at the Lease Commencement Date, excepting normal wear and
tear, condemnation and casualty other than that required to be insured against
by Tenant hereunder.
(c) If Tenant remains in possession of the Demised Premises after
expiration of the Term, with or without Landlord's acquiescence and without any
express agreement of the parties, Tenant shall be a tenant-at-sufferance at one
hundred fifty percent (150%) of the Base Rent in effect at the end of the Term.
There shall be no renewal of this Lease by operation of law. In addition to the
foregoing, Tenant shall be liable for all damages, direct and consequential,
incurred by Landlord as a result of such holdover. No receipt of money by
Landlord from Tenant after the termination of this Lease or Tenant's right of
possession of the Demised Premises shall reinstate, continue or extend the Term
or Tenant's right of possession.
30. Late Payments. In the event any installment of rent, inclusive of
Base Rent or other sums due hereunder, if any, is not paid within five (5) days
after the due date therefor, Tenant shall pay an administrative fee (the
"Administrative Fee") equal to five percent (5%) of such past due amount, plus
interest on the amount past due at the lesser of (i) the maximum interest rate
allowed by law or (ii) a rate of twelve percent (12%) per annum (the "Interest
Rate"), in order to defray the additional expenses incurred by Landlord as a
result of such late payment. The Administrative Fee is in addition to, and not
in lieu of, any of the Landlord's remedies hereunder.
31. Quiet Enjoyment. So long as there is no uncured Event of Default
hereunder, Landlord agrees that Tenant shall have the right to quietly use and
enjoy the Demised Premises for the Term in accordance with the terms and
conditions hereof.
32. Miscellaneous.
(a) The parties hereto hereby covenant and agree that Landlord shall
receive the Base Rent and all other sums payable by Tenant hereinabove provided
as net income from the Demised Premises, without any abatement (except as set
forth in Section 19 and Section 20), reduction, set-off, counterclaim, defense
or deduction whatsoever.
(b) If any clause or provision of this Lease is determined to be
illegal, invalid or unenforceable under present or future laws effective during
the Term, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and that in lieu of
such illegal, invalid or unenforceable clause or provision there shall be
substituted a clause or provision as similar in terms to such illegal, invalid
or unenforceable clause or provision as may be possible and be legal, valid and
enforceable,
(c) All rights, powers, and privileges conferred hereunder upon the
parties hereto shall be cumulative, but not restrictive to those given by law.
(d) TIME IS OF THE ESSENCE FOR THIS LEASE.
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(e) No failure of Landlord or Tenant to exercise any power given
Landlord or Tenant hereunder or to insist upon strict compliance by Landlord or
Tenant with its obligations hereunder, and no custom or practice of the parties
at variance with the terms hereof shall constitute a waiver of Landlord's or
Tenant's rights to demand exact compliance with the terms hereof.
(f) This Lease contains the entire agreement of the parties hereto as
to the subject matter of this Lease and no prior representations, inducements,
letters of intent, promises or agreements, oral or otherwise, between the
parties not embodied herein shall be of any force and effect. Any future
amendment to this Lease must be in writing and signed by the parties hereto. The
masculine (or neuter) pronoun, singular number shall include the masculine,
feminine and neuter gender and the singular and plural number.
(g) This contract shall create the relationship of landlord and tenant
between Landlord and Tenant; no estate shall pass out of Landlord; Tenant's
interest is not subject to levy and sale, and is not assignable by Tenant except
as expressly set forth herein.
(h) Tenant shall have the right to include in its required securities
filing a copy of this Lease, as required by applicable federal securities laws
and may record a memorandum of this Lease on the real property records.
(i) The captions of this Lease are for convenience only and are not a
part of this Lease, and do not in any way define, limit, describe or amplify the
terms or provisions of this Lease or the scope or intent thereof.
(j) This Lease may be executed in multiple counterparts, each of which
shall constitute an original, but all of which taken together shall constitute
one and the same agreement.
(k) This Lease shall be interpreted under the laws of the State where
the Demised Premises are located.
(l) The parties acknowledge that this Lease is the result of
negotiations between the parties, and in construing any ambiguity hereunder no
presumption shall be made in favor of either party. No inference shall be made
from any item which has been stricken from this Lease other than the deletion of
such item.
33. No Offer Until Executed. The submission of this Lease by Landlord
to Tenant for examination or consideration does not constitute an offer by
Landlord to lease the Demised Premises and this Lease shall become effective, if
at all, only upon the execution and delivery thereof by Landlord and Tenant.
Execution and delivery of this Lease by Tenant to Landlord constitutes an offer
to lease the Demised Premises on the terms contained herein. The offer by Tenant
will be irrevocable until 6:00 p.m. Eastern time for fifteen (15) days after the
date of execution of this Lease by Tenant and delivery to Landlord.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
under seals, the day and year first above written.
LANDLORD:
Date: October 3, 2003 Middle Road Properties, LLC, (SEAL)
a North Carolina limited liability company
By: /s/ John D. Soffe
-------------------------------------
Name: John D. Soffe
Title:
TENANT:
Date: October 3, 2003 M.J. SOFFE Co., (SEAL)
a North Carolina corporation
By: /s/ Robert W. Humphreys
-------------------------------------
Name: Robert W. Humphreys
Title:
26
EXHIBIT A
Demised Premises