<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) June 13, 1997
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
----------------------------------------------------
(Exact name of Registrant as specified in charter)
MARYLAND 33-99994 13-3726306
--------------- ---------------------- --------------------
(State of (Commission File No.) (IRS Employer
organization) Identification No.)
50 Rockefeller Plaza, 2nd Floor
New York, New York 10020
-----------------------------------------
(Address of principal executive offices)
(212) 492-1100
--------------------------------
(Registrant's telephone number)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
DESCRIPTION OF PROPERTY LEASED TO PAGG CORPORATION
General
On July 8, 1997, Corporate Property Associates 12 Incorporated
(the "Company"), through a wholly-owned subsidiary (the "PAGG Subsidiary"),
purchased from PAGG Corporation ("PAGG") a manufacturing, office, research and
development facility containing approximately 108,125 square feet and located in
Milford, Massachusetts (the "PAGG Facility"). The PAGG Facility is suitable and
adequate for use as a manufacturing, office, research and development facility.
The Cost of the PAGG Facility will be depreciated over a 40-year period on a
straight-line basis.
Concurrently with the acquisition of the PAGG Facility by the
PAGG Subsidiary, the PAGG Subsidiary entered into a net lease (the "PAGG Lease")
with PAGG for the PAGG Facility. Material terms of the PAGG Lease are described
below.
PURCHASE TERMS
The cost to the Company of acquiring the PAGG Facility,
including the Acquisition Fee payable to an Affiliate of the Advisor, was
$5,549,738, which amount is less than the leased fee Appraised Value of the PAGG
Facility. An Acquisition Fee of $138,738 was paid to W. P. Carey & Co., Inc., an
Affiliate of the Advisor. W. P. Carey & Co. will receive a Subordinated
Acquisition Fee of $110,995, payable over an eight year period, but only if the
Company satisfies the Preferred Return.
DESCRIPTION OF THE LEASE
General
The PAGG Lease is absolutely net and bondable and in normal
financeable form. PAGG will pay maintenance, insurance, taxes and all other
expenses associated with the operation and maintenance of the PAGG Facility,
except for the Company's debt service and income taxes. In the opinion of
management of the Company, the PAGG Facility is adequately covered by insurance.
Term
The initial term of the PAGG Lease (the "Initial Term") is 12
years, followed by two five-year renewal terms (each, an "Extended Term") at the
option of PAGG.
Rent
The initial annual rent ("Basic Rent") under the PAGG Lease is
$590,000 payable quarterly in advance, in equal installments of $147,500.
Additionally, the PAGG Lease provides that at the end of the fourth year of the
Initial Term and at the end of each additional fourth year of the Initial Term
and each Extended Term thereafter, the annual rent for each of the next four
years of the term will be adjusted by a formula that would increase the annual
rent by the cumulative increase in the Consumer Price Index over the immediately
preceding four years, but not in excess of 4% for any one year during such four
year period.
DESCRIPTION OF FINANCING
The Company has obtained a commitment from First Allmerica
Financial Life Company for a ten (10) year $3,200,000 mortgage loan at an
interest rate of 7.70% per annum with monthly payments of principal and interest
in the amount of $26,171.73 based on a 20 year amortization schedule.
<PAGE> 3
DESCRIPTION OF PAGG
PAGG Corporation provides turnkey electronic manufacturing
services to a variety of industries. Originally a vendor of electronic
connectors, PAGG has integrated into a contract manufacturer for the electronic
business. In a growing trend, manufacturers of electronic products such as
computers and scanners, outsource the production of a number of the components
and sub-assemblies required for their finished product. Manufacturing cables
and circuit boards, the Company is a turnkey electronics manufacturer, capable
of designing equipment to specification as well as providing order fulfillment
to ship to its customers.
The following is a summary of selected financial data for PAGG Corporation for
the six months ended April 30, 1997:
CONSOLIDATED STATEMENT OF EARNINGS DATA
APRIL 30, 1997
--------------
Net sales $9,500,586
Cost of sales 9,153,784
Income (loss) from operations (996,966)
Net income (loss) (933,370)
CONSOLIDATED BALANCE SHEET DATA
AS OF APRIL 30, 1997
---------------------
Balance Sheet Data:
Cash and cash equivalents $ 117,519
Accounts receivable 4,737,428
Merchandise inventories 3,730,118
Total assets 18,691,261
Total liabilities 14,273,266
Stockholders' equity 4,724,995
<PAGE> 4
DESCRIPTION OF PROPERTY LEASED TO BON-TON DEPARTMENT STORES, INC.
General
On April 10, 1997, Corporate Property Associates 12
Incorporated (the "Company"), through a wholly-owned subsidiary (the "Bon-Ton
Subsidiary"), purchased from Bon-Ton Department Stores, Inc. ("Bon-Ton") a
distribution facility containing approximately 325,000 square feet and located
in Allentown, Pennsylvania (the "Allentown Facility") and a retail facility
containing approximately 80,884 square feet and located in Johnstown,
Pennsylvania (the "Johnstown Facility" ) and together with the Allentown
Facility, (the "Bon-Ton Facilities"). The Bon-Ton Facilities are suitable and
adequate for use as distribution and retail facilities. The Cost of the Bon-Ton
Facilities will be depreciated over a 40-year period on a straight-line basis.
Concurrently with the acquisition of the Bon-Ton Facility by
the Bon-Ton Subsidiary, the Bon-Ton Subsidiary entered into a net lease (the
"Bon-Ton Lease") with Bon-Ton for the Bon-Ton Facilities. The obligations of
Bon-Ton under the Bon-Ton Lease were guaranteed by The Bon-Ton Stores, Inc., the
sole shareholder of the parent company of Bon-Ton. Material terms of the Bon-Ton
Lease are described below.
PURCHASE TERMS
The cost to the Company of acquiring the Bon-Ton Facilities,
including the Acquisition Fee payable to an Affiliate of the Advisor, was
$12,041,885, which amount is less than the leased fee Appraised Value of the
Bon-Ton Facility. An Acquisition Fee of $301,017 was paid to W. P. Carey & Co.,
Inc., an Affiliate of the Advisor. W. P. Carey & Co. will receive a Subordinated
Acquisition Fee of $240,868, payable over an eight year period, but only if the
Company satisfies the Preferred Return.
DESCRIPTION OF THE LEASE
General
The Bon-Ton Lease is absolutely net and bondable and in normal
financeable form. Bon-Ton will pay maintenance, insurance, taxes and all other
expenses associated with the operation and maintenance of the Bon-Ton Facility,
except for the Company's debt service and income taxes. In the opinion of
management of the Company, the Bon-Ton Facility is adequately covered by
insurance.
Term
The initial term of the Bon-Ton Lease (the "Initial Term") is
20 years, followed by six five-year renewal terms (each, an "Extended Term") at
the option of Bon-Ton.
Rent
The initial annual rent ("Basic Rent") under the Bon-Ton Lease
is $1,270,750 payable quarterly in advance, in equal installments of
$317,687.50. Additionally, the Bon-Ton Lease provides that at the end of the
third year of the Initial Term and at the end of each additional third year of
the Initial Term the annual rent for each of the next three years of the term
will be adjusted by a formula that would increase the annual rent by the
cumulative increase in the Consumer Price Index over the immediately preceding
three years, but not in excess of 3% for any one year during such three year
period. During each Extended Term, the annual rent for the Allentown Facility
will continue to increase as provided in the foregoing sentence and the annual
rent for the Johnstown Facility will be the sum of $350,000 and 1.5% of gross
sales in excess of $12,000,000.
<PAGE> 5
Right of First Refusal
The Bon-Ton Lease provides Bon-Ton with a right of first
refusal to purchase the Bon-Ton Facilities. In the event the leased premises are
contracted for sale by the Company to a third party, the Company shall give
written notice to Bon-Ton of such sale or provide Bon-Ton with a copy of the
executed contract of sale. Bon-Ton has the option to elect to purchase the
Bon-Ton Facilities for the period of 90 days following receipt of such notice or
30 days from receipt of an executed sales contract, at a price equal to the
contract price agreed to between the Company and the third party. Bon-Ton may
exercise this right upon each proposed sale of the Bon-Ton Facility within the
first fifteen years of the Bon-Ton Lease and may exercise this right only once
after the fifteen year of the Bon-Ton Lease.
DESCRIPTION OF FINANCING
The Company has obtained a commitment from Bank United to
provide a limited recourse $6,900,000 mortgage loan. The loan will be for an
initial term of 3 years, interest only at a floating rate of interest,
adjustable monthly to the 1 month London Interbank Offered Rate plus 1.90%. The
Company has the right to convert the loan to a fixed rate of interest based on
5, 7 or 10 year U.S. Treasury Security plus 1.90% and, in such event, the term
of the loan will be extended for up to 8, 10 or 13 years from the date of
closing depending on the term of the U.S. Treasury Security selected by the
Company. Upon such conversion, principal and interest will be payable based upon
a 20-year amortization schedule.
DESCRIPTION OF BON-TON DEPARTMENT STORES, INC.
The Bon-Ton Department Stores is a publicly traded regional
department store chain. The Company operates 64 department stores located
primarily in PA, NY, MD, WV, NJ and GA.
The company's stores, which are typically anchor tenants of
shopping malls, carry moderate to better brand names fashion and accessories for
women, men and children as well as cosmetics, jewelry, shoes, china, linens,
housewares, gifts and other products.
The following is a summary of selected financial data for Bon-Ton over the last
three years:
CONSOLIDATED STATEMENT OF EARNINGS DATA
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------------------
February 1, February 3, January 28,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $626,482,000 $607,357,000 $494,908,000
Income (loss) from operations 26,447,000 (6,247,000) 26,668,000
Net income (loss) 6,811,000 (9,203,000) 13,630,000
Earnings (loss) per share $ 0.61 $ (0.83) $ 1.23
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
AS OF
----------------------------------
February 1, February 3,
1997 1996
------------ -----------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents $ 6,516,000 $ 6,941,000
Merchandise inventories 161,191,000 141,741,000
Total assets 341,252,000 331,173,000
Total liabilities 229,767,000 226,999,000
Common stock 83,000 83,000
Common stock - Class A 30,000 30,000
Stockholders' equity 111,485 104,174
</TABLE>
<PAGE> 6
DESCRIPTION OF PROPERTY LEASED TO THE VERMONT TEDDY BEAR COMPANY
General
On July 18, 1997, Corporate Property Associates 12
Incorporated (the "Company"), through a wholly-owned subsidiary (the "Teddy
Subsidiary"), purchased from The Vermont Teddy Bear Company ("Teddy") a
manufacturing, retail, tourist destination and office facility located in
Shelbourne, Vermont (the "Teddy Facility"). The Teddy Facility is suitable and
adequate for use as manufacturing, retail, tourist destination and office
facility. The Cost of the Teddy Facility will be depreciated over a 40-year
period on a straight-line basis.
Concurrently with the acquisition of the Teddy Facility by the
Teddy Subsidiary, the Teddy Subsidiary entered into a net lease (the "Teddy
Lease") with Teddy for the Teddy Facility. Material terms of the Teddy Lease are
described below.
PURCHASE TERMS
The cost to the Company of acquiring the Teddy Facility,
including the Acquisition Fee payable to an Affiliate of the Advisor, was
$5,863,874, which amount is less than the leased fee Appraised Value of the
Teddy Facility. An Acquisition Fee of $146,597 was paid to W. P. Carey & Co.,
Inc., an Affiliate of the Advisor. W. P. Carey & Co. will receive a Subordinated
Acquisition Fee of $117,277, payable over an eight year period, but only if the
Company satisfies the Preferred Return.
WARRANTS
The Teddy Subsidiary was issued a warrant to purchase 150,000
shares of the common stock of Teddy at the average closing price of the common
stock as quoted on NASDAQ for the thirty day period commencing on July 3, 1997
and ending August 2, 1997.
DESCRIPTION OF THE LEASE
General
The Teddy Lease is absolutely net and bondable and in normal
financeable form. Teddy will pay maintenance, insurance, taxes and all other
expenses associated with the operation and maintenance of the Teddy Facility,
except for the Company's debt service and income taxes. In the opinion of
management of the Company, the Teddy Facility is adequately covered by
insurance.
Term
The initial term of the Teddy Lease (the "Initial Term") is 20
years, followed by three five-year renewal terms (each, an "Extended Term") at
the option of Teddy.
Rent
The initial annual rent ("Basic Rent") under the Teddy Lease
is $652,400 payable quarterly in advance, in equal installments of $163,100.
Additionally, the Teddy Lease provides that at the end of the third year of the
Initial Term and at the end of each additional third year of the Initial Term
and Extended Term the annual rent for each of the next three years of the term
will be adjusted by a formula that would increase the annual rent by the
cumulative increase in the Consumer Price Index over the immediately preceding
three years, but not in excess of 4% for any one year during such three year
period.
<PAGE> 7
Right of First Refusal
The Teddy Lease provides Teddy with a right of first refusal
to purchase the Teddy Facilities. In the event the leased premises are
contracted for sale by the Company to a third party, the Company shall give
written notice to Teddy of such sale. Teddy has the option to elect to purchase
the Teddy Facilities for the period of 30 days following receipt of such notice
at a price equal to the contract price agreed to between the Company and the
third party. Teddy may exercise this right upon each proposed sale of the Teddy
Facility within the first ten years of the Teddy Lease and may exercise this
right only once after the tenth year of the Teddy Lease.
DESCRIPTION OF FINANCING
The Company has obtained financing from Vermont National Bank
for a ten (10) year $3,311,508.74 mortgage loan (the "Loan") at an initial rate
of interest of 8.75% per annum which interest rate may be increased by not more
than .50% per year commencing on the first day of the sixth (6th) year of the
Loan (the "Fifth Year Anniversary"). The Loan shall require the payment of
principal and interest based upon an amortization schedule of not less than
twenty (20) years for the first five (5) years of the Loan and beginning upon
the Fifth Year Anniversary and each year anniversary thereafter, the payments
will be reamortized using the interest rate in effect for that year, based upon
the remaining amortization.
DESCRIPTION OF THE VERMONT TEDDY BEAR COMPANY
The Vermont Teddy Bear Co., Inc. designs, manufactures and
directly markets American-made teddy bears and related products. The Company's
growth has been fueled primarily through its Bear-Grams marketing concept of a
customer sending a personalized teddy bear to celebrate important life events
and holidays with family members, friends and business associates. The Company
offers teddy bears in a variety of sizes and colors, as well as approximately
100 different teddy bear outfits to further personalize the Bear-Gram. Founded
in 1982, the Company has grown to $17 million in annual sales and enjoys strong
brand recognition and distribution in the Northeastern region of the country.
The following is a summary of selected financial data for Teddy over the last
three years:
CONSOLIDATED STATEMENT OF EARNINGS DATA
<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED JUNE 30,
MARCH 31, -----------------------------
1997 1996 1995
---------- ----------- -----------
<S> <C> <C> <C>
Net revenues $5,330,093 $17,039,618 $20,044,796
Costs of goods sold 2,222,211 7,309,038 9,101,028
Gross profits 3,107,882 9,730,580 10,943,768
Selling, general and administative expenses 3,381,623 9,241,809 13,463,631
Net income (loss) $ (713,960) $ 151,953 $(2,494,477)
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
AS OF AS OF JUNE 30,
MARCH 31, -----------------------------
1997 1996 1995
---------- ----------- -----------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents $ 1,089,713 $ 1,121,500 $ 1,070,862
Net accounts receivable 26,057 131,550 122,679
Inventories 3,566,517 1,974,731 3,042,484
Total assets 15,739,221 14,239,272 15,361,544
Total indebtedness 8,501,586 6,274,993 7,549,984
Common stock 258,638 258,638 258,625
Stockholders' equity $ 7,237,685 $ 7,964,279 $ 7,811,560
</TABLE>
<PAGE> 8
DESCRIPTION OF PROPERTY LEASED TO SILGAN CONTAINERS CORPORATION
General
On June 13, 1997, Corporate Property Associates 12
Incorporated (the "Company"), through a wholly-owned subsidiary (the "Silgan
Subsidiary"), purchased from Silgan Containers Corporation ("Silgan") an office
and manufacturing facility containing approximately 66,596 square feet and a
warehouse facility containing approximately 120,950 square feet and located in
Menomonie, Wisconsin (the "Menomonie Facilities"). Additionally, on June 13,
1997, the Company through the Silgan Subsidiary purchased from Northern Can
Systems, Inc. an office and laboratory building containing approximately 40,835
square feet and located in Oconomowoc, Wisconsin (the "Oconomowoc Facility" )
and together with the Menomonie Facility, (the "Silgan Facilities"). The Silgan
Facilities are suitable and adequate for use as manufacturing, office, warehouse
and laboratory facilities. The Cost of the Silgan Facilities will be depreciated
over a 40-year period on a straight-line basis.
Concurrently with the acquisition of the Silgan Facilities by
the Silgan Subsidiary, the Silgan Subsidiary entered into a net lease (the
"Silgan Lease") with Silgan for the Silgan Facilities. Material terms of the
Silgan Lease are described below.
PURCHASE TERMS
The cost to the Company of acquiring the Silgan Facilities,
including the Acquisition Fee payable to an Affiliate of the Advisor, was
$8,505,000, which amount is less than the leased fee Appraised Value of the
Silgan Facility. An Acquisition Fee of $213,889 was paid to W. P. Carey & Co.,
Inc., an Affiliate of the Advisor. W. P. Carey & Co. will receive a Subordinated
Acquisition Fee of $171,111, payable over an eight year period, but only if the
Company satisfies the Preferred Return.
DESCRIPTION OF THE LEASE
General
The Silgan Lease is absolutely net and bondable and in normal
financeable form. Silgan will pay maintenance, insurance, taxes and all other
expenses associated with the operation and maintenance of the Silgan Facility,
except for the Company's debt service and income taxes. In the opinion of
management of the Company, the Silgan Facility is adequately covered by
insurance.
Term
The initial term of the Silgan Lease (the "Initial Term") is
15 years, followed by three five-year renewal terms (each, an "Extended Term")
at the option of Silgan.
Rent
The initial annual rent ("Basic Rent") under the Silgan Lease
is $893,200 payable quarterly in advance, in equal installments of $223,300.
Additionally, the Silgan Lease provides that at the end of the fifth year of the
Initial Term and at the end of each additional fifth year of the Initial Term
and each Extended Term thereafter, the annual rent for each of the next five
years of the term will be adjusted by a formula that would increase the annual
rent by the cumulative increase in the Consumer Price Index over the immediately
preceding five years.
<PAGE> 9
DESCRIPTION OF FINANCING
The Company is seeking mortgage financing for the Silgan
Facilities, but the Company has not yet obtained a commitment with respect to
any such mortgage financing. There is no guaranty that the Company will obtain
financing or obtain financing on terms adequate to the Company.
DESCRIPTION OF SILGAN CORPORATION
The Silgan Corporation is a leading North American manufacturer of
consumer goods packaging products, producing steel and aluminum containers for
human and pet food, custom design plastic containers for personal care, health,
food, pharmaceutical and household chemical products and specialty packaging
items, including metal caps and closures, plastic bowl and paper containers
used by processors in the food industry.
The following is a summary of selected financial data for Silgan Corporation
over the last three years:
CONSOLIDATED STATEMENT OF EARNINGS DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1996 1995 1994
-------------- -------------- ------------
<S> <C> <C> <C>
Net sales $1,405,742,000 $1,101,905,000 $861,374,000
Cost of goods sold 1,222,976,000 970,491,000 748,290,000
Gross Profits 182,766,000 131,414,000 113,084,000
Selling, general and administrative expenses 58,058,000 45,734,000 37,160,000
Income from operations 124,710,000 70,935,000 59,195,000
Net income $ 32,319,000 $ 6,806,000 $ 12,053,000
</TABLE>
CONSOLIDATED BALANCE SHEET DATA
<TABLE>
<CAPTION>
AS OF
------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents $ 947,000 $ 2,092,000
Net accounts receivable 101,436,000 109,929,000
Total assets 900,369,000 888,723,000
Total indebtedness 985,128,000 875,863,000
Common stock -- --
Stockholders' equity (deficit) $(84,759,000) $ 12,860,000
</TABLE>
<PAGE> 10
Item 7. Financial Statements and Exhibits
(b) Pro Forma financial information
Corporate Property Associates 12 Incorporated and Subsidiaries
Pro Forma Consolidated Balance Sheet
March 31, 1997
(Unaudited)
Pro forma adjustments
---------------------
<TABLE>
<CAPTION>
Vermont
Historical Teddy Bear (A) PAGG (B) Silgan Containers (C) Bon-Ton Stores (D)
---------- -------------- -------- --------------------- ------------------
<S> <C> <C> <C> <C> <C>
Assets:
Land and buildings $124,969,391 $5,863,874 $5,549,378 $8,505,000 $12,041,885
Accumulated depreciation (1,862,767)
----------------------------------------------------------------------------------
Real estate accounted for
under the operating method 123,106,624 5,863,874 5,549,378 8,505,000 12,041,885
Net investment in direct
financing leases 40,875,200
Equity investments 16,327,820
Cash and cash equivalents 47,736,329 (2,435,088) (2,238,383) (8,333,889) (4,901,017)
Other assets 3,475,062
----------------------------------------------------------------------------------
Total assets $231,521,035 $3,428,786 $3,310,995 $171,111 $7,140,868
==================================================================================
Liabilities:
Limited recourse mortgage
notes payable $55,353,631 $3,311,509 $3,200,000 $6,900,000
Accrued interest payable 529,705
Accrued expenses and
accounts payable 200,683
Accounts payable to affiliates 3,650,692
Deferred acquisition fees
payable to affiliates 4,238,591 117,277 110,995 $171,111 240,868
Prepaid rental income and
security deposits 2,970,914
Dividends payable 2,034,989
----------------------------------------------------------------------------------
Total liabilities 68,979,205 3,428,786 3,310,995 171,111 7,140,868
==================================================================================
Shareholders' equity:
Common stock 18,557
Additional paid-in capital 165,414,232
Distributions in excess of
accumulated earnings (2,721,471)
----------------------------------------------------------------------------
162,711,318
Less, treasury stock (169,488)
----------------------------------------------------------------------------
Total shareholders' equity 162,541,830
----------------------------------------------------------------------------
Total liabilities and
shareholders' equity $231,521,035 $3,428,786 $3,310,995 $171,111 $7,140,868
============================================================================
ETEC
Childtime Childcare (E) Scott Companies (F) Spectrian (G) Modification (H) Pro Forma
----------------------- ------------------- ------------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
Assets:
Land and buildings $6,048,000 $4,000,000 $166,977,528
Accumulated depreciation
Real estate accounted for (1,862,767)
under the operating method 6,048,000 - - 4,000,000 165,114,761
---------------------------------------------------------------------------------------------
Net investment in direct
financing leases 40,875,200
Equity investments 16,327,820
Cash and cash equivalents (6,048,000) 10,300,000 10,000,000 (4,000,000) 40,079,952
Other assets 3,475,062
---------------------------------------------------------------------------------------------
Total assets - $10,300,000 $10,000,000 - $265,872,795
=============================================================================================
Liabilities:
Limited recourse mortgage
notes payable $10,300,000 $10,000,000 $89,065,140
Accrued interest payable 529,705
Accrued expenses and -
accounts payable 200,683
Accounts payable to affiliates 3,650,692
Deferred acquisition fees -
payable to affiliates 4,878,842
Prepaid rental income and -
security deposits 2,970,914
Dividends payable 2,034,989
---------------------------------------------------------------------------------------------
Total liabilities - 10,300,000 10,000,000 - 103,330,965
---------------------------------------------------------------------------------------------
Shareholders' equity:
Common stock 18,557
Additional paid-in capital 165,414,232
Distributions in excess of
accumulated earnings (2,721,471)
---------------------------------------------------------------------------------------------
162,711,318
Less, treasury stock (169,488)
---------------------------------------------------------------------------------------------
Total shareholders' equity 162,541,830
---------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity - $10,300,000 $10,000,000 - $265,872,795
=============================================================================================
</TABLE>
<PAGE> 11
Corporate Property Associates 12 Incorporated and Subsidiaries
Pro Forma Consolidated Statement of Income
For the three months ended March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Historical Vermont Teddy Bear (A) PAGG (B) Silgan Containers (C) Bon-Ton Stores (D)
---------- ---------------------- -------- --------------------- ------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental income from operating leases $3,037,949 $163,100 $147,500 $223,300 $317,688
Interest income from direct
financing leases 1,286,677
Other interest income 455,029
--------------------------------------------------------------------------------------
4,779,655 163,100 147,500 223,300 317,688
--------------------------------------------------------------------------------------
Expenses:
Interest expense 1,204,217 72,327 61,491 146,625
Depreciation 525,254 27,493 27,934 49,594 64,137
General and administrative expense 425,704
Property expenses 567,552
Amortization 13,759
--------------------------------------------------------------------------------------
2,736,486 99,820 89,425 49,594 210,762
--------------------------------------------------------------------------------------
Income before income from
equity investments 2,043,169 63,280 58,075 173,706 106,926
Income from equity investments 507,056
--------------------------------------------------------------------------------------
Net income $2,550,225 $63,280 $58,075 $173,706 $106,926
======================================================================================
Proforma
adjustment ETEC
Childtime Childcare (E) Scott Companies (F) Spectrian (G) modification (H) QMS (I)
--------------------------------------------------------- ---------------- -------
<S> <C> <C> <C> <C>
Revenue:
Rental income from operating leases $280,000 $114,569 $159,897 $235,278
Interest income from direct
financing leases
Other interest income
------------------------------------------------------------------------------------
280,000 114,569 - 159,897 235,278
------------------------------------------------------------------------------------
Expenses:
Interest expense 198,694 189,163 47,983 77,487
Depreciation 43,654 12,689 57,756 39,104
General and administrative expense
Property expenses
Amortization
------------------------------------------------------------------------------------
43,654 211,383 189,163 105,739 116,591
------------------------------------------------------------------------------------
Income before income from
equity investments 236,346 (96,814) (189,163) 54,158 118,687
Income from equity investments
------------------------------------------------------------------------------------
Net income $236,346 ($96,814) ($189,163) $54,158 $118,687
====================================================================================
RSI (J) Other (S) Pro Forma
------- --------- ---------
<S> <C> <C> <C>
Revenue:
Rental income from operating leases $4,679,281
Interest income from direct -
financing leases ($59,703) 1,226,974
Other interest income ($455,029) -
-----------------------------------
(59,703) (455,029) 5,906,255
-----------------------------------
Expenses:
Interest expense (37,725) 18,494 1,978,756
Depreciation 847,615
General and administrative expense 425,704
Property expenses 123,216 690,768
Amortization 13,759
-----------------------------------
(37,725) 141,710 3,956,602
-----------------------------------
Income before income from -
equity investments (21,978) (596,739) 1,949,653
Income from equity investments 507,056
-----------------------------------
Net income ($21,978) ($596,739) $2,456,709
===================================
</TABLE>
<PAGE> 12
Corporate Property Associates 12 Incorporated and Subsidiaries
Pro Forma Consolidated Statement of Income
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Historical Vermont Teddy Bear (A) PAGG (B) Silgan Containers (C) Bon-Ton Stores (D)
---------- ---------------------- -------- --------------------- ------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental income from operating leases $5,000,989 $652,400 $590,000 $893,200 $1,270,752
Interest income from direct
financing leases 4,559,544
Other interest income 1,873,094
-----------------------------------------------------------------------------------------
11,433,627 652,400 590,000 893,200 1,270,752
-----------------------------------------------------------------------------------------
Expenses:
Interest expense 3,525,774 287,233 243,960 586,500
Depreciation 947,206 109,972 111,734 198,375 256,547
General and administrative expense 1,488,793
Property expenses 1,269,968
Amortization 34,085
-----------------------------------------------------------------------------------------
7,265,826 397,205 355,694 198,375 843,047
-----------------------------------------------------------------------------------------
Income before income from
equity investments 4,167,801 255,195 234,306 694,825 427,705
Income from equity investments 2,042,400
-----------------------------------------------------------------------------------------
Net income $6,210,201 $255,195 $234,306 $694,825 $427,705
=========================================================================================
Proforma adjustments
ETEC
Childtime Childcare (E) Scott Companies (F) Spectrian (G) modification (H) QMS (I)
----------------------- --------------- ------------------ ---------------- -------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental income from operating leases $1,120,000 $1,940,000 $1,701,296 $841,937 $1,689,376
Interest income from direct
financing leases
Other interest income
-------------------------------------------------------------------------------------
1,120,000 1,940,000 1,701,296 841,937 1,689,376
-------------------------------------------------------------------------------------
Expenses:
Interest expense 805,836 767,373 268,888 600,638
-------------------------------------------------------------------------------------
Depreciation 174,615 304,514 264,150 189,880 312,832
-------------------------------------------------------------------------------------
General and administrative expense
Property expenses
Amortization
174,615 1,110,350 1,031,523 458,768 913,470
Income before income from
equity investments 945,385 829,650 669,773 383,169 775,906
Income from equity investments
-------------------------------------------------------------------------------------
Net income $945,385 $829,650 $669,773 $383,169 $775,906
=====================================================================================
RSI (J) Knogo (K) Garden Ridge (L) Celadon (M) Q Clubs (N)
------- --------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental income from operating leases $512,515 $959,026 $501,667 $391,524
Interest income from direct
financing leases ($200,541)
Other interest income
--------------------------------------------------------------------
(200,541) 512,515 959,026 501,667 391,524
--------------------------------------------------------------------
Expenses:
Interest expense (257,932) 393,437
Depreciation 79,578 148,660 95,215 64,180
General and administrative expense
Property expenses
Amortization
--------------------------------------------------------------------
(257,932) 79,578 542,097 95,215 64,180
--------------------------------------------------------------------
Income before income from
equity investments 57,391 432,937 416,929 406,452 327,344
Income from equity investments
--------------------------------------------------------------------
Net income $57,391 $432,937 $416,929 $406,452 $327,344
====================================================================
Del Monte (O) Telos (P) Lanxide (Q) APBI (R) Other (S) Pro Forma
------------- --------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Rental income from operating leases $643,125 $18,707,807
Interest income from direct
financing leases $280,064 $259,914 4,898,981
Other interest income ($1,673,094) -
--------------------------------------------------------------------
643,125 280,064 259,914 - (1,673,094) 23,606,788
--------------------------------------------------------------------
Expenses:
Interest expense 314,567 170,477 102,691 $48,877 162,526 8,020,845
Depreciation 133,562 3,391,020
General and administrative expense 1,488,793
Property expenses 1,190,586 2,460,554
Amortization 34,085
--------------------------------------------------------------------
448,129 170,477 102,691 48,877 1,353,112 15,395,297
--------------------------------------------------------------------
Income before income from
equity investments 194,996 109,587 157,223 (48,877) (3,226,206) 8,211,491
Income from equity investments 2,042,400
--------------------------------------------------------------------
Net income $194,996 $109,587 $157,223 ($48,877)($3,226,206) $10,253,891
====================================================================
</TABLE>
<PAGE> 13
<PAGE> 14
Statement No. 4
CORPORATE PROPERTY ASSOCIATES 12 INCORPORATED
PRO FORMA CONSOLIDATED STATEMENT OF TAXABLE INCOME
AND AFTER TAX CASH FLOW FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Consolidated pro forma net income $ 10,253,891
Depreciation on direct financing leases (T) (835,466)
Difference between interest accrued on direct financing leases and
rental revenue recognized for tax purposes (U) (106,659)
Adjustment for straight-lining of rents on operating method leases for GAAP (V) (141,600)
Adjustment to equity income from GAAP to tax basis (W) (486,643)
------------
Pro forma taxable income 8,683,523
Add: Depreciation from direct financing and operating leases (X) 4,226,486
Distributions from equity investments in excess of share of tax earnings (Y) 192,608
Less: Principal paid (Z) (1,990,337)
------------
Pro forma after-tax cash flow $ 11,112,280
============
</TABLE>
<PAGE> 15
1. BASIS OF PRESENTATION:
The pro forma consolidated financial statements of Corporate Property
Associates 12 Incorporated and Subsidiaries (the "Company") which are unaudited
have been prepared based on the historical financial statements of the Company.
The pro forma consolidated balance sheet of the Company at March 31, 1997 has
been prepared as if the purchase of properties leased to PAGG Corporation
("PAGG"),The Bon-Ton Department Stores, Inc. ("Bon-Ton Stores"), Silgan
Containers Corporation ("Silgan Containers") and Vermont Teddy Bear Company,
Inc. ("Vermont Teddy Bear") , the completion of build-to-suit construction at
properties leased to and to be leased to Childtime Childcare, Inc. ("Childtime
Childcare"), completion of an addition to the property leased to ETEC Systems,
Inc. ("ETEC") and limited recourse mortgage financings on the Company properties
leased to Scott Companies, Inc. ("Scott Companies") and Spectrian Corporation
had been completed at the balance sheet date. The pro forma statements of income
for the year ended December 31, 1996 and the three-month period ended March 31,
1997 have been prepared as if the acquisition of properties purchased by the
Company subsequent to January 1, 1996 and related mortgage financings and
material modification of existing lease or mortgage financing agreements had
occurred on January 1, 1996. To the extent that properties has been acquired
prior to January 1, 1996 and the existing lease and mortgage agreements have not
been materially modified, lease revenues and depreciation and interest expenses
are stated at their historical basis.
Since December 31, 1996 , the Company purchased properties leased to
PAGG, Bon-Ton Stores, Childtime Childcare, Scott Companies, Silgan Containers,
Vermont Teddy Bear and QMS, Inc. ("QMS") and since December 31, 1995, the
Company purchased properties leased to Lanxide Corporation ("Lanxide"),
Rheometric Scientific, Inc. ("RSI"), Telos Corporation ("Telos"), Spectrian,
Celadon Group, Inc. ("Celadon"), Garden Ridge Corporation ("Garden Ridge"), Q
Clubs, Inc. and Knogo North America, Inc. (Knogo"). In addition, the Company
obtained limited recourse financing on a property leased to Applied Bioscience
International, Inc. ("APBI"), completed construction on build-to-suit facilities
leased to Del Monte Corporation ("Del Monte") and purchased a 50% equity
interest in a limited liability company which leases property to The Upper Deck
Company ("Upper Deck"). To the extent that any purchase of property, completion
of construction and completion of mortgage financing occurred subsequent to
December 31, 1995, the pro forma adjustment presented is intended to reflect an
adjustment for the difference between what has been recorded in the historical
consolidated statements of income relating to that property and what the effect
would have been if the Company held its ownership interest and obtained related
mortgage financing where applicable as of January 1, 1996. As the purchase of
the Company's interest in the Upper Deck LLC occurred on January 4, 1996 and
historical basis results are comparable to pro forma results, no pro forma
adjustments relating to the investment in the Upper Deck LLC has been presented.
Adjustments have been presented to reflect the Company's asset management and
performance fee expenses and interest accrued on deferred acquisition fees
payable as though all purchase transactions and completion of construction had
occurred on January 1, 1996. In addition, an adjustment to eliminate other
interest income has been presented as a significant portion of such interest has
been generated by cash available for investment in real estate; although a
portion of such interest income is applicable to the Company's working capital
reserves rather than cash available for investment, the Company believes it is
not practicable to allocate such interest income by its sources. The pro forma
financial information should be read in conjunction with the historical
consolidated financial statements of the Company.
The pro forma financial results are not necessarily indicative of the
financial condition or the results of operations had the acquisitions occurred
on January 1, 1996 or prior, nor are they necessarily indicative of the
financial position or the results of operations for future periods.
2. PRO FORMA ADJUSTMENTS:
<PAGE> 16
A. The Vermont Teddy Bear lease provides for annual rent of $652,400.
Annual depreciation expense on the Vermont Teddy Bear property of $109,972 is
computed on a straight-line basis over 40 years and is based on buildings and
improvements of $4,398,874. In connection with the purchase of the property, the
Company obtained a limited recourse mortgage loan of $3,311,509 which provides
for monthly payments of $29,264 at an initial annual interest rate of 8.75% and
is based on a 20-year amortization schedule.
B. The PAGG lease provides for annual rent of $590,000. Annual
depreciation expense on the PAGG property of $117,734 is computed on a
straight-line basis over 40 years and is based on buildings and improvements of
$,469,378. The Company has received a commitment for a $3,208,000 mortgage loan
with monthly payments of principal and interest of $26,172 and based on a
20-year amortization schedule.
C. The Silgan Containers lease provides for annual rent of $893,200.
Annual depreciation expense on the Silgan Containers properties of $198,375 is
computed on a straight-line basis over 40 years and is based on buildings and
improvements of $7,935,000.
D. The Bon-Ton Stores leases provides for annual rent of $1,270,752.
Annual depreciation expense on the Bon-Ton Stores properties of $256,547 is
computed on a straight-line basis over 40 years and is based on buildings and
improvements of $10,261,885. The Bon-Ton lease provides for an adjustment to
annual rent based on the terms of limited recourse mortgage financing that the
Company intends to obtain in the future. The Company has received a commitment
from a lender for a mortgage loan on the properties of $6,900,000 which is
interest only at a floating rate of interest. For pro forma purposes, an annual
interest rate of 8.5% has been used.
E. In January 1997, the Company purchased four properties and entered
into an agreement with Childtime Childcare to construct facilities at the
properties and to purchase an additional six properties with such additional
costs capped at $6,048,000. Annual completion of construction (including the
additional six properties), annual rent will be $1,120,000. Annual depreciation
expense on the Childtime Childcare properties of $174,000 is computed on a
straight-line basis over 40 years and is based on buildings and improvements of
$174,615 is based on an estimate that the ultimate cost of buildings and
improvements will be $6,984,600 representing approximately 70% of total property
costs. The actual basis of buildings and improvements may vary from this
estimate.
F. The Scott Companies lease provides for annual rent of $1,940,000.
For the three-month period ended March 31, 1997, pro forma rent is $485,000 of
which $370,431 has been included in the historical results of operations. Annual
depreciation expense of $304,514 is computed on a straight-line basis over 40
years and is based on buildings and improvements of $12,180,574. For the
three-month period ended March 31, 1997, pro forma depreciation is $76,129 of
which $63,440 has been included in the historical results of operations. On May
13, 1997, the Company obtained a limited recourse mortgage loan of $10,300,000
at an annual interest rate of 7.9% which is collateralized by the Scott
Companies property. The loan provides for monthly debt service of $85,513 and is
based on a 20-year amortization schedule. Pro forma interest for the year ended
December 31, 1996 and the three-month period ended March 31, 1997 is $805,836
and $198,694, respectively.
G. The Spectrian lease provides for annual rent of $1,925,000 of which
$223,704 is included in the historical results of operations for the year ended
December 31, 1996. Annual depreciation expense of $301,879 of which $37,729 has
been included in the historical results of operations for the year ended
December 31, 1996 is computed on a straight-line basis over 40 years and is
based on buildings and improvements of $12,075,177. On April 14, 1997, the
Company obtained a limited recourse mortgage loan of $10,000,000 at an annual
interest rate of 7.75% which is collateralized by the Spectrian property. The
loan provides for monthly debt service of $82,095 and is based on a 20-year
amortization schedule. Pro forma interest for the year ended December 31, 1996
and the three-month period ended March 31, 1997 is $767,373 and $189,163,
respectively.
<PAGE> 17
H. In February 1995, The Company purchased land and an
office/manufacturing facility in Hayward, California for $11,859,000 with
$6,250,000 of the purchase price provided by limited recourse mortgage
financing. In August 1996, the Company entered into a modification agreement
with ETEC. In consideration of the Company's agreeing to cancel its rights for
stock warrants for 90,546 shares of ETEC common stock, ETEC refunded $2,633,473
of the original purchase price which was applied as a prepayment on the mortgage
loan. In addition, the Company agreed to fund an addition to the property of
$9,000,000 of which $5,000,000 was funded in February 1997 by an increase in the
outstanding balance of the original mortgage loan. After the completion of the
completion, rent will be increased pursuant to a formula; annual rent is
projected to be $2,050,520. For the year ended December 31, 1996 and the
three-month period ended March 31, 1997, the pro forma adjustment to rent is
$841,937 and $159,897, respectively, based on rents of $1,208,583 and $352,733,
respectively, included in the historical results of operations. Pro forma annual
depreciation expense of $429,902 is computed on a straight-line basis over 40
years and is based on buildings and improvements of $17,196,065. For the year
ended December 31, 1996 and the three-month period ended March 31, 1997, pro
forma depreciation is $429,902 and $107,475, respectively, of which $240,022 and
$49,719, respectively has been included in the historical results of operations.
For pro forma purposes, interest expense is based on a mortgage loan of
$8,616,527 at an interest rate of 8.03% and based on a 15-year amortization
schedule. The loan balance is based on an initial loan of $6,250,000, an
additional loan of $5,000,000 less the partial prepayment of $2,633,473; as
there have been scheduled principal payment installments made on the loan since
it was obtained in February 1995, the actual outstanding balance at the loan at
the time the $5,000,000 advance was obtained of approximately $8,220,000 was
lower than the amount used for pro forma purposes. The loan provides that
interest on the portion of the balance in excess of $6,300,000 is based on a
variable rate; as the actual rate does not vary significantly from the fixed
portion, the 8.03% annual interest rate has been applied for pro forma purposes.
For pro forma purposes, interest expense for the year ended December 31, 1996
and the three-month period ended March 31, 1997 was $680,690 and $166,228,
respectively of which $411,802 and $118,245, respectively, is included in the
historical results of operations.
I. The QMS lease provides for annual rent of $1,689,376. For the
three-month period ended March 31, 1997, pro forma rent is $422,344 of which
$187,066 is included in the historical results of operations. Annual
depreciation expense of $312,832 is computed on a straight-line basis over 40
years and is based on buildings and improvements of $12,513,273. Pro forma
depreciation for the three-month period ended March 31, 1997 is $78,208 of which
$39,104 is included in the historical results of operations. Pro forma interest
expense is based on a limited recourse mortgage loan of $7,200,000 which bears
interest at an annual rate of LIBOR plus 2.75%, which for pro forma purposes
8.75% is used, and provides for monthly principal payments of $24,303. Pro forma
interest for the year ended December 31, 1996 and the three-month period ended
March 31, 1997 is $600,638 and $146,286, respectively. Included in the
historical results of operations for the three-month period ended March 31, 1997
is interest expense of $68,799.
J. The Company entered into a lease with RSI in February 1996. In
February 1997, the RSI lease was modified and the mortgage loan on the RSI
property was prepaid in its entirety. Although the Company intends to obtain new
financing on the RSI property in the future, the Company has not received any
commitment from a lender. Accordingly, a pro forma adjustment to interest
expense have been made to eliminate the interest expense that was recorded in
the historical results of operations. As amended, annual rent and quarterly rent
is $805,360 and $201,340, respectively, of which $1,005,901 and $261,043 has
been recorded in the historical results of operations for the year ended
December 31, 1996 and the three-month period ended March 31, 1997, respectively.
As the RSI lease has been classified as a direct financing lease for financial
statement purposes, no depreciation expense has been recorded.
K. The Knogo lease provides for annual rent of $524,000 of which
$11,485 has been included in the historical results of operations for the year
ended December 31, 1996. Annual depreciation expense of $83,038, of which $3,460
is included in the historical results of operations for the year ended December
<PAGE> 18
31, 1996, is computed on a straight-line basis over 40 years and is based on
buildings and improvements of $3,321,512.
L. The Garden Ridge lease currently provides for annual rent of
$854,164; however, on the straight-line basis required under generally accepted
accounting principles, annual pro forma rent is $995,764 of which $36,738 is
included in the historical results of operations for the year ended December 31,
1996. Annual depreciation expense of $155,123, of which $6,463 is included in
the historical results of operations for the year ended December 31, 1996, is
computed on a straight-line basis over 40 years and is based on buildings and
improvements of $6,204,923. Pro forma interest expense is based on a $4,600,000
limited recourse mortgage loan at an annual interest rate of 8.72% which is
collateralized by the Garden Ridge property. The loan provides for monthly debt
service of $37,725 and a 20-year amortization schedule Pro forma interest for
the year ended December 31, 1996 is $399,008 of which $5,571 is included in the
historical results of operations.
M. The Celadon lease provides for annual rents of $700,000 of which
$198,333 is included in the historical results of operations for the year ended
December 31, 1996. Annual depreciation expense of $134,010, of which $38,795 is
included in the historical results of operations for the year ended December 31,
1996, is computed on a straight-line basis over 40 years and is based on
buildings and improvements of $5,360,400.
N. The Company owns two properties leased to Q Clubs (formerly known as
Sports & Fitness of Clubs of America) one of which was purchased in 1996. The Q
Clubs lease of the property purchased in 1996 provides for annual rents of
$694,000 of which $302,476 is included in the historical results of operations
for the year ended December 31, 1996. Annual depreciation of $118,486, of which
$54,306 is included in the historical results of operations for the year ended
December 31, 1996, is computed on a straight-line basis over 40 years and is
based on buildings and improvements of $4,739,442.
O. The Del Monte lease provides for annual rents of $1,286,250 of which
$643,125 is included in the historical results of operations for the year ended
December 31, 1996. Annual depreciation of $246,300, of which $112,738 is
included in the historical results of operations for the year ended December 31,
1996, is computed on a straight-line basis over 40 years and is based on
buildings and improvements of $9,852,019. The $6,250,000 of limited recourse
mortgage financing provides for quarterly payments of interest and principal
based on a 20-year amortization schedule. Of such mortgage amount, $5,500,000 is
based on a fixed annual interest rate of 10% and $750,000 is based on a variable
rate indexed to LIBOR. For pro forma purposes, the entire amount is calculated
as though the entire debt bears interest at an annual interest rate of 10%. Pro
forma interest for the year ended December 31, 1996 is$621,162 of which $306,595
is included in the historical results of operations.
P. The Telos lease provides for annual rent of $1,447,000 of which
$1,660,936 is included in the historical results of operations for the year
ended December 31, 1996. As the lease has been classified as a direct financing
lease for financial statement purposes, no depreciation expense has been
recorded. The Company obtained limited recourse financing of $6,250,000 which
bears interest at a variable rate indexed to LIBOR and provides for a 20-year
amortization schedule. For pro forma purposes, an annual interest rate of 9.5%
has been applied resulting in pro forma interest expense of $589,040 of which
$418,563 has been included in the historical results of operations for the year
ended December 31, 1996.
Q. The Lanxide lease provides for annual rent of $1,030,000 of which
$770,086 is included in the historical results of operations for the year ended
December 31, 1996. As the lease has been classified as a direct financing lease
for financial statement purposes, no depreciation expense has been recorded
There are two mortgage loans collateralized by the Lanxide property, the first
priority mortgage of $4,000,000 provides for quarterly payments of interest and
principal at an annual interest rate of 10.25% based on a 15-year amortization
schedule and a second mortgage of $400,000 which is a variable rate obligation
and is also based on a 15-year amortization schedule. For pro forma purposes, an
annual interest rate of
<PAGE> 19
10.25% has been applied to both loans. Pro forma interest for the year ended
December 31, 1996 is $446,052 of which $343,361 is included in the historical
results of operations.
R. The Company obtained a limited recourse mortgage loan of $7,500,000
collateralized by the APBI property in January 1996. Pro forma interest on the
loan which bears interest at an annual interest rate of 8.25% and is based on a
20-year amortization schedule for the year ended December 31, 1996 is $613,109
of which $564,142 is included in the historical results of operations.
S. The Company accrues interest on the deferred acquisition fee payable
to an affiliate at the rate of 7% per annum. Based on a pro forma deferred fee
of $4,878,842, pro forma interest for the year ended December 31, 1996 is
$341,519 of which $178,993 is included in the historical results of operations.
For the three-month period ended March 31, 1997, pro forma interest on the
deferred fee is $85,380 of which $66,886 is included in the historical results
of operations. The asset management and performance fee are each based on -1/2
of 1% of pro forma Average Invested Assets of $245,268,698. Average Invested
Assets are based on the total cost of directly owned properties and the pro rata
assets of properties owned indirectly through ownership interests in general
partnerships and limited liability companies with deduction less the noncash
component of such bases related to the deferred acquisition fee. Pro forma asset
management and performance fee for the year ended December 31, 1996 and the
three-month period ended March 31, 1997 is $2,452,687 and $613,172,
respectively, of which $1,262,101 and $489,956, respectively, are included in
the historical results of operations.
T. For tax purposes, the Company deducts interest on buildings and
improvements which are classified as direct financing leases for financial
reporting purposes. Depreciation of $835,466 is computed on a straight-line
basis over 40 years and is based on buildings and improvements of $33,418,643.
U. The Company's interest income on its direct financing leases differs
from rental revenue recognized for tax purposes as certain adjustments are made
for financial reporting purposes to recognize revenue so as to produce a
constant rate of return. Such adjustments are not recognized for tax purposes.
V. For financial reporting purposes, rental revenue is recognized on a
straight-line basis if certain conditions are met; however, such adjustment is
not recognized for tax purposes.
W. The Company's share of income from equity investments was $2,042,400
and $1,555,757 for tax purposes. The difference in income is primarily related
to the differences in revenue recognition on direct financing leases and that no
depreciation is taken on direct financing leases for financial reporting
purposes.
X. The depreciation amount is based on pro forma depreciation on the
statement of income for the year ended December 31, 1996 and the tax
depreciation on direct financing leases in Note T.
Y. During 1996, the Company received distributions from its equity
investments of $1,748,365.
Z. Principal paid on mortgages, including pro forma projections on the
mortgages described above, were as follows:
<TABLE>
<S> <C>
Big V Supermarkets $ 38,796
Q Clubs, Inc. 86,856
The Garden Companies 73,960
Walmart Stores 64,151
Del Monte Corporation 104,489
APBI 153,840
Telos 110,059
Lanxide 131,502
QMS 291,636
Scott Companies 220,325
Sprecrian 217,766
Garden Ridge 53,691
Pagg 70,100
Vermont Teddy Bear 63,937
ETEC 309,229
----------
$1,990,337
==========
</TABLE>
<PAGE> 20
(c) EXHIBITS
The following exhibits are filed as part of this Current Report on Form 8-K:
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page No.
----------- ------- --------
<S> <C> <C>
10.1 Lease Agreement dated July 8, 1997 by and between
GGAP (MA) QRS 12-31, Inc., as Landlord, and PAGG
Corporation, as Tenants.
10.2(*) Lease Agreement dated July 10, 1997 by and between
URSA (VT) QRS 12-30, Inc., as Landlord, and The
Vermont Teddy Bear Company, as Tenants.
10.3 Lease Agreement dated April 10, 1997 by and
between BT (PA) QRS 12-25, Inc., as Landlord, and
The Bon-Ton Department Stores, Inc., as Tenants.
10.4 Lease Agreement dated June 13, 1997 by and between
CAN (WI) QRS 12-34, Inc., as Landlord, and Silgan
Containers Corporation, as Tenants.
</TABLE>
- ---------
* Will be filed by amendment.
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CORPORATE PROPERTY ASSOCIATES
12 INCORPORATED
By: /s/ Claude Fernandez
-------------------------------------
Claude Fernandez
Executive Vice President and Chief
Administrative Officer
By: /s/ Michael D. Roberts
-------------------------------------
Michael D. Roberts
First Vice President and
Controller
Dated: August 12, 1997
<PAGE> 1
EXHIBIT 10.1
LEASE AGREEMENT
by and between
GGAP (MA) QRS 12-31, INC.,
a Massachusetts corporation
as LANDLORD
and
PAGG CORPORATION,
a Massachusetts corporation,
as TENANT
Premises: 425 Fortune Boulevard
Milford, Massachusetts
Dated as of: July 8, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties............................................................ 1
1. Demise of Premises................................................. 1
2. Certain Definitions................................................ 1
3. Title and Condition................................................ 7
4. Use of Leased Premises; Quiet Enjoyment............................ 9
5. Term .............................................................. 9
6. Basic Rent......................................................... 10
7. Additional Rent.................................................... 10
8. Net Lease; Non-Terminability....................................... 12
9. Payment of Impositions ............................................ 13
10. Compliance with Laws and Easement Agreements;
Environmental Matters.............................................. 14
11. Liens; Recording and Title......................................... 16
12. Maintenance and Repair............................................. 16
13. Alterations and Improvements....................................... 17
14. Permitted Contests................................................. 18
15. Indemnification.................................................... 19
16. Insurance.......................................................... 20
17. Casualty and Condemnation.......................................... 23
18. [Intentionally Deleted]............................................ 25
19. Restoration........................................................ 25
20. [Intentionally Deleted]............................................ 26
21. Assignment and Subletting; Prohibition
against Leasehold Financing........................................ 26
22. Events of Default.................................................. 28
23. Remedies and Damages Upon Default.................................. 30
24. Notices............................................................ 33
25. Estoppel Certificate............................................... 33
26. Surrender.......................................................... 34
27. No Merger of Title................................................. 34
28. Books and Records.................................................. 35
29. Non-Recourse as to Landlord........................................ 35
30. Financing.......................................................... 35
31. Subordination...................................................... 36
32. Covenants.......................................................... 36
33. Tax Treatment; Reporting........................................... 36
34. Miscellaneous...................................................... 36
EXHIBITS
Exhibit "A" - Premises
Exhibit "B" - Machinery and Equipment
Exhibit "C" - Schedule of Permitted Encumbrances
Exhibit "D" - Rent Schedule
Exhibit "E" - Covenants
Exhibit "F" - Related Documents
</TABLE>
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LEASE AGREEMENT, made as of this 8th day of July, 1997,
between GGAP (MA) QRS 12-31, INC., a Massachusetts corporation ("Landlord"),
with an address c/o W. P. Carey & Co., Inc., 50 Rockefeller Plaza, 2nd Floor,
New York, New York 10020, and PAGG CORPORATION, a Massachusetts corporation
("Tenant"), with an address at 425 Fortune Boulevard, Milford, Massachusetts
01757.
In consideration of the rents and provisions herein stipulated
to be paid and performed, Landlord and Tenant hereby covenant and agree as
follows:
1. Demise of Premises. Landlord hereby demises and lets to
Tenant, and Tenant hereby takes and leases from Landlord, for the term and upon
the provisions hereinafter specified and subject to the terms of the Ground
Lease, the following described property (collectively, the "Leased Premises"):
(a) Landlord's leasehold interest in the premises described in Exhibit "A"
hereto and created by the Ground Lease (as hereinafter defined), together with
the Appurtenances (collectively, the "Land"); (b) the buildings, structures and
other improvements now or hereafter constructed on the Land (collectively, the
"Improvements"); and (c) the fixtures, machinery, equipment and other property
described in Exhibit "B" hereto (collectively, the "Equipment").
2. Certain Definitions.
"Additional Rent" shall mean Additional Rent as defined in
Paragraph 7.
"Adjoining Property" shall mean all sidewalks, driveways,
curbs, gores and vault spaces adjoining any of the Leased Premises.
"Alterations" shall mean all changes, additions,
improvements or repairs to, all alterations, reconstructions, renewals,
replacements or removals of and all substitutions or replacements for any of the
Improvements or Equipment, both interior and exterior, structural and
non-structural, and ordinary and extraordinary.
"Appurtenances" shall mean all tenements, hereditaments,
easements, rights-of-way, rights, privileges in and to the Land, including (a)
easements over other lands granted by any Easement Agreement and (b) any
streets, ways, alleys, vaults, gores or strips of land adjoining the Land.
"Assignment" shall mean any assignment of rents and leases
from Landlord to a Lender which (a) encumbers any of the Leased Premises and (b)
secures Landlord's obligation to
<PAGE> 4
repay a Loan, as the same may be amended, supplemented or modified from time to
time.
"Basic Rent" shall mean Basic Rent as defined in
Paragraph 6.
"Basic Rent Payment Dates" shall mean the Basic Rent
Payment Dates as defined in Paragraph 6.
"Casualty" shall mean any injury to or death of any person
or any loss of or damage to any property (including the Leased Premises)
included within or related to the Leased Premises or arising from the Adjoining
Property.
"Commencement Date" shall mean Commencement Date as defined
in Paragraph 5.
"Condemnation" shall mean a Taking.
"Condemnation Notice" shall mean notice or knowledge of the
institution of or intention to institute any proceeding for Condemnation.
"Costs" of Landlord or Tenant associated with a specified
transaction shall mean all reasonable costs and expenses incurred by Landlord or
Tenant associated with such transaction (but only if appropriate to the
particular transaction), including without limitation, reasonable attorneys'
fees and expenses, court costs, and brokerage fees, as the circumstances
require.
"Covenants" shall mean the covenants and agreements
described on Exhibit "E".
"CPI" shall mean CPI as defined in Exhibit "D" hereto.
"Default Rate" shall mean the Default Rate as defined in
Paragraph 7(a)(iv).
"Easement Agreement" shall mean any conditions, covenants,
restrictions, easements, declarations, licenses and other agreements listed as
Permitted Encumbrances or as may hereafter affect the Leased Premises.
"Environmental Law" shall mean (i) whenever enacted or
promulgated, any applicable federal, state, foreign and local law, statute,
ordinance, rule, regulation, license, permit, authorization, approval, consent,
court order, judgment, decree, injunction, code, requirement or agreement with
any governmental entity, (x) relating to pollution (or the cleanup thereof), or
the protection of air, water vapor, surface water,
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<PAGE> 5
groundwater, drinking water supply, land (including land surface or subsurface),
plant, aquatic and animal life or (y) concerning exposure to, or the use,
containment, storage, recycling, reclamation, reuse, treatment, generation,
discharge, transportation, processing, handling, labeling, production, disposal
or remediation of Hazardous Substances, Hazardous Conditions or Hazardous
Activities, in each case as amended and as now or hereafter in effect, and (ii)
any common law or equitable doctrine (including, without limitation, injunctive
relief and tort doctrines such as negligence, nuisance, trespass and strict
liability) that is reasonably likely to impose liability or obligations or
injuries or damages due to or threatened as a result of the presence of,
exposure to, or ingestion of, any Hazardous Substance. The term Environmental
Law includes, without limitation, the federal Comprehensive Environmental
Response Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the federal Water Pollution Control Act, the federal Clean
Air Act, the federal Clean Water Act, the federal Resource Conservation and
Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments
thereto) (collectively, "RCRA"), the federal Solid Waste Disposal Act, the
federal Toxic Substance Control Act, the federal Insecticide, Fungicide and
Rodenticide Act, the federal Occupational Safety and Health Act of 1970, the
federal National Environmental Policy Act and the federal Hazardous Materials
Transportation Act, each as amended and as now or hereafter in effect and any
similar state or local Law.
"Environmental Violation" shall mean (a) any direct or
indirect discharge, disposal, spillage, emission, escape, pumping, pouring,
injection, leaching, release, seepage, filtration or transporting of any
Hazardous Substance at, upon, under, onto or within the Leased Premises, or from
the Leased Premises to the environment, in violation of any Environmental Law or
in excess of any reportable quantity established under any Environmental Law or
which is reasonably likely to result in any liability to Landlord, Tenant or
Lender, any Federal, state or local government or any other Person for the costs
of any removal or remedial action or natural resources damage or for bodily
injury or property damage, (b) any deposit, storage, dumping, placement or use
of any Hazardous Substance at, upon, under or within the Leased Premises or
which extends to any Adjoining Property in violation of any Environmental Law or
in excess of any reportable quantity established under any Environmental Law or
which is reasonably likely to result in any liability to any Federal, state or
local government or to any other Person for the costs of any removal or remedial
action or natural resources damage or for bodily injury or property damage, (c)
the abandonment or discarding at, under, on or from the Leased Premises at any
time prior to the expiration of the Term or earlier termination of this Lease,
of any barrels, containers or other receptacles containing any Hazardous
Substances in violation of any Environmental Laws, (d) any activity, occurrence
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<PAGE> 6
or condition which is reasonably likely to result in any liability, cost or
expense to Landlord or Lender or any other owner or occupier of the Leased
Premises, or which is reasonably likely to result in a creation of a lien on the
Leased Premises under any Environmental Law, or (e) any violation of or
noncompliance with any Environmental Law.
"Equipment" shall mean the Equipment as defined in
Paragraph 1.
"Event of Default" shall mean an Event of Default as
defined in Paragraph 22(a).
"Federal Funds" shall mean federal or other immediately
available funds which at the time of payment are legal tender for the payment of
public and private debts in the United States of America.
"Ground Lease" shall mean that certain Ground Lease, dated
November 1, 1988, between Howard A. Fafard, as lessor, and Paul J. Beattie,
Trustee of Granite Park Realty Trust, as lessee, as amended by an Amendment to
Ground Lease, dated September 29, 1989, notice of which is recorded in the
Worcester District Registry of Deeds in Book 12391, Page 304, the interests of
lessor and lessee being thereafter assigned of record.
"Hazardous Activity" means any activity, process, procedure
or undertaking which directly or indirectly (i) procures, generates or creates
any Hazardous Substance; (ii) causes or results in (or threatens to cause or
result in) the release, seepage, spill, leak, flow, discharge or emission of any
Hazardous Substance into the environment (including the air, ground water,
watercourses or water systems), (iii) involves the containment or storage of any
Hazardous Substance; or (iv) would cause the Leased Premises or any portion
thereof to become a hazardous waste treatment, recycling, reclamation,
processing, storage or disposal facility within the meaning of any Environmental
Law.
"Hazardous Condition" means any condition which would
support any claim or liability under any Environmental Law, including the
presence of underground storage tanks.
"Hazardous Substance" means (i) any substance, material,
product, petroleum, petroleum product, derivative, compound or mixture, mineral
(including asbestos), chemical, gas, medical waste, or other pollutant, in each
case whether naturally occurring, man-made or the by-product of any process,
that is toxic, harmful or hazardous or acutely hazardous to the environment or
public health or safety or (ii) any substance regulated under any Environmental
Law, whether or not defined as hazardous as such under any Environmental Law.
Hazardous
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<PAGE> 7
Substances include, without limitation, any toxic or hazardous waste, pollutant,
contaminant, industrial waste, petroleum or petroleum-derived substances or
waste, radon, radioactive materials, asbestos, asbestos containing materials,
urea formaldehyde foam insulation, lead and polychlorinated biphenyls.
"Impositions" shall mean the Impositions as defined in
Paragraph 9(a).
"Improvements" shall mean the Improvements as defined in
Paragraph 1.
"Indemnitee" shall mean an Indemnitee as defined in
Paragraph 15.
"Insurance Requirements" shall mean the requirements of all
insurance policies required to be maintained in accordance with this Lease.
"Land" shall mean the Land as defined in Paragraph 1.
"Law" shall mean any constitution, statute, rule of law,
code, ordinance, order, judgment, decree, injunction, rule, regulation, policy,
requirement or administrative or judicial determination, even if unforeseen or
extraordinary, of every duly constituted governmental authority, court or
agency, now or hereafter enacted or in effect.
"Lease" shall mean this Lease Agreement.
"Lease Year" shall mean, with respect to the first Lease
Year, the period commencing on the Commencement Date and ending at midnight on
the last day of the twelfth (12th) consecutive calendar month following the
month in which the Commencement Date occurred, and each succeeding twelve (12)
month period during the Term.
"Leased Premises" shall mean the Leased Premises as defined
in Paragraph 1.
"Legal Requirements" shall mean the applicable requirements
of all present and future Laws (including but not limited to Environmental Laws
and Laws relating to accessibility to, usability by, and discrimination against,
disabled individuals), and all covenants, restrictions and conditions now or
hereafter of record which may be applicable to Tenant or to any of the Leased
Premises, which relate to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or restoration of any of the Leased
Premises, even if compliance therewith necessitates structural changes or
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<PAGE> 8
improvements or results in interference with the use or enjoyment of any of the
Leased Premises.
"Lender" shall mean any person or entity (and their
respective successors and assigns) which may, on or after the date hereof, make
a Loan to Landlord or is the holder of any Note and gives written notice thereof
to Tenant.
"Loan" shall mean any loan made by one or more Lenders to
Landlord, which loan is secured by a Mortgage and an Assignment and evidenced by
a Note.
"Monetary Obligations" shall mean Rent and all other sums
payable by Tenant under this Lease to Landlord or to any third party on behalf
of Landlord.
"Mortgage" shall mean any mortgage or deed of trust from
Landlord to a Lender which (a) encumbers any of the Leased Premises and (b)
secures Landlord's obligation to repay a Loan, as the same may be amended,
supplemented or modified.
"Net Award" shall mean (a) the entire award payable to
Landlord or Lender by reason of a Condemnation whether pursuant to a judgment or
by agreement or otherwise, or (b) the entire proceeds of any insurance required
under clauses (i), (ii) (to the extent payable to Landlord, Lender or Tenant),
(iv), (v) or (vi) of Paragraph 16(a), as the case may be, less any expenses
incurred by Landlord, Lender and Tenant in collecting such award or proceeds.
"Note" shall mean any promissory note evidencing Landlord's
obligation to repay a Loan, as the same may be amended, supplemented or
modified.
"Permitted Encumbrances" shall mean those covenants,
restrictions, reservations, liens, conditions and easements and other
encumbrances, other than any Mortgage or Assignment, listed on Exhibit "C"
hereto (but such listing shall not be deemed to revive any such encumbrances
that have expired or terminated or are otherwise invalid or unenforceable).
"Person" shall mean an individual, partnership,
association, corporation or other entity.
"Present Value" of any amount shall mean such amount
discounted by a rate per annum which is the lower of (a) the Prime Rate at the
time such present value is determined or (b) six percent (6%) per annum.
"Prime Rate" shall mean the annual interest rate as
published, from time to time, in The Wall Street Journal as the "Prime Rate" in
its column entitled "Money Rate". The Prime
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<PAGE> 9
Rate may not be the lowest rate of interest charged by any "large U.S. money
center commercial banks" and Landlord makes no representations or warranties to
that effect. In the event The Wall Street Journal ceases publication or ceases
to publish the "Prime Rate" as described above, the Prime Rate shall be the
average per annum discount rate (the "Discount Rate") on ninety-one (91) day
bills ("Treasury Bills") issued from time to time by the United States Treasury
at its most recent auction, plus three hundred (300) basis points. If no such
91-day Treasury Bills are then being issued, the Discount Rate shall be the
discount rate on Treasury Bills then being issued for the period of time closest
to ninety-one (91) days.
"Rent" shall mean, collectively, Basic Rent and Additional
Rent.
"Site Assessment" shall mean a Site Assessment as defined
in Paragraph 10(c).
"State" shall mean the Commonwealth of Massachusetts.
"Surviving Obligations" shall mean any obligations of
Tenant under this Lease, actual or contingent, which arise on or prior to the
expiration or prior termination of this Lease or which survive such expiration
or termination by their own terms.
"Taking" shall mean any taking or damaging of all or a
portion of any of the Leased Premises (i) in or by condemnation or other eminent
domain proceedings pursuant to any Law, general or special, or (ii) by reason of
any agreement with any condemnor in settlement of or under threat of any such
condemnation or other eminent domain proceeding. The Taking shall be considered
to have taken place as of the later of the date actual physical possession is
taken by the condemnor, or the date on which the right to compensation and
damages accrues under the law applicable to the Leased Premises.
"Term" shall mean the Term as defined in Paragraph 5.
3. Title and Condition.
(a) The Leased Premises are demised and let subject to (i)
the terms of the Ground Lease, (ii) the rights of any Persons in possession of
the Leased Premises, (iii) the existing state of title of any of the Leased
Premises, including any Permitted Encumbrances, (iv) any state of facts which an
accurate survey or physical inspection of the Leased Premises might show, (v)
all present Legal Requirements, including any existing violation of any thereof,
and (vi) the condition of the Leased Premises as of the commencement of the
Term, without representation or warranty by Landlord.
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<PAGE> 10
(b) Tenant acknowledges that the Leased Premises is in good
condition and repair at the inception of this Lease. LANDLORD LEASES AND WILL
LEASE AND TENANT TAKES AND WILL TAKE THE LEASED PREMISES AS IS. TENANT
ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER
CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE
MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF
THE LEASED PREMISES, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS
FITNESS, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY
OF THE MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT,
LATENT OR PATENT, (iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH
SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x) MERCHANTABILITY,
(xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY, (xiv) OPERATION, (xv) THE
EXISTENCE OF ANY HAZARDOUS SUBSTANCE, HAZARDOUS CONDITION OR HAZARDOUS ACTIVITY
OR (xvi) COMPLIANCE OF THE LEASED PREMISES WITH ANY LAW OR LEGAL REQUIREMENT;
AND ALL RISKS INCIDENT THERETO ARE TO BE BORNE BY TENANT. TENANT ACKNOWLEDGES
THAT THE LEASED PREMISES IS OF ITS SELECTION AND TO ITS SPECIFICATIONS AND THAT
THE LEASED PREMISES HAS BEEN INSPECTED BY TENANT AND IS SATISFACTORY TO IT. IN
THE EVENT OF ANY DEFECT OR DEFICIENCY IN ANY OF THE LEASED PREMISES OF ANY
NATURE, WHETHER LATENT OR PATENT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR
LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF THIS PARAGRAPH 3(b) HAVE
BEEN NEGOTIATED, AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY
WARRANTIES BY LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE LEASED
PREMISES, ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW
OR HEREAFTER IN EFFECT OR ARISING OTHERWISE.
(c) Tenant represents to Landlord that Tenant has reviewed
Landlord's examination of title to the Leased Premises prior to the execution
and delivery of this Lease and has found the same to be satisfactory for the
purposes contemplated hereby. Tenant acknowledges that Tenant has only the
subleasehold right of possession and use of the Leased Premises as to the Land
and a leasehold right as to the Improvements and Equipment as provided herein,
and that, to its knowledge, (i) the Improvements conform to all material Legal
Requirements and all Insurance Requirements, (ii) all easements necessary or
appropriate for the use or operation of the Leased Premises have been obtained,
(iii) all contractors and subcontractors who have performed work on or supplied
materials to the Leased Premises have been fully paid, and all materials and
supplies have been fully paid for, (iv) the Improvements have been fully
completed in all material respects in a workmanlike manner of first class
quality, and (v) all Equipment necessary or appropriate for the use or operation
of the Leased Premises has been installed and is presently fully operative in
all material respects.
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<PAGE> 11
(d) Landlord hereby assigns to Tenant, without recourse or
warranty whatsoever, all warranties, guaranties, indemnities and similar rights
which Landlord may have against any manufacturer, seller, engineer, contractor
or builder in respect of any of the Leased Premises. Such assignment shall
remain in effect until the expiration or earlier termination of this Lease,
whereupon such assignment shall cease and all of said warranties, guaranties,
indemnities and other rights shall automatically revert to Landlord.
4. Use of Leased Premises; Quiet Enjoyment.
(a) Tenant may occupy and use the Leased Premises for
manufacturing, assembly, research, development, warehouse, office and related or
ancillary uses and for no other purpose without the prior written consent of
Landlord which shall not be unreasonably withheld or delayed. Tenant shall not
use or occupy or permit any of the Leased Premises to be used or occupied, nor
do or permit anything to be done in or on any of the Leased Premises, in a
manner which would or might be reasonably likely to (i) violate any Law or Legal
Requirement, (ii) make void or voidable or cause any insurer to cancel any
insurance required by this Lease, or make it difficult or impossible to obtain
any such insurance at commercially reasonable rates, (iii) cause structural
injury to any of the Improvements or (iv) constitute a public or private
nuisance or waste.
(b) Subject to the provisions hereof, so long as no Event
of Default has occurred and is continuing, Tenant shall quietly hold, occupy and
enjoy the Leased Premises throughout the Term, without any hindrance, ejection
or molestation by Landlord or any Person claiming by, through or under Landlord,
with respect to matters that arise after the date hereof, provided that Landlord
or its agents may enter upon and examine any of the Leased Premises at such
reasonable times as Landlord may select and upon reasonable notice to Tenant
(which shall be not less than 2 business days except in the case of an
emergency, in which no notice shall be required) for the purpose of inspecting
the Leased Premises, verifying compliance or non-compliance by Tenant with its
obligations hereunder and the existence or non-existence of an Event of Default,
showing the Leased Premises to prospective Lenders and purchasers and taking
such other action with respect to the Leased Premises as is permitted by any
provision hereof. Any such entry shall be done in a manner that does not
interfere with Tenant's operations, with Tenant's representative present, and in
compliance with Tenant's confidentiality procedures and requirements.
5. Term.
(a) Subject to the provisions hereof, Tenant shall have and
hold the Leased Premises for an initial term (such term, as extended or renewed
in accordance with the provisions
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hereof, being called the "Term") commencing on the date hereof (the
"Commencement Date") and ending on the last day of the one hundred forty-fourth
(144th) full calendar month next following the date hereof (the "Expiration
Date").
(b) Provided that if, on or prior to the Expiration Date or
any other Renewal Date (as hereinafter defined) this Lease shall not have been
terminated pursuant to any provision hereof, then on the Expiration Date and on
the fifth (5th), anniversary of the Expiration Date (the Expiration Date and
such anniversary being a "Renewal Date"), Tenant shall have the right to extend
the Term for an additional period of five (5) years, provided that Tenant shall
have notified Landlord in writing at least one (1) year prior to the next
Renewal Date that Tenant is extending this Lease as of the next Renewal Date.
Any such extension of the Term shall be subject to all of the provisions of this
Lease, as the same may be amended, supplemented or modified.
(c) If Tenant does not exercise its option to extend or
further extend the Term, or if this Lease has been terminated following an Event
of Default, then Landlord shall have the right during the remainder of the Term
then in effect and, in any event, Landlord shall have the right during the last
year of the Term, to (i) advertise the availability of the Leased Premises for
sale or reletting and to erect upon the Leased Premises signs indicating such
availability and (ii) show the Leased Premises to prospective purchasers or
tenants or their agents at such reasonable times and upon notice and in the
manner specified in Paragraph 4(b) as Landlord may select.
6. Basic Rent. Tenant shall pay to Landlord, as annual rent
for the Leased Premises during the Term, the amounts determined in accordance
with Exhibit "D" hereto ("Basic Rent"), commencing on the first day of August,
1997, and continuing on the first day of each November, February, May and August
thereafter during the Term (each such day being a "Basic Rent Payment Date").
Each such rental payment shall be made, at Landlord's sole discretion, (a) to
Landlord at its address set forth above and/or to one other Person, at such
addresses and in such proportions as Landlord may direct by fifteen (15) days'
prior written notice to Tenant, and (b) by a check delivered on or prior to the
applicable Basic Rent Payment Date, or by wire transfer in Federal Funds. Pro
rata Basic Rent for the period from the date hereof through the last day of the
month hereof shall be paid on the date hereof.
7. Additional Rent.
(a) Tenant shall pay and discharge, as additional rent
(collectively, "Additional Rent"):
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(i) except as otherwise specifically provided herein,
all costs and expenses of Tenant and Landlord specifically referenced herein
which are incurred in connection or associated with (A) charges from third
parties that Tenant is obligated to pay hereunder in connection with the use,
occupancy, possession, operation, condition, design, construction, maintenance,
alteration, repair or restoration of any of the Leased Premises, (B) the
performance of any of Tenant's obligations under this Lease, (C) any
Condemnation proceedings, (D) the adjustment, settlement or compromise of any
insurance claims involving or arising from any of the Leased Premises, (E) the
prosecution, defense or settlement of any litigation involving or arising from
Tenant's use, operation, maintenance and repair of any of the Leased Premises or
Tenant's obligations under this Lease, (F) the proper exercise or enforcement by
Landlord, its successors and assigns, of any of its rights under this Lease, (G)
any amendment to or modification or termination of this Lease made at the
request of Tenant, (H) reasonable fees and expenses of Landlord's counsel
incurred in connection with any act undertaken by Landlord (or its counsel) at
the request of Tenant, or incurred in connection with any act of Landlord
performed on behalf of Tenant pursuant to its rights under this Lease, (I) the
Ground Lease and (J) any other items specifically required to be paid by Tenant
under this Lease;
(ii) after the date all or any portion of any
installment of Basic Rent is due and not paid, an amount equal to five percent
(5%) of the amount of such unpaid installment or portion thereof, provided,
however, that with respect to the first late payment of all or any portion of
any installment of Basic Rent in any consecutive twelve (12) month period, the
Late Charge shall not be due and payable unless the Basic Rent has not been paid
within ten (10) days' following notice from Landlord that such installment is
overdue;
(iii) interest at the rate (the "Default Rate") of
three percent (3%) over the Prime Rate per annum on the following sums until
paid in full: (A) all overdue installments of Basic Rent after the respective
due dates thereof, (B) all overdue amounts of Additional Rent relating to
obligations which Landlord shall have paid on behalf of Tenant, from the date of
payment thereof by Landlord so long as Landlord shall have notified Tenant of
any such sums at least ten (10) days prior to payment and Tenant shall not have
paid the same prior to expiration of such period, and (C) all other overdue
amounts of Additional Rent, from the date when any such amount becomes overdue.
(b) Tenant shall pay and discharge (i) any Additional Rent
referred to in Paragraph 7(a)(i) when the same shall become due, provided that
amounts which are billed to Landlord or any third party, but not to Tenant,
shall be paid to Landlord or any such third party, as Tenant may elect, within
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twenty (20) days after Landlord's demand for payment thereof which shall be
accompanied by a copy of any such bill, and (ii) any other Additional Rent which
Tenant is to pay directly to Landlord, within twenty (20) days after Landlord's
demand for payment thereof.
(c) In no event shall amounts payable under Paragraph
7(a)(ii), (iii) and (iv) exceed the maximum amount permitted by applicable Law.
8. Net Lease; Non-Terminability.
(a) This is a net lease and all Monetary Obligations shall
be paid without notice or demand and without set-off, counterclaim, recoupment,
abatement, suspension, deferment, diminution, deduction, reduction or defense
(collectively, a "Set-Off").
(b) Except as otherwise expressly provided herein, this
Lease and the rights of Landlord and the obligations of Tenant hereunder shall
not be affected by any event or for any reason, including the following: (i) any
damage to or theft, loss or destruction of any of the Leased Premises unless
caused by the affirmative actions of Landlord or Lender or any of their agents,
employee or contractors, (ii) any default on the part of Landlord hereunder or
under any Note, Mortgage, Assignment or any other agreement so long as the same
does not cause a termination of this Lease, (iii) any latent or other defect in
any of the Leased Premises, (iv) the breach of any warranty of any seller or
manufacturer of any of the Equipment, (v) any violation of any provision of this
Lease by Landlord, (vi) the bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution or winding-up of, or other proceeding
affecting Landlord, (vii) the exercise of any remedy, including foreclosure,
under any Mortgage or Assignment so long as the same does not cause a
termination of this Lease, (viii) any action with respect to this Lease
(including the disaffirmance hereof) which may be taken by Landlord, any
trustee, receiver or liquidator of Landlord, the landlord under the Ground Lease
or any court under the Federal Bankruptcy Code or otherwise, (ix) any
interference with Tenant's use of the Leased Premises (unless such interference
is caused by the affirmative actions of Landlord, its agents, employees or
contractors, is material and is not as a result of an Event of Default) or (x)
market or economic changes.
(c) The obligations of Tenant hereunder shall be separate
and independent covenants and agreements, all Monetary Obligations shall
continue to be payable in all events except as otherwise specifically provided
herein (or, in lieu thereof, Tenant shall pay amounts equal thereto), and the
obligations of Tenant hereunder shall continue unaffected except as otherwise
specifically provided herein unless the requirement to pay or
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perform the same shall have been terminated pursuant to an express provision of
this Lease. All Rent payable by Tenant hereunder shall constitute "rent" for all
purposes (including Section 502(b)(6) of the Bankruptcy Code).
(d) Except as otherwise expressly provided herein, Tenant
shall have no right and hereby waives all rights which it may have under any Law
(i) to quit, terminate or surrender this Lease or any of the Leased Premises, or
(ii) to any Set-Off of any Monetary Obligations.
9. Payment of Impositions.
(a) Tenant shall, before interest or penalties are due
thereon, provided that Tenant has timely received the applicable tax bills from
the lessor under the Ground Lease, pay and discharge all taxes (including real
and personal property, franchise, sales and rent taxes), all charges for any
easement or agreement maintained for the benefit of any of the Leased Premises,
all assessments and levies, all permit, inspection and license fees, all rents
and charges for water, sewer, utility and communication services relating to any
of the Leased Premises, all ground rents and all other public charges whether of
a like or different nature, even if unforeseen or extraordinary, imposed upon or
assessed against (i) Tenant, (ii) Tenant's leasehold interest in the Leased
Premises, (iii) any of the Leased Premises, or (iv) Landlord as a result of or
arising in respect of the ownership, occupancy, leasing, use or possession of
any of the Leased Premises, any activity conducted on any of the Leased
Premises, or the Rent (collectively, the "Impositions"); provided, that nothing
herein shall obligate Tenant to pay (A) income, excess profits or other taxes of
Landlord (or Lender) which are determined on the basis of Landlord's (or
Lender's) net income or net worth (unless such taxes are in lieu of or a
substitute for any other tax, assessment or other charge upon or with respect to
the Leased Premises which, if it were in effect, would be payable by Tenant
under the provisions hereof or by the terms of such tax, assessment or other
charge), (B) any estate, inheritance, succession, gift or similar tax imposed on
Landlord, (C) any capital gains tax imposed on Landlord or (D) any amounts
claimed or incurred for any period other than the Term. If any Imposition may be
paid in installments without interest or penalty, Tenant shall have the option
to pay such Imposition in installments; in such event, Tenant shall be liable
only for those installments which accrue or become due and payable during the
Term. Tenant shall prepare and file all tax reports required by governmental
authorities which relate to the Impositions and which can be filed by it. Tenant
shall deliver to Landlord (1) copies of all settlements and notices pertaining
to the Impositions which may be issued by any governmental authority within ten
(10) days after Tenant's receipt thereof, (2) receipts for payment of all taxes
required to be paid by Tenant hereunder within thirty (30) days after the due
date thereof and (3)
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receipts for payment of all other Impositions within ten (10) days after
Landlord's request therefor. Landlord shall, promptly upon receipt thereof,
forward copies to Tenant of any notices, bills, demands or the like from any
third parties for any Impositions or other Additional Rent that Tenant is
obligated to pay hereunder.
(b) Landlord shall have the right during the occurrence of
an Event of Default or if required by any Lender to require Tenant to pay to
Landlord an additional monthly sum (each an "Escrow Payment") sufficient to pay
the Escrow Charges (as hereinafter defined) as they become due. As used herein,
"Escrow Charges" shall mean real estate taxes on the Leased Premises or payments
in lieu thereof and premiums on any insurance required by this Lease. Landlord
shall reasonably determine the amount of the Escrow Charges and of each Escrow
Payment. As long as the Escrow Payments are being held by Landlord the Escrow
Payments shall not be commingled with other funds of Landlord or other Persons
and interest thereon shall accrue for the benefit of Tenant from the date such
monies are received and invested until the date such monies are disbursed to pay
Escrow Charges. Landlord shall apply the Escrow Payments to the payment of the
Escrow Charges in such order or priority as Landlord shall reasonably determine
but in any event not later than as required by law. If at any time the Escrow
Payments theretofore paid to Landlord shall be insufficient for the payment of
the Escrow Charges, Tenant, within ten (10) days after Landlord's demand
therefor, shall pay the amount of the deficiency to Landlord.
10. Compliance with Laws and Easement Agreements;
Environmental Matters.
(a) Tenant shall, at its expense, comply with and conform
to, and cause the Leased Premises and any other Person occupying any part of the
Leased Premises to comply with and conform to, all Insurance Requirements, Legal
Requirements (including all applicable Environmental Laws) and the Ground Lease.
Tenant shall not at any time (i) cause, permit or suffer to occur any
Environmental Violation or (ii) permit any sublessee, assignee or other Person
occupying the Leased Premises under or through Tenant to cause, permit or suffer
to occur any Environmental Violation.
(b) Tenant, at its sole cost and expense, will at all
times promptly and faithfully abide by, discharge and perform all of the
covenants, conditions and agreements contained in any Easement Agreement on the
part of Landlord or the occupier to be kept and performed thereunder. Tenant
will not alter, modify, amend or terminate any Easement Agreement, give any
consent or approval thereunder, or enter into any new Easement Agreement
without, in each case, the prior written consent of Landlord.
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<PAGE> 17
(c) In connection with any refinancing or sale of the
Leased Premises (excluding Landlord's initial financing) or if reasonably
required by any Lender and subject to the requirements of Paragraph 4(b), upon
prior written notice from Landlord, Tenant shall permit such persons as Landlord
or Lender may designate ("Site Reviewers") to visit the Leased Premises and
perform environmental site investigations and assessments ("Site Assessments")
on the Leased Premises for the purpose of determining whether there exists on
the Leased Premises. The scope of such Site Assessment(s) shall conform to the
reasonable requirements of such Lender in the case of a refinancing or the
potential buyer in the case of a proposed sale. As reasonably requested, such
Site Assessments may include both above and below the ground testing for
Environmental Violations and such other tests as may be necessary, in the
opinion of the Site Reviewers, to conduct the Site Assessments. Tenant shall
supply to the Site Reviewers such historical and operational information
regarding the Leased Premises as may be reasonably requested by the Site
Reviewers to facilitate the Site Assessments, and shall make available for
meetings with the Site Reviewers appropriate personnel having knowledge of such
matters. Except as otherwise provided in Paragraph 30(a) the cost of any other
Site Assessment shall be paid by Landlord. Landlord shall promptly provide
Tenant with a copy of each Site Assessment report (including letter reports) and
data provided to Landlord relating thereto. Provided that no monetary Event of
Default then exists and is continuing, the designation of any Site Reviewers
shall be subject to Tenant's approval, which shall not be unreasonably withheld
or delayed.
(d) Tenant shall notify Landlord promptly after becoming
aware of any Environmental Violation which is required to be reported to any
governmental authority under any applicable Environmental Law or of any release
of any Hazardous Substance to the environment in violation of any applicable
Environmental Law or noncompliance with any of the covenants contained in this
Paragraph 10 and shall forward to Landlord immediately upon receipt thereof
copies of all orders, reports, notices, permits, applications or other
communications relating to any such violation or noncompliance. If Tenant fails
to promptly commence or thereafter to diligently pursue the correction of any
Environmental Violation (whether or not notice is required to be given to
Landlord) which occurs or is found to exist, Landlord, following fifteen (15)
days written notice to Tenant (except in the event of an emergency, in which
case no notice shall be required) shall have the right to correct such
Environmental Violation.
(e) All future leases, subleases or concession agreements
relating to the Leased Premises entered into by Tenant shall contain covenants
of the other party not to at any time
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(i) cause any Environmental Violation to occur or (ii) permit any Person
occupying the Leased Premises through said subtenant or concessionaire to cause
any Environmental Violation to occur.
11. Liens; Recording.
(a) Tenant shall not, directly or indirectly, create or
permit to be created or to remain and shall promptly discharge or remove any
lien, levy or encumbrance on any of the Leased Premises or on any Rent or any
other sums payable by Tenant under this Lease, other than any Mortgage or
Assignment, the Permitted Encumbrances and any mortgage, lien, encumbrance or
other charge created by, resulting solely from any act or omission of, or caused
by or consented to in writing by Landlord. NOTICE IS HEREBY GIVEN THAT LANDLORD
SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE
FURNISHED TO TENANT OR TO ANYONE HOLDING OR OCCUPYING ANY OF THE LEASED PREMISES
THROUGH OR UNDER TENANT, AND THAT NO MECHANICS' OR OTHER LIENS FOR ANY SUCH
LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD
IN AND TO ANY OF THE LEASED PREMISES UNLESS DISCHARGED OR BONDED OFF. LANDLORD
MAY AT ANY TIME, AND AT LANDLORD'S REQUEST TENANT SHALL PROMPTLY, POST ANY
NOTICES ON THE LEASED PREMISES REGARDING SUCH NON-LIABILITY OF LANDLORD.
(b) Tenant shall execute, deliver and record, file or
register (collectively, "record") all such instruments as may be required or
permitted by any present or future Law in order to evidence the respective
interests of Landlord and Tenant in the Leased Premises, and shall cause a
memorandum of this Lease (or, if such a memorandum cannot be recorded, this
Lease), and any supplement hereto or thereto, to be recorded in such manner and
in such places as may be required or permitted by any present or future Law in
order to protect the validity and priority of this Lease.
12. Maintenance and Repair.
(a) Tenant shall at all times maintain the Leased Premises
and shall maintain or enforce its rights concerning maintenance of the Adjoining
Property in as good repair and appearance as they are in on the date hereof and
fit to be used for their intended use in accordance with the better of the
practices generally recognized as then acceptable by other companies in its
industry or observed by Tenant with respect to the other real properties owned
or operated by it, and, in the case of the Equipment, in as good mechanical
condition as it was on the later of the date hereof or the date of its
installation, except (as to the Leased Premises) for ordinary wear and tear and
casualty damage, subject in such event to Tenant's restoration obligations under
Paragraphs 17 and 19. Tenant shall take every other action necessary or
appropriate for the preservation and safety of the Leased Premises. Tenant shall
promptly make all
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Alterations of every kind and nature, whether foreseen or unforeseen, which may
be required to comply with the foregoing requirements of this Paragraph 12(a).
Landlord shall not be required to make any Alteration, whether foreseen or
unforeseen, or to maintain any of the Leased Premises or Adjoining Property in
any way, and Tenant hereby expressly waives any right which may be provided for
in any Law now or hereafter in effect to make Alterations at the expense of
Landlord or to require Landlord to make Alterations. Any Alteration made by
Tenant pursuant to this Paragraph 12 shall be made in conformity with the
provisions of Paragraph 13, except as otherwise specifically provided under the
terms of Paragraphs 17 and 19.
(b) If any Improvement, now or hereafter constructed,
shall (i) encroach upon any setback or any property, street or right-of-way
adjoining the Leased Premises, (ii) violate the provisions of any restrictive
covenant affecting the Leased Premises, (iii) hinder or obstruct any easement or
right-of-way to which any of the Leased Premises is subject or (iv) impair the
rights of others in, to or under any of the foregoing, Tenant shall, promptly
after receiving notice thereof, either (A) obtain from all necessary parties
waivers or settlements of all claims, liabilities and damages resulting from
each such encroachment, violation, hindrance, obstruction or impairment, whether
the same shall affect Landlord, Tenant or both, or (B) take such action as shall
be necessary to remove all such encroachments, hindrances or obstructions and to
end all such violations or impairments, including, if necessary, making
Alterations.
13. Alterations and Improvements.
(a) Tenant shall have the right, without having obtained
the prior written consent of Landlord and Lender, to make (i) Alterations or a
series of related Alterations that, as to any such Alterations or series of
related Alterations, do not cost in excess of $250,000 and (ii) to install
Equipment in the Improvements or accessions to the Equipment that, as to such
Equipment or accessions, do not cost in excess of $250,000, so long as at the
time of construction or installation of any such Equipment or Alterations no
Event of Default exists and is continuing and the value and utility of the
Leased Premises is not diminished thereby in any material respects. If the cost
of any Alterations, series of related Alterations, Equipment or accessions
thereto is in excess of $250,000, the prior written approval of Landlord shall
be required, such approval not to be unreasonably withheld, delayed or
conditioned. Tenant shall not construct upon the Land any additional buildings
without having first obtained the prior written consent of Landlord, such
approval not to be unreasonably withheld, delayed or conditioned.
(b) If Tenant makes any Alterations pursuant to this
Paragraph 13 or as required by Paragraph 12 or 17 (such
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Alterations and actions being hereinafter collectively referred to as "Work"),
whether or not Landlord's consent is required, then (i) the market value of the
Leased Premises shall not be lessened in any material respect or its usefulness
impaired in any material respect by any such Work, (ii) all such Work shall be
performed by Tenant in a good and workmanlike manner, (iii) all such Work shall
be expeditiously completed in compliance with all Legal Requirements then in
effect, (iv) all such Work shall comply with the Insurance Requirements, (v) if
any such Work involves the replacement of Equipment or parts thereto, all
replacement Equipment or parts shall be in first class condition, (vi) Tenant
shall promptly discharge or remove all liens filed against any of the Leased
Premises arising out of such Work, (vii) Tenant shall procure and pay for all
permits and licenses required in connection with any such Work, (viii) all such
Work shall be the property of Landlord and except for items not treated as
Equipment pursuant to Exhibit "B", and, subject to the terms of the Ground
Lease, shall be subject to this Lease, and Tenant shall execute and deliver to
Landlord any document requested by Landlord evidencing the assignment to
Landlord of all estate, right, title and interest (other than the leasehold
estate created hereby) of Tenant or any other Person claiming under Tenant, and
(ix) for Work that will cost in excess of $250,000 Tenant shall comply, to the
extent requested by Landlord or required by this Lease, with the provisions of
Paragraphs 11(a) and 19(a)(i), whether or not such Work involves restoration of
the Leased Premises.
14. Permitted Contests. Notwithstanding any other provision of
this Lease, Tenant shall not be required to (a) pay any Imposition, (b)
discharge or remove any lien referred to in Paragraph 11 or 13 or (c) take any
action with respect to any encroachment, violation, hindrance, obstruction or
impairment referred to in Paragraph 12(b) (such non-compliance with the terms
hereof being hereinafter referred to collectively as "Permitted Violations"), so
long as at the time of such contest no monetary Event of Default exists and is
continuing and so long as Tenant shall contest, in good faith, the existence,
amount or validity thereof, the amount of the damages caused thereby, or the
extent of its or Landlord's liability therefor by appropriate proceedings so
long as during the pendency thereof none of the following shall occur: (i) the
realization upon, the Permitted Violation so contested, (ii) the sale,
forfeiture or loss of any of the Leased Premises or any Rent to satisfy or to
pay any damages caused by any Permitted Violation, (iii) any material
interference with the use or occupancy of any of the Leased Premises, (iv) any
interference with the payment of any Rent, or (v) the cancellation of any
insurance policy or a statement by the carrier that coverage will be denied.
Tenant shall provide Landlord security which is satisfactory, in Landlord's
reasonable judgment, to assure that such Permitted Violation is corrected,
including all Costs, interest and penalties that may be incurred or become due
in connection therewith. While any proceedings
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which comply with the requirements of this Paragraph 14 are pending and the
required security is held by Landlord, Landlord shall not have the right to
correct any Permitted Violation thereby being contested unless Landlord is
required by law to correct such Permitted Violation and Tenant's contest does
not prevent or stay such requirement as to Landlord. Each such contest shall be
promptly and diligently prosecuted by Tenant to a final conclusion, except that
Tenant, so long as the conditions of this Paragraph 14 are at all times complied
with, has the right to attempt to settle or compromise such contest through
negotiations. Tenant shall pay any and all losses, judgments, decrees and Costs
in connection with any such contest and shall, promptly after the final
determination of such contest, fully pay and discharge the amounts which shall
be levied, assessed, charged or imposed or be determined to be payable therein
or in connection therewith, together with all penalties, fines, interest and
Costs thereof or in connection therewith, and perform all acts the performance
of which shall be ordered or decreed as a result thereof. No such contest shall
subject Landlord to the risk of any civil or criminal liability.
15. Indemnification.
(a) Tenant shall pay, protect, indemnify, defend, save and
hold harmless Landlord and all other Persons described in Paragraph 29 (each an
"Indemnitee") from and against any and all liabilities, losses, damages
(excluding punitive and consequential damages, except to the extent payable to a
third Person), penalties, Costs (including reasonable attorneys' fees and
costs), causes of action, suits, claims, demands or judgments of any nature
whatsoever, howsoever caused (unless caused by the gross negligence or willful
misconduct of the Indemnitee seeking indemnification), without regard to the
form of action and whether based on strict liability, negligence or any other
theory of recovery at law or in equity, arising from (i) any matter pertaining
to the use, non-use, occupancy, operation, condition, design, construction,
maintenance, repair or restoration of the Leased Premises or Adjoining Property,
(ii) any casualty in any manner arising from the Leased Premises or Adjoining
Property, whether or not Indemnitee has or should have knowledge or notice of
any defect or condition causing or contributing to said casualty, (iii) any
violation by Tenant of any provision of this Lease, any Legal Requirement or any
Permitted Encumbrance or any encumbrance Tenant consented to or (iv) any
alleged, threatened or actual Environmental Violation, including (A) liability
for response costs and for costs of removal and remedial action incurred by the
United States Government, any state or local governmental unit or any other
Person, or damages from injury to or destruction or loss of natural resources,
including the reasonable costs of assessing such injury, destruction or loss,
incurred pursuant to Section 107 of CERCLA, or any successor section or act or
provision of any similar state or local Law, (B) liability for costs and
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expenses of abatement, correction or clean-up, fines, damages, response costs or
penalties which arise from the provisions of any of the other Environmental Laws
and (C) liability for personal injury or property damage arising under any
statutory or common-law tort theory, including damages assessed for the
maintenance of a public or private nuisance or for carrying on of a dangerous
activity.
(b) In case any action or proceeding is brought against
any Indemnitee by reason of any such claim, (i) Tenant may retain its own
counsel and defend such action (it being understood that Landlord may employ
counsel of its choice to monitor the defense of any such action) and (ii) such
Indemnitee shall notify Tenant to resist or defend such action or proceeding by
retaining counsel reasonably satisfactory to such Indemnitee, and such
Indemnitee will cooperate and assist in the defense of such action or proceeding
if reasonably requested so to do by Tenant.
(c) The obligations of Tenant under this Paragraph 15
shall survive any termination, expiration or rejection in bankruptcy of this
Lease.
16. Insurance.
(a) Tenant shall maintain the following insurance on or in
connection with the Leased Premises:
(i) Insurance against physical loss or damage to the
Improvements and Equipment as provided under a standard "All Risk" property
policy including but not limited to flood (if the Leased Premises is in a flood
zone) and earthquake coverage in amounts not less than the actual replacement
cost of the Improvements and Equipment. Such policies shall contain Replacement
Cost and Agreed Amount Endorsements and shall contain deductibles not more than
$50,000 per occurrence.
(ii) Commercial General Liability Insurance (including
but not limited to Incidental Medical Malpractice and Host Liquor Liability) and
Business Automobile Liability Insurance (including Non-Owned and Hired
Automobile Liability) against claims for personal and bodily injury, death or
property damage occurring on, in or as a result of the use of the Leased
Premises, in an amount not less than $10,000,000 per occurrence/annual
aggregate.
(iii) Worker's compensation insurance covering all
persons employed by Tenant in connection with any work done on or about any of
the Leased Premises for which claims for death, disease or bodily injury may be
asserted against Landlord, Tenant or any of the Leased Premises or, in lieu of
such Worker's Compensation Insurance, a program of insurance
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complying with the rules, regulations and requirements of the appropriate agency
of the State.
(iv) Comprehensive Boiler and Machinery Insurance on
any of the Equipment or any other equipment on or in the Leased Premises, in an
amount not less than $1,000,000 per accident for damage to property. Such
policies shall include at least $1,000,000 per accident for Off-Premises Service
Interruption and may contain a deductible not to exceed $50,000.
(v) Business Interruption Extra Expense Insurance at
limits to cover 100% of losses and expenses incurred over the period of
indemnity not less than one year from time of loss. Such insurance shall name
Landlord as loss payee solely with respect to Rent payable to or for the benefit
of Landlord under this Lease.
(vi) During any period in which substantial
Alterations at the Leased Premises are being undertaken, builder's risk
insurance covering the total completed value including "soft costs" endorsements
with respect to the Improvements being altered or repaired (on a completed
value, non-reporting basis), replacement cost of work performed and equipment,
supplies and materials furnished in connection with such construction or repair
of Improvements or Equipment, together with such "soft cost" endorsements and
such other endorsements as Landlord may reasonably require and general
liability, worker's compensation and automobile liability insurance with respect
to the Improvements being constructed, altered or repaired.
(b) The insurance required by Paragraph 16(a) shall be
written by companies which have a Best's rating of A:X or above and are admitted
in, and approved to write insurance policies by, the State Insurance Department
for the State. The insurance policies shall be in amounts sufficient at all
times to satisfy any coinsurance requirements thereof. The insurance referred to
in Paragraphs 16(a)(i), 16(a)(iv), 16(a)(v) and 16(a)(vi) shall name Tenant as
insured and Lender and Landlord as loss payee. The insurance referred to in
Paragraph 16(a)(ii) shall name Landlord and Lender as additional insureds. If
said insurance or any part thereof shall expire, be withdrawn or become void,
Tenant shall immediately obtain new or additional insurance reasonably
satisfactory to Landlord.
(c) Each insurance policy referred to in clauses (i),
(iv), (v) and (vi) of Paragraph 16(a) shall contain standard non-contributory
mortgagee clauses in favor of and acceptable to Lender. Each policy required by
any provision of Paragraph 16(a), except clause (iii) thereof, shall provide
that it may not be cancelled except after thirty (30) days' prior notice to
Landlord and Lender. Each such policy shall also provide that any loss otherwise
payable thereunder shall be payable
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notwithstanding (i) any act or omission of Landlord or Tenant which might,
absent such provision, result in a forfeiture of all or a part of such insurance
payment, (ii) the occupation or use of any of the Leased Premises for purposes
more hazardous than those permitted by the provisions of such policy, (iii) any
foreclosure or other action or proceeding taken by Lender pursuant to any
provision of the Mortgage, Note, Assignment or other document evidencing or
securing the Loan upon the happening of an event of default therein or (iv) any
change in title to or ownership of any of the Leased Premises.
(d) Tenant shall pay as they become due all premiums for
the insurance required by Paragraph 16(a), shall renew or replace each policy
and deliver to Landlord evidence of the payment of the full premium therefor or
installment then due at least thirty (30) days prior to the expiration date of
such policy, and shall promptly deliver to Landlord original certificates.
(e) Anything in this Paragraph 16 to the contrary
notwithstanding, any insurance which Tenant is required to obtain pursuant to
Paragraph 16(a) may be carried under a "blanket" or umbrella policy or policies
covering other properties or liabilities of Tenant, provided that such "blanket"
or umbrella policy or policies otherwise comply with the provisions of this
Paragraph 16 and provided further that Tenant shall provide to Landlord a
Statement of Values which shall be reviewed annual and amended as necessary
based on Replacement Cost Valuations. The original or a certified copy of each
such "blanket" or umbrella policy shall promptly be delivered to Landlord.
(f) Tenant shall promptly comply with and conform to (i)
all provisions of each insurance policy required by this Paragraph 16 and (ii)
all reasonable requirements of the insurers thereunder applicable to Landlord,
Tenant or any of the Leased Premises or to the use, manner of use, occupancy,
possession, operation, maintenance, alteration or repair of any of the Leased
Premises, even if such compliance necessitates Alterations or results in
interference with the use or enjoyment of any of the Leased Premises.
(g) Tenant shall not carry separate insurance concurrent
in form or contributing in the event of a Casualty with that required in this
Paragraph 16 unless (i) Landlord and Lender are included therein as named
insureds, with loss payable as provided herein, and (ii) such separate insurance
complies with the other provisions of this Paragraph 16. Tenant shall
immediately notify Landlord of such separate insurance and shall deliver to
Landlord the original policies thereof.
(h) All policies shall contain effective waivers by the
carrier against all claims for insurance premiums against
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Landlord and shall contain full waivers of subrogation against the Landlord.
(i) All proceeds of any insurance required under
Paragraph 16(a) shall be payable as follows:
(i) Except for proceeds payable to a Person other than
Landlord, Tenant or Lender, all proceeds of insurance required under clauses
(ii), (iii), (iv), (v) and (vii) of Paragraph 16(a) and proceeds attributable to
the general liability coverage provisions of Builder's Risk insurance under
clause (vi) of Paragraph 16(a) shall be payable to Landlord or, if required by
the Mortgage, to Lender.
(ii) Proceeds of insurance required under clause (i)
of Paragraph 16(a) and proceeds attributable to Builder's Risk insurance (other
than its general liability coverage provisions) under clause (vi) of Paragraph
16(a) shall be payable to Landlord (or Lender) and applied as set forth in
Paragraph 17. Tenant shall apply the Net Award to restoration of the Leased
Premises in accordance with the applicable provisions of this Lease.
17. Casualty and Condemnation.
(a) If any Casualty to the Leased Premises occurs Tenant
shall give Landlord and Lender immediate notice thereof. So long as no monetary
Event of Default exists and is continuing, Tenant is hereby authorized to
adjust, collect and compromise all claims under any of the insurance policies
required by Paragraph 16(a) and to execute and deliver on behalf of Landlord all
necessary proofs of loss, receipts, vouchers and releases required by the
insurers and Landlord shall cooperate with Tenant in connection with such claims
and shall have the right to join with Tenant therein. Any final adjustment,
settlement or compromise of any such claim shall be subject to the prior written
approval of Landlord (which shall not be unreasonably withheld or delayed) and
Landlord shall have the right to prosecute or contest, or to require Tenant to
prosecute or contest, any such claim, adjustment, settlement or compromise. If a
monetary Event of Default exists and is continuing, Tenant shall not be entitled
to adjust, collect or compromise any such claim or to participate with Landlord
in any adjustment, collection and compromise of the Net Award payable in
connection with a Casualty and during such period Tenant agrees to sign, upon
the request of Landlord, all such proofs of loss, receipts, vouchers and
releases. Each insurer is hereby authorized and directed to make payment under
said policies, including return of unearned premiums, directly to Landlord or,
if required by the Mortgage, to Lender instead of to Landlord and Tenant
jointly, subject to the terms of Paragraphs 17(c) and 19. The rights of Landlord
under this Paragraph 17(a) shall be extended to Lender if and to the extent that
any Mortgage so provides.
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(b) Tenant, immediately upon receiving a Condemnation
Notice, shall notify Landlord and Lender thereof. So long as no monetary Event
of Default exists and is continuing, Tenant is authorized to collect, settle and
compromise the amount of any Net Award and Landlord shall have the right to join
with Tenant herein. If a monetary Event of Default exists and is continuing,
Landlord shall be authorized to collect, settle and compromise the amount of any
Net Award and Tenant shall not be entitled to participate with Landlord in any
Condemnation proceeding or negotiations under threat thereof or to contest the
Condemnation or the amount of the Net Award therefor. No agreement with any
condemnor in settlement or under threat of any Condemnation shall be made by
Tenant without the written consent of Landlord. Subject to the provisions of
this Paragraph 17(b), Tenant hereby irrevocably assigns to Landlord any award or
payment to which Tenant is or may be entitled by reason of any Condemnation,
whether the same shall be paid or payable for Tenant's leasehold interest
hereunder or otherwise; but nothing in this Lease shall impair Tenant's right to
any award or payment on account of Tenant's trade fixtures, equipment or other
tangible property which is not part of the Equipment, moving expenses or loss of
business, if available, to the extent that and so long as (i) Tenant shall have
the right to make, and does make, a separate claim therefor against the
condemnor and (ii) such claim does not in any way reduce either the amount of
the award otherwise payable to Landlord for the Condemnation of Landlord's fee
interest in the Leased Premises or the amount of the award (if any) otherwise
payable for the Condemnation of Tenant's leasehold interest hereunder. The
rights of Landlord under this Paragraph 17(b) shall also be extended to Lender
if and to the extent that any Mortgage so provides.
(c) If (i) any insured Casualty or Condemnation shall
occur and in the reasonable opinion of Tenant the Leased Premises can be
substantially restored within one hundred eighty (180) days following the date
of such Casualty or Condemnation to a functional unit sufficient for the
operation of Tenant's business or (ii) if any uninsured Casualty shall occur,
this Lease shall continue, notwithstanding such event, and there shall be no
abatement or reduction of any Monetary Obligations in excess of amounts paid to
Landlord under the insurance described in Paragraph 16(a)(v). Promptly after
such Casualty or Condemnation and, at Tenant's option, notice of Landlord's
receipt of the Net Award, Tenant, as required in Paragraphs 12(a) and 13(b),
shall commence and diligently continue to restore the Leased Premises as nearly
as possible to their value, condition and character immediately prior to such
event (assuming the Leased Premises to have been in the condition required by
this Lease). So long as no monetary Event of Default exists and is continuing,
any Net Award up to and including $250,000 shall be paid by Landlord to Tenant
promptly upon receipt by Landlord and Tenant shall restore the Leased Premises
in accordance with the requirements of Paragraphs 12(a) and 13(b) of this Lease.
Any
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Net Award in excess of $250,000 shall be made available by Landlord (or Lender,
if required by the terms of any Mortgage) to Tenant for the restoration of any
of the Leased Premises pursuant to and in accordance with the provisions of
Paragraph 19 hereof.
(d) If any Casualty or Condemnation shall occur and in the
reasonable opinion of Tenant the Leased Premises cannot be substantially
restored within such one hundred eighty (180) day period then, at Tenant's
option, this Lease shall terminate (except for Surviving Obligations) as of the
date Landlord receives the Net Award.
18. [Intentionally Deleted].
19. Restoration.
(a) Landlord (or Lender if required by any Mortgage) shall
hold Net Award in excess of $250,000 in a fund (the "Restoration Fund") and
disburse amounts from the Restoration Fund only in accordance with the following
conditions:
(i) prior to commencement of restoration, (A) the
architects, contracts, contractors, plans and specifications for the restoration
shall have been approved by Landlord, such approval not to be unreasonably
withheld or delayed, (B) if Tenant shall have obtained the same, Landlord and
Lender shall be provided with mechanics' lien insurance acceptable performance
and payment bonds which insure satisfactory completion of and payment for the
restoration, and (C) if permitted by applicable law, appropriate waivers of
mechanics' and materialmen's liens shall have been filed;
(ii) at the time of any disbursement, no monetary
Event of Default shall exist and be continuing and no mechanics' or
materialmen's liens shall have been filed against any of the Leased Premises and
remain undischarged or unbonded;
(iii) disbursements shall be made promptly from time
to time in an amount not exceeding the cost of the work completed since the last
disbursement (assuming payment of such disbursement), upon receipt of (A)
reasonably satisfactory evidence, including architects' certificates, of the
stage of completion, the estimated total cost of completion and performance of
the work to date in a good and workmanlike manner in accordance with the
contracts, plans and specifications, (B) waivers of liens in form reasonably
satisfactory to Landlord and (C) a satisfactory bringdown of title insurance;
(iv) each request for disbursement shall be
accompanied by a certificate of Tenant, signed by an authorized representative
of Tenant, describing the work for which payment is requested, stating the cost
incurred in connection therewith,
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stating that Tenant has not previously received payment for such work and, upon
full completion of the work, also stating that the work has been fully completed
and, to Tenant's knowledge, complies with the applicable requirements of this
Lease;
(v) Landlord or Lender may retain a portion of the
restoration fund for the retainage established under the Construction Contracts
until the restoration is fully completed;
(vi) if the Restoration Fund is held by Landlord, the
Restoration Fund shall not be commingled with Landlord's other funds and shall
bear interest at a rate agreed to by Landlord and Tenant; and
(vii) such other reasonable conditions as Landlord or
Lender may impose.
(b) Prior to commencement of restoration and at any time
during restoration, if the estimated cost of completing the restoration work
free and clear of all liens, as determined by Landlord, exceeds the amount of
the Net Award available for such restoration, the amount of such excess shall,
upon demand by Landlord, be paid by Tenant to Landlord to be added to the
Restoration Fund. Any sum so added by Tenant which remains in the Restoration
Fund upon completion of restoration shall be refunded to Tenant. For purposes of
determining the source of funds with respect to the disposition of funds
remaining after the completion of restoration, the Net Award shall be deemed to
be disbursed prior to any amount added by Tenant.
(c) If any sum remains in the Restoration Fund after
completion of the restoration and any refund to Tenant pursuant to Paragraph
19(b), such sum shall be retained by Landlord or, if required by a Note or
Mortgage, paid by Landlord to a Lender.
20. [Intentionally Deleted].
21. Assignment and Subletting; Prohibition against Leasehold
Financing.
(a) (i) Tenant shall have the right upon not less than
forty-five (45) days prior written notice to, but without the approval of,
Landlord to assign this Lease or to sublet the Leased Premises in its entirety
("Preapproved Transfer") in connection with any transaction described in
Sections 2 and 3 of Exhibit "E".
(ii) If Tenant desires to assign this Lease other than
with respect to a Preapproved Transfer, whether by operation of law or
otherwise, then Tenant shall, not less than forty-five (45) days prior to the
date on which it desires to make any such assignment submit to Landlord
information regarding
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the following with respect to the proposed assignee ("Review Criteria"): (A)
credit, (B) capital structure, (C) management, (D) operating history, (E)
proposed use of the Leased Premises and (F) risk factors associated with the
proposed use of the Leased Premises by the proposed assignee, taking into
account factors such as environmental concerns and product liability. Landlord
shall review such information and shall approve or disapprove the proposed
assignee no later than the thirtieth (30th) day following receipt of all such
information, such approval not to be unreasonably withheld or delayed, and
Landlord shall be deemed to have acted reasonably in granting or withholding
consent if such grant or disapproval is based solely on its review of the Review
Criteria using prudent business judgment.
(b) (i) Tenant shall have the right, upon thirty (30) days
prior written notice to Landlord and Lender, to enter into one or more subleases
that demise, in the aggregate, up to but not in excess of fifty percent (50%) of
the gross space in the Improvements with no consent or approval of Landlord
being required or necessary ("Preapproved Sublet"). Other than pursuant to
Preapproved Sublets at no time during the Term shall subleases for more than
fifty percent (50%) of the gross space in the Leased Premises be permitted
without the prior written consent of Landlord, which consent shall be reasonably
granted or withheld based on a review of the Review Criteria as they relate to
the proposed sublessee if the proposed sublet is for all or substantially all of
the Leased Premises and a review of the factor described at clause (E) of the
Review Criteria if the proposed sublet is for only a portion of the Leased
Premises. Landlord and Lender shall be deemed to have acted reasonably in
granting or withholding consent if such grant or disapproval is based solely on
their reasonable review of the Review Criteria applying prudent business
judgment (and shall not be unreasonably delayed).
(c) If Tenant assigns all its rights and interest under
this Lease, the assignee under such assignment shall expressly assume all the
obligations of Tenant hereunder, actual or contingent, including obligations of
Tenant which may have arisen on or prior to the date of such assignment, by a
written instrument delivered to Landlord at the time of such assignment. Each
sublease of any of the Leased Premises shall be subject and subordinate to the
provisions of this Lease. No assignment or sublease shall affect or reduce any
of the obligations of Tenant hereunder, and all such obligations shall continue
in full force and effect as obligations of a principal and not as obligations of
a guarantor, as if no assignment or sublease had been made. No assignment or
sublease shall impose any additional obligations on Landlord under this Lease.
(d) Tenant shall, within ten (10) days after the execution
and delivery of any assignment or sublease, deliver a
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duplicate original copy thereof to Landlord which, in the event of an
assignment, shall be in recordable form.
(e) As security for performance of its obligations under
this Lease, Tenant hereby grants, conveys and assigns to Landlord all right,
title and interest of Tenant in and to all subleases now in existence or
hereafter entered into for any or all of the Leased Premises, any and all
extensions, modifications and renewals thereof and all rents, issues and profits
therefrom. Landlord shall have the absolute right at any time following the
occurrence of an Event of Default to collect such rents and sums of money and to
retain the same. Tenant shall not consent to, cause or allow any modification or
alteration of any of the terms, conditions or covenants of any of the subleases
requiring Landlord's consent hereunder or the termination thereof, without the
prior written approval of Landlord, which consent shall not be unreasonably
withheld or delayed, nor shall Tenant accept any rents more than thirty (30)
days in advance of the accrual thereof with respect to any of the Subleases nor
do nor permit anything to be done, the doing of which, nor omit or refrain from
doing anything, the omission of which, will or could be a breach of or default
in the terms of any of the subleases.
(f) Tenant shall not have the power to mortgage, pledge or
otherwise encumber its interest under this Lease or any sublease of the Leased
Premises, and any such mortgage, pledge or encumbrance made in violation of this
Paragraph 21 shall be void and of no force and effect.
(g) Landlord may sell or transfer the Leased Premises at
any time without Tenant's consent to any third party (each a "Third Party
Purchaser"). In the event of any such transfer, Tenant shall attorn to any Third
Party Purchaser as Landlord so long as such Third Party Purchaser and Landlord
notify Tenant in writing of such transfer. At the request of Landlord, Tenant
will execute such documents confirming the agreement referred to above and such
other agreements as Landlord may reasonably request, provided that such
agreements do not increase the liabilities and obligations of or decrease the
rights of Tenant hereunder.
22. Events of Default.
(a) The occurrence of any one or more of the following
(after expiration of any applicable cure period as provided in Paragraph 22(b))
shall, at the sole option of Landlord, constitute an "Event of Default" under
this Lease:
(i) a failure by Tenant to make any payment of any
Monetary Obligation when due, regardless of the reason for such failure;
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(ii) a failure by Tenant duly to perform and observe,
or a violation or breach of, any other provision hereof not otherwise
specifically mentioned in this Paragraph 22(a);
(iii) The breach of any Covenant shall occur;
(iv) Tenant shall (A) voluntarily be adjudicated a
bankrupt or insolvent, (B) seek or consent to the appointment of a receiver or
trustee for itself or for the Leased Premises, (C) file a petition seeking
relief under the bankruptcy or other similar laws of the United States, any
state or any jurisdiction, (D) make a general assignment for the benefit of
creditors, or (E) be unable to pay its debts as they mature;
(v) a court shall enter an order, judgment or decree
appointing, without the consent of Tenant, a receiver or trustee for it or for
any of the Leased Premises or approving a petition filed against Tenant which
seeks relief under the bankruptcy or other similar laws of the United States,
any state or any jurisdiction, and such order, judgment or decree shall remain
undischarged or unstayed ninety (90) days after it is entered;
(vi) the Leased Premises shall have been vacated or
abandoned;
(vii) Tenant shall be liquidated or dissolved or shall
begin proceedings towards its liquidation or dissolution;
(viii) the estate or interest of Tenant in any of the
Leased Premises shall be levied upon or attached in any proceeding and such
estate or interest is about to be sold or transferred or such process shall not
be vacated or discharged within sixty (60) days after it is made; or
(ix) an Event of Default beyond the expiration of any
applicable grace or cure period shall occur under the Ground Lease.
(b) No notice or cure period shall be required in any one
or more of the following events: (A) the occurrence of an Event of Default under
clause (iii), (iv), (v), (vi), (vii), (viii), or (ix) of Paragraph 22(a); or (B)
the default consists of an assignment entered into in violation of Paragraph 21.
If the default consists of the failure to pay any Monetary Obligation under
clause (i) of Paragraph 22(a), the applicable cure period shall be ten (10) days
from the date on which notice is given. If the default consists of a default
under clause (ii) of Paragraph 22(a), other than the events specified in clause
(B) of the first sentence of this Paragraph 22(b), the applicable cure period
shall be thirty (30) days from the date on which
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notice is given or, if the default cannot be cured within such thirty (30) day
period and delay in the exercise of a remedy would not (in Landlord's reasonable
judgment) cause any material adverse harm to Landlord or any of the Leased
Premises, the cure period shall be extended for the period required to cure the
default (but such cure period, including any extension, shall not in the
aggregate exceed ninety (90) days), provided that Tenant shall commence to cure
the default within the said thirty-day period and shall actively, diligently and
in good faith proceed with and continue the curing of the default until it shall
be fully cured.
23. Remedies and Damages Upon Default.
(a) If an Event of Default shall have occurred and is
continuing, Landlord shall have the right, at its sole option, then or at any
time thereafter, to exercise its remedies and to collect damages from Tenant in
accordance with this Paragraph 23, subject in all events to applicable Law,
without demand upon or notice to Tenant except as otherwise provided in
Paragraph 22(b) and this Paragraph 23.
(i) Landlord may give Tenant notice of Landlord's
intention to terminate this Lease on a date specified in such notice. Upon such
date, this Lease, the estate hereby granted and all rights of Tenant hereunder
shall expire and terminate. Upon such termination, Tenant shall immediately
surrender and deliver possession of the Leased Premises to Landlord in
accordance with Paragraph 26. If Tenant does not so surrender and deliver
possession of the Leased Premises, Landlord may following summary process,
re-enter and repossess the Leased Premises. Upon or at any time after taking
possession of the Leased Premises in accordance with the prior sentence,
Landlord may, by legal process, remove any Persons or property therefrom.
Landlord shall be under no liability for or by reason of any such entry,
repossession or removal. Notwithstanding such entry or repossession, Landlord
may collect the damages set forth in Paragraph 23(b)(i) or 23(b)(ii).
(ii) After repossession of the Leased Premises
pursuant to clause (i) above, Landlord shall have the right to relet any of the
Leased Premises to such tenant or tenants, for such term or terms, for such
rent, on such conditions and for such uses as Landlord in its sole discretion
may determine, and collect and receive any rents payable by reason of such
reletting. Landlord may make such Alterations in connection with such reletting
as it may deem advisable in its sole discretion. Notwithstanding any such
reletting, Landlord may collect the damages set forth in Paragraph 23(b)(ii).
(iii) Landlord may declare by notice to Tenant the
entire Basic Rent (in the amount of Basic Rent then in effect) for the remainder
of the then current Term to be
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immediately due and payable. Tenant shall immediately pay to Landlord all such
Basic Rent discounted to its Present Value, all accrued Rent then due and
unpaid, all other Monetary Obligations which are then due and unpaid and all
Monetary Obligations which arise or become due by reason of such Event of
Default (including any customary reletting costs incurred by Landlord). Upon
receipt by Landlord of all such accelerated Basic Rent and Monetary Obligations,
this Lease shall remain in full force and effect and Tenant shall have the right
to possession of the Leased Premises from the date of such receipt by Landlord
to the end of the Term, and subject to all the provisions of this Lease,
including the obligation to pay all increases in Basic Rent and all Monetary
Obligations that subsequently become due, except that (A) no Basic Rent which
has been prepaid hereunder shall be due thereafter during the said Term and (B)
Tenant shall have no option to extend or renew the Term.
(b) The following constitute damages to which Landlord
shall be entitled if Landlord exercises its remedies under Paragraph 23(a)(i) or
23(a)(ii):
(i) If Landlord exercises its remedy under Paragraph
23(a)(i) but not its remedy under Paragraph 23(a)(ii) (or attempts to exercise
such remedy and is unsuccessful in reletting the Leased Premises) then, upon
written demand from Landlord, Tenant shall pay to Landlord, as liquidated and
agreed final damages for Tenant's default and in lieu of all current damages
beyond the date of such demand (it being agreed that it would be impracticable
or extremely difficult to fix the actual damages), an amount equal to the
Present Value of the excess, if any, of (A) all Basic Rent from the date of such
demand to the date on which the Term is scheduled to expire hereunder in the
absence of any earlier termination, re-entry or repossession over (B) the then
fair market rental value of the Leased Premises for the same period. Tenant
shall also pay to Landlord all of Landlord's costs in connection with the
repossession of the Leased Premises and any attempted reletting thereof,
including all brokerage commissions, legal expenses, reasonable attorneys' fees,
employees' expenses, costs of necessary Alterations and expenses and preparation
for reletting.
(ii) If Landlord exercises its remedy under Paragraph
23(a)(i) or its remedies under Paragraph 23(a)(i) and 23(a)(ii), then Tenant
shall, until the end of what would have been the Term in the absence of the
termination of the Lease, and whether or not any of the Leased Premises shall
have been relet, be liable to Landlord for, and shall pay to Landlord, as
liquidated and agreed current damages all Monetary Obligations which would be
payable under this Lease by Tenant in the absence of such termination less the
net proceeds, if any, of any reletting pursuant to Paragraph 23(a)(ii), after
deducting from such proceeds all of Landlord's costs (including the items listed
in the last sentence of Paragraph 23(b)(i) hereof) incurred in
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connection with such repossessing and reletting; provided, that if Landlord has
not relet the Leased Premises, such costs of Landlord shall be considered to be
Monetary Obligations payable by Tenant. Tenant shall be and remain liable for
all sums aforesaid, and Landlord may recover such damages from Tenant and
institute and maintain successive actions or legal proceedings against Tenant
for the recovery of such damages. Nothing herein contained shall be deemed to
require Landlord to wait to begin such action or other legal proceedings until
the date when the Term would have expired by its own terms had there been no
such Event of Default.
(c) Notwithstanding anything to the contrary herein
contained, in lieu of or in addition to any of the foregoing remedies and
damages, Landlord may exercise any remedies and collect any damages available to
it at law or in equity. If Landlord is unable to obtain full satisfaction
pursuant to the exercise of any remedy, it may pursue any other remedy which it
has hereunder or at law or in equity; provided, that Landlord shall not be
entitled to obtain more than full satisfaction notwithstanding the exercise of
multiple remedies by Landlord.
(d) Landlord shall not be required to mitigate any of its
damages hereunder unless required to by applicable Law. If any Law shall validly
limit the amount of any damages provided for herein to an amount which is less
than the amount agreed to herein, Landlord shall be entitled to the maximum
amount available under such Law.
(e) No termination of this Lease, repossession or
reletting of the Leased Premises, exercise of any remedy or collection of any
damages pursuant to this Paragraph 23 shall relieve Tenant of any Surviving
Obligations.
(f) WITH RESPECT TO ANY REMEDY OR PROCEEDING OF LANDLORD
HEREUNDER, LANDLORD AND TENANT WAIVE ANY RIGHT TO A TRIAL BY JURY.
(g) Upon the occurrence of any Event of Default, Landlord
shall have the right (but no obligation) to perform any act required of Tenant
hereunder and, if performance of such act requires that Landlord enter the
Leased Premises, Landlord may enter the Leased Premises for such purpose.
(h) No failure of either party (i) to insist at any time
upon the strict performance of any provision of this Lease or (ii) to exercise
any option, right, power or remedy contained in this Lease shall be construed as
a waiver, modification or relinquishment thereof. A receipt by Landlord of any
sum in satisfaction of any Monetary Obligation with knowledge of the breach of
any provision
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hereof shall not be deemed a waiver of such breach, and no waiver by a party of
any provision hereof shall be deemed to have been made unless expressed in a
writing signed by such party.
(i) Tenant hereby waives and surrenders, for itself and
all those claiming under it, including creditors of all kinds, (i) any right and
privilege which it or any of them may have under any present or future Law to
redeem any of the Leased Premises or to have a continuance of this Lease after
termination of this Lease or of Tenant's right of occupancy or possession
pursuant to any court order or any provision hereof, and (ii) the benefits of
any present or future Law which exempts property from liability for debt or for
distress for rent.
(j) Except as otherwise provided herein, all remedies are
cumulative and concurrent and no remedy is exclusive of any other remedy. Each
remedy may be exercised at any time an Event of Default has occurred and is
continuing and may be exercised from time to time. No remedy shall be exhausted
by any exercise thereof.
24. Notices. All notices, demands, requests, consents,
approvals, offers, statements and other instruments or communications required
or permitted to be given pursuant to the provisions of this Lease shall be in
writing and shall be deemed to have been given and received for all purposes
when delivered in person or by Federal Express or other reliable 24-hour
delivery service or five (5) business days after being deposited in the United
States mail, by registered or certified mail, return receipt requested, postage
prepaid, addressed to the other party at its address stated above or when
delivery is refused. A copy of any notice given by Tenant to Landlord shall
simultaneously be given by Tenant to Reed Smith Shaw & McClay, 2500 One Liberty
Place, Philadelphia, PA 19103, Attention: Chairman, Real Estate Department and a
copy of any notice given by Landlord to Tenant shall simultaneously be given to
Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125 High Street, Boston, MA
02110, Attn: Margaret M. Brill. For the purposes of this Paragraph, any party
may substitute another address stated above (or substituted by a previous
notice) for its address by giving fifteen (15) days' notice of the new address
to the other party, in the manner provided above.
25. Estoppel Certificate. At any time upon not less than
twenty (20) days' prior written request by either Landlord or Tenant (the
"Requesting Party") to the other party (the "Responding Party"), the Responding
Party shall deliver to the Requesting Party a statement in writing, executed by
an authorized officer of the Responding Party, certifying (a) that, except as
otherwise specified, this Lease is unmodified and in full force and effect, (b)
the dates to which Basic Rent and Additional Rent have been paid, (c) that, to
the knowledge of the signer of such certificate and except as otherwise
specified, no default by either Landlord or Tenant exists hereunder and
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(d) such other matters as the Requesting Party may reasonably request relating
to the status of the Lease and the Leased Premises. Any such statements by the
Responding Party may be relied upon by the Requesting Party, any Lender or their
assignees and by any prospective purchaser or mortgagee of any of the Leased
Premises. Any certificate required under this Paragraph 25 and delivered by
Tenant shall state that, in the opinion of each person signing the same, he has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to the subject matter of such certificate, and shall
briefly state the nature of such examination or investigation.
26. Surrender. Upon the expiration or earlier termination of
this Lease, Tenant shall peaceably leave and surrender the Leased Premises to
Landlord in the same condition in which the Leased Premises was at the
commencement of this Lease, except as repaired, rebuilt, restored, altered,
replaced or added to as permitted or required by any provision of this Lease,
and except for ordinary wear and tear and Casualty damage that Tenant is not
otherwise required to restore pursuant to the terms of this Lease. Upon such
surrender, Tenant shall (a) remove from the Leased Premises all property which
is owned by Tenant or third parties other than Landlord and (b) repair any
damage caused by such removal. Property not so removed shall become the property
of Landlord, and Landlord may thereafter cause such property to be removed from
the Leased Premises. The cost of removing and disposing of such property and
repairing any damage to any of the Leased Premises caused by such removal shall
be paid by Tenant to Landlord upon demand. Landlord shall not in any manner or
to any extent be obligated to reimburse Tenant for any such property which
becomes the property of Landlord pursuant to this Paragraph 26.
27. No Merger of Title. There shall be no merger of the
leasehold estate created by this Lease with the leasehold estate in the Land and
the fee estate in the remainder of the Leased Premises by reason of the fact
that the same Person may acquire or hold or own, directly or indirectly, (a) the
leasehold estate created hereby or any part thereof or interest therein and (b)
the fee estate in any of the Leased Premises or any part thereof or interest
therein, unless and until all Persons having any interest in the interests
described in (a) and (b) above which are sought to be merged shall join in a
written instrument effecting such merger and shall duly record the same.
28. Books and Records.
(a) Tenant shall keep adequate records and books of
account with respect to the finances and business of Tenant generally and with
respect to the Leased Premises, in accordance with generally accepted accounting
principles ("GAAP") consistently applied.
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(b) Tenant shall deliver to Landlord and to Lender within
ninety (90) days of the close of each fiscal year, annual audited financial
statements of Tenant prepared by a nationally recognized firm of independent
certified public accountants containing balance sheets, statements of income and
retained earnings and statements of cash flow. Tenant shall also furnish to
Landlord within forty-five (45) days after the end of each of the three
remaining quarters unaudited financial statements and all other quarterly
reports of Tenant, certified by Tenant's chief financial officer, and all
filings, if any, of Form 10-K, Form 10-Q and other required filings with the
Securities and Exchange Commission pursuant to the provisions of the Securities
Exchange Act of 1934, as amended, or any other Law. All financial statements of
Tenant shall be prepared in accordance with GAAP consistently applied.
29. Non-Recourse as to Landlord. Anything contained herein to
the contrary notwithstanding, any claim based on or in respect of any liability
of Landlord under this Lease shall be enforced only against the Leased Premises
and not against any other assets, properties or funds of (i) Landlord, (ii) any
director, officer, general partner, shareholder, limited partner, beneficiary,
employee or agent of Landlord or any general partner of Landlord or any of its
general partners (or any legal representative, heir, estate, successor or assign
of any thereof), (iii) any successor partnership or corporation (or other
entity) of Landlord or any of its general partners, shareholders, officers,
directors, employees or agents, either directly or through Landlord or its
general partners, shareholders, officers, directors, employees or agents or any
predecessor or successor partnership or corporation (or other entity), or (iv)
any Person affiliated with any of the foregoing, or any director, officer,
employee or agent of any thereof.
30. Financing.
(a) Tenant agrees to pay, within thirty (30) days of
written request therefor, the reasonable balance of Tenant's legal fees and
reasonable and customary costs and expenses such as legal fees, recording fees,
title insurance, survey, mortgage points, if any, incurred by Landlord in
financing the initial Loan, up to a maximum of $14,621.80.
(b) If Landlord desires to obtain or refinance any Loan,
Tenant shall agree, upon request of Landlord, to supply any such Lender with
such notices and information as Tenant is required to give to Landlord hereunder
and to consent to such financing if such consent is requested by such Lender
subject to Tenant's receipt of a satisfactory recognition, subordination,
non-disturbance and attornment agreement. Such subordination, nondisturbance and
attornment agreement may require Tenant to confirm that (a) Lender and its
assigns will not be liable for
-35-
<PAGE> 38
any misrepresentation, act or omission of Landlord and (b) Lender and its
assigns will not be subject to any counterclaim, demand or offset which Tenant
may have against Landlord.
31. Subordination. This Lease and Tenant's interest hereunder
shall be subordinate to any Mortgage or other security instrument hereafter
placed upon the Leased Premises by Landlord, and to any and all advances made or
to be made thereunder, to the interest thereon, and all renewals, replacements
and extensions thereof, provided that any such Mortgage or other security
instrument (or a separate instrument in recordable form duly executed by the
holder of any such Mortgage or other security instrument and delivered to
Tenant) shall provide for the recognition of this Lease, including Tenant's
occupancy rights, and all of Tenant's other rights and Landlord's obligations
hereunder and the agreement not to disturb Tenant's occupancy hereunder unless
and until an Event of Default exists.
32. Covenants. Tenants hereby covenants and agrees to comply
with all the covenants and agreements described in Exhibit "E" hereto.
33. Tax Treatment; Reporting. Landlord and Tenant each
acknowledge that each shall treat this transaction as a true lease for state law
purposes and shall report this transaction as a Lease for Federal income tax
purposes. For Federal income tax purposes each shall report this Lease as a true
lease with Landlord as the owner of the Leased Premises and Equipment and Tenant
as the lessee of such Leased Premises and Equipment including: (1) treating
Landlord as the owner of the property eligible to claim depreciation deductions
under Section 167 or 168 of the Internal Revenue Code of 1986 (the "Code") with
respect to the Leased Premises and Equipment, (2) Tenant reporting its Rent
payments as rent expense under Section 162 of the Code, and (3) Landlord
reporting the Rent payments as rental income.
34. Miscellaneous.
(a) The paragraph headings in this Lease are used only for
convenience in finding the subject matters and are not part of this Lease or to
be used in determining the intent of the parties or otherwise interpreting this
Lease.
(b) As used in this Lease, the singular shall include the
plural and any gender shall include all genders as the context requires and the
following words and phrases shall have the following meanings: (i) "including"
shall mean "including without limitation"; (ii) "provisions" shall mean
"provisions, terms, agreements, covenants and/or conditions"; (iii) "lien" shall
mean "lien, charge, encumbrance, title retention agreement, pledge, security
interest, mortgage and/or deed of trust"; (iv) "obligation" shall mean
"obligation, duty,
-36-
<PAGE> 39
agreement, liability, covenant and/or condition"; (v) "any of the Leased
Premises" shall mean "the Leased Premises or any part thereof or interest
therein"; (vi) "any of the Land" shall mean "the Land or any part thereof or
interest therein"; (vii) "any of the Improvements" shall mean "the Improvements
or any part thereof or interest therein"; (viii) "any of the Equipment" shall
mean "the Equipment or any part thereof or interest therein"; and (ix) "any of
the Adjoining Property" shall mean "the Adjoining Property or any part thereof
or interest therein".
(c) Any act which Landlord is permitted to perform under
this Lease may be performed at any time and from time to time by Landlord or any
person or entity designated by Landlord. Except as otherwise specifically
provided herein, Landlord shall have the right, at its sole option, to withhold
its consent whenever such consent is required under this Lease for any reason or
no reason. Time is of the essence with respect to the performance by Tenant and
Landlord of their respective obligations under this Lease.
(d) Landlord shall in no event be construed for any
purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant, operator, concessionaire or licensee of Tenant with respect to any of
the Leased Premises or otherwise in the conduct of their respective businesses.
(e) This Lease and the documents listed on Exhibit "F"
hereto which may be executed by Tenant on or about the effective date hereof at
Landlord's request constitute the entire agreement between the parties and
supersede all prior understandings and agreements, whether written or oral,
between the parties hereto relating to the Leased Premises and the transactions
provided for herein. Landlord and Tenant are business entities having
substantial experience with the subject matter of this Lease and have each fully
participated in the negotiation and drafting of this Lease. Accordingly, this
Lease shall be construed without regard to the rule that ambiguities in a
document are to be construed against the drafter.
(f) This Lease may be modified, amended, discharged or
waived only by an agreement in writing signed by the party against whom
enforcement of any such modification, amendment, discharge or waiver is sought.
(g) The covenants of this Lease shall run with the land
and bind Landlord and Tenant and their respective successors and assigns and all
present and subsequent encumbrancers and subtenants of any of the Leased
Premises, and shall inure to the benefit of Landlord, Tenant and their
respective successors and assigns. If there is more than one Tenant, the
obligations of each shall be joint and several.
-37-
<PAGE> 40
(h) If any one or more of the provisions contained in this
Lease shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Lease, but this Lease shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
(i) This Lease shall be governed by and construed and
enforced in accordance with the Laws of the State.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease
to be duly executed under seal as of the day and year first above written.
LANDLORD:
GGAP (MA) QRS 12-31, INC., a
Massachusetts corporation
By: _____________________________________
Title: __________________________________
ATTEST: TENANT:
PAGG CORPORATION,
a Massachusetts corporation
By: _____________________________ By: _____________________________________
Title: __________________________ Title: __________________________________
[Corporate Seal]
-38-
<PAGE> 41
EXHIBIT A
PREMISES
<PAGE> 42
EXHIBIT B
EQUIPMENT
All fixtures, machinery, apparatus, equipment, fittings and appliances of every
kind and nature whatsoever now or hereafter affixed or attached to or installed
in any of the Leased Premises (except as hereafter provided), including all
electrical, anti-pollution, heating, lighting (including hanging fluorescent
lighting), incinerating, power, air cooling, air conditioning, humidification,
sprinkling, plumbing, lifting, cleaning, fire prevention, fire extinguishing and
ventilating systems, devices and machinery and all engines, pipes, pumps, tanks
(including exchange tanks and fuel storage tanks), motors, conduits, ducts,
steam circulation coils, blowers, steam lines, compressors, oil burners,
boilers, doors, windows, loading platforms, lavatory facilities, stairwells,
fencing (including cyclone fencing), passenger and freight elevators, overhead
cranes and garage units, together with all additions thereto, substitutions
therefor and replacements thereof required or permitted by this Lease, but
excluding all inventory, personal property and all trade fixtures, machinery,
office, manufacturing and warehouse equipment which are not necessary to the
operation, as buildings, of the buildings which constitute part of the Leased
Premises.
<PAGE> 43
EXHIBIT C
PERMITTED ENCUMBRANCES
[NOTE: Recording references herein are to the Worcester
District Registry of Deeds unless otherwise stated.]
1. Together with the right and easement to use, in common with
Howard A. Fafard and others lawfully entitled thereto, the area shown as and
labeled "50' Wide Access & Utility Easement total Area = 128,755 + S.F. or 2.96
+ Acres" on a plan recorded in Plan Book 611, Plan 115, for all purposes for
which streets, roads and ways are utilized in the Commonwealth of Massachusetts,
together with all rights of way and easements above and below the ground
necessary for poles, conduits, or both, for telephone, gas, electricity, water,
sanitary sewers, storm sewers and other utilities.
2. Together with the right and easement granted as appurtenant
to Lot 16A, of which the Leased Premises is a part, to use, in common with
Ledgemere Land Corporation and others lawfully entitled thereto, the area shown
as and labeled "Area = 4,149 + S.F. or 1.10 Ac." on plan recorded in Plan Book
611, Plan 115, for access and underground utility easement purposes, which right
and easement was created by a Grant of Easements from Ledgemere Land Corporation
to Howard A. Fafard, dated December 12, 1988, recorded in Book 12391, Page 293.
3. Subject to the easements set forth in a Deed of Easements
from Howard A. Fafard to the Town of Milford, dated March 7, 1985, recorded in
Book 8804, Page 155, to an order of Taking by the town of Milford for the layout
of Fortune Boulevard, dated June 1, 1985, recorded in Book 8804, Page 157.
4. Subject to easement shown as and labeled "10' Wide Easement
for future Highway Layout" on plans recorded in Plan Book 507, Plan 44, and Plan
Book 611, Plan 115.
5. Subject to nonexclusive right and easement granted
appurtenant to Lot 5 shown on plan recorded in Plan Book 511, Plan 3, to use the
water within the former granite quarry pits shown on said plan, which right and
easement was created by deed from Howard A. Fafard to Ledgemere Land
Corporation, dated November 23, 1983, recorded in book 8011, Page 385.
6. Subject to the utility easements for the transmission
and/or distribution of intelligence by electricity or otherwise set forth in
instrument from Howard A. Fafard to New England Telephone and Telegraph Company,
dated September 21, 1983, recorded in Book 7969, Page 374.
7. Subject to the rights and easements set forth in a Deed of
Easement from Howard A. Fafard to Ledgemere Land
<PAGE> 44
Corporation, dated December 23, 1983, recorded in Book 8040, Page 6.
8. Subject to an Order of Conditions (File No. 223-259), dated
September 27, 1988, issued by the Milford Conservation Commission, recorded in
Book 11668, Page 339, as effected by an Extension Permit recorded in Book 13679,
Page 234, and a Certificate of Compliance recorded on May 4, 1994 as Instrument
No. 54594.
9. Subject to an Order of Conditions (File No. 223-447), dated
May 3, 1994, issued by the Milford Conservation Commission, recorded on May 4,
1994 as Instrument No. 54596.
10. Subject to and with the benefit of an Easement from
Dennison Development Associates, dated May 8, 1996, recorded in Book 17336, Page
357.
11. Real property taxes and assessments for the current year
and thereafter.
<PAGE> 45
EXHIBIT D
BASIC RENT PAYMENTS
1. Basic Rent. Subject to the adjustments provided for in
Paragraphs 2, 3 and 4 below, Basic Rent payable in respect of the Term shall be
$590,000 per annum, payable quarterly in advance on each Basic Rent Payment
Date, in equal installments of $147,500 each.
2. CPI Adjustments to Basic Rent. The Basic Rent shall be
subject to adjustment, in the manner hereinafter set forth, for increases in the
index known as United States Department of Labor, Bureau of Labor Statistics,
Consumer Price Index, All Urban Consumers, United States City Average, All
Items, (1982-84=100) ("CPI") or the successor index that most closely
approximates the CPI. If the CPI shall be discontinued with no successor or
comparable successor index, Landlord and Tenant shall attempt to reasonably
agree upon a substitute index or formula, but if they are unable to so agree,
then the matter shall be determined by arbitration in accordance with the rules
of the American Arbitration Association then prevailing in New York City. Any
decision or award resulting from such arbitration shall be final and binding
upon Landlord and Tenant and judgment thereon may be entered in any court of
competent jurisdiction. In no event will the Basic Rent as adjusted by the CPI
adjustment be less than the Basic Rent in effect for the four (4) year period
immediately preceding such adjustment.
3. Effective Dates of CPI Adjustments. Basic Rent shall not be
adjusted to reflect changes in the CPI until the fourth (4th) anniversary of the
Basic Rent Payment Date on which the first full quarterly installment of Basic
Rent shall be due and payable (the "First Full Basic Rent Payment Date"). As of
the fourth (4th) anniversary of the First Full Basic Rent Payment Date and
thereafter on the eighth (8th) and, if the initial Term is extended, on the
twelfth (12th), sixteenth (16th) and twentieth (20th) anniversaries of the First
Full Basic Rent Payment Date, Basic Rent shall be adjusted to reflect increases
in the CPI during the most recent four (4) year period immediately preceding
each of the foregoing dates (each such date being hereinafter referred to as the
"Basic Rent Adjustment Date").
4. Method of Adjustment for CPI Adjustment.
(a) As of each Basic Rent Adjustment Date when the average
CPI determined in clause (i) below exceeds the Beginning CPI (as defined in this
Paragraph 4(a)), the Basic Rent in effect immediately prior to the applicable
Basic Rent Adjustment Date shall be multiplied by a fraction, the numerator of
which shall be the difference between (i) the average CPI for the three (3) most
recent calendar months (the "Prior Months") ending prior to such Basic Rent
Adjustment Date for which the CPI
<PAGE> 46
has been published on or before the forty-fifth (45th) day preceding such Basic
Rent Adjustment Date and (ii) the Beginning CPI, and the denominator of which
shall be the Beginning CPI. An amount equal to the lesser of (x) the product of
such multiplication or 12.55% of the Basic Rent in effect immediately prior to
such Basic Rent Adjustment Date shall be added to the Basic Rent in effect
immediately prior to such Basic Rent Adjustment Date.] As used herein,
"Beginning CPI" shall mean the average CPI for the three (3) calendar months
corresponding to the Prior Months, but occurring four (4) years earlier. If the
average CPI determined in clause (i) is the same or less than the Beginning CPI,
the Basic Rent will remain the same for the ensuing four (4) year period.
(b) Effective as of a given Basic Rent Adjustment Date,
Basic Rent payable under this Lease until the next succeeding Basic Rent
Adjustment Date shall be the Basic Rent in effect after the adjustment provided
for as of such Basic Rent Adjustment Date.
(c) Notice of the new annual Basic Rent and a detailed
explanation of the calculation setting forth the new Basic Rent shall be
delivered to Tenant on or before the tenth (10th) day preceding each Basic Rent
Adjustment Date, but any failure to do so by Landlord shall not be or be deemed
to be a waiver by Landlord of Landlord's rights to collect such sums. Tenant
shall pay to Landlord, within ten (10) days after a notice of the new annual
Basic Rent is delivered to Tenant, all amounts due from Tenant, but unpaid,
because the stated amount as set forth above was not delivered to Tenant at
least ten (10) days preceding the basic Rent Adjustment Date in question.
<PAGE> 47
EXHIBIT E
COVENANTS
1. Tenant shall maintain its corporate existence, rights and
franchises in full force and effect in its jurisdiction of incorporation. Tenant
shall qualify and remain qualified as a corporation in each jurisdiction in
which failure to receive or retain such qualification would have a material
adverse effect on the business, operations or financial condition of the
enterprise comprised of the Tenant.
2. The Tenant shall not consolidate with or merge into any
other Person unless, immediately following such consolidation or merger Tenant
is the surviving entity or, if not, the surviving corporation shall have, on a
proforma basis, an Adjusted Consolidated Net Worth of not less than the Tenant's
Consolidated Net Worth immediately preceding such consolidation or merger.
3. The Tenant shall not in a single transaction or series of
related transactions, sell or convey, transfer, abandon or lease all or
substantially all of its assets to any Person unless (i) immediately after such
transaction, on a proforma basis, such Person shall have a Consolidated Net
Worth of not less than the Tenant's Consolidated Net Worth immediately preceding
such transaction; and (ii) this Lease is assigned to such Person, subject to and
in accordance with Paragraph 21 of this Lease.
4. The Tenant shall not without the consent of Landlord, which
shall not be unreasonably withheld, engage, in any substantial manner, in any
business except the electronics business.
5. For the purpose of this Exhibit "E" the following terms
shall have the following meanings:
"Consolidated Net Worth" shall mean, at any date, the net
worth of Tenant and its Subsidiaries on a consolidated basis, determined in
accordance with GAAP.
"GAAP" shall mean generally accepted accounting principles
as in effect from time to time in the United States of America, applied on a
consistent basis.
"Person" shall mean an individual, partnership,
association, corporation or other entity.
<PAGE> 48
EXHIBIT F
RELATED DOCUMENTS
Seller's/Lessee's Certificate
Assignment of Ground Lease and Deed of Building
Conveyance, Bill of Sale and Assignment
<PAGE> 1
EXHIBIT 10.3
BT (PA) QRS 12-25, INC.
C/O W.P. CAREY & CO., INC.
50 ROCKEFELLER PLAZA
SECOND FLOOR
NEW YORK, NY 10020
April 10, 1997
The Bon-Ton Department Stores, Inc.
2801 E. Market Street
York, PA 17405
Re: Lease Agreement, dated as of April 10, 1997,
between BT (PA) QRS 12-25, Inc. and The
Bon-Ton Department Stores, Inc.(the "Lease")
--------------------------------------------
Gentlemen:
This letter will confirm that under Paragraph 31 of the Lease Agreement
of even date between the undersigned, as landlord, and The Bon-Ton Department
Stores, Inc., as Tenant, Tenant shall not be required to pay a mortgage
commitment fee or "points" in excess of the lesser of 1% of the principal amount
of the loan and $69,000.
Very truly yours,
BT (PA) QRS 12-25, INC.
By: _________________________________
Title: Second Vice President
<PAGE> 2
LEASE AGREEMENT
by and between
BT (PA) QRS 12-25, INC.,
a Pennsylvania corporation
as LANDLORD
and
THE BON-TON DEPARTMENT STORES, INC.,
a Pennsylvania corporation,
as TENANT
Premises: Allentown, Pennsylvania
Johnstown, Pennsylvania
Dated as of: April 10, 1997
<PAGE> 3
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Parties............................................... 1
1. Demise of Premises.................................... 1
2. Certain Definitions................................... 1
3. Title and Condition................................... 11
4. Use of Leased Premises; Quiet Enjoyment............... 13
5. Term ................................................. 14
6. Basic Rent............................................ 15
7. Additional Rent....................................... 15
8. Net Lease; Non-Terminability.......................... 17
9. Payment of Impositions ............................... 18
10. Compliance with Law; Environmental Matters............ 20
11. Liens; Recording and Title............................ 22
12. Maintenance and Repair................................ 23
13. Alterations and Improvements.......................... 24
14. Permitted Contests.................................... 25
15. Indemnification....................................... 26
16. Insurance............................................. 28
17. Casualty and Condemnation............................. 32
18. Termination Events.................................... 34
19. Restoration; Reduction of Rent........................ 36
20. Procedures Upon Purchase.............................. 38
21. Assignment and Subletting; Prohibition
against Leasehold Financing........................... 39
22. Events of Default..................................... 43
23. Remedies and Damages Upon Default..................... 46
24. Notices............................................... 50
25. Estoppel Certificate.................................. 51
26. Surrender............................................. 52
27. No Merger of Title.................................... 53
28. Books and Records..................................... 53
29. Determination of Value................................ 54
30. Non-Recourse as to Landlord........................... 56
31. Financing............................................. 57
32. Subordination......................................... 57
33. Financial Covenants................................... 58
34. Tax Treatment; Reporting.............................. 58
35. Right of First Refusal................................ 58
36. Sale of Related Premises by Landlord.................. 60
37. Substitution and Exchange of Premises................. 61
38. Release of Excess Land................................ 63
39. Miscellaneous......................................... 63
</TABLE>
<PAGE> 4
EXHIBITS
- --------
Exhibit "A-1" - Premises
Exhibit "A-2" - Excess Land
Exhibit "B" - Machinery and Equipment
Exhibit "C" - Schedule of Permitted Encumbrances
Exhibit "D" - Rent Schedule
Exhibit "E" - Acquisition Costs
Exhibit "F" - Percentage Allocation of Basic Rent
Exhibit "G" - Financial Covenants
Exhibit "H" - Termination Values
Exhibit "I" - Post Closing Environmental and Land Use
Compliance Obligations
<PAGE> 5
LEASE AGREEMENT, made as of this 10th day of April, 1997, between BT
(PA) QRS 12-25, INC., a Pennsylvania corporation ("Landlord"), with an address
c/o W.P. Carey & Co., Inc., 50 Rockefeller Plaza, 2nd Floor, New York, New York
10020, and THE BON-TON DEPARTMENT STORES, INC., a Pennsylvania corporation
("Tenant"), with an address at 2801 E. Market Street, York, Pennsylvania 17402.
In consideration of the rents and provisions herein stipulated to be
paid and performed, Landlord and Tenant hereby covenant and agree as follows:
1. Demise of Premises. Landlord hereby demises and lets to
Tenant, and Tenant hereby takes and leases from Landlord, for the term and upon
the provisions hereinafter specified, the following described property
(hereinafter referred to collectively as the "Leased Premises" and individually
as the "Allentown Premises", a distribution facility containing approximately
325,000 square feet, and the "Johnstown Premises", a retail facility containing
approximately 80,884 square feet, each of which premises is more particularly
described in the applicable description in Exhibit "A-1" attached hereto and
made a part hereof and shall include the portions of items (a), (b) and (c) of
this Paragraph 1 located thereon or therein and appertaining thereto): (a) the
premises described in Exhibit "A-1" hereto, together with the Appurtenances
(collectively, the "Land"); (b) the buildings, structures and other improvements
now or hereafter constructed on the Land (collectively, the "Improvements"); and
(c) the fixtures, machinery, equipment and other property described in Exhibit
"B" hereto (collectively, the "Equipment").
2. Certain Definitions.
"Acquisition Cost" of each of the Related Premises shall mean
the amount set forth opposite such premises on Exhibit "E" hereto.
"Additional Rent" shall mean Additional Rent as defined in
Paragraph 7.
"Adjoining Property" shall mean all sidewalks, driveways,
curbs, gores and vault spaces adjoining any of the Leased Premises.
"Affected Premises" shall mean the Affected Premises as
defined in Paragraph 18.
"Alterations" shall mean all changes, additions, improvements
or repairs to, all alterations, reconstructions, renewals, replacements or
removals of and all substitutions or
<PAGE> 6
replacements for any of the Improvements or Equipment, both interior and
exterior, structural and non-structural, and ordinary and extraordinary.
"Appurtenances" shall mean all tenements, hereditaments,
easements, rights-of-way, rights, privileges in and to the Land, including (a)
easements over other lands granted by any Easement Agreement and (b) any
streets, ways, alleys, vaults, gores or strips of land adjoining the Land.
"Assignment" shall mean any assignment of rents and leases
from Landlord to a Lender which (a) encumbers any of the Leased Premises and (b)
secures Landlord's obligation to repay a Loan, as the same may be amended,
supplemented or modified from time to time.
"Basic Rent" shall mean Basic Rent as defined in Paragraph 6.
"Basic Rent Payment Dates" shall mean the Basic Rent Payment
Dates as defined in Paragraph 6.
"Casualty" shall mean any injury to or death of any person or
any loss of or damage to any property (including the Leased Premises) included
within or related to the Leased Premises or arising from the Adjoining Property.
"Commencement Date" shall mean Commencement Date as defined in
Paragraph 5.
"Complete Assignment" shall mean Complete Assignment as
defined in Paragraph 21(a).
"Condemnation" shall mean a Taking and/or a Requisition.
"Condemnation Notice" shall mean notice or knowledge of the
institution of or intention to institute any proceeding for Condemnation.
"Costs" of a Person or associated with a specified transaction
shall mean all reasonable costs and expenses incurred by such Person or
associated with such transaction (exclusive of any internal costs of such
Person), including without limitation, attorneys' fees and expenses, court
costs, brokerage fees, escrow fees, title insurance premiums, mortgage
commitment fees, mortgage points, recording fees and transfer taxes, as the
circumstances require.
"Covenants" shall mean the covenants and agreements described
on Exhibit "G".
<PAGE> 7
"CPI" shall mean CPI as defined in Exhibit "D" hereto.
"Default Rate" shall mean the Default Rate as defined in
Paragraph 7(a)(iv).
"Easement Agreement" shall mean any conditions, covenants,
restrictions, easements, declarations, licenses and other agreements listed as
Permitted Encumbrances or as may hereafter affect either of the Related
Premises.
"Environmental Law" shall mean (i) whenever enacted or
promulgated, any applicable federal, state, foreign and local law, statute,
ordinance, rule, regulation, license, permit, authorization, approval, consent,
court order, judgment, decree, injunction, code, requirement or agreement with
any governmental entity, (x) relating to pollution (or the cleanup thereof), or
the protection of air, water vapor, surface water, groundwater, drinking water
supply, land (including land surface or subsurface), plant, aquatic and animal
life from injury caused by a Hazardous Substance or (y) concerning exposure to,
or the use, containment, storage, recycling, reclamation, reuse, treatment,
generation, discharge, transportation, processing, handling, labeling,
production, disposal or remediation of Hazardous Substances, Hazardous Condition
or Hazardous Activity, in each case as amended and as now or hereafter in
effect, and (ii) any common law or equitable doctrine (including, without
limitation, injunctive relief and tort doctrines such as negligence, nuisance,
trespass and strict liability) that may impose liability or obligations or
injuries or damages due to or threatened as a result of the presence of,
exposure to, or ingestion of, any Hazardous Substance. The term Environmental
Law includes, without limitation, the federal Comprehensive Environmental
Response Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the federal Water Pollution Control Act, the federal Clean
Air Act, the federal Clean Water Act, the federal Resources Conservation and
Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments to
RCRA), the federal Solid Waste Disposal Act, the federal Toxic Substance Control
Act, the federal Insecticide, Fungicide and Rodenticide Act, the federal
Occupational Safety and Health Act of 1970, the federal National Environmental
Policy Act and the federal Hazardous Materials Transportation Act, each as
amended and as now or hereafter in effect and any similar state or local Law.
"Environmental Violation" shall mean (a) any direct or
indirect discharge, disposal, spillage, emission, escape, pumping, pouring,
injection, leaching, release, seepage, filtration or transporting of any
Hazardous Substance at, upon, under, onto or within either Related Premises, or
from either Related Premises to the environment, in violation of any
Environmental Law or in excess of any reportable quantity
<PAGE> 8
established under any Environmental Law or which could result in any liability
to Landlord, Tenant or Lender for the costs of any removal or remedial action or
natural resources damage or for bodily injury or property damage, (b) any
deposit, storage, dumping, placement or use of any Hazardous Substance at, upon,
under or within the Leased Premises or which extends from the Leased Premises to
any Adjoining Property in violation of any Environmental Law or in excess of any
reportable quantity established under any Environmental Law or which could
result in any liability to Landlord, Tenant or Lender for the costs of any
removal or remedial action or natural resources damage or for bodily injury or
property damage, (c) the abandonment or discarding of any barrels, containers or
other receptacles containing any Hazardous Substances in violation of any
Environmental Laws, (d) any activity, occurrence or condition which could result
in any liability, cost or expense to Landlord or Lender or any other owner or
occupier of the Leased Premises, or which could result in a creation of a lien
on any Related Premises under any Environmental Law or (e) any violation of or
noncompliance with any Environmental Law.
"Equipment" shall mean the Equipment as defined in
Paragraph 1.
"Event of Default" shall mean an Event of Default as defined
in Paragraph 22(a).
"Excess Land" shall mean Excess Land as described in
Exhibit "A-2".
"Exchange Premises" shall mean Exchange Premises as defined in
Paragraph 37.
"Fair Market Value" shall mean (a) with respect to a
determination of Fair Market Value under Paragraph 21(a) the fair market value
of the Leased Premises or either Related Premises, as the case may be, as of the
Relevant Date as affected and encumbered by this Lease and (b) with respect to a
determination of Fair Market Value under Paragraph 37 the fair market value of
the Exchange Premises as of the Relevant Date as if unaffected and unencumbered
by this Lease (value in use and value in exchange). For all purposes of this
Lease, Fair Market Value shall be determined in accordance with the procedure
specified in Paragraph 29.
"Fair Market Value Date" shall mean the date when the Fair
Market Value is determined in accordance with Paragraph 29.
"Federal Funds" shall mean federal or other immediately
available funds which at the time of payment are
<PAGE> 9
legal tender for the payment of public and private debts in the United States of
America.
"Guarantor" shall mean The Bon-Ton Stores, Inc., a
Pennsylvania corporation.
"Guaranty" shall mean the Guaranty and Suretyship Agreement
dated as of the date hereof from Guarantor to Landlord guaranteeing the payment
and performance by Tenant of all of Tenant's obligations under the Lease.
"Hazardous Activity" means any activity, process, procedure or
undertaking which directly or indirectly (i) procures, generates or creates any
Hazardous Substance; (ii) causes or results in (or threatens to cause or result
in) the release, seepage, spill, leak, flow, discharge or emission of any
Hazardous Substance into the environment (including the air, ground water,
watercourses or water systems), (iii) involves the containment or storage of any
Hazardous Substance; or (iv) would cause any of the Leased Premises or any
portion thereof to become a hazardous waste treatment, recycling, reclamation,
processing, storage or disposal facility within the meaning of any Environmental
Law.
"Hazardous Condition" means any condition which would support
any claim or liability under any Environmental Law, including the presence of
underground storage tanks.
"Hazardous Substance" means (i) any substance, material,
product, petroleum, petroleum product, derivative, compound or mixture, mineral
(including asbestos), chemical, gas, medical waste, or other pollutant, in each
case whether naturally occurring, man-made or the by-product of any process,
that is toxic, harmful or hazardous or acutely hazardous to the environment or
public health or safety or (ii) any substance supporting a claim under any
Environmental Law, whether or not defined as hazardous as such under any
Environmental Law. Hazardous Substances include, without limitation, any toxic
or hazardous waste, pollutant, contaminant, industrial waste, petroleum or
petroleum-derived substances or waste, radon, radioactive materials, asbestos,
asbestos containing materials, urea formaldehyde foam insulation, lead,
polychlorinated biphenyls.
"Impositions" shall mean the Impositions as defined in
Paragraph 9(a).
"Improvements" shall mean the Improvements as defined in
Paragraph 1.
"Indemnitee" shall mean an Indemnitee as defined in
Paragraph 15.
<PAGE> 10
"Initial Term" shall mean the Initial Term as defined in
Paragraph 5(a).
"Insurance Requirements" shall mean the requirements of all
insurance policies maintained in accordance with this Lease.
"Intended Assignment Offer" shall mean Intended Assignment
Offer as defined in Paragraph 21(a).
"Land" shall mean the Land as defined in Paragraph 1.
"Law" shall mean any constitution, statute, rule of law, code,
ordinance, order, judgment, decree, injunction, rule, regulation, policy,
requirement or administrative or judicial determination, even if unforeseen or
extraordinary, of every duly constituted governmental authority, court or
agency, now or hereafter enacted or in effect.
"Lease" shall mean this Lease Agreement.
"Lease Bifurcation" shall mean Lease Bifurcation as defined in
Paragraph 21(a).
"Lease Year" shall mean, with respect to the first Lease Year,
the period commencing on the Commencement Date and ending at midnight on the
last day of the twelfth (12th) consecutive calendar month following the month in
which the Commencement Date occurred, and each succeeding twelve (12) month
period during the Term.
"Leased Premises" shall mean the Leased Premises as defined in
Paragraph 1.
"Legal Requirements" shall mean the requirements of all
present and future Laws (including but not limited to Environmental Laws) and
all covenants, restrictions and conditions now or hereafter of record which may
be applicable to Tenant or to either Related Premises, or to the use, manner of
use, occupancy, possession, operation, maintenance, alteration, repair or
restoration of either Related Premises, even if compliance therewith
necessitates structural changes or improvements or results in interference with
the use or enjoyment of either Related Premises.
"Lender" shall mean any person or entity (and their respective
successors and assigns) which may, after the date hereof, make a Loan to
Landlord or is the holder of any Note.
<PAGE> 11
"Loan" shall mean any loan made by one or more Lenders to
Landlord, which loan is secured by a Mortgage and an Assignment and evidenced by
a Note.
"Monetary Obligations" shall mean Rent and all other sums
payable by Tenant under this Lease to Landlord, to any third party on behalf of
Landlord or to any Indemnitee.
"Mortgage" shall mean any first mortgage or deed of trust from
Landlord to a Lender which (a) encumbers any of the Leased Premises and (b)
secures Landlord's obligation to repay a Loan, as the same may be amended,
supplemented or modified.
"Net Award" shall mean (a) the entire award payable to
Landlord or Lender by reason of a Condemnation whether pursuant to a judgment or
by agreement or otherwise, or (b) the entire proceeds of any insurance required
under clauses (i), (ii) (to the extent payable to Landlord or Lender), (iv), (v)
or (vi) of Paragraph 16(a), as the case may be, less any expenses incurred by
Landlord and Lender in collecting such award or proceeds.
"Note" shall mean any promissory note evidencing Landlord's
obligation to repay a Loan, as the same may be amended, supplemented or
modified.
"Offer Amount" shall mean the greater of Fair Market Value or
the sum of the Acquisition Cost and any applicable Prepayment Premium.
"Partial Assignment" shall mean Partial Assignment as defined
in Paragraph 21(a).
"Partial Casualty" shall mean any Casualty which does not
constitute a Termination Event.
"Partial Condemnation" shall mean any Condemnation which does
not constitute a Termination Event.
"Permitted Encumbrances" shall mean those covenants,
restrictions, reservations, liens, conditions and easements and other
encumbrances, other than any Mortgage or Assignment, listed on Exhibit "C"
hereto (but such listing shall not be deemed to revive any such encumbrances
that have expired or terminated or are otherwise invalid or unenforceable).
"Person" shall mean an individual, partnership, association,
corporation or other entity.
"Prepayment Premium" shall mean any payment (other than a
payment of principal and/or interest which Landlord is required to make under a
Note or a Mortgage) by reason of any
<PAGE> 12
prepayment by Landlord of any principal due under a Note or Mortgage, and which
may be (in lieu of such prepayment premium or prepayment penalty) a "make whole"
clause requiring a prepayment premium in an amount sufficient to compensate the
Lender for the loss of the benefit of the Loan due to prepayment.
"Present Value" of any amount shall mean such amount
discounted by a rate per annum which is the lower of (a) the Prime Rate at the
time such present value is determined or (b) seven and one-half percent (7.5%)
per annum.
"Prime Rate" shall mean the interest rate per annum as
published, from time to time, in The Wall Street Journal as the "Prime Rate" in
its column entitled "Money Rate". The Prime Rate may not be the lowest rate of
interest charged by any "large U.S. money center commercial banks" and Landlord
makes no representations or warranties to that effect. In the event The Wall
Street Journal ceases publication or ceases to publish the "Prime Rate" as
described above, the Prime Rate shall be the average per annum discount rate
(the "Discount Rate") on ninety-one (91) day bills ("Treasury Bills") issued
from time to time by the United States Treasury at its most recent auction, plus
three hundred (300) basis points. If no such 91-day Treasury Bills are then
being issued, the Discount Rate shall be the discount rate on Treasury Bills
then being issued for the period of time closest to ninety-one (91) days.
"Related Premises" shall mean any one of the Allentown
Premises and Johnstown Premises.
"Relevant Amount" shall mean the Termination Amount or the
Offer Amount, as the case may be.
"Relevant Date" shall mean (a) the date immediately prior to
the date on which Tenant makes the Intended Assignment Offer and (b) the date on
which Tenant and Landlord commence to determine the Fair Market Value of the
Exchange Premises under Paragraph 37(a) hereof.
"Remaining Premises" shall mean the Related Premises which are
not Affected Premises under Paragraph 18 or Assignment Premises under
Paragraph 21.
"Renewal Date" shall mean Renewal Date as defined in
Paragraph 5(b).
"Rent" shall mean, collectively, Basic Rent and Additional
Rent.
"Site Assessment" shall mean a Site Assessment as defined in
Paragraph 10(c).
<PAGE> 13
"State" shall mean the Commonwealth of Pennsylvania.
"Surviving Obligations" shall mean any obligations of Tenant
under this Lease, actual or contingent, which arise on or prior to the
expiration or prior termination of this Lease or which survive such expiration
or termination by their own terms.
"Taking" shall mean (a) any taking or damaging of all or a
portion of any of the Leased Premises (i) in or by condemnation or other eminent
domain proceedings pursuant to any Law, general or special, or (ii) by reason of
any agreement with any condemnor in settlement of or under threat of any such
condemnation or other eminent domain proceeding, or (iii) by any other means, or
(b) any de facto condemnation. The Taking shall be considered to have taken
place as of the later of the date actual physical possession is taken by the
condemnor, or the date on which the right to compensation and damages accrues
under the law applicable to the applicable Related Premises.
"Term" shall mean the Term as defined in Paragraph 5.
"Termination Amount" shall mean the sum of the applicable
Termination Value and any Prepayment Premium which Landlord will be required to
pay in prepaying any Loan with proceeds of the Termination Amount.
"Termination Date" shall mean the Termination Date as defined
in Paragraph 18.
"Termination Event" shall mean a Termination Event as defined
in Paragraph 18.
"Termination Notice" shall mean Termination Notice as defined
in Paragraph 18(a).
"Termination Value" shall mean the Termination Value specified
in Exhibit "H" hereto for the applicable Lease Year.
"Third Party Purchaser" shall mean the Third Party Purchaser
as defined in Paragraph 21(f).
3. Title and Condition.
(a) The Leased Premises are demised and let subject to
(i) the rights of any Persons in possession of the Leased Premises, (ii) the
existing state of title of any of the Leased Premises, including any Permitted
Encumbrances, (iii) any state of facts which an accurate survey or physical
inspection of the Leased Premises might show, (iv) all Legal Requirements,
<PAGE> 14
including any existing violation of any thereof, and (v) the condition of the
Leased Premises as of the commencement of the Term, without representation or
warranty by Landlord.
(b) Tenant acknowledges that the Leased Premises are in
good condition and repair at the inception of this Lease. LANDLORD LEASES AND
WILL LEASE AND TENANT TAKES AND WILL TAKE THE LEASED PREMISES AS IS. TENANT
ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER
CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE
MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF
THE LEASED PREMISES, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS
FITNESS, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY
OF THE MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT,
LATENT OR PATENT, (iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH
SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x) MERCHANTABILITY,
(xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY (xiv) OPERATION OR (xv) THE
EXISTENCE OF ANY HAZARDOUS SUBSTANCE; AND ALL RISKS INCIDENT THERETO ARE TO BE
BORNE BY TENANT. TENANT ACKNOWLEDGES THAT THE LEASED PREMISES ARE OF ITS
SELECTION AND TO ITS SPECIFICATIONS AND THAT THE LEASED PREMISES HAVE BEEN
INSPECTED BY TENANT AND ARE SATISFACTORY TO IT. IN THE EVENT OF ANY DEFECT OR
DEFICIENCY IN ANY OF THE LEASED PREMISES OF ANY NATURE, WHETHER LATENT OR
PATENT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT
THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT
LIABILITY IN TORT). THE PROVISIONS OF THIS PARAGRAPH 3(b) HAVE BEEN NEGOTIATED,
AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY
LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE LEASED PREMISES,
ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR
HEREAFTER IN EFFECT OR ARISING OTHERWISE.
(c) Tenant represents to Landlord that Tenant has
examined the title to the Leased Premises prior to the execution and delivery of
this Lease and has found the same to be satisfactory for the purposes
contemplated hereby. Tenant acknowledges that (i) fee simple title (both legal
and equitable) to the Leased Premises is in Landlord and, except as provided in
Paragraph 35 hereof with respect to certain rights of refusal to purchase the
Leased Premises, that Tenant has only the leasehold right of possession and use
of the Leased Premises as provided herein, (ii) this Lease is a single Lease for
multiple properties and shall not be terminable with respect to less than all of
the Leased Premises or severable with respect to any one or more Related
Premises except as specifically provided herein, (iii) the Improvements conform
to all material Legal Requirements and all Insurance Requirements, (iv) all
easements necessary or appropriate for the use or operation of the Leased
Premises have been obtained, (v) all contractors and subcontractors who have
performed work on or supplied materials to the Leased Premises have been fully
paid to the extent required by their respective
<PAGE> 15
contracts, and all materials and supplies have been fully paid for, (vi) the
Improvements have been fully completed in all material respects and are of a
quality equal to comparable properties operated by Tenant, and (vii) all
Equipment necessary or appropriate for the use or operation of the Leased
Premises has been installed and is presently fully operative in all material
respects.
(d) Landlord hereby assigns to Tenant, without recourse
or warranty whatsoever, all warranties, guaranties, indemnities and similar
rights which Landlord may have against any manufacturer, seller, engineer,
contractor or builder in respect of any of the Leased Premises. Such assignment
shall remain in effect until an Event of Default occurs or until the expiration
or earlier termination of this Lease, whereupon such assignment shall cease and
all of said warranties, guaranties, indemnities and other rights shall
automatically revert to Landlord.
4. Use of Leased Premises; Quiet Enjoyment.
(a) Tenant may occupy and use the Allentown Premises for
distribution, assembly, warehousing, retail and light manufacturing and the
Johnstown Premises for a retail facility and for no other purpose without the
prior written consent of Landlord, which shall not be unreasonably withheld.
Tenant shall not use or occupy or permit any of the Leased Premises to be used
or occupied, nor do or permit anything to be done in or on any of the Leased
Premises, in a manner which would or might (i) violate any Law or Legal
Requirement, (ii) make void or voidable or cause any insurer to cancel any
insurance required by this Lease, or make it difficult or impossible to obtain
any such insurance at commercially reasonable rates, (iii) cause structural
injury to any of the Improvements or (iv) constitute a public or private
nuisance or waste.
(b) Subject to the provisions hereof, so long as no Event
of Default has occurred and is continuing, Tenant shall quietly hold, occupy and
enjoy the Leased Premises throughout the Term, without any hindrance, ejection
or molestation by Landlord with respect to matters that arise after the date
hereof, provided that Landlord or its agents may enter upon and examine any of
the Leased Premises at such reasonable times as Landlord may select and upon
reasonable notice to Tenant (except in the case of any emergency, in which event
no notice shall be required) for the purpose of inspecting the Leased Premises,
verifying compliance or non-compliance by Tenant with its obligations hereunder
and the existence or non-existence of an Event of Default or event which with
the passage of time and/or notice would constitute an Event of Default, showing
the Leased Premises to prospective Lenders and purchasers and taking such other
action with respect to the Leased Premises as is permitted by any provision
hereof.
<PAGE> 16
5. Term.
(a) Subject to the provisions hereof, Tenant shall have
and hold the Leased Premises for an initial term (the "Initial Term" and the
Initial Term, as extended or renewed in accordance with the provisions hereof,
being called the "Term") commencing on the date hereof (the "Commencement Date")
and ending on the last day of the two hundred fortieth (240th) calendar month
next following the date hereof (the "Expiration Date").
(b) Provided that if, on or prior to the Expiration Date
or any other Renewal Date (as hereinafter defined) this Lease shall not have
been terminated pursuant to any provision hereof, then on the Expiration Date
and on the fifth (5th), tenth (10th), fifteenth (15th), twentieth (20th) and
twenty-fifth (25th) anniversaries of the Expiration Date (the Expiration Date
and each such anniversary being a "Renewal Date"), the Term shall be deemed to
have been automatically extended for an additional period of five (5) years with
respect to both of the Allentown Premises and the Johnstown Premises, unless
Tenant shall notify Landlord in writing at least twelve (12) months prior to the
next Renewal Date that Tenant is terminating this Lease as of the next Renewal
Date with respect to either one or both of the Allentown Premises and the
Johnstown Premises. Unless Landlord receives any such notification Tenant shall,
if requested by Landlord, and upon notice to Tenant, execute a document in
recordable form evidencing the extension of the Term with respect to one or both
of the Allentown Premises or Johnstown Premises, as applicable. Any such
extension of the Term shall be subject to all of the provisions of this Lease,
as the same may be amended, supplemented or modified; provided, however, if the
Term is extended with respect to one but not both Related Premises, the Lease
shall, as of the applicable Renewal Date, terminate as to the Related Premises
for which the Term was not extended, and shall continue in effect only with
respect to the Related Premises for which the Term is extended.
(c) If Tenant exercises its option pursuant to Paragraph
5(b) not to have the Term automatically extended, or if an Event of Default
occurs, then Landlord shall have the right during the remainder of the Term then
in effect and, in any event, Landlord shall have the right during the last year
of the Term, to (i) advertise the availability of any of the Leased Premises for
sale or reletting and to erect upon the Allentown Premises signs indicating such
availability and (ii) show any of the Leased Premises to prospective purchasers
or tenants or their agents at such reasonable times as Landlord may select.
6. Basic Rent. Tenant shall pay to Landlord, as annual rent for
the Leased Premises during the Term, the amounts determined in accordance with
Exhibit "D" hereto ("Basic Rent"),
<PAGE> 17
commencing on the first day of May, 1997, and continuing on the first day of
each August, November, February and May thereafter during the Term (each such
day being a "Basic Rent Payment Date"). Each such rental payment shall be made,
at Landlord's sole discretion, (a) to Landlord at its address set forth above
and/or to such other Persons, at such addresses and in such proportions as
Landlord may direct by fifteen (15) days' prior written notice to Tenant (in
which event Tenant shall give Landlord notice of each such payment concurrent
with the making thereof and provided Landlord shall not change the address to
which payments shall be sent and/or the payee more than twice in any Lease
Year), and (b) by a check hand delivered at least three (3) business days before
or mailed at least five (5) days before the applicable Basic Rent Payment Date,
or in Federal Funds. Pro rata Basic Rent for the period from the date hereof
through the last day of the month hereof shall be paid on the date hereof.
7. Additional Rent.
(a) Tenant shall pay and discharge, as additional rent
(collectively, "Additional Rent"):
(i) except as otherwise specifically provided
herein, all costs and expenses of Tenant, Landlord and any other Persons
specifically referenced herein which are incurred in connection or associated
with (A) the ownership, use, non-use, occupancy, possession, operation,
condition, design, construction, maintenance, alteration, repair or restoration
of any of the Leased Premises, (B) the performance of any of Tenant's
obligations under this Lease, (C) any sale or other transfer of any of the
Leased Premises to Tenant under this Lease, (D) any Condemnation proceedings,
(E) the adjustment, settlement or compromise of any insurance claims involving
or arising from any of the Leased Premises, (F) the prosecution, defense or
settlement of any litigation involving or arising from any of the Leased
Premises, this Lease, or the sale of the Leased Premises by Tenant to Landlord,
(G) the exercise or enforcement by Landlord, its successors and assigns, of any
of its rights under this Lease, (H) any amendment to or modification or
termination of this Lease made at the request of Tenant or any Complete
Assignment or Partial Assignment (and Lease Bifurcation and Loan bifurcation in
connection therewith), (I) Costs of Landlord's counsel incurred in connection
with the preparation, negotiation and execution of this Lease, or incurred in
connection with any act undertaken by Landlord (or its counsel) at the request
of Tenant, or incurred in connection with any act of Landlord performed on
behalf of Tenant, and (J) any other items specifically required to be paid by
Tenant under this Lease;
(ii) after the date all or any portion of any
installment of Basic Rent is due and not paid, an amount equal to five percent
(5%) of the amount of such unpaid
<PAGE> 18
installment or portion thereof ("Late Charge"); provided, however, that with
respect to the first late payment of all or any portion of any installment of
Basic Rent in any Lease Year, the Late Charge shall not be due and payable
unless the Basic Rent has not been paid within two (2) days following notice
from Landlord that such payment or portion thereof has not been received;
(iii) a sum equal to any additional sums (including
any late charge, default penalties, interest and fees of Lender's counsel) which
are payable by Landlord to any Lender under any Note by reason of Tenant's late
payment or non-payment of Basic Rent or by reason of an Event of Default; and
(iv) interest at the rate (the "Default Rate") of
five percent (5%) over the Prime Rate per annum on the following sums until paid
in full: (A) all overdue installments of Basic Rent from the respective due
dates thereof, (B) all overdue amounts of Additional Rent relating to
obligations which Landlord shall have paid on behalf of Tenant, from the date of
payment thereof by Landlord, and (C) all other overdue amounts of Additional
Rent, from the date when any such amount becomes overdue.
(b) Tenant shall pay and discharge (i) any Additional
Rent referred to in Paragraph 7(a)(i) when the same shall become due, provided
that amounts which are billed to Landlord or any third party, but not to Tenant,
shall be paid within five (5) days after Landlord's demand for payment thereof,
and (ii) any other Additional Rent, within five (5) days after Landlord's demand
for payment thereof.
(c) In no event shall amounts payable under Paragraph
7(a)(ii), (iii) and (iv) exceed the maximum amount permitted by applicable Law.
8. Net Lease; Non-Terminability.
(a) This is a net lease and all Monetary Obligations
shall be paid without notice or demand and without set-off, counterclaim,
recoupment, abatement, suspension, deferment, diminution, deduction, reduction
or defense (collectively, a "Set-Off").
(b) Except as otherwise expressly provided herein, this
Lease and the rights of Landlord and the obligations of Tenant hereunder shall
not be affected by any event or for any reason, including the following: (i) any
damage to or theft, loss or destruction of any of the Leased Premises, (ii) any
Condemnation, (iii) Tenant's acquisition of ownership of any of the Leased
Premises other than pursuant to an express provision of this Lease, (iv) any
default on the part of Landlord hereunder or under any Note, Mortgage,
Assignment or any other agreement,
<PAGE> 19
(v) any latent or other defect in any of the Leased Premises, (vi) the breach of
any warranty of any seller or manufacturer of any of the Equipment, (vii) any
violation of Paragraph 4(b) or any other provision of this Lease by Landlord,
(viii) the bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution or winding-up of, or other proceeding affecting
Landlord, (ix) the exercise of any remedy, including foreclosure, under any
Mortgage or Assignment, (x) any action with respect to this Lease (including the
disaffirmance hereof) which may be taken by Landlord, any trustee, receiver or
liquidator of Landlord or any court under the Federal Bankruptcy Code or
otherwise, (xi) any interference with Tenant's use of the Leased Premises, (xii)
market or economic changes or (xiii) any other cause, whether similar or
dissimilar to the foregoing, any present or future Law to the contrary
notwithstanding.
(c) The obligations of Tenant hereunder shall be separate
and independent covenants and agreements, all Monetary Obligations shall
continue to be payable in all events (or, in lieu thereof, Tenant shall pay
amounts equal thereto), and the obligations of Tenant hereunder shall continue
unaffected unless the requirement to pay or perform the same shall have been
terminated pursuant to an express provision of this Lease. All Rent payable by
Tenant hereunder shall constitute "rent" for all purposes (including Section
502(b)(6) of the Bankruptcy Code).
(d) Except as otherwise expressly provided herein, Tenant
shall have no right and hereby waives all rights which it may have under any Law
(i) to quit, terminate or surrender this Lease or any of the Leased Premises, or
(ii) to any Set-Off of any Monetary Obligations.
9. Payment of Impositions.
(a) Tenant shall, before interest or penalties are due
thereon, pay and discharge all taxes (including real and personal property,
franchise, sales and rent taxes), all charges for any easement or agreement
maintained for the benefit of any of the Leased Premises, all assessments and
levies, all permit, inspection and license fees, all rents and charges for
water, sewer, utility and communication services relating to any of the Leased
Premises, all ground rents and all other public charges whether of a like or
different nature, even if unforeseen or extraordinary, imposed upon or assessed
against (i) Tenant, (ii) Tenant's possessory interest in the Leased Premises,
(iii) any of the Leased Premises, (iv) Landlord as a result of or arising in
respect of the acquisition, ownership, occupancy, leasing, use, possession or
sale of any of the Leased Premises, any activity conducted on any of the Leased
Premises, or the Rent, or (v) any Lender by reason of any Note, Mortgage,
Assignment or other document evidencing or securing a Loan and which (as to this
clause (v)) are normal and customary and Landlord has agreed to pay
(collectively, the "Impositions"); provided, that nothing
<PAGE> 20
herein shall obligate Tenant to pay (A) income, excess profits or other taxes of
Landlord (or Lender) which are determined on the basis of Landlord's (or
Lender's) net income or net worth (unless such taxes are in lieu of or a
substitute for any other tax, assessment or other charge upon or with respect to
the Leased Premises which, if it were in effect, would be payable by Tenant
under the provisions hereof or by the terms of such tax, assessment or other
charge), (B) any estate, inheritance, succession, gift or similar tax imposed on
Landlord, (C) any capital gains tax imposed on Landlord in connection with the
sale of the Leased Premises or either Related Premises to any Person or (D) any
transfer tax imposed on Landlord in connection with the sale of the Leased
Premises or either Related Premises to any Person except for a sale to Tenant or
its assignee or designee. If any Imposition may be paid in installments without
interest or penalty, Tenant shall have the option to pay such Imposition in
installments; in such event, Tenant shall be liable only for those installments
which accrue or become due and payable during the Term. Tenant shall prepare and
file all tax reports required by governmental authorities which relate to the
Impositions. Tenant shall deliver to Landlord receipts for payment of all taxes
required to be paid by Tenant hereunder within forty-five (45) days after the
due date thereof and within ten (10) days after written request from Landlord
copies of all settlements and notices pertaining to the Impositions which may be
issued by any governmental authority and receipts for payment of all other
Impositions. In no event shall Tenant have any obligation to pay Impositions
applicable to a period extending beyond the expiration of the Term.
(b) Landlord shall have the right if required by the
terms of any Mortgage and, in any event, during the occurrence of an Event of
Default to require Tenant to pay to Landlord an additional monthly sum (each an
"Escrow Payment") sufficient to pay the Escrow Charges (as hereinafter defined)
as they become due. As used herein, "Escrow Charges" shall mean real estate
taxes on the Leased Premises or payments in lieu thereof and premiums on any
insurance required by this Lease. Landlord shall determine the amount of the
Escrow Charges and of each Escrow Payment. The Escrow Payments may be commingled
with other funds of Landlord or other Persons and no interest thereon shall be
due or payable to Tenant. Landlord shall apply the Escrow Payments to the
payment of the Escrow Charges in such order or priority as required by law or
any Lender. If at any time the Escrow Payments theretofore paid to Landlord
shall be insufficient for the payment of the Escrow Charges, Tenant, within ten
(10) days after Landlord's demand therefor, shall pay the amount of the
deficiency to Landlord.
<PAGE> 21
10. Compliance with Laws and Easement Agreements; Environmental
Matters.
(a) Tenant shall, at its expense, comply with and conform
to, and cause any other Person occupying any part of the Leased Premises to
comply with and conform to, all Insurance Requirements and Legal Requirements
(including all applicable Environmental Laws). Tenant shall not at any time (i)
cause, permit or suffer to occur any Environmental Violation or (ii) permit any
sublessee, assignee or other Person occupying the Leased Premises under or
through Tenant to cause, permit or suffer to occur any Environmental Violation.
(b) Tenant, at its sole cost and expense, will at all
times promptly and faithfully (i) abide by, discharge and perform all of the
covenants, conditions and agreements contained in any Easement Agreement on the
part of Landlord or the occupier to be kept and performed thereunder and (ii)
enforce the obligations of any other Persons under any Easement Agreement.
Tenant will not alter, modify, amend or terminate any Easement Agreement, give
any consent or approval thereunder, or enter into any new Easement Agreement
without, in each case, prior written consent of Landlord, which consent shall
not be unreasonably withheld or delayed provided, however, as to the Johnstown
Premises no such consent of Landlord shall be required unless the alteration,
modification or amendment shall (i) reduce the required parking ratio at the
Johnstown Premises, (ii) impair vehicular or pedestrian access to or visibility
of the Johnstown Premises, (iii) permit in the shopping center in which the
Johnstown Premises are located construction of additional improvements
containing 75,000 square feet or more of floor area in excess of the floor area
permitted under the Easement Agreement prior to such alteration, modification or
amendment or (iv) otherwise adversely impact the value of the Johnstown Premises
for its intended use. It is further agreed that Landlord's consent shall not be
required to the entry by Tenant into any new Easement Agreement so long as such
Easement Agreement is terminable at any time by Landlord upon not more than
ninety (90) days notice.
(c) Upon prior written notice from Landlord, Tenant shall
permit such persons as Landlord may designate ("Site Reviewers") to visit the
Leased Premises and perform environmental site investigations and assessments
("Site Assessments") on the Leased Premises for the purpose of determining
whether there exists on the Leased Premises any Environmental Violation or any
condition which could result in any Environmental Violation. Such Site
Assessments may include both above and below the ground testing for
Environmental Violations and such other tests as may be necessary, in the
opinion of the Site Reviewers, to conduct the Site Assessments. Tenant shall
supply to the Site Reviewers such historical and operational information
regarding the Leased Premises as may be
<PAGE> 22
reasonably requested by the Site Reviewers to facilitate the Site Assessments,
and shall make available for meetings with the Site Reviewers appropriate
personnel having knowledge of such matters. The cost of performing and reporting
Site Assessments shall be paid by Tenant if such Site Assessment shall disclose
an Environmental Violation; otherwise the cost shall be paid by Landlord and
shall not be Additional Rent.
(d) If an Environmental Violation occurs or is found to
exist and, in Landlord's reasonable judgment, the cost of remediation of the
same is likely to exceed $100,000, Tenant shall provide to Landlord, within
thirty (30) days after Landlord's request therefor, adequate financial
assurances that Tenant will effect such remediation in accordance with
applicable Environmental Laws. Such financial assurances shall be a bond or
letter of credit satisfactory to Landlord in form and substance and in an amount
equal to or greater than Landlord's reasonable estimate, based upon a Site
Assessment performed pursuant to Paragraph 10(c), of the anticipated cost of
such remedial action.
(e) Notwithstanding any other provision of this Lease,
if an Environmental Violation occurs or is found to exist and the Term would
otherwise terminate or expire, then, at the option of Landlord, the Term shall
be automatically extended beyond the date of termination or expiration and this
Lease shall remain in full force and effect beyond such date until the earlier
to occur of (i) the completion of all remedial action in accordance with
applicable Environmental Laws or (ii) the date specified in a written notice
from Landlord to Tenant terminating this Lease.
(f) If Tenant fails to comply with any requirement of any
Environmental Law in connection with any Environmental Violation which occurs or
is found to exist, Landlord shall have the right (but no obligation) to take any
and all actions as Landlord shall deem necessary or advisable in order to cure
such Environmental Violation.
(g) Tenant shall notify Landlord immediately after
becoming aware of any Environmental Violation (or alleged Environmental
Violation) or noncompliance with any of the covenants contained in this
Paragraph 10 and shall forward to Landlord immediately upon receipt thereof
copies of all orders, reports, notices, permits, applications or other
communications relating to any such violation or noncompliance.
(h) All future leases, subleases or concession agreements
relating to the Allentown Premises entered into by Tenant shall contain
covenants of the other party thereto which are similar to the covenants of
Tenant contained in subparagraphs (a) and (g) of this Paragraph 10.
<PAGE> 23
(i) Tenant shall have performed or cause to be performed
the post closing obligations described in Exhibit "I" attached hereto and made a
part hereof.
11. Liens; Recording.
(a) Tenant shall not, directly or indirectly, create or
permit to be created or to remain and shall promptly discharge or remove any
lien, levy or encumbrance on any of the Leased Premises or on any Rent or any
other sums payable by Tenant under this Lease, other than any Mortgage or
Assignment, the Permitted Encumbrances and any mortgage, lien, encumbrance or
other charge created by or resulting solely from any act or omission of
Landlord. NOTICE IS HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE FOR ANY
LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR TO ANYONE
HOLDING OR OCCUPYING ANY OF THE LEASED PREMISES THROUGH OR UNDER TENANT, AND
THAT NO MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS
SHALL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO ANY OF THE LEASED
PREMISES. LANDLORD MAY AT ANY TIME POST ANY NOTICES ON THE LEASED PREMISES
REGARDING SUCH NON-LIABILITY OF LANDLORD.
(b) Tenant shall execute, deliver and record, file or
register (collectively, "record") all such instruments as may be required or
permitted by any present or future Law in order to evidence the respective
interests of Landlord and Tenant in any of the Leased Premises, and shall cause
a memorandum of this Lease (or, if such a memorandum cannot be recorded, this
Lease), and any supplement hereto or thereto, to be recorded in such manner and
in such places as may be required or permitted by any present or future Law in
order to protect the validity and priority of this Lease.
12. Maintenance and Repair.
(a) Tenant shall at all times maintain or cause to be
maintained each Related Premises and the Adjoining Property in as good repair
and appearance as each is in on the date hereof and fit to be used for their
intended use in accordance with the better of the practices generally recognized
as then acceptable by other companies in its industry or observed by Tenant with
respect to similar properties in comparable retail environments that are owned
or operated by it, and, in the case of the Equipment, in as good mechanical
condition as it was on the later of the date hereof or the date of its
installation, except for ordinary wear and tear. Tenant shall take every other
action reasonably necessary or appropriate for the preservation and safety of
each Related Premises. Tenant shall promptly make all Alterations of every kind
and nature, whether foreseen or unforeseen, which may be required to comply with
the foregoing requirements of this Paragraph 12(a). Landlord shall not be
required to make any Alteration, whether foreseen or unforeseen,
<PAGE> 24
or to maintain any of the Related Premises or Adjoining Property in any way, and
Tenant hereby expressly waives any right which may be provided for in any Law
now or hereafter in effect to make Alterations at the expense of Landlord or to
require Landlord to make Alterations. Any Alteration made by Tenant pursuant to
this Paragraph 12 shall be made in conformity with the provisions of
Paragraph 13.
(b) If any Improvement, now or hereafter constructed,
shall (i) encroach upon any setback or any property, street or right-of-way
adjoining any of the Leased Premises, (ii) violate the provisions of any
restrictive covenant affecting any of the Leased Premises, (iii) hinder or
obstruct any easement or right-of-way to which any of the Leased Premises is
subject or (iv) impair the rights of others in, to or under any of the
foregoing, Tenant shall, promptly after receiving notice or otherwise acquiring
knowledge thereof, either (A) obtain from all necessary parties waivers or
settlements of all claims, liabilities and damages resulting from each such
encroachment, violation, hindrance, obstruction or impairment, whether the same
shall affect Landlord, Tenant or both, or (B) take such action as shall be
reasonably necessary to remove all such encroachments, hindrances or
obstructions and to end all such violations or impairments, including, if
necessary, making Alterations.
13. Alterations and Improvements.
(a) Tenant shall have the right, without having obtained
the prior written consent of Landlord and Lender, to make (i) Alterations or a
series of related Alterations that, as to any such Alterations or series of
related Alterations, do not cost in excess of $250,000 in any Lease Year with
respect to either of the Related Premises and (ii) to install Equipment in the
Improvements or accessions to the Equipment that, as to such Equipment or
accessions, do not cost in excess of $250,000 as to either of the Related
Premises in any Lease Year, so long as at the time of construction or
installation of any such Equipment or Alterations no Event of Default exists and
the value and utility of the Leased Premises is not diminished thereby. If the
cost of any Alterations or series of related Alterations as to either of the
Related Premises in any Lease Year or if the Equipment or accessions thereto
installed in either of the Related Premises in any Lease Year is in excess of
$250,000, the prior written approval of Landlord and Lender shall be required,
such approval not to be unreasonably withheld, delayed or conditioned. Tenant
shall not construct upon the Land any additional buildings without having first
obtained the prior written consent of Landlord and Lender, which approval shall
not be unreasonably withheld or delayed.
(b) If Tenant makes any Alterations pursuant to this
Paragraph 13 or as required by Paragraph 12 or 17 (such Alterations and actions
being hereinafter collectively referred
<PAGE> 25
to as "Work"), then (i) the market value of the Leased Premises shall not be
lessened by any such Work or its usefulness impaired, (ii) all such Work shall
be performed by Tenant in a good and workmanlike manner, (iii) all such Work
shall be expeditiously completed in compliance with all Legal Requirements, (iv)
all such Work shall comply with the requirements of all insurance policies
required to be maintained by Tenant hereunder, (v) if any such Work involves the
replacement of Equipment or parts thereto, all replacement Equipment or parts
shall have (A) a value in use equivalent to the greater of (1) the value in use
on the date hereof of the Equipment being replaced immediately prior to the
occurrence of the event which required its replacement (assuming such Replaced
Equipment was then in the condition required by this Lease) or (2) the value in
use on the date hereof of the Equipment being replaced and (B) where appropriate
a useful life equal to the greater of the useful life on the date hereof of the
Equipment being replaced or the useful life of the Equipment being replaced
immediately prior to the occurrence of the event which required its replacement
(assuming such Replaced Equipment was then in the condition required by this
Lease), (vi) Tenant shall promptly discharge or remove all liens filed against
any of the Leased Premises arising out of such Work, (vii) Tenant shall procure
and pay for all permits and licenses required in connection with any such Work,
(viii) all such Work shall be the property of Landlord and shall be subject to
this Lease, and Tenant shall execute and deliver to Landlord any document
requested by Landlord evidencing the assignment to Landlord of all estate,
right, title and interest (other than the leasehold estate created hereby) of
Tenant or any other Person thereto or therein, and (ix) Tenant shall comply, to
the extent required by this Lease, with the provisions of Paragraphs 12(a) and
19(a), whether or not such Work involves restoration of the Leased Premises.
14. Permitted Contests. Notwithstanding any other provision of
this Lease, Tenant shall not be required to (a) pay any Imposition, (b)
discharge or remove any lien referred to in Paragraph 11 or 13 or (c) take any
action with respect to any encroachment, violation, hindrance, obstruction or
impairment referred to in Paragraph 12(b) (such non-compliance with the terms
hereof being hereinafter referred to collectively as "Permitted Violations"), so
long as at the time of such non-compliance no Event of Default exists and so
long as Tenant shall contest, in good faith, the existence, amount or validity
thereof, the amount of the damages caused thereby, or the extent of its or
Landlord's liability therefor by appropriate proceedings which shall operate
during the pendency thereof to prevent or stay (i) the collection of, or other
realization upon, the Permitted Violation so contested, (ii) the sale,
forfeiture or loss of any of the Leased Premises or any Rent to satisfy or to
pay any damages caused by any Permitted Violation, (iii) any interference with
the use or occupancy of any of the Leased Premises, (iv) any interference with
the payment of any Rent, or
<PAGE> 26
(v) the cancellation or increase in the rate of any insurance policy or a
statement by the carrier that coverage will be denied. Tenant shall provide
Landlord security which is satisfactory, in Landlord's reasonable judgment, to
assure that such Permitted Violation is corrected, including all Costs, interest
and penalties that may be incurred or become due in connection therewith. While
any proceedings which comply with the requirements of this Paragraph 14 are
pending and the required security is held by Landlord, Landlord shall not have
the right to correct any Permitted Violation thereby being contested unless
Landlord is required by law to correct such Permitted Violation and Tenant's
contest does not prevent or stay such requirement as to Landlord. Each such
contest shall be promptly and diligently prosecuted by Tenant to a final
conclusion, except that Tenant, so long as the conditions of this Paragraph 14
are at all times complied with, has the right to attempt to settle or compromise
such contest through negotiations. Tenant shall pay any and all losses,
judgments, decrees and Costs in connection with any such contest and shall,
promptly after the final determination of such contest, fully pay and discharge
the amounts which shall be levied, assessed, charged or imposed or be determined
to be payable therein or in connection therewith, together with all penalties,
fines, interest and Costs thereof or in connection therewith, and perform all
acts the performance of which shall be ordered or decreed as a result thereof.
No such contest shall subject Landlord to the risk of any civil or criminal
liability.
15. Indemnification.
(a) Tenant shall pay, protect, indemnify, defend, save
and hold harmless Landlord, Lender and all other Persons described in Paragraph
30 (each an "Indemnitee") from and against any and all liabilities, losses,
damages (including punitive damages), penalties, Costs (including attorneys'
fees and costs), causes of action, suits, claims, demands or judgments of any
nature whatsoever, howsoever caused, without regard to the form of action and
whether based on strict liability, gross negligence, negligence or any other
theory of recovery at law or in equity, arising from (i) any matter pertaining
to the acquisition (or the negotiations leading thereto), ownership, leasing,
use, non-use, occupancy, operation, management, condition, design, construction,
maintenance, repair or restoration of any of the Leased Premises or Adjoining
Property, (ii) any casualty in any manner arising from any of the Leased
Premises or Adjoining Property, whether or not Indemnitee has or should have
knowledge or notice of any defect or condition causing or contributing to said
casualty, (iii) any violation by Tenant of any provision of this Lease, any
contract or agreement to which Tenant is a party, any Legal Requirement or any
Permitted Encumbrance or any encumbrance Tenant consented to or (iv) any
alleged, threatened or actual Environmental Violation, including (A) liability
for response costs and for costs of
<PAGE> 27
removal and remedial action incurred by the United States Government, any state
or local governmental unit or any other Person, or damages from injury to or
destruction or loss of natural resources, including the reasonable costs of
assessing such injury, destruction or loss, incurred pursuant to Section 107 of
CERCLA, or any successor section or act or provision of any similar state or
local Law, (B) liability for costs and expenses of abatement, correction or
clean-up, fines, damages, response costs or penalties which arise from the
provisions of any of the other Environmental Laws and (C) liability for personal
injury or property damage arising under any statutory or common-law tort theory,
including damages assessed for the maintenance of a public or private nuisance
or for carrying on of a dangerous activity.
(b) In case any action or proceeding is brought against
any Indemnitee by reason of any such claim, (i) Tenant may, except in the event
of a conflict of interest or a dispute between Tenant and any such Indemnitee or
during the continuance of an Event of Default, retain its own counsel and defend
such action (it being understood that Landlord, at its sole cost and expense
which shall not be Additional Rent, may employ counsel of its choice to monitor
the defense of any such action) and (ii) such Indemnitee shall notify Tenant to
resist or defend such action or proceeding by retaining counsel reasonably
satisfactory to such Indemnitee, and such Indemnitee will cooperate and assist
in the defense of such action or proceeding if reasonably requested to do so by
Tenant. In the event of a conflict of interest or dispute or during the
continuance of an Event of Default, Landlord shall have the right to select
counsel, and the cost of such counsel shall be paid by Tenant.
(c) The obligations of Tenant under this Paragraph 15
shall survive any termination, expiration or rejection in bankruptcy of this
Lease.
16. Insurance.
(a) Tenant shall maintain the following insurance on or
in connection with the Leased Premises:
(i) Insurance against physical loss or damage to the
Improvements and Equipment as provided under a standard "All Risk" property
policy including but not limited to flood (to the extent that a Related Premises
is in a flood zone) and earthquake coverage in amounts not less than the actual
replacement cost of the Improvements and Equipment. Such policies shall contain
Replacement Cost and Agreed Amount Endorsements and shall contain deductibles
not more than $150,000 per occurrence.
(ii) Commercial General Liability Insurance
(including but not limited to Incidental Medical Malpractice and
<PAGE> 28
Host Liquor Liability if required) against claims for personal and bodily
injury, death or property damage occurring on, in or as a result of the use of
the Leased Premises, in an amount not less than $10,000,000 per
occurrence/annual aggregate and all other coverage extensions that are usual and
customary for properties of this size and type provided, however, that the
Landlord shall have the right to require such higher limits as may be reasonable
and customary for properties of this size and type.
(iii) Worker's compensation insurance covering all
persons employed by Tenant in connection with any work done on or about any of
the Leased Premises for which claims for death, disease or bodily injury may be
asserted against Landlord, Tenant or any of the Leased Premises or, in lieu of
such Worker's Compensation Insurance, a program of self-insurance complying with
the rules, regulations and requirements of the appropriate agency of the State
or States in which the Leased Premises are located.
(iv) Comprehensive Boiler and Machinery Insurance on
any of the Equipment or any other equipment on or in the Leased Premises in an
amount not less than $5,000,000 per accident for damage to property. Such
policies shall include at least $250,000 per accident for Off-Premises Service
Interruption, Expediting Expenses, Ammonia Contamination, and Hazardous
Materials Clean-up Expense and may contain a deductible not to exceed $150,000.
(v) Business Income/Extra Expense Insurance to
include loss of rents at limits sufficient to cover 100% of the annual rent
payable to Landlord with a period of indemnity not less than one year from time
of loss. Such insurance shall name Landlord as additional insured solely with
respect to Rent payable to or for the benefit of Landlord under this Lease
Agreement.
(vi) During any period in which substantial
Alterations at any Related Premises are being undertaken, builder's risk
insurance (which may be provided by the contractor performing the work) covering
the total completed value including any "soft costs" with respect to the
Improvements being altered or repaired (on a completed value, non-reporting
basis), replacement cost of work performed and equipment, supplies and materials
furnished in connection with such construction or repair of Improvements or
Equipment, together with such "soft cost" endorsements and such other
endorsements as Landlord may reasonably require and general liability, worker's
compensation and automobile liability insurance with respect to the Improvements
being constructed, altered or repaired.
(vii) Such other insurance (or other terms with
respect to any insurance required pursuant to this Paragraph
<PAGE> 29
16, including without limitation amounts of coverage, deductibles, form of
mortgagee clause) on or in connection with any of the Leased Premises as
Landlord or Lender may reasonably require, which at the time is usual and
commonly obtained in connection with properties similar in type of building
size, use and location to the Leased Premises.
(b) The insurance required by Paragraph 16(a) shall be
written by companies which have a Best's rating of A:X or above and are admitted
in, or approved to write insurance policies by, the State Insurance Department
for the states in which the Leased Premises are located. The insurance policies
shall be in amounts sufficient at all times to satisfy any coinsurance
requirements thereof. The insurance referred to in Paragraphs 16(a)(i),
16(a)(iv) and 16(a)(vi) shall name Tenant as insured and Landlord as Owner and
Lender as loss payee, each as its interest may appear. The insurance referred to
in Paragraph 16(a)(ii) shall name Landlord and Lender as additional insureds,
and the insurance referred to in Paragraph 16(a)(v) shall name Landlord as
additional insured and Lender and Landlord as loss payee, each as its interest
may appear. If said insurance or any part thereof shall expire, be withdrawn,
become void, voidable, unreliable or unsafe for any reason, including a breach
of any condition thereof by Tenant or the failure or impairment of the capital
of any insurer, Tenant shall immediately obtain new or additional insurance
reasonably satisfactory to Landlord.
(c) Each insurance policy referred to in clauses (i),
(iv), (v) and (vi) of Paragraph 16(a) shall contain standard non-contributory
mortgagee clauses in favor of and reasonably acceptable to Lender. Each policy
required by any provision of Paragraph 16(a), except clause (iii) thereof, shall
provide that it may not be cancelled except after thirty (30) days' prior notice
to Landlord and Lender. Each such policy shall also provide that any loss
otherwise payable thereunder to Landlord, Lender or any third Person shall be
payable notwithstanding (i) any act or omission of Tenant which might, absent
such provision, result in a forfeiture of all or a part of such insurance
payment, (ii) the occupation or use of any of the Leased Premises for purposes
more hazardous than those permitted by the provisions of such policy, (iii) any
foreclosure or other action or proceeding taken by Lender pursuant to any
provision of the Mortgage, Note, Assignment or other document evidencing or
securing the Loan upon the happening of an event of default therein or (iv) any
change in title to or ownership of any of the Leased Premises.
(d) Tenant shall pay as they become due all premiums for
the insurance required by Paragraph 16(a), shall renew or replace each policy
and, upon Landlord's request, deliver to Landlord evidence of the payment of the
full premium therefor or installment then due prior to the expiration date of
<PAGE> 30
such policy, and shall promptly deliver to Landlord original certificates of
insurance signed by an authorized representative of the applicable insurance
company.
(e) Anything in this Paragraph 16 to the contrary
notwithstanding, any insurance which Tenant is required to obtain pursuant to
Paragraph 16(a) may be carried under a "blanket" or umbrella policy or policies
covering other properties or liabilities of Tenant, provided that such "blanket"
or umbrella policy or policies otherwise comply with the provisions of this
Paragraph 16. Original Certificates of insurance for each such "blanket" or
umbrella policy signed by an authorized representative of the applicable
insurance company shall promptly be delivered to Landlord.
(f) Tenant shall have the replacement cost and insurable
value of the Improvements and Equipment determined from time to time as required
by the replacement cost and agreed amount endorsements and shall deliver to
Landlord the new replacement cost and agreed amount endorsement or certificate
evidencing such endorsement promptly upon Tenant's receipt thereof.
(g) Tenant shall promptly comply with and conform to
(i) all provisions of each insurance policy required by this Paragraph 16 and
(ii) all reasonable requirements of the insurers thereunder applicable to
Landlord, Tenant or any of the Leased Premises or to the use, manner of use,
occupancy, possession, operation, maintenance, alteration or repair of any of
the Leased Premises, even if such compliance necessitates Alterations or results
in interference with the use or enjoyment of any of the Leased Premises.
(h) Tenant shall not carry separate insurance concurrent
in form or contributing in the event of a Casualty with that required in this
Paragraph 16 unless (i) Landlord and Lender are included therein as additional
insureds, with loss payable as provided herein, and (ii) such separate insurance
complies with the other provisions of this Paragraph 16. Tenant shall
immediately notify Landlord of such separate insurance and shall deliver to
Landlord the original policies or certified copies therefor.
(i) All policies shall contain full waivers of
subrogation against the Landlord.
(j) All proceeds of any insurance required under
Paragraph 16(a) shall be payable as follows:
(i) Except for proceeds payable to a Person other
than Landlord, Tenant or Lender, all proceeds of insurance required under
clauses (ii), (iv), (v) and (vii) of Paragraph 16(a) and proceeds attributable
to the general liability coverage
<PAGE> 31
provisions of Builder's Risk insurance under clause (vi) of Paragraph 16(a)
shall be payable to Landlord or, if required by the Mortgage, to Lender, as
their interests may appear.
(ii) Proceeds of insurance required under clause (i)
of Paragraph 16(a) and proceeds attributable to Builder's Risk insurance (other
than its general liability coverage provisions) under clause (vi) of Paragraph
16(a) shall be payable by Landlord (or Lender) and applied as set forth in
Paragraph 17. Tenant shall apply the Net Award to restoration of the Leased
Premises in accordance with the applicable provisions of this Lease.
17. Casualty and Condemnation.
(a) If any Casualty to either of the Related Premises
occurs, Tenant shall give Landlord and Lender immediate notice thereof. So long
as no Event of Default exists Tenant is hereby authorized to adjust, collect and
compromise all claims under any of the insurance policies required by Paragraph
16(a) (except public liability insurance claims payable to a Person other than
Tenant, Landlord or Lender) and to execute and deliver on behalf of Landlord all
necessary proofs of loss, receipts, vouchers and releases required by the
insurers and Landlord shall have the right to join with Tenant therein. Any
final adjustment, settlement or compromise of any such claim shall be subject to
the prior written approval of Landlord, which shall not be unreasonably withheld
or delayed, and Landlord shall have the right to prosecute or contest, or to
require Tenant to prosecute or contest, any such claim, adjustment, settlement
or compromise. If an Event of Default exists, Tenant shall not be entitled to
adjust, collect or compromise any such claim or to participate with Landlord in
any adjustment, collection and compromise of the Net Award payable in connection
with a Casualty. Tenant agrees to sign, upon the request of Landlord, all such
proofs of loss, receipts, vouchers and releases. Each insurer is hereby
authorized and directed to make payment under said policies, including return of
unearned premiums, directly to Landlord or, if required by the Mortgage, to
Lender instead of to Landlord and Tenant jointly, and Tenant hereby appoints
each of Landlord and Lender as Tenant's attorneys-in-fact to endorse any draft
therefor. The rights of Landlord under this Paragraph 17(a) shall be extended to
Lender if and to the extent that any Mortgage so provides.
(b) Tenant, immediately upon receiving a Condemnation
Notice, shall notify Landlord and Lender thereof. So long as no Event of Default
exists, Tenant is authorized to collect, settle and compromise the amount of any
Net Award and Landlord shall have the right to join with Tenant therein. If an
Event of Default exists, Landlord shall be authorized to collect, settle and
compromise the amount of any Net Award and Tenant shall not be entitled to
participate with Landlord in any
<PAGE> 32
Condemnation proceeding or negotiations under threat thereof or to contest the
Condemnation or the amount of the Net Award therefor. No agreement with any
condemnor in settlement or under threat of any Condemnation shall be made by
Tenant without the written consent of Landlord and Lender. Subject to the
provisions of this Paragraph 17(b), Tenant hereby irrevocably assigns to
Landlord any award or payment to which Tenant is or may be entitled by reason of
any Condemnation, whether the same shall be paid or payable for Tenant's
leasehold interest hereunder or otherwise; but nothing in this Lease shall
impair Tenant's right to any award or payment on account of Tenant's trade
fixtures, equipment or other tangible property which is not part of the
Equipment, moving expenses or loss of business, if available, to the extent that
and so long as (i) Tenant shall have the right to make, and does make, a
separate claim therefor against the condemnor and (ii) such claim does not in
any way reduce either the amount of the award otherwise payable to Landlord for
the Condemnation of Landlord's fee interest in the Leased Premises or the amount
of the award (if any) otherwise payable for the Condemnation of Tenant's
leasehold interest hereunder. The rights of Landlord under this Paragraph 17(b)
shall also be extended to Lender if and to the extent that any Mortgage so
provides.
(c) If any Partial Casualty (whether or not insured
against) or Partial Condemnation shall occur to any Related Premises, this Lease
shall continue, notwithstanding such event, and there shall be no abatement or
reduction of any Monetary Obligations. Promptly after such Partial Casualty or
Partial Condemnation, Tenant, as required in Paragraph 12(a), shall commence and
diligently continue to restore the Leased Premises as nearly as possible to
their value, condition and character immediately prior to such event (assuming
the Leased Premises to have been in the condition required by this Lease). So
long as no Event of Default exists, any Net Award up to and including $250,000
shall be paid by Landlord to Tenant and Tenant shall restore the Leased Premises
in accordance with the requirements of Paragraph 13(b) of this Lease. Any Net
Award in excess of $250,000 shall (unless such Casualty resulting in the Net
Award is a Termination Event) be made available by Landlord (or Lender if the
terms of the Mortgage so require) to Tenant for the restoration of any of the
Leased Premises pursuant to and in accordance with and subject to the provisions
of Paragraph 19 hereof. If any Casualty or Condemnation which is not a Partial
Casualty or Partial Condemnation shall occur, Tenant shall comply with the terms
and conditions of Paragraph 18.
18. Termination Events.
(a) If (i) all of either Related Premises shall be taken
by a Taking or (ii) any substantial portion of either Related Premises shall be
taken by a Taking or all or any substantial portion of either Related Premises
shall be totally
<PAGE> 33
damaged or destroyed by a Casualty and, in any such case, Tenant certifies and
covenants to Landlord that it will forever abandon operations at the Related
Premises, (any one or all of the Related Premises described in the above clauses
(i) and (ii) above being hereinafter referred to as the "Affected Premises" and
each of the events described in the above clauses (i) and (ii) shall hereinafter
be referred to as a "Termination Event"), then (x) in the case of (i) above,
Tenant shall be obligated, within thirty (30) days after Tenant receives a
Condemnation Notice and (y) in the case of (ii) above, Tenant shall have the
option, within sixty (60) days after Tenant receives a Condemnation Notice or
sixty (60) days after the Casualty, as the case may be, to give to Landlord
written notice (a "Termination Notice") of the Tenant's option to terminate this
Lease as to the Affected Premises in the form described in Paragraph 18(b).
(b) A Termination Notice shall contain (i) notice of
Tenant's intention to terminate this Lease as to the Affected Premises on the
first Basic Rent Payment Date which occurs at least ninety (90) days after the
date of the Termination Notice (the "Termination Date"), (ii) a binding and
irrevocable offer of Tenant to pay the Termination Amount and (iii) if the
Termination Event is an event described in Paragraph 18(a)(ii), the
certification and covenant described therein and a certified resolution of the
Board of Directors of Tenant authorizing the same.
(c) If Landlord shall reject such offer to terminate this
Lease as to the Affected Premises by written notice to Tenant (a "Rejection"),
which Rejection shall contain the written consent of Lender, not later than
thirty (30) days following the date on which Landlord receives the Termination
Notice, then this Lease shall terminate as to the Affected Premises on the
Termination Date; provided that, if Tenant has not satisfied all Monetary
Obligations and all other obligations and liabilities under this Lease which
have arisen as to the Affected Premises (collectively, "Remaining Obligations")
on or prior to the Termination Date, then Landlord may, at its option, extend
the date on which this Lease may terminate as to the Affected Premises to a date
which is no later than the first Basic Rent Payment Date after the Termination
Date on which Tenant has satisfied all Remaining Obligations. Upon such
termination (i) all obligations of Tenant hereunder as to the Affected Premises
shall terminate except for any Surviving Obligations, (ii) Tenant shall
immediately vacate and shall have no further right, title or interest in or to
any of the Affected Premises and (iii) the Net Award shall be retained by
Landlord. Notwithstanding anything to the contrary hereinabove contained, if
Tenant shall have received a Rejection and, on the date when this Lease would
otherwise terminate as provided above, if Tenant has not satisfied all Remaining
Obligations on such date, then Landlord may, at its option, extend the date on
which this Lease may terminate to a date which is no later than the first Basic
<PAGE> 34
Rent Payment Date after such date on which Tenant has satisfied all such
Remaining Obligations.
(d) Unless Tenant shall have received a Rejection not
later than the thirtieth (30th) day following the date of the Termination
Notice, Landlord shall be conclusively presumed to have accepted such offer. If
such offer is accepted by Landlord then, on the Termination Date, Tenant shall
pay to Landlord the Termination Amount and all Remaining Obligations and
Landlord shall convey to Tenant or its designee the Affected Premises or the
remaining portion thereof, if any, all in accordance with Paragraph 20, and
shall assign to Tenant (or pay over to Tenant) the Net Award.
(e) In the event of the termination of this Lease as to
the Affected Premises as hereinabove provided, this Lease shall remain in full
force and effect as to the Remaining Premises; provided, that the Basic Rent for
the Remaining Premises to be paid after such termination shall be the Basic Rent
otherwise payable hereunder with respect to the Leased Premises multiplied by
the percentage set forth on Exhibit "F" for the Remaining Premises.
19. Restoration.
(a) Landlord (or Lender if required by any Mortgage)
shall hold any Net Award in excess of $250,000 in a fund (the "Restoration
Fund") and disburse amounts from the Restoration Fund only in accordance with
the following conditions:
(i) prior to commencement of restoration, (A) the
architects, contracts, contractors, plans and specifications for the restoration
shall have been approved by Landlord, such approval not to be unreasonably
withheld, (B) Landlord and Lender shall be provided with acceptable performance
and payment bonds which insure satisfactory completion of and payment for the
restoration, are in an amount and form and have a surety acceptable to Landlord,
and name Landlord and Lender as additional dual obligees, and (C) appropriate
waivers of mechanics' and materialmen's liens shall have been filed;
(ii) at the time of any disbursement, no Event of
Default shall exist and no mechanics' or materialmen's liens shall have been
filed against any of the Leased Premises and remain undischarged or unbonded;
(iii) disbursements shall be made from time to time
in an amount not exceeding the cost of the work completed since the last
disbursement, upon receipt of (A) satisfactory evidence, including architects'
certificates, of the stage of completion, the estimated total cost of completion
and
<PAGE> 35
performance of the work to date in a good and workmanlike manner in accordance
with the contracts, plans and specifications, (B) waivers of liens, (C)
contractors' and subcontractors' sworn statements as to completed work and the
cost thereof for which payment is requested and (D) a satisfactory bringdown of
title insurance;
(iv) each request for disbursement shall be
accompanied by a certificate of Tenant, signed by the president or a vice
president of Tenant, describing the work for which payment is requested, stating
the cost incurred in connection therewith, stating that Tenant has not
previously received payment for such work and, upon completion of the work, also
stating that the work has been fully completed and complies with the applicable
requirements of this Lease;
(v) Landlord may retain ten percent (10%) of the
Restoration Fund until the restoration is fully completed;
(vi) the Restoration Fund shall not be commingled
with Landlord's other funds and shall bear interest at a rate agreed to by
Landlord and Tenant; and
(vii) such other reasonable conditions as Landlord
or Lender may impose.
(b) Prior to commencement of restoration and at any time
during restoration, if the estimated cost of completing the restoration work
free and clear of all liens, as determined by Landlord, exceeds the amount of
the Net Award available for such restoration, the amount of such excess shall,
upon demand by Landlord, be paid by Tenant to Landlord to be added to the
Restoration Fund. Any sum so added by Tenant which remains in the Restoration
Fund upon completion of restoration shall be refunded to Tenant. For purposes of
determining the source of funds with respect to the disposition of funds
remaining after the completion of restoration, the Net Award shall be deemed to
be disbursed prior to any amount added by Tenant.
(c) If any sum remains in the Restoration Fund after
completion of the restoration and any refund to Tenant pursuant to Paragraph
19(b), such sum (the "Remaining Sum") shall be retained by Landlord or, if
required by a Note or Mortgage, paid by Landlord to a Lender.
(d) Any Net Award not in excess of $250,000 shall be paid
over to Tenant by Landlord or Lender promptly upon receipt and shall be used by
Tenant to restore the applicable Related Premises in accordance with the
provisions of Paragraph 17(c).
<PAGE> 36
20. Procedures Upon Purchase.
(a) If the Leased Premises or any of the Related Premises
are purchased by Tenant pursuant to any provision of this Lease, Landlord need
not convey any better title thereto than that which was conveyed to Landlord,
and Tenant or its designee shall accept such title, subject, however, to the
Permitted Encumbrances and to all other liens, exceptions and restrictions on,
against or relating to any of the Leased Premises or the applicable Related
Premises and to all applicable Laws, but free of the lien of and security
interest created by any Mortgage or Assignment and liens, exceptions and
restrictions on, against or relating to the Leased Premises or the applicable
Related Premises which have been created by or resulted solely from acts of
Landlord after the date of this Lease, unless the same are Permitted
Encumbrances or customary utility easements benefiting the Leased Premises or
were created with the concurrence of Tenant or as a result of a default by
Tenant under this Lease.
(b) Upon the date fixed for any such purchase of the
Leased Premises or any of the Related Premises pursuant to any provision of this
Lease (any such date the "Purchase Date"), Tenant shall pay to Landlord, or to
any Person to whom Landlord directs payment, the Relevant Amount therefor
specified herein, in Federal Funds, less any credit of the Net Award received
and retained by Landlord or a Lender allowed against the Relevant Amount, and
Landlord shall deliver to Tenant (i) a special warranty deed which describes the
premises being conveyed and conveys the title thereto as provided in Paragraph
20(a), (ii) such other instruments as shall be necessary to transfer to Tenant
or its designee any other property (or rights to any Net Award not yet received
by Landlord or a Lender) then required to be sold by Landlord to Tenant pursuant
to this Lease and (iii) any Net Award received by Landlord, not credited to
Tenant against the Relevant Amount and required to be delivered by Landlord to
Tenant pursuant to this Lease; provided, that if any Monetary Obligations remain
outstanding on such date, then Landlord may deduct from the Net Award the amount
of such Monetary Obligations. If on the Purchase Date any Monetary Obligations
remain outstanding and no Net Award is payable to Tenant by Landlord or the
amount of such Net Award is less than the amount of the Monetary Obligations,
then Tenant shall pay to Landlord on the Purchase Date the amount of such
Monetary Obligations. Upon the completion of such purchase, this Lease and all
obligations and liabilities of Tenant hereunder with respect to the applicable
Related Premises (but not with respect to the Remaining Premises) shall
terminate, except any Surviving Obligations.
(c) If the completion of such purchase shall be delayed
after (i) the Termination Date, in the event of a purchase pursuant to Paragraph
18 or, (ii) the date scheduled for
<PAGE> 37
such purchase, in the event of a purchase under any other provision of this
Lease then (x) Rent shall continue to be due and payable until completion of
such purchase and (y) at Landlord's sole option, Fair Market Value shall be
redetermined and the Relevant Amount payable by Tenant pursuant to the
applicable provision of this Lease shall be adjusted to reflect such
redetermination.
(d) Any prepaid Monetary Obligations paid to Landlord
shall be prorated as of the Purchase Date, and the prorated unapplied balance
shall be deducted from the Relevant Amount due to Landlord; provided, that no
apportionment of any Impositions shall be made upon any such purchase.
21. Assignment and Subletting; Prohibition against Leasehold
Financing.
(a)(i) Except as specifically provided in this Paragraph 21
and subject to the terms hereof, Tenant shall not assign this Lease, voluntarily
or involuntarily, whether by operation of law or otherwise. Tenant shall have
the right, upon thirty (30) days prior written notice to Landlord and Lender,
with no consent of Landlord or Lender being required or necessary ("Preapproved
Assignment") (A) to assign this Lease either in its entirety ("Complete
Assignment") or (B) to cause Landlord to bifurcate this Lease into two leases
("Lease Bifurcation"), one for each Related Premises (each, a "Bifurcated
Lease"), provided that the Basic Rent under each such Bifurcated Lease shall be
allocated between each of the Related Premises as provided in Exhibit "F", and
to assign this Lease with respect to either Related Premises ("Partial
Assignment"), provided that any such Complete Assignment or Partial Assignment
is to a Person ("Preapproved Assignee"), that immediately following such
assignment has a publicly traded unsecured senior debt rating of "A" or better
from Moody's Investors Services, Inc. or a rating of "A" or better from Standard
& Poor's Corporation, and in the event all of such rating agencies cease to
furnish such ratings, then a comparable rating by any rating agency reasonably
acceptable to Landlord and Lender.
(ii) If Tenant desires to assign this Lease through
either a Complete Assignment or a Partial Assignment to a Person
("Non-Preapproved Assignee") who would not be a Preapproved Assignee
("Non-Preapproved Assignment") then Tenant shall, not less than sixty (60) days
prior to the date on which it desires to make a Non-Preapproved Assignment
submit to Landlord and Lender information regarding the following with respect
to the Non-Preapproved Assignee (the "Criteria"): (A) credit, (B) capital
structure, (C) management, (D) operating history, (E) proposed use of the Leased
Premises and (F) risk factors associated with the proposed use of the Leased
Premises by the Non-Preapproved Assignee, taking into account factors such as
environmental concerns, product liability and the like.
<PAGE> 38
Landlord and Lender shall review such Criteria and shall approve or disapprove
the Non-Preapproved Assignee no later than the thirtieth (30th) day following
receipt of all such Criteria, and Landlord and Lender shall be deemed to have
acted reasonably in granting or withholding consent if such grant or disapproval
is based on their review of the Criteria.
(iii) If Landlord and Lender withhold consent to the
Non-Preapproved Assignment and Tenant desires to complete the Non-Preapproved
Assignment, Tenant shall make a rejectable offer (the "Intended Assignment
Offer") to purchase the Leased Premises or applicable Related Premises for a
purchase price equal to the Offer Amount and to consummate the purchase on the
first Basic Rent Payment Date occurring thirty (30) days after the determination
of Fair Market Value (the "Intended Assignment Purchase Date"). Notwithstanding
the foregoing, if the Intended Assignment Offer is accepted by Landlord and the
Non-Preapproved Assignment occurs on a date (the "Assignment Date") that is
prior to the Intended Assignment Purchase Date, then no later than the
Assignment Date, Tenant shall deposit in escrow with Lender an amount (the
"Deposit Amount") equal to one hundred ten percent (110%) of the sum of the
applicable Acquisition Cost and any Prepayment Premium. The Deposit Amount shall
be held by and invested by Landlord and the Deposit Amount, together with any
interest earned thereon, shall be applied on the Intended Assignment Purchase
Date to payment of the Assignment Offer Amount. Any part of the Deposit Amount
and interest earned thereon in excess of the Assignment Offer Amount shall be
refunded to Tenant.
(iv) If Landlord shall reject the Intended
Assignment Offer by notice to Tenant, such notice to contain the written consent
of Lender to such rejection, no later than the thirtieth (30th) day following
receipt of the Intended Assignment Offer by Landlord, then this Lease shall
remain in full force and effect and Landlord and Lender shall be deemed to have
consented to the Non-Preapproved Assignment (notwithstanding their original
withholding of consent). Nothing provided herein shall constitute a waiver by
Landlord of the obligation of Tenant to comply with the requirements of this
Paragraph 21(a)(iv) if a subsequent Non-Preapproved Assignment arises. No
rejection of the Intended Assignment Offer shall be effective for any purpose
unless consented to in writing by Lender.
(v) Unless Landlord shall have rejected the Intended
Assignment Offer by the foregoing notice to Tenant not later than the thirtieth
(30th) day following receipt of the information described in the foregoing
Paragraph 21(a)(ii), Landlord shall be conclusively presumed to have accepted
the Intended Assignment Offer. If the Intended Assignment Offer is accepted by
Landlord, Tenant shall pay to Landlord the Offer Amount (less the Deposit Amount
and interest thereon paid to Landlord) on the Intended Assignment Purchase Date
and, provided
<PAGE> 39
that no Rent or any other charge is due and unpaid under this Lease as of the
Intended Assignment Purchase Date and Tenant is otherwise in compliance with the
terms of this Lease, Landlord shall convey to Tenant the Leased Premises in
accordance with the provisions of Paragraph 20 of this Lease.
(b) Tenant shall have the right, upon thirty (30) days
prior written notice to Landlord and Lender, to enter into one or more subleases
that demise, in the aggregate, up to but not in excess of thirty-five percent
(35%) of the gross space in the Allentown Premises and to enter into one or more
subleases or license agreements for the Johnstown Premises for customary full
service department store licensed operations with no consent or approval of
Landlord being required or necessary ("Preapproved Sublet"). Other than pursuant
to a Preapproved Sublet, no portion of the Leased Premises shall be subleased
during the Term to any other Person without the prior written consent of
Landlord and Lender, which consent shall be granted or withheld based on a
review of the Criteria. Landlord and Lender shall be deemed to have acted
reasonably in granting or withholding consent if such grant or disapproval is
based on their reasonable review of the Criteria.
(c) If Tenant assigns all its rights and interest under
this Lease either in a Partial Assignment with respect to a Related Premises or
a Complete Assignment with respect to the Leased Premises, the assignee under
any such assignment shall expressly assume all the obligations of Tenant
hereunder, actual or contingent, including obligations of Tenant which may have
arisen on or prior to the date of such assignment, by a written instrument
delivered to Landlord at the time of such assignment. Each sublease or license
agreement of either of the Related Premises shall be subject and subordinate to
the provisions of this Lease. Upon any assignment (i) to a Preapproved Assignee
or (ii) any assignment to a Non-Preapproved Assignee that is consented to by
Landlord and Lender and that, immediately following such assignment has a
publicly traded unsecured senior debt rating of "Baa" or better from Moody's
Investors Services, Inc. or a rating "BBB" from Standard & Poor's Corporation,
or a Replacement Agency, Tenant shall be released from all of its obligations
hereunder which arise after the date of such assignment, except for Surviving
Obligations. No other assignment and no sublease shall affect or reduce any of
the obligations of Tenant hereunder, and all such obligations shall continue in
full force and effect as obligations of a principal and not as obligations of a
guarantor, as if no assignment or sublease had been made. No assignment or
sublease shall impose any additional obligations on Landlord under this Lease.
(d) Tenant shall, within ten (10) days after the
execution and delivery of any assignment or sublease consented to by Landlord,
deliver a duplicate original copy thereof to
<PAGE> 40
Landlord which, in the event of an assignment, shall be in recordable form.
(e) As security for performance of its obligations under
this Lease, Tenant hereby grants, conveys and assigns to Landlord all right,
title and interest of Tenant in and to all subleases now in existence or
hereafter entered into for any or all of the Leased Premises, any and all
extensions, modifications and renewals thereof and all rents, issues and profits
therefrom. Landlord hereby grants to Tenant a license to collect and enjoy all
rents and other sums of money payable under any sublease of any of the Leased
Premises, provided, however, that if an Event of Default has occurred and is
continuing, Landlord shall have the absolute right upon notice to Tenant and any
subtenants to revoke said license and to collect such rents and sums of money
and to apply the same against the Rent due under the Lease. Tenant shall not
accept any rents more than thirty (30) days in advance of the accrual thereof.
(f) Tenant shall not have the power to mortgage, pledge
or otherwise encumber its interest under this Lease or any sublease of any of
the Related Premises, and any such mortgage, pledge or encumbrance made in
violation of this Paragraph 21 shall be void and of no force and effect.
(g) If required by any Lender, Landlord may cause a Lease
Bifurcation to occur and subject to the provisions of Paragraph 36, Landlord may
sell or transfer the Leased Premises at any time without Tenant's consent to any
third party (each a "Third Party Purchaser"). In the event of any such transfer,
Tenant shall attorn to any Third Party Purchaser as Landlord so long as such
Third Party Purchaser and Landlord notify Tenant in writing of such transfer. At
the request of Landlord, Tenant will execute such documents confirming the
agreement referred to above and such other agreements as Landlord may reasonably
request, provided that such agreements do not increase the liabilities and
obligations of Tenant hereunder.
22. Events of Default.
(a) The occurrence of any one or more of the following
(after expiration of any applicable cure period as provided in Paragraph 22(b))
shall, at the sole option of Landlord, constitute an "Event of Default" under
this Lease:
(i) a failure by Tenant to make any payment of any
Monetary Obligation, regardless of the reason for such failure;
(ii) a failure by Tenant duly to perform and
observe, or a violation or breach of, any provision hereof not otherwise
specifically mentioned in this Paragraph 22(a);
<PAGE> 41
(iii) any representation or warranty made by Tenant
herein or in any certificate, demand or request made pursuant hereto proves to
be incorrect, now or hereafter, in any material respect;
(iv) a default beyond any applicable cure period or
at maturity by Tenant or Guarantor in any payment of principal or interest on
any obligations for borrowed money having an original principal balance of
$10,000,000 or more in the aggregate, or in the performance of any other
provision contained in any instrument under which any such obligation is created
or secured (including the breach of any covenant thereunder), (x) if such
payment is a payment at maturity or a final payment, or (y) if an effect of such
default is to cause, or permit any Person to cause, such obligation to become
due prior to its stated maturity;
(v) a default by Tenant or Guarantor beyond any
applicable cure period in the payment of rent under, or in the performance of
any other material provision of, any other lease or leases that have, in the
aggregate, rental obligations over the terms thereof of $5,000,000 or more (less
any amounts payable from the proceeds of insurance) if the Landlord under any
such lease or leases commences to exercise its remedies thereunder;
(vi) a final, non-appealable judgment or judgments
for the payment of money in excess of $5,000,000 in the aggregate shall be
rendered against Tenant or Guarantor and the same shall remain undischarged for
a period of sixty (60) consecutive days;
(vii) Tenant shall (A) voluntarily be adjudicated a
bankrupt or insolvent, (B) seek or consent to the appointment of a receiver or
trustee for itself or for any of the Related Premises, (C) file a petition
seeking relief under the bankruptcy or other similar laws of the United States,
any state or any jurisdiction, (D) make a general assignment for the benefit of
creditors, or (E) be unable to pay its debts as they mature;
(viii) a court shall enter an order, judgment or
decree appointing, without the consent of Tenant, a receiver or trustee for it
or for any of the Related Premises or approving a petition filed against Tenant
which seeks relief under the bankruptcy or other similar laws of the United
States, any state or any jurisdiction, and such order, judgment or decree shall
remain undischarged or unstayed sixty (60) days after it is entered;
<PAGE> 42
(ix) either of the Related Premises shall remain
vacant for a period that exceeds twelve (12) consecutive months or shall be
abandoned;
(x) Tenant shall be liquidated or dissolved or shall
begin proceedings towards its liquidation or dissolution;
(xi) the estate or interest of Tenant in any of the
Related Premises shall be levied upon or attached in any proceeding and such
estate or interest is about to be sold or transferred or such process shall not
be vacated or discharged within sixty (60) days after it is made;
(xii) a failure by Tenant to perform or observe, or
a violation or breach of, or a misrepresentation by Tenant under, any provision
of any Assignment or any other document between Tenant and Lender with respect
to a Loan, if such failure, violation, breach or misrepresentation gives rise to
a default beyond any applicable cure period with respect to any Loan;
(xiii) the breach of any Covenant shall occur; or
(xiv) an Event of Default (as defined in the
Guaranty) beyond any applicable cure period shall occur under the Guaranty.
(b) No notice or cure period shall be required in any one
or more of the following events: (A) the occurrence of an Event of Default under
clause (i) (except as otherwise set forth below), (iii), (iv), (v), (vi), (vii),
(viii), (ix), (x), (xi), (xii), (xiii) or (xiv) of Paragraph 22(a); (B) the
default consists of a failure to provide any insurance required by Paragraph 16
or an assignment or sublease entered into in violation of Paragraph 21; or (C)
the default is such that any delay in the exercise of a remedy by Landlord could
reasonably be expected to cause irreparable harm to Landlord. If the default
consists of the failure to pay any Monetary Obligation under clause (i) of
Paragraph 22(a), the applicable cure period shall be three (3) days from the
date on which notice is given, but Landlord shall not be obligated to give
notice of, or allow any cure period for, any such default more than one (1) time
within any consecutive twelve (12) month period. If the default consists of a
default under clause (ii) of Paragraph 22(a), other than the events specified in
clauses (B) and (C) of the first sentence of this Paragraph 22(b), the
applicable cure period shall be twenty (20) days from the date on which notice
is given or, if the default cannot be cured within such twenty (20) day period
and delay in the exercise of a remedy would not (in Landlord's reasonable
judgment) cause any material adverse harm to Landlord or any of the Leased
Premises, the cure period shall
<PAGE> 43
be extended for the period required to cure the default (but such cure period,
including any extension, shall not in the aggregate exceed sixty (60) days),
provided that Tenant shall commence to cure the default within the said
twenty-day period and shall actively, diligently and in good faith proceed with
and continue the curing of the default until it shall be fully cured.
23. Remedies and Damages Upon Default.
(a) If an Event of Default shall have occurred and is
continuing, Landlord shall have the right, at its sole option, then or at any
time thereafter, to exercise its remedies and to collect damages from Tenant in
accordance with this Paragraph 23, subject in all events to applicable Law,
without demand upon or notice to Tenant except as otherwise provided in
Paragraph 22(b) and this Paragraph 23.
(i) Landlord may give Tenant notice of Landlord's
intention to terminate this Lease on a date specified in such notice. Upon such
date, this Lease, the estate hereby granted and all rights of Tenant hereunder
shall expire and terminate. Upon such termination, Tenant shall immediately
surrender and deliver possession of the Leased Premises to Landlord in
accordance with Paragraph 26. If Tenant does not so surrender and deliver
possession of all of the Leased Premises, Landlord may re-enter and repossess
any of the Leased Premises not surrendered, with or without legal process, by
peaceably entering any of the Leased Premises and changing locks or by summary
proceedings, ejectment or any other lawful means or procedure. Upon or at any
time after taking possession of any of the Leased Premises, Landlord may, by
peaceable means or legal process, remove any Persons or property therefrom.
Landlord shall be under no liability for or by reason of any such entry,
repossession or removal. Notwithstanding such entry or repossession, Landlord
may (A) exercise the remedy set forth in and collect the damages permitted by
Paragraph 23(a)(iii) or (B) collect the damages set forth in Paragraph 23(b)(i)
or 23(b)(ii).
(ii) After repossession of any of the Leased
Premises pursuant to clause (i) above, Landlord shall have the right to relet
any of the Leased Premises to such tenant or tenants, for such term or terms,
for such rent, on such conditions and for such uses as Landlord in its sole
discretion may determine, and collect and receive any rents payable by reason of
such reletting. Landlord may make such Alterations in connection with such
reletting as it may deem advisable in its sole discretion. Notwithstanding any
such reletting, Landlord may collect the damages set forth in Paragraph
23(b)(ii).
(iii) Landlord may declare by notice to Tenant the
entire Basic Rent (in the amount of Basic Rent then in effect) for the remainder
of the then current Term to be
<PAGE> 44
immediately due and payable. Tenant shall immediately pay to Landlord all such
Basic Rent discounted to its Present Value, all accrued Rent then due and
unpaid, all other Monetary Obligations which are then due and unpaid and all
Monetary Obligations which arise or become due by reason of such Event of
Default (including any Costs of Landlord). Upon receipt by Landlord of all such
accelerated Basic Rent and Monetary Obligations, this Lease shall remain in full
force and effect and Tenant shall have the right to possession of the Leased
Premises from the date of such receipt by Landlord to the end of the Term, and
subject to all the provisions of this Lease, including the obligation to pay all
increases in Basic Rent and all Monetary Obligations that subsequently become
due, except that (A) no Basic Rent which has been prepaid hereunder shall be due
thereafter during the said Term and (B) Tenant shall have no option to extend or
renew the Term.
(b) The following constitute damages to which Landlord
shall be entitled if Landlord exercises its remedies under Paragraph 23(a)(i) or
23(a)(ii):
(i) If Landlord exercises its remedy under Paragraph
23(a)(i) but not its remedy under Paragraph 23(a)(ii) (or attempts to exercise
such remedy and is unsuccessful in reletting the Leased Premises) then, upon
written demand from Landlord, Tenant shall pay to Landlord, as liquidated and
agreed final damages for Tenant's default and in lieu of all current damages
beyond the date of such demand (it being agreed that it would be impracticable
or extremely difficult to fix the actual damages), an amount equal to the
Present Value of the excess, if any, of (A) all Basic Rent from the date of such
demand to the date on which the Term is scheduled to expire hereunder in the
absence of any earlier termination, re-entry or repossession over (B) the then
fair market rental value of the Leased Premises for the same period. Tenant
shall also pay to Landlord all of Landlord's Costs in connection with the
repossession of the Leased Premises and any attempted reletting thereof,
including all brokerage commissions, legal expenses, reasonable attorneys' fees,
employees' expenses, costs of Alterations and expenses and preparation for
reletting.
(ii) If Landlord exercises its remedy under
Paragraph 23(a)(i) or its remedies under Paragraph 23(a)(i) and 23(a)(ii), then
Tenant shall, until the end of what would have been the Term in the absence of
the termination of the Lease, and whether or not any of the Leased Premises
shall have been relet, be liable to Landlord for, and shall pay to Landlord, as
liquidated and agreed current damages on the date on which the same are due and
payable under the terms of this Lease all Monetary Obligations which would be
payable under this Lease by Tenant in the absence of such termination less the
net proceeds, if any, of any reletting pursuant to Paragraph 23(a)(ii), after
deducting from such proceeds all of Landlord's Costs (including
<PAGE> 45
the items listed in the last sentence of Paragraph 23(b)(i) hereof) incurred in
connection with such repossessing and reletting; provided, that if Landlord has
not relet the Leased Premises, such Costs of Landlord shall be considered to be
Monetary Obligations payable by Tenant. Tenant shall be and remain liable for
all sums aforesaid, and Landlord may recover such damages from Tenant and
institute and maintain successive actions or legal proceedings against Tenant
for the recovery of such damages. Nothing herein contained shall be deemed to
require Landlord to wait to begin such action or other legal proceedings until
the date when the Term would have expired by its own terms had there been no
such Event of Default.
(c) Notwithstanding anything to the contrary herein
contained, in lieu of or in addition to any of the foregoing remedies and
damages, Landlord may exercise any remedies and collect any damages available to
it at law or in equity. If Landlord is unable to obtain full satisfaction
pursuant to the exercise of any remedy, it may pursue any other remedy which it
has hereunder or at law or in equity.
(d) Landlord shall not be required to mitigate any of its
damages hereunder unless required to by applicable Law. If any Law shall validly
limit the amount of any damages provided for herein to an amount which is less
than the amount agreed to herein, Landlord shall be entitled to the maximum
amount available under such Law.
(e) No termination of this Lease, repossession or
reletting of any of the Leased Premises, exercise of any remedy or collection of
any damages pursuant to this Paragraph 23 shall relieve Tenant of any Surviving
Obligations.
(f) WITH RESPECT TO ANY REMEDY OR PROCEEDING OF LANDLORD
HEREUNDER, TENANT WAIVES ANY RIGHT TO A TRIAL BY JURY.
(g) Upon the occurrence of any Event of Default, Landlord
shall have the right (but no obligation) to perform any act required of Tenant
hereunder and, if performance of such act requires that Landlord enter the
Leased Premises, Landlord may enter the Leased Premises for such purpose.
(h) No failure of Landlord (i) to insist at any time upon
the strict performance of any provision of this Lease or (ii) to exercise any
option, right, power or remedy contained in this Lease shall be construed as a
waiver, modification or relinquishment thereof. A receipt by Landlord of any sum
in satisfaction of any Monetary Obligation with knowledge of the breach of any
provision hereof shall not be deemed a waiver of such breach, and no waiver by
Landlord of any provision hereof shall be deemed to have been made unless
expressed in a writing signed by Landlord.
<PAGE> 46
(i) Tenant hereby waives and surrenders, for itself
and all those claiming under it, including creditors of all kinds, (i) any right
and privilege which it or any of them may have under any present or future Law
to redeem any of the Leased Premises or to have a continuance of this Lease
after termination of this Lease or of Tenant's right of occupancy or possession
pursuant to any court order or any provision hereof, and (ii) the benefits of
any present or future Law which exempts property from liability for debt or for
distress for rent.
(j) Except as otherwise provided herein, all remedies
are cumulative and concurrent and no remedy is exclusive of any other remedy.
Each remedy may be exercised at any time an Event of Default has occurred and is
continuing and may be exercised from time to time. No remedy shall be exhausted
by any exercise thereof.
24. Notices. All notices, demands, requests, consents, approvals,
offers, statements and other instruments or communications required or permitted
to be given pursuant to the provisions of this Lease shall be in writing and
shall be deemed to have been given and received for all purposes when delivered
in person or by Federal Express or other reliable 24-hour delivery service or
five (5) business days after being deposited in the United States mail, by
registered or certified mail, return receipt requested, postage prepaid,
addressed to the other party at its address hereinafter provided or when
delivery is refused. Notice shall be sent to:
If to Tenant by certified U.S. Mail:
The Bon-Ton Department Stores, Inc.
P.O. Box 2821
York, Pennsylvania 17405-2821
Attn: Senior Vice President and Real Estate
Legal and Governmental Affairs
If to Tenant by other delivery service:
The Bon-Ton Department Stores, Inc.
2801 E. Market Street
York, Pennsylvania 17402-2495
Attn: Senior Vice President and Real Estate
Legal and Governmental Affairs
<PAGE> 47
With a duplicate copy delivered in
either case, by certified U.S. Mail
to:
The Bon-Ton Department Stores, Inc.
P.O. Box 2821
York, Pennsylvania 17405-2821
Attn: Vice President - Real Estate
and Corporate Counsel
If to Landlord:
BT (PA) QRS 12-25, Inc.
c/o W.P. Carey & Co., Inc.
50 Rockefeller Plaza
Second Floor
New York, NY 10020
Attn: Property Manager
With a duplicate copy:
Reed Smith Shaw & McClay
2500 One Liberty Place
Philadelphia, PA 19103
Attention: Chairman, Real Estate Department
For the purposes of this Paragraph, any party may substitute another
address stated above (or substituted by a previous notice) for its address by
giving fifteen (15) days' notice of the new address to the other party, in the
manner provided above.
25. Estoppel Certificate. At any time upon not less than fifteen (15)
days' prior written request by either Landlord or Tenant (the "Requesting
Party") to the other party (the "Responding Party"), the Responding Party shall
deliver to the Requesting Party a statement in writing, executed by an
authorized officer of the Responding Party, certifying (a) that, except as
otherwise specified, this Lease is unmodified and in full force and effect, (b)
the dates to which Basic Rent, Additional Rent and all other Monetary
Obligations have been paid, (c) that, to the knowledge of the signer of such
certificate and except as otherwise specified, no default by either Landlord or
Tenant exists hereunder, (d) such other matters as the Requesting Party may
reasonably request, and (e) if Tenant is the Responding Party that, except as
otherwise specified, there are no proceedings pending or, to the knowledge of
the signer, threatened, against Tenant before or by an court or administrative
agency which, if adversely decided, would materially and adversely affect the
financial condition and operations of Tenant. Any such statements by the
Responding Party may be relied upon by the Requesting Party, any Person whom the
Requesting Party notifies the Responding Party in its request
<PAGE> 48
for the Certificate is an intended recipient or beneficiary of the Certificate,
any Lender or their assignees and by any prospective purchaser or mortgagee of
any of the Leased Premises.
26. Surrender. Upon the expiration or earlier termination of this
Lease, Tenant shall peaceably leave and surrender the Leased Premises to
Landlord in the same condition in which the Leased Premises was at the
commencement of this Lease, except as repaired, rebuilt, restored, altered,
replaced or added to as permitted or required by any provision of this Lease,
and except for ordinary wear and tear. Upon such surrender, Tenant shall (a)
remove from the Leased Premises all property which is owned by Tenant or third
parties other than Landlord and (b) repair any damage caused by such removal.
Property not so removed shall become the property of Landlord, and Landlord may
thereafter cause such property to be removed from the Leased Premises. The cost
of removing and disposing of such property and repairing any damage to any of
the Leased Premises caused by such removal shall be paid by Tenant to Landlord
upon demand. Landlord shall not in any manner or to any extent be obligated to
reimburse Tenant for any such property which becomes the property of Landlord
pursuant to this Paragraph 26.
27. No Merger of Title. There shall be no merger of the leasehold
estate created by this Lease with the fee estate in any of the Leased Premises
by reason of the fact that the same Person may acquire or hold or own, directly
or indirectly, (a) the leasehold estate created hereby or any part thereof or
interest therein and (b) the fee estate in any of the Leased Premises or any
part thereof or interest therein, unless and until all Persons having any
interest in the interests described in (a) and (b) above which are sought to be
merged shall join in a written instrument effecting such merger and shall duly
record the same.
28. Books and Records.
(a) Tenant shall keep adequate records and books of
account with respect to the finances and business of Tenant generally and,
consistent with the operation of its business, with respect to the Leased
Premises in accordance with generally accepted accounting principles ("GAAP")
consistently applied, and shall permit Landlord and Lender by their respective
agents, accountants and attorneys, upon reasonable notice to Tenant, to visit
and inspect the Leased Premises and examine (and make copies of) the records and
books of account and to discuss the finances and business with the officers of
Tenant, at such reasonable times as may be requested by Landlord. Upon the
request of Landlord (either telephonically or in writing), Tenant shall provide
Landlord with copies of any information to which Landlord would be entitled in
the course of a personal visit.
<PAGE> 49
(b) Tenant shall deliver to Landlord and to Lender within
ninety (90) days of the close of each fiscal year of Tenant, annual audited
financial statements of Tenant prepared by nationally recognized independent
certified public accountants. Tenant shall also furnish to Landlord within
forty-five (45) days after the end of each of the three remaining quarters
unaudited financial statements and all other quarterly reports of Tenant,
certified by Tenant's chief financial officer, and all filings, if any, of Form
10-K, Form 10-Q and other required filings with the Securities and Exchange
Commission pursuant to the provisions of the Securities Exchange Act of 1934, as
amended, or any other Law. All financial statements of Tenant shall be prepared
in accordance with GAAP consistently applied. All annual financial statements
shall be accompanied (i) by an opinion of said accountants stating that (A)
there are no qualifications as to the scope of the audit and (B) the audit was
performed in accordance with GAAP and (ii) by the affidavit of the president or
a vice president of Tenant, dated within five (5) days of the delivery of such
statement, stating that (C) the affiant knows of no Event of Default, or event
which, upon notice or the passage of time or both, would become an Event of
Default which has occurred and is continuing hereunder or, if any such event has
occurred and is continuing, specifying the nature and period of existence
thereof and what action Tenant has taken or proposes to take with respect
thereto and (D) except as otherwise specified in such affidavit, that Tenant has
fulfilled all of its obligations under this Lease which are required to be
fulfilled on or prior to the date of such affidavit. Tenant shall not be
required to comply with the requirements of Paragraph 28(b) for so long as
Tenant's financial statements are consolidated with the financial statement of
Guarantor and Guarantor provides to Landlord the financial statements required
under Section 2.02 of the Guaranty, except that Tenant shall, in all events,
provide to Landlord monthly profit and loss statements for the Leased Premises.
29. Determination of Value.
(a) If a determination of Fair Market Value is required
pursuant to any provision of this Lease, such Fair Market Value shall be
determined in accordance with the following procedure:
(i) Landlord and Tenant shall endeavor to agree upon
such Fair Market Value within thirty (30) days after the date (the "Applicable
Initial Date") on which (A) Tenant makes the Intended Assignment Offer under
Paragraph 21(a) or (B) Tenant makes an offer with respect to the Allentown
Premises pursuant to Paragraph 37. Upon reaching such agreement, the parties
shall execute an agreement setting forth the amount of such Fair Market Value.
<PAGE> 50
(ii) If the parties shall not have signed such
agreement within thirty (30) days after the Applicable Initial Date, Tenant
shall within fifty (50) days after the Applicable Initial Date select an
appraiser and notify Landlord in writing of the name, address and qualifications
of such appraiser. Within twenty (20) days following Landlord's receipt of
Tenant's notice of the appraiser selected by Tenant, Landlord shall select an
appraiser and notify Tenant of the name, address and qualifications of such
appraiser. Such two appraisers shall endeavor to agree upon Fair Market Value
based on a written appraisal made by each of them as of the Relevant Date (and
given to Landlord by Tenant). If such two appraisers shall agree upon a Fair
Market Value, the amount of such Fair Market Value as so agreed shall be binding
and conclusive.
(iii) If such two appraisers shall be unable to agree
upon a Fair Market Value within twenty (20) days after the selection of an
appraiser by Landlord, then such appraisers shall advise Landlord and Tenant of
their respective determination of Fair Market Value and shall select a third
appraiser to make the determination of Fair Market Value. The selection of the
third appraiser shall be binding and conclusive upon Landlord and Tenant.
(iv) If such two appraisers shall be unable to agree
upon the designation of a third appraiser within ten (10) days after the
expiration of the twenty (20) day period referred to in clause (iii) above, or
if such third appraiser does not make a determination of Fair Market Value
within twenty (20) days after his selection, then such third appraiser or a
substituted third appraiser, as applicable, shall, at the request of either
party hereto (with respect to the other party), be appointed by the President or
Chairman of the American Arbitration Association in New York, New York. The
determination of Fair Market Value made by the third appraiser appointed
pursuant hereto shall be made within twenty (20) days after such appointment.
(v) If a third appraiser is selected, Fair Market
Value shall be the average of the determination of Fair Market Value made by the
third appraiser and the determination of Fair Market Value made by the appraiser
(selected pursuant to Paragraph 29(a)(ii) hereof) whose determination of Fair
Market Value is nearest to that of the third appraiser. Such average shall be
binding and conclusive upon Landlord and Tenant.
(vi) All appraisers selected or appointed pursuant to
this Paragraph 29(a) shall (A) be independent qualified MAI appraisers (B) have
no right, power or authority to alter or modify the provisions of this Lease,
(C) utilize the definition of Fair Market Value hereinabove set forth above, and
(D) be registered in the State if the State provides for or requires such
registration.
<PAGE> 51
(vii) The Cost of the procedure described in this
Paragraph 29(a) above shall be borne by Tenant.
(b) If, by virtue of any delay, Fair Market Value is not
determined by the expiration or termination of the then current Term, then the
date on which the Term would otherwise expire or terminate shall be extended
with respect to the Leased Premises or the Related Premises, as applicable, to
the date specified for termination in the particular provision of this Lease
pursuant to which the determination of Fair Market Value is being made.
(c) In determining Fair Market Value as defined in clause
(a) of the definition of Fair Market Value, the appraisers shall add (i) the
present value of the Rent for the remaining Term (with assumed increases in the
CPI to be determined by the appraisers) using a discount rate (which may be
determined by an investment banker retained by each appraiser) based on the
creditworthiness of Tenant and (ii) the present value of the Leased Premises as
of the end of such Term. The appraisers shall further assume that no default
then exists under the Lease, that Tenant has complied (and will comply) with all
provisions of the Lease, and that Guarantor and Tenant have not violated (and
will not violate) any of the Covenants.
30. Non-Recourse as to Landlord. Anything contained herein to the
contrary notwithstanding, any claim based on or in respect of any liability of
Landlord under this Lease shall be enforced only against the Leased Premises and
not against any other assets, properties or funds of (a) Landlord, (b) any
director, officer, general partner, limited partner, employee or agent of
Landlord, or any general partner of Landlord, any of its general partners or
shareholders (or any legal representative, heir, estate, successor or assign of
any thereof), (c) any predecessor or successor partnership or corporation (or
other entity) of Landlord, or any of its general partners, either directly or
through Landlord or its general partners or any predecessor or successor
partnership or corporation or their shareholders, officers, directors, employees
or agents (or other entity), or (d) any other Person (including Carey Property
Advisors, Carey Fiduciary Advisors, Inc., W.P. Carey & Co., Inc., W.P. Carey
Incorporated and any Person affiliated with any of the foregoing, or any
director, officer, employee or agent of any thereof).
31. Financing.
(a) Tenant agrees to pay all costs and expenses incurred
by Landlord in connection with the purchase, leasing and initial financing of
the Leased Premises including, without limitation, the cost of appraisals,
environmental reports, title
<PAGE> 52
insurance, surveys, legal fees and expenses and Lender's commitment fees.
(b) If Landlord desires to obtain or refinance any Loan,
Tenant shall negotiate in good faith with Landlord concerning any request made
by any Lender or proposed Lender for changes or modifications in this Lease. In
particular, Tenant shall agree, upon request of Landlord, to supply any such
Lender with such notices and information as Tenant is required to give to
Landlord hereunder and to extend the rights of Landlord hereunder to any such
Lender and to consent to such financing if such consent is requested by such
Lender. Tenant shall provide any other consent or statement and shall execute
any and all other documents that such Lender reasonably requires in connection
with such financing, including any environmental indemnity agreement and
subordination, non-disturbance and attornment agreement, so long as the same do
not materially adversely affect any right, benefit or privilege of Tenant under
this Lease or materially increase Tenant's obligations under this Lease. Such
subordination, nondisturbance and attornment agreement may require Tenant to
confirm that (a) Lender and its assigns will not be liable for any
misrepresentation, act or omission of Landlord and (b) Lender and its assigns
will not be subject to any counterclaim, demand or offsets which Tenant may have
against Landlord.
32. Subordination. This Lease and Tenant's interest hereunder shall be
subordinate to any Mortgage or other security instrument hereafter placed upon
the Leased Premises by Landlord, and to any and all advances made or to be made
thereunder, to the interest thereon, and all renewals, replacements and
extensions thereof, provided that any such Mortgage or other security instrument
(or a separate instrument in recordable form duly executed by the holder of any
such Mortgage or other security instrument and delivered to Tenant) shall
provide for the recognition of this Lease and all Tenant's rights hereunder
unless and until an Event of Default exists or Landlord shall have the right to
terminate this Lease pursuant to any applicable provision hereof.
33. Financial Covenants. Tenant hereby covenants and agrees to comply
with all the Covenants to the extent the Covenants are applicable to Tenant.
34. Tax Treatment; Reporting. Landlord and Tenant each acknowledge that
each shall treat this transaction as a true lease for state law purposes and
shall report this transaction as a Lease for Federal income tax purposes. For
Federal income tax purposes each shall report this Lease as a true lease with
Landlord as the owner of the Leased Premises and Equipment and Tenant as the
lessee of such Leased Premises and Equipment including: (1) treating Landlord as
the owner of the property eligible to claim depreciation deductions under
Section 167 or
<PAGE> 53
168 of the Internal Revenue Code of 1986 (the "Code") with respect to the Leased
Premises and Equipment, (2) Tenant reporting its Rent payments as rent expense
under Section 162 of the Code, and (3) Landlord reporting the Rent payments as
rental income.
35. Right of First Refusal.
(a) Landlord shall provide notice ("Market Notice") to
Tenant if Landlord intends to market the Leased Premises or either Related
Premises for sale. Except as otherwise provided in Paragraph 35(e), and provided
an Event of Default does not then exist, if Landlord shall enter into a contract
(the "Sale Contract") for the sale of the entire Leased Premises or for either
of the Related Premises with a Third Party Purchaser, which Sale Contract shall
be conditioned upon Tenant's failure to exercise its right under this Paragraph
35, then promptly following the execution thereof, Landlord shall give written
notice to Tenant, together with a copy of the executed Sale Contract.
(b) For a period equal to the greater of (i) thirty (30)
days following receipt of such executed Sale Contract or (ii) ninety (90) days
following a market receipt of a Market Notice, Tenant shall have the right and
option, exercisable by written notice to Landlord given within said thirty (30)
day period, to elect to purchase the Premises which are the subject of such Sale
Contract (the "Sale Premises") at the purchase price and upon all the terms and
conditions set forth in the Sale Contract except that no contingencies contained
in such Sale Contract as to environmental assessments, engineering studies,
inspection of the Sale Premises, availability of financing, sale of other
property, state of the title to or encumbrances on the Sale Premises, or any
other condition or contingency to the Third Party Purchaser's obligation to
purchase the Sale Premises which pertains to the physical condition of the Sale
Premises, shall apply to Tenant's obligation to purchase the Sale Premises under
this Paragraph 35, and Tenant shall be obligated to purchase the Sale Premises
without any such condition or contingency.
(c) If at the expiration of the aforesaid thirty (30) day
period Tenant shall have failed to exercise the aforesaid option, Landlord may
sell the Sale Premises to such Third Party Purchaser upon the terms set forth in
such contract.
(d) Except as otherwise specifically provided herein, the
closing date for any purchase of the Sale Premises by Tenant pursuant to this
Paragraph 35 shall be the later to occur of (i) ninety (90) days after the date
of Tenant's notice to Landlord of its intention to purchase the Sale Premises
upon the terms of a Sale Contract with a Third Party Purchaser or (ii) the
closing date provided in such Sale Contract. At such closing Landlord shall
convey the Sale Premises to Tenant in accordance
<PAGE> 54
with, and Tenant shall pay to Landlord the purchase price and other
consideration set forth in, the applicable Sale Contract.
(e) Tenant shall have the right to exercise the foregoing
right of first refusal upon (i) each proposed sale of the Leased Premises prior
to the fifteenth (15th) anniversary of this Lease and (ii) notwithstanding the
lack of exercise by Tenant in (i) above, one (1) time after the fifteenth (15th)
anniversary of this Lease; provided, that if, following compliance with the
procedure described in this Paragraph 35, a Third Party Purchaser does not
purchase the Leased Premises, such event shall not count as an exercise of
Tenant's right of first refusal. Notwithstanding anything to the contrary, if
Tenant fails to exercise the right of first refusal granted pursuant to this
Paragraph (c), subsection (ii), after the fifteenth (15th) anniversary of this
Lease and the sale to the Third Party Purchaser is consummated, or if the Term
of this Lease shall terminate or expire or a Lease Bifurcation occurs that is
requested by, or a result of Tenant's act, such rights of first refusal granted
pursuant to this Paragraph 36 shall terminate and be null and void and of no
further force and effect. In such event Tenant shall execute a quitclaim deed
and such other documents as Landlord shall reasonably request evidencing the
termination of its right of first refusal.
(f) If Tenant does not exercise its right of first
refusal to purchase the Sale Premises and the Sale Premises are transferred to a
Third Party Purchaser, Tenant will attorn to any Third Party Purchaser as
Landlord so long as such Third Party Purchaser and Landlord notify Tenant in
writing of such transfer. At the request of Landlord, Tenant will execute such
documents confirming the agreement referred to above and such other agreements
as Landlord may reasonably request, provided that such agreements do not
increase the liabilities and obligations of Tenant hereunder.
(g) The provisions of this Paragraph 35 shall not apply
to or prohibit (i) any mortgaging, subjection to deed of trust or other
hypothecation of Landlord's interest in the Leased Premises, (ii) any sale of
the Leased Premises pursuant to a private power of sale under or judicial
foreclosure of any Mortgage or other security instrument or device to which
Landlord's interest in the Leased Premises is now or hereafter subject, (iii)
any transfer of Landlord's interest in the Leased Premises to a Lender,
beneficiary under deed of trust or other holder of a security interest therein
or their designees by deed in lieu of foreclosure, (iv) any transfer of the
Leased Premises to any governmental or quasi-governmental agency with power of
condemnation, (v) any transfer of the Leased Premises to any affiliate of
Landlord or to any entity for whom W.P. Carey & Co., Inc., W.P. Carey
Incorporated or any of their affiliates provides management services or
investment advice, (vi) any Person to whom Landlord sells all or substantially
all of its assets, or
<PAGE> 55
(vii) any transfer of the Leased Premises to any of the successors or assigns of
any of the Persons referred to in the foregoing clauses (i) through (vi).
36. Sale of Related Premises by Landlord. If at any time or from time
to time Landlord sells either Related Premises (any such premises, a "Landlord
Sale Premises") either to Tenant or to a Third Party Purchaser, then Landlord
and Tenant agree that (i) the Lease shall be bifurcated with respect to the
remaining Related Premises and the Landlord Sale Premises; (ii) Tenant will
attorn to any purchaser with respect to the Landlord Sale Premises purchased so
long as such purchaser assumes the obligations of Landlord under the Lease with
respect to the Landlord Sale Premises; and (iii) the terms of the Lease will
remain in full force and effect with respect to the Landlord Sale Premises
except that the Basic Rent will be the percentage of the then Basic Rent which
is allocated to the Landlord Sale Premises as set forth on Exhibit "F" attached
hereto and made a part hereof; and (iv) the terms of the Lease will remain in
full force and effect with respect to the remaining Related Premises except that
the Basic Rent will be the percentage of the then Basic Rent which is allocated
to the remaining Related Premises as set forth on Exhibit "F" attached hereto
and made a part hereof. At the request of Landlord, Tenant will execute such
documents confirming the agreements referred to above and such other agreements
as Landlord may reasonably request provided that such agreements will not result
in any cost to Tenant and will not increase the liabilities and obligations of
Tenant hereunder.
37. Substitution and Exchange of Premises.
(a) If at any time after the end of the second (2nd)
Lease Year, Tenant in its reasonable business judgment determines that the
Allentown Premises has become uneconomic for Tenant's continued use and
occupancy in its business operations, then Tenant shall have the right to make a
rejectable offer to convey to Landlord a substitute property (the "Exchange
Premises") and lease the Exchange Premises back from Landlord on the terms and
conditions provided herein in exchange for the conveyance to Tenant of the
Allentown Premises and the termination of the Lease with respect to the
Allentown Premises (the "Exchange"). In the event that Tenant elects to exercise
such right, Tenant shall deliver to Landlord (i) a certificate of Tenant stating
that the Allentown Premises are no longer economic or suitable for Tenant's
continued use and occupancy in its business operations, specifying in reasonable
detail the reasons therefore, and further certifying that Tenant intends forever
to abandon its operations at the Allentown Premises, which certificate shall be
accompanied by a resolution of the board of directors of Tenant authorizing the
delivery of such notice and the Exchange; (ii) a description and an appraisal of
the Exchange Premises by an appraiser and in such form as are satisfactory to
Landlord; (iii) such other relevant data as Landlord may request demonstrating
the economic viability of the Exchange Premises,
<PAGE> 56
the marketability of title to the Exchange Premises and the environmental status
of the Exchange Premises; (iv) Tenant's rejectable offer to convey the Exchange
Premises to Landlord and lease back the Exchange Premises in exchange for
Landlord conveying the Allentown Premises to Tenant and terminating the Lease
with respect to the Allentown Premises and (v) a statement of Tenant's intention
to affect the Exchange on the first Basic Rent Payment Date occurring at least
ninety (90) days following determination of Fair Market Value of the Exchange
Premises (the "Exchange Date"). Landlord and Tenant shall promptly commence to
determine the Fair Market Value of the Exchange Premises.
(b) Landlord, with the written consent of Lender, shall
accept or reject such offer not later than sixty (60) days following
determination of Fair Market Value of the Exchange Premises. If Landlord, with
the written consent of Lender, shall reject Tenant's offer then this Lease shall
remain in full force and effect with respect to the Allentown Premises. If
Landlord, with the written consent of Lender, shall accept Tenant's offer and if
on the Exchange Date all conditions and requirements imposed by Landlord and
Lender in connection with the acceptance of Tenant's offer of substitution have
been satisfied, including, but not limited to, (i) the approval of Landlord,
Lender and their respective counsel of all documents relating to the Exchange;
(ii) payment in full by Tenant of all installments of annual Basic Rent,
Additional Rent and all other charges due and unpaid hereunder; (iii) compliance
by Tenant with all other obligations and liabilities, actual or contingent,
under this Lease which have arisen on or prior to the Exchange Date and Tenant
not then being in default hereunder; (iv) delivery to Landlord and Lender,
respectively, of ALTA "owner" and "mortgagee" title insurance policies insuring
Landlord's fee title to the Exchange Premises and Lender's first lien thereon
subject only to such matters as Landlord and Lender shall approve; (v) Tenant's
conveyance of the Exchange Premises to Landlord, the lease back of the Exchange
Premises to Tenant in accordance with and subject to the terms and conditions of
this Lease as the same shall be amended accordingly, and (vi) the mortgaging of
the Exchange Premises in accordance with and subject to the terms of the
Mortgage as the same shall be amended to reflect the substitution of the
Exchange Premises for the Allentown Premises; then the Allentown Premises shall
be conveyed to Tenant in accordance with the provisions of Paragraph 20 and all
obligations hereunder with respect to the Allentown Premises shall terminate,
except for any obligations or liabilities of Tenant, actual or contingent,
arising prior to such conveyance.
Tenant shall pay charges incident to the Exchange, regardless of whether or not
the Exchange occurs, including, but not limited to, Landlord's and Lender's
counsel fees, escrow fees, recording fees, brokerage fees incurred by Tenant,
title insurance and all federal, state and local taxes which may be incurred or
imposed
<PAGE> 57
by reason of such conveyance and transfer and/or by delivery of any deed or
other instrument.
38. Release of Excess Land. Landlord acknowledges that Tenant has
committed to convey the Excess Land to the Township of Whitehall, and Landlord
shall, upon Tenant's request, convey the Excess Land to Tenant or Tenant's
designee; provided, that the following conditions are satisfied: the Leased
Premises shall have been subdivided in compliance with all applicable
subdivision laws, Legal Requirements and Easement Agreements so that the Excess
Land and the remainder of the Leased Premises (the "Retained Premises") are
separate tracts, (ii) after such sale both the Excess Land and the Retained
Premises shall comply with all applicable Laws, Legal Requirements and Easement
Agreements, and (iii) all Costs of Landlord, Lender and Tenant in connection
with the transfer of the Excess Land and in complying with the above conditions,
including reasonable attorneys' fees, shall be borne solely by Tenant. If
Landlord conveys the Excess Land, then this Lease and any Mortgage granted by
Landlord shall terminate with respect to the Excess Land, but shall remain in
full force and effect with respect to the Retained Premises, provided, however,
that in no event will the release of the Excess Land from this Lease amend,
reduce or modify any of the obligations and liabilities of Tenant hereunder,
including the obligation to pay Basic Rent in the amount set forth in Exhibit
"D" hereto.
39. Miscellaneous.
(a) The paragraph headings in this Lease are used only
for convenience in finding the subject matters and are not part of this Lease or
to be used in determining the intent of the parties or otherwise interpreting
this Lease.
(b) As used in this Lease, the singular shall include
the plural and any gender shall include all genders as the context requires and
the following words and phrases shall have the following meanings: (i)
"including" shall mean "including without limitation"; (ii) "provisions" shall
mean "provisions, terms, agreements, covenants and/or conditions"; (iii) "lien"
shall mean "lien, charge, encumbrance, title retention agreement, pledge,
security interest, mortgage and/or deed of trust"; (iv) "obligation" shall mean
"obligation, duty, agreement, liability, covenant and/or condition"; (v) "any of
the Leased Premises" shall mean "the Leased Premises or any part thereof or
interest therein"; (vi) "any of the Land" shall mean "the Land or any part
thereof or interest therein"; (vii) "any of the Improvements" shall mean "the
Improvements or any part thereof or interest therein"; (viii) "any of the
Equipment" shall mean "the Equipment or any part thereof or interest therein";
and (ix) "any of the Adjoining Property" shall mean "the Adjoining Property or
any part thereof or interest therein".
<PAGE> 58
<PAGE> 59
(c) Any act which Landlord is permitted to perform under
this Lease may be performed at any time and from time to time by Landlord or any
person or entity designated by Landlord. Each appointment of Landlord as
attorney-in-fact for Tenant hereunder is irrevocable and coupled with an
interest. Except as otherwise specifically provided herein, Landlord shall have
the right, at its sole option, to withhold or delay its consent whenever such
consent is required under Paragraph 21 of this Lease for any reason or no
reason. In all other cases, Landlord shall not unreasonably withhold its
consent, provided that Lender consents to any such request. Time is of the
essence with respect to the performance by Tenant of its obligations under this
Lease.
(d) Landlord shall in no event be construed for any
purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant, operator, concessionaire or licensee of Tenant with respect to any of
the Leased Premises or otherwise in the conduct of their respective businesses.
(e) This Lease and any documents which may be executed
by Tenant on or about the effective date hereof at Landlord's request constitute
the entire agreement between the parties and supersede all prior understandings
and agreements, whether written or oral, between the parties hereto relating to
the Leased Premises and the transactions provided for herein. Landlord and
Tenant are business entities having substantial experience with the subject
matter of this Lease and have each fully participated in the negotiation and
drafting of this Lease. Accordingly, this Lease shall be construed without
regard to the rule that ambiguities in a document are to be construed against
the drafter.
(f) This Lease may be modified, amended, discharged or
waived only by an agreement in writing signed by the party against whom
enforcement of any such modification, amendment, discharge or waiver is sought.
(g) The covenants of this Lease shall run with the land
and bind Tenant, its successors and assigns and all present and subsequent
encumbrancers and subtenants of any of the Leased Premises, and shall inure to
the benefit of Landlord, its successors and assigns. If there is more than one
Tenant, the obligations of each shall be joint and several.
(h) Notwithstanding any provision in this Lease to the
contrary, all Surviving Obligations of Tenant shall survive the expiration or
termination of this Lease with respect to any Related Premises.
(i) If any one or more of the provisions contained in
this Lease shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such
<PAGE> 60
invalidity, illegality or unenforceability shall not affect any other provision
of this Lease, but this Lease shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
(j) All exhibits attached hereto are incorporated herein
as if fully set forth.
(k) This Lease shall be governed by and construed and
enforced in accordance with the Laws of the State.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
duly executed under seal as of the day and year first above written.
LANDLORD:
BT (PA) QRS 12-25, INC., a
Pennsylvania corporation
By: _________________________________
Title: Second Vice President
ATTEST: TENANT:
THE BON-TON DEPARTMENT STORES,
INC., a Pennsylvania corporation
By: __________________________ By: _________________________________
Title: Secretary Title: Senior Vice President
[Corporate Seal]
<PAGE> 61
EXHIBIT A-1
PREMISES
Allentown Premises
ALL THAT CERTAIN tract of land situate along S.R. 1023 (formerly known as L.R.
555 Spur), also known as 3585 South Church Street, in Whitehall Township, Lehigh
County, Pennsylvania, as shown on As-Built Survey Plan titled "Bon-Ton
Department Stores, Inc. Distribution Center" Plan #P-3364 dated February, 1997
as prepared by F & M Associates, Inc., Consulting Civil Engineers, Allentown,
Pennsylvania, bounded and described as follows, to wit:
BEGINNING at a point on the centerline of said S.R. 1023 said point being in
line with land of now or late James M. Potocnie, et al., being Lot A of
Whitehall Business Park, thence (1) from said point of beginning, passing
through aforesaid S.R. 1023 (required right-of-way being 60.00 feet wide) and
along land of now or late James M. Potocnie, et al., being Lot 4 of Whitehall
Business Park, now or late First Lehigh Bank, being Lot 4A of Whitehall Business
Park and now or late Schwan's Enterprises, Inc., North 43 degrees 22 minutes 07
seconds East 948.76 feet (passing though a found concrete monument at 32.70
feet) to an iron pipe found, thence (2) along land of now or late Whitehall
Township, South 41 degrees 50 minutes 24 seconds East, 1,815.19 feet (passing
through a found iron pipe at 1,798.65 feet) to a point; thence (3) in and along
the centerline of Columbia Street, T-925 (required right-of-way being 60.00 feet
wide) South 44 degrees 06 minutes 45 seconds West 618.36 feet to a railroad
spike found; thence (4) continuing in and along the aforesaid centerline of
Columbia Street South 44 degrees 19 minutes 02 seconds West 143.50 feet to a
point at the intersection with the centerline of aforesaid South Church Street
(S.R. 1023); thence in and along the aforementioned centerline of South Church
Street (S.R. 1023) the following five courses and distances: 1) North 57 degrees
33 minutes 58 seconds West 510.78 feet to a point; 2) North 57 degrees 47
minutes 18 seconds West 759.83 feet to a point; 3) North 35 degrees 13 minutes
08 seconds West 167.84 feet to a point; 4) North 24 degrees 21 minutes 28
seconds West 104.10 feet to a point; and 5) North 21 degrees 34 minutes 12
seconds West 320.82 feet to the point or place of beginning.
Containing 40.138 acres.
BEING the same premises which Hess's Department Stores, Inc., by deed dated
9/30/94 and recorded 10/5/94 in the Recorder's Office of the County of Lehigh in
Deed Book Volume 1534 Page 67 conveyed unto The Bon-Ton Stores, Inc., now known
as The Bon-Ton Department Stores, Inc., Grantor herein.
<PAGE> 62
Johnstown Premises
ALL THAT CERTAIN parcel of land situate in the Township of Richland, County of
Cambria, State of Pennsylvania and within The Developer Tract of Johnstown
Zamias Limited Partnership, being Department Store Tract 2 as shown on the Plan
of Minor Subdivision for Johnstown Zamias Limited Partnership prepared by L.
Robert Kimbell and Associates of Ebensburg, Pennsylvania, and recorded May 22,
1991, in Plot Map 311 F, bounded and described as follows:
BEGINNING at a point, said point being radial to and 22.00 feet South of the
centerline point of tangency station of the ring road and also being radial to
and 44.00 feet South of the Northern end point of a 423.78 feet radius arc
described in The Developer Tract, thence through The Developer Tract as follows:
(1) North 65 degrees 48 minutes 45 seconds East, a distance of 424.73 feet to a
point of curvature, (2) Northeast along a curve to the right having a radius of
265.06, a central angle of 23 degrees 54 minutes 44 seconds and an arc distance
of 110.62 feet to a point, (3) South 04 degrees 56 minutes 36 seconds West, a
distance of 613.41 feet, (4) South 64 degrees 56 minutes 20 seconds West, a
distance of 26.34 feet, (5) South 25 degrees 03 minutes 40 seconds East, a
distance of 50.00 feet, (6) South 64 degrees 56 minutes 20 seconds West, a
distance of 236.00 feet, (7) North 25 degrees 03 minutes 40 seconds West a
distance of 50.00 feet, (8) North 70 degrees 03 minutes 40 seconds West, a
distance of 113.73, (9) North 25 degrees 03 minutes 40 seconds West, a distance
of 464.82 feet to a point of curvature, (10) Northeast along a curve to the
right having a radius of 379.78 feet, a central angle of 18 degrees 01 minute 06
seconds and an arc distance of 119.43 feet, to the point of beginning.
CONTAINING 6.63 acres.
THE bearings of the above-described parcel of land are based on the Pennsylvania
State Plan Coordinate System, South Zone.
BEING the same premises which Johnstown Zamias Limited Partnership, by deed
dated 12/18/91 and recorded 12/20/91 in the Recorder's Office of the County of
Cambria in Deed Book 1260 page 918. conveyed to The Bon-Ton Stores, Inc., now
known as The Bon-Ton Department Stores, Inc., Grantor herein.
<PAGE> 63
EXHIBIT A-2
EXCESS LAND
All that certain parcel of land situate along Columbia Street (T-925),
in Whitehall Township, Lehigh County, Pennsylvania, bounded and described as
follows, to wit:
Beginning at a point on the centerline of said Columbia Street (T-925)
said point being in line with land of now or late Whitehall Township and being
the easterly most property corner of the Grantor, thence
1. from the said point of beginning in and along the aforesaid
centerline of Columbia Street, T-925 (required right-of-way being 60.00 feet
wide) S 44(degrees) 06' 45" W 100.00 feet to a point, thence
2. passing through the aforesaid Columbia Street (T-925) and
along land of the Grantor herein, N 40(degrees) 21' 36" W 310.00 feet to a
point, thence
3. continuing along land of the Grantor herein, N 1(degree)31'
02" E 133.63 feet to a point, thence
4. along the aforesaid land of now or late Whitehall Township, S
41(degrees) 50' 24" E 400.00 feet (passing through a found iron pipe at 383.46
feet) to the point or place of beginning.
containing 0.775 acres or 33,776 square feet
Subject to all existing and proposed access, drainage and utility
easements.
Being all as shown on a plan titled "Parcel to be Conveyed to Whitehall
Township, Lehigh County - The Bon-Ton Department Stores, Inc., Distribution
Center Property", Plan #P-3365, dated February 20, 1997, last revised March 12,
1997 as prepared by F & M Associates, Inc., Consulting Civil Engineers,
Allentown, Pennsylvania.
<PAGE> 64
EXHIBIT B
MACHINERY AND EQUIPMENT
All fixtures, machinery, apparatus, equipment, fittings and appliances of every
kind and nature whatsoever now or hereafter affixed or attached to or installed
in any of the Leased Premises (except as hereafter provided), including all
electrical, anti-pollution, heating, lighting (including hanging fluorescent
lighting), incinerating, power, air cooling, air conditioning, humidification,
sprinkling, plumbing, lifting, cleaning, fire prevention, fire extinguishing and
ventilating systems, devices and machinery and all engines, pipes, pumps, tanks
(including exchange tanks and fuel storage tanks), motors, conduits, ducts,
steam circulation coils, blowers, steam lines, compressors, oil burners,
boilers, doors, windows, loading platforms, lavatory facilities, stairwells,
fencing (including cyclone fencing), passenger and freight elevators, overhead
cranes and garage units, together with all additions thereto, substitutions
therefor and replacements thereof required or permitted by this Lease, but
excluding all personal property and all trade fixtures, machinery, office,
manufacturing and warehouse equipment which are not necessary to the operation,
as buildings, of the buildings which constitute part of the Leased Premises.
<PAGE> 65
EXHIBIT C
PERMITTED ENCUMBRANCES
<PAGE> 66
EXHIBIT D
BASIC RENT PAYMENTS
1. Basic Rent.
(a) Initial Term.
(i) Subject to the adjustments provided for in
Paragraphs 1(b), 2, 3 and 4 below, Basic Rent payable in respect of the Initial
Term shall be $1,270,750 per annum, payable quarterly in advance on each Basic
Rent Payment Date, in equal installments of $317,687.50 each.
(ii) If the initial Loan obtained by Landlord is at
an interest rate of less than 8.15% per annum (the "Lesser Rate"), then the
annual and quarterly installments of Basic Rent payable under Paragraph 1(a)
above shall be reduced by the difference between the debt service payable on a
loan in the principal amount of $6,900,000 ("Principal Amount") at an interest
rate of 8.15% per annum and an amortization of twenty (20) years ("Amortization
Schedule") and debt service payments on a loan in the Principal Amount at an
interest rate equal to the Lesser Rate and based upon the Amortization Schedule.
If the initial Loan obtained by Landlord is at an interest rate of greater than
8.15% per annum (the "Greater Rate"), then the annual and quarterly installments
of Basic Rent payable under Paragraph 1(a) above shall be increased by the
difference between the debt service payable on a loan in the Principal Amount at
the interest rate of 8.15% per annum and based upon the Amortization Schedule
and the debt service payments on the Principal Amount at an interest rate equal
to the Greater Rate and based upon the Amortization Schedule; provided, however,
that if the Greater Rate is higher than 8.50% per annum, the Greater Rate shall
be deemed to be 8.50% per annum.
(b) Renewal Terms.
(i) The annual Basic Rent for the Allentown Premises
for each Renewal Term will be the Basic Rent in effect immediately prior to the
Renewal Date for the applicable Renewal Term, adjusted as provided for in
Paragraphs 2, 3 and 4 below.
(ii) (A) For so long as the Johnstown Premises are
and continue to be used for retail purposes, the annual Basic Rent for the
Johnstown Premises for each Renewal Term shall be the sum of Three Hundred Fifty
Thousand Dollars ($350,000) and 1.5% of annual Gross Sales in excess of
$12,000,000 for the fiscal year of Tenant ending on or immediately prior to the
Renewal Date and for each fiscal year of Tenant thereafter during the applicable
Renewal Term ("Gross Sales Rent"). If there is construction of an Alteration at
the Johnstown Premises so that the Johnstown Premises contain in excess of
80,884 gross square feet of floor area, then, to the extent the Alteration
increases the selling area of the Johnstown Premises, the Gross Sales Rent
Tenant is required to pay Landlord
<PAGE> 67
shall be adjusted to reflect such increased floor area. This adjustment shall be
effected by multiplying Gross Sales Rent by a fraction having as a numerator
80,884 and having as a denominator the expanded floor area of the Johnstown
Premises.
(B) If at any time the Johnstown Premises
shall cease to be used for retail purposes the annual Basic Rent for such year
and for all subsequent years shall be the annual Basic Rent in effect
immediately prior to the year in which such retail use was terminated and shall
thereafter be adjusted as provided for in Paragraphs 2, 3 and 4 below.
(C) The term "Gross Sales" as used in this
Lease shall mean the amount of gross retail sales made upon the Premises by
Tenant and the amount of gross retail sales, if any, made upon the Premises by
an departmental lessee, concessionaire, licensee or subtenant of Tenant
occupying space within the Premises, whether such sales be paid in cash or be
evidenced by check, credit card charge, charge account or exchange, including
the amounts received from the sale of goods, wares and merchandise and for
services performed on or at the Premises (including the value of all goods
accepted in lieu of cash payment), together with the amount of all mail or
telephone orders taken or received and filled on the Premises, after deducting
or excluding, as the case may be, the following: (1) the amount of all sales,
use, gross receipts, value added, excise, retailers' occupation or other similar
taxes imposed in a specific amount or percentage upon, or determined by, the
amount of retail sales made upon the Premises, or any such tax separately stated
as comprising a component of the purchase price of an item; (2) amounts in
excess of Tenant's (or any such departmental lessee's, concessionaire's,
licensee's or subtenant's) cash sale price charged on sales made on credit, for
cash on delivery, or under a time payment plan or layaway plan; (3) sales
subject to employee discounts; (4) sales of promotional items (e.g. Christmas
Bears) made at little or no profit; (5) refunds and allowances for merchandise
returned to the Premises made to customers and charged by Tenant to the Premises
regardless of whether the sales out of which such refunds and allowances arose
were ever included in Gross Sales; (6) receipts from snack bars and cafeterias
operated solely for the use of Tenant's employees, weighing machines, vending
machines maintained for the convenience of Tenant's employees and the incidental
convenience of customers, amusement devices, and public telephones; (7) sale of
gift certificates, provided, however, that the cash sale price of any item
purchased with such a certificate shall be included in Gross Sales unless
otherwise excludable under the provisions of this subsection (C); (8) premium,
commissions, payments and other amounts received from or in connection with (i)
the sale of policies of insurance, mutual funds, stocks, bonds and other
securities, travelers' checks, money orders, and similar items, (ii) the sale or
rendition of financial services of all types including without limitation the
operation of checking and saving accounts, the
<PAGE> 68
issuance and cashing of checks, the furnishing of bill paying, custodial,
investment and fiduciary services, the making of secured and unsecured loans,
the operation of facilities for the electronic transfer of funds and use of
credit cards, the preparation of income tax returns and the operation of a real
estate brokerage business; and (iii) the sale of postage stamps, fishing and
hunting licenses, and tickets (including, but not limited to, those customarily
sold by travel and theater agencies); (9) charges for repairs, alterations, gift
wrapping, monogramming, delivery or installation of merchandise; (10) sales of
offices, departments or divisions not located upon the Premises including, but
not limited to, those resulting from referrals or solicitations made on or from
the Premises such as sales procured through an in-store custom decorating studio
which are filled by a custom decorating service center located outside the
Premises; (11) sales of service contracts and assured performance plans relating
to merchandise sold by Tenant; (12) sales made through the commercial and
industrial sales department of Tenant or through any travel agency operated on
the Premises; (13) proceeds of claims for damage to merchandise; (14) exchanges
of merchandise between stores of Tenant where such exchanges are made solely for
the convenient operation of Tenant's business; (15) returns to shippers or
manufacturers; (16) sales of trade fixtures, machinery and equipment not carried
as stock in trade by Tenant; (17) sales in bulk of damaged or aged merchandise;
(18) sales to bona fide non-profit or charitable institutions below the normal
retail price and sales made for the benefit of bona fide non-profit or
charitable institutions; and (19) deposits in anticipation of sale, provided
same shall be included in Gross Sales upon completion of the sale.
2. CPI Adjustments to Basic Rent. The Basic Rent shall be subject to
adjustment, in the manner hereinafter set forth, for increases in the index
known as United States Department of Labor, Bureau of Labor Statistics, Consumer
Price Index, All Urban Consumers, United States City Average, All Items,
(1982-84=100) ("CPI") or the successor index that most closely approximates the
CPI. If the CPI shall be discontinued with no successor or comparable successor
index, Landlord and Tenant shall attempt to agree upon a substitute index or
formula, but if they are unable to so agree, then the matter shall be determined
by arbitration in accordance with the rules of the American Arbitration
Association then prevailing in New York City. Any decision or award resulting
from such arbitration shall be final and binding upon Landlord and Tenant and
judgment thereon may be entered in any court of competent jurisdiction. In no
event will the Basic Rent as adjusted by the CPI adjustment be less than the
Basic Rent in effect for the three (3) year period immediately preceding such
adjustment.
3. Effective Dates of CPI Adjustments. Basic Rent shall not be adjusted
to reflect changes in the CPI until the third (3rd) anniversary of the Basic
Rent Payment Date on which the first full quarterly installment of Basic Rent
shall be due
<PAGE> 69
and payable (the "First Full Basic Rent Payment Date"). As of the third (3rd)
anniversary of the First Full Basic Rent Payment Date and thereafter on the
sixth (6th), ninth (9th), twelfth (12th), fifteenth (15th) and eighteenth (18th)
and, if the Initial Term is extended, on the twenty-first (21st) anniversary and
each third (3rd) anniversary thereafter of the First Full Basic Rent Payment
Date, Basic Rent shall be adjusted to reflect increases in the CPI during the
most recent three (3) year period immediately preceding each of the foregoing
dates (each such date being hereinafter referred to as the "Basic Rent
Adjustment Date").
4. Method of Adjustment for CPI Adjustment.
(a) As of each Basic Rent Adjustment Date, the Basic Rent
in effect immediately prior to such date shall be multiplied by the Aggregate
CPI Increase (as hereinafter defined) and the product of such multiplication
shall be added to the Basic Rent in effect immediately prior to such Basic Rent
Adjustment Date.
"Aggregate CPI Increase" shall mean the product of the sums of one (1)
plus each of the compounded increases (but not decreases) in the Relevant CPI
(as hereinafter defined) for each of the three (3) 12-month periods ending on
the first, second and third anniversaries (each such anniversary being a
"Calculation Date") of the first full Basic Rent Payment Date (in the case of
the First Basic Rent Adjustment Date) or the preceding Basic Rent Adjustment
Date (in the case of each subsequent Basic Rent Adjustment Date) over the
Relevant CPI for the previous 12-month period (each an "Annual Increase") from
which product shall be subtracted one (1); provided, that if the Annual Increase
for any 12-month period is greater than 3%, then the Annual Increase for such
12-month period shall be deemed to be 3%. The Relevant CPI for the 12-month
period ending on any Calculation Date shall be equal to the average CPI for the
three (3) calendar months published on or before the forty-fifth (45) day
preceding such Calculation Date (the "Prior Months"), and the Relevant CPI for
each of the preceding 12-month periods shall be equal to the average CPI for the
three (3) months of such 12-month period which correspond to the Prior Months.
By way of example and not of limitation, if, immediately prior to the
Basic Rent Adjustment Date occurring on the ninth (9th) anniversary of the First
Full Basic Rent Payment Date, Basic Rent is $100 and the increases in the
Relevant CPI for the three (3) preceding years are 2%, 0% and 12%, respectively,
the Aggregate CPI Increase will be as follows: (1.02 x 1.0 x 1.03) = 1.0506 - 1
= 0.0506; then, .0506 x $100 = $5.06; then $100 + $5.06 = $105.06, which is the
new Basic Rent. Said another way, .0506 + 1 = 1.0506; then, $100 x 1.0506 =
$105.06, which is the new Basic Rent.
<PAGE> 70
(b) Notice of the new annual Basic Rent shall be
delivered to Tenant on or before the tenth (10th) day preceding each Basic Rent
Adjustment Date.
(c) Effective as of a given Basic Rent Adjustment Date,
Basic Rent payable under this Lease until the next succeeding Basic Rent
Adjustment Date shall be the Basic Rent in effect after the adjustment provided
for as of such Basic Rent Adjustment Date.
<PAGE> 71
EXHIBIT E
ACQUISITION COST
<TABLE>
<S> <C>
Allentown Premises $ 8,068,063.00
Johnstown Premises $ 3,973,822.00
--------------
$12,041,885.00
</TABLE>
<PAGE> 72
EXHIBIT F
PERCENTAGE ALLOCATION OF BASIC RENT
<TABLE>
<S> <C>
Allentown Premises 67%
Johnstown Premises 33%
100%
</TABLE>
In the event of a Lease Bifurcation, the lease for the Allentown Premises shall
provide for Basic Rent equal to 67% of the Basic Rent as of the date immediately
prior to the Lease Bifurcation and the lease for the Johnstown Premises shall
provide for Basic Rent equal to 33% of the Basic Rent as of the date immediately
prior to the Lease Bifurcation.
<PAGE> 73
EXHIBIT G
FINANCIAL COVENANTS
1. Corporate Existence; Sale of Assets.
(a) Tenant shall maintain its corporate existence, rights
and franchises in full force and effect in its jurisdiction of incorporation.
Tenant shall, and shall cause of its Subsidiaries to, qualify and remain
qualified as a foreign corporation in each jurisdiction in which failure to
receive or retain such qualification would have a material adverse effect on the
business, operations or financial condition of the enterprise comprised of the
Tenant and its Subsidiaries taken as a whole.
(b) The Tenant shall not in a single transaction or
series of related transactions, sell or convey, transfer, abandon or lease all
or substantially all of its assets to any Person. Notwithstanding the above,
Tenant shall have the right in a single transaction or series of related
transactions to sell or convey all or substantially all of its assets to a
Person if the following conditions are met:
(i) the Lease is assigned to such Person in
compliance with the provisions of Paragraph 21 of this Lease or Tenant
repurchases the Leased Premises in accordance with Paragraph 21 of this Lease;
and
(ii) immediately after such transaction the
purchaser, assignee or transferee is in compliance with the terms and covenants
of this Lease.
2. Consolidated Net Worth. At all times during the Term Consolidated
Net Worth shall not as of the end of each fiscal quarter of Tenant that ends on
and after January 31, 1997 be less than $85,000,000.
3. Definitions. For the purpose of this Exhibit "E" the following terms
shall have the following meanings:
"Closing Date" shall mean April 10, 1997.
"Consolidated Net Worth" shall mean, at any date, the net worth of
Tenant and its consolidated Subsidiaries on a consolidated basis, determined in
accordance with GAAP.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time in the United States of America, applied on a consistent
basis.
"Person" shall mean an individual, partnership, association,
corporation or other entity.
<PAGE> 74
"Subsidiary" of any Person means a corporation a majority of the Voting
Stock of which is at the time owned, or the management of which is otherwise
controlled, directly or indirectly, through one or intermediaries, or both, by
such Person.
<PAGE> 75
EXHIBIT H
TERMINATION VALUES
<TABLE>
<CAPTION>
Lease Year Termination Value
---------- -----------------
<S> <C>
1 $12,222,513
2 $12,192,408
3 $10,687,173
4 $10,687,173
5 $10,687,173
6 $10,687,173
7 $12,687,173
8 $ 9,633,508
9 $ 9,633,508
10 $ 9,633,508
11 $ 9,633,508
12 $ 9,633,508
13 $ 8,489,529
14 $ 8,489,529
15 $ 8,489,529
16 $ 8,489,529
17 $ 8,489,529
18 $ 8,308,901
19 $ 8,308,901
20 and thereafter $ 8,308,901
</TABLE>
The Termination Value with respect to the Allentown Premises shall be 67% of the
applicable Termination Value specified above and the Termination Value with
respect to the Johnstown Premises shall be 33% of the applicable Termination
Value specified above.
<PAGE> 76
EXHIBIT I
POSTCLOSING ENVIRONMENTAL AND LAND USE COMPLIANCE OBLIGATIONS
ALLENTOWN PREMISES
Tenant shall conduct the following actions at the Allentown Premises
and provide Landlord with a written status report, on or before the tenth day of
each month commencing July 10, 1997, until completion of all of the activities
listed below in a manner satisfactory to Landlord. Tenant's failure to timely
comply with any of the obligations hereunder shall constitute an Event of
Default.
A. Closure of Waste Oil Underground Storage Tank. On or before March 1,
1998, Tenant shall have permanently closed the waste oil tank by removing the
tank in accordance with all applicable Pennsylvania Department of Environmental
Protection ("PADEP") regulations; shall have conducted a Site Assessment and any
remediation of contaminated soils and/or groundwater as may be required if a
release from the tank has occurred; and shall have submitted an Underground
Storage Tank System Closure Report Form to PADEP for approval. All tank handling
activities shall be conducted by a PADEP certified tank installer.
B. Connection to Public Sanitary Sewer System. On or before September
12, 1997 or such later date as may be agreed to by the Township of Whitehall,
Tenant shall have completed connection of the property to the public sewer
system in accordance with the letter from George Lindenmuth of the Township of
Whitehall dated March 10, 1996 (front page).
C. Disconnection of Floor Drain. On or before November 1, 1997, Tenant
shall disconnect the floor trench drains in the garage area at the west end of
the building and fill it in to reduce the potential for releases of hydraulic
oil from the oil reservoir and any chemical spills to the environment.
D. Secondary Containment. On or before November 1, 1997, Tenant shall
install a containment curb around the storage area which shall be sufficient to
contain any spills of chemicals or other materials from the largest storage
container stored in the storage area.
E. Fire Connection/Electrical Work. On or before October 1, 1997 Tenant
shall provide to Landlord evidence that a second fire connection from Columbia
Street to the Improvements has been installed and that all outstanding
electrical permits for electrical work previously performed have been satisfied.
<PAGE> 1
EXHIBIT 10.4
LEASE AGREEMENT
by and between
CAN (WI) QRS 12-34, INC.,
a Wisconsin corporation
as LANDLORD
and
SILGAN CONTAINERS CORPORATION,
a Delaware corporation,
as TENANT
Premises: Menomonie, Wisconsin
Oconomowoc, Wisconsin
Dated as of: June 13, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Parties.................................................. 1
1. Demise of Premises....................................... 1
2. Certain Definitions...................................... 1
3. Title and Condition...................................... 11
4. Use of Leased Premises; Quiet Enjoyment.................. 12
5. Term .................................................... 13
6. Basic Rent............................................... 14
7. Additional Rent.......................................... 14
8. Net Lease; Non-Terminability............................. 16
9. Payment of Impositions .................................. 17
10. Compliance with Law; Environmental Matters............... 18
11. Liens; Recording and Title............................... 20
12. Maintenance and Repair................................... 21
13. Alterations and Improvements............................. 22
14. Permitted Contests....................................... 23
15. Indemnification.......................................... 24
16. Insurance................................................ 25
17. Casualty and Condemnation................................ 29
18. Termination Events....................................... 31
19. Restoration.............................................. 32
20. Procedures Upon Purchase................................. 33
21. Assignment and Subletting; Prohibition
against Leasehold Financing.............................. 35
22. Events of Default........................................ 40
23. Remedies and Damages Upon Default........................ 42
24. Notices.................................................. 46
25. Estoppel Certificate..................................... 47
26. Surrender................................................ 47
27. No Merger of Title....................................... 48
28. Books and Records........................................ 48
29. Determination of Value................................... 51
30. Non-Recourse as to Landlord.............................. 52
31. Financing................................................ 53
32. Subordination............................................ 54
33. Tax Treatment; Reporting................................. 54
34. Right of First Refusal................................... 54
35. Economic Abandonment..................................... 56
36. Miscellaneous............................................ 57
EXHIBITS
- --------
Exhibit "A" - Premises
Exhibit "B" - Machinery and Equipment
Exhibit "C" - Schedule of Permitted Encumbrances
Exhibit "D" - Rent Schedule
Exhibit "E" - Percentage Allocation of Basic Rent
Exhibit "F" - Schedule of Termination Values
Exhibit "G" - Post Closing Obligations
</TABLE>
<PAGE> 3
LEASE AGREEMENT, made as of this 13th day of June, 1997, between CAN
(WI) QRS 12-34, INC., a Wisconsin corporation ("Landlord"), with an address c/o
W.P. Carey & Co., Inc., 50 Rockefeller Plaza, 2nd Floor, New York, New York
10020, and SILGAN CONTAINERS CORPORATION, ("Tenant"), a Delaware corporation
with an address at 21800 Oxnard Street, Suite 600, Woodland Hills, CA 91367.
In consideration of the rents and provisions herein stipulated to be
paid and performed, Landlord and Tenant hereby covenant and agree as follows:
1. Demise of Premises. Landlord hereby demises and lets to Tenant, and
Tenant hereby takes and leases from Landlord, for the term and upon the
provisions hereinafter specified, the following described property (hereinafter
referred to collectively as the "Leased Premises" and individually as the
"Menomonie Premises" (comprised of (x) an office and manufacturing building
containing approximately 66,596 square feet and (y) a warehouse building
containing approximately 120,950 square feet) and "Oconomowoc Premises"
(comprised of one building used for office and laboratory space and containing
approximately 40,835 square feet) each of which premises is more particularly
described in the applicable description in Exhibit "A" attached hereto and made
a part hereof and shall include the portions of items (a), (b) and (c) of this
Paragraph 1 located thereon or therein and appertaining thereto): (a) the
premises described in Exhibit "A" hereto, together with the Appurtenances
(collectively, the "Land"); (b) the buildings, structures and other improvements
now or hereafter constructed on the Land (collectively, the "Improvements"); and
(c) the fixtures, machinery, equipment and other property described in Exhibit
"B" hereto (collectively, the "Equipment").
2. Certain Definitions.
"Abandonment Date" shall mean the Abandonment Date as defined
in Paragraph 35.
"Abandonment Notice" shall mean Abandonment Notice as defined
in Paragraph 35.
"Abandonment Premises" shall mean either of the Related
Premises, as applicable.
"Additional Rent" shall mean Additional Rent as defined in
Paragraph 7.
"Adjoining Property" shall mean all sidewalks, driveways,
curbs, gores and vault spaces adjoining any of the Leased Premises and for which
Landlord has any legal obligations.
<PAGE> 4
"Affected Premises" shall mean the Affected Premises as
defined in Paragraph 18.
"Affiliate" shall mean any Person which directly or indirectly
controls or is controlled by such Person. "Controls" and "controlled by" each
refers to the effective power to direct or cause the direction of the management
and policies of the Person in question, which, if not the Tenant or Landlord, as
the case may be, shall be through the ownership of shares in Tenant or shares or
units in Landlord.
"Alterations" shall mean all changes, additions, improvements
or repairs to, all alterations, reconstructions, renewals, replacements or
removals of and all substitutions or replacements for any of the Improvements or
Equipment, both interior and exterior, structural and non-structural, and
ordinary and extraordinary.
"Appurtenances" shall mean all tenements, hereditaments,
easements, rights-of-way, rights, privileges in and to the Land, including (a)
easements over other lands granted by any Easement Agreement and (b) any
streets, ways, alleys, vaults, gores or strips of land adjoining the Land.
"Assignment" shall mean any assignment of rents and leases
from Landlord to a Lender which (a) encumbers any of the Leased Premises and (b)
secures Landlord's obligation to repay a Loan, as the same may be amended,
supplemented or modified from time to time.
"Basic Rent" shall mean Basic Rent as defined in Paragraph 6.
"Basic Rent Payment Dates" shall mean the Basic Rent Payment
Dates as defined in Paragraph 6.
"Business Days" shall mean any day except Saturday, Sunday and
any other holiday that national banks in the State are authorized to close.
"Casualty" shall mean any injury to or death of any person or
any loss of or damage to any property (including the Leased Premises) included
within or related to the Leased Premises or arising from the Adjoining Property.
"Commencement Date" shall mean Commencement Date as defined in
Paragraph 5.
"Condemnation" shall mean a Taking.
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<PAGE> 5
"Condemnation Notice" shall mean notice or knowledge of the
institution of or intention to institute any proceeding for Condemnation.
"Corporate Fiduciary" shall mean Corporate Fiduciary as
defined in Paragraph 9(b).
"Costs" of a Person or associated with a specified transaction
shall mean all reasonable costs and expenses incurred by such Person or
associated with such transaction, including without limitation, attorneys' fees
and expenses, court costs, brokerage fees, escrow fees, title insurance
premiums, mortgage commitment fees, mortgage points, recording fees and transfer
taxes, as the circumstances require.
"CPA:12" shall mean Corporate Property Associates 12
Incorporated.
"CPI" shall mean CPI as defined in Exhibit "D" hereto.
"Default Rate" shall mean the Default Rate as defined in
Paragraph 7(a)(iv).
"Default Termination Amount" shall mean the Default
Termination Amount as defined in Paragraph 23(a)(iii).
"Deposit Amount" shall mean Deposit Amount as defined in
Paragraph 21(a)(iii).
"Easement Agreement" shall mean any conditions, covenants,
restrictions, easements, declarations, licenses and other agreements listed as
Permitted Encumbrances or as may hereafter affect any Leased Premises.
"Environmental Law" shall mean (i) whenever enacted or
promulgated, any applicable federal, state, foreign and local law, statute,
ordinance, rule, regulation, license, permit, authorization, approval, consent,
court order, judgment, decree, injunction, code, requirement or agreement with
any governmental entity, (x) relating to pollution (or the cleanup thereof), or
the protection of air, water vapor, surface water, groundwater, drinking water
supply, land (including land surface or subsurface), plant, aquatic and animal
life from injury caused by a Hazardous Substance or (y) concerning exposure to,
or the use, containment, storage, recycling, reclamation, reuse, treatment,
generation, discharge, transportation, processing, handling, labeling,
production, disposal or remediation of Hazardous Substances, Hazardous Condition
or Hazardous Activity, in each case as amended and as now or hereafter in
effect, and (ii) any common law or equitable doctrine (including, without
limitation, injunctive relief and tort doctrines such as
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<PAGE> 6
negligence, nuisance, trespass and strict liability) that may impose liability
or obligations or injuries or damages due to or threatened as a result of the
presence of, exposure to, or ingestion of, any Hazardous Substance. The term
Environmental Law includes, without limitation, the federal Comprehensive
Environmental Response Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act, the federal Water Pollution Control Act, the
federal Clean Air Act, the federal Clean Water Act, the federal Resources
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments to RCRA), the federal Solid Waste Disposal Act, the federal Toxic
Substance Control Act, the federal Insecticide, Fungicide and Rodenticide Act,
the federal Occupational Safety and Health Act of 1970, the federal National
Environmental Policy Act and the federal Hazardous Materials Transportation Act,
each as amended and as now or hereafter in effect and any similar state or local
Law.
"Environmental Violation" shall mean (a) any direct or
indirect discharge, disposal, spillage, emission, escape, pumping, pouring,
injection, leaching, release, seepage, filtration or transporting of any
Hazardous Substance at, upon, under, onto or within the Leased Premises, or from
the Leased Premises to the environment, in violation of any Environmental Law or
in excess of any reportable quantity established under any Environmental Law or
which results in any liability to Landlord, Tenant or Lender, any Federal, state
or local government or any other Person for the costs of any removal or remedial
action or natural resources damage or for bodily injury or property damage, (b)
any deposit, storage, dumping, placement or use of any Hazardous Substance at,
upon, under or within the Leased Premises or which extends to any Adjoining
Property in violation of any Environmental Law or in excess of any reportable
quantity established under any Environmental Law or which results in any
liability to any Federal, state or local government or to any other Person for
the costs of any removal or remedial action or natural resources damage or for
bodily injury or property damage, (c) the abandonment or discarding of any
barrels, containers or other receptacles containing any Hazardous Substances in
violation of any Environmental Laws, (d) any activity, occurrence or condition
which results in any liability, cost or expense to Landlord or Lender or any
other owner or occupier of the Leased Premises, or which could result in a
creation of a lien on any Related Premises under any Environmental Law or (e)
any violation of or noncompliance with any Environmental Law.
"Equipment" shall mean the Equipment as defined in Paragraph
1.
"Event of Default" shall mean an Event of Default as defined
in Paragraph 22(a).
-4-
<PAGE> 7
"Fair Market Value" of either the Leased Premises or any
Related Premises, as the case may be, and the context may require, shall mean
the higher of (a) the fair market value of the Leased Premises or any Related
Premises, as the case may be, as of the Relevant Date as if unaffected and
unencumbered by this Lease or (b) the fair market value of the Leased Premises
or Related Premises, as the case may be, as of the Relevant Date as affected and
encumbered by this Lease without assuming that the Term has been extended for
any extension periods provided for herein except for any extensions for which
Landlord has received the notice required under Paragraph 5(b). For all purposes
of this Lease, Fair Market Value shall be determined in accordance with the
procedure specified in Paragraph 29.
"Fair Market Value Date" shall mean the date when the Fair
Market Value is determined in accordance with Paragraph 29.
"Federal Funds" shall mean federal or other immediately
available funds which at the time of payment are legal tender for the payment of
public and private debts in the United States of America.
"GAAP" shall mean generally accepted accounting principles as
in effect from time to time in the United States of America, applied on a
consistent basis.
"Hazardous Activity" means any activity, process, procedure or
undertaking which directly or indirectly (i) procures, generates or creates any
Hazardous Substance; (ii) causes or results in (or threatens to cause or result
in) the release, seepage, spill, leak, flow, discharge or emission of any
Hazardous Substance into the environment (including the air, ground water,
watercourses or water systems), (iii) involves the containment or storage of any
Hazardous Substance; or (iv) would cause any of the Leased Premises or any
portion thereof to become a hazardous waste treatment, recycling, reclamation,
processing, storage or disposal facility within the meaning of any Environmental
Law.
"Hazardous Condition" means any condition which would support
any claim or liability under any Environmental Law, including the presence of
underground storage tanks.
"Hazardous Substance" means (i) any substance, material,
product, petroleum, petroleum product, derivative, compound or mixture, mineral
(including asbestos), chemical, gas, medical waste, or other pollutant, in each
case whether naturally occurring, man-made or the by-product of any process,
that is toxic, harmful or hazardous or acutely hazardous to the environment or
public health or safety or (ii) any substance supporting a claim under any
Environmental Law, whether or not defined as hazardous as such under any
Environmental Law.
-5-
<PAGE> 8
Hazardous Substances include, without limitation, any toxic or hazardous waste,
pollutant, contaminant, industrial waste, petroleum or petroleum-derived
substances or waste, radon, radioactive materials, asbestos, asbestos containing
materials, urea formaldehyde foam insulation, lead, polychlorinated biphenyls.
"Impositions" shall mean the Impositions as defined in
Paragraph 9(a).
"Improvements" shall mean the Improvements as defined in
Paragraph 1.
"Indemnitee" shall mean an Indemnitee as defined in Paragraph
15.
"Initial Term" shall mean Initial Term as defined in Paragraph
5(a).
"Insurance Requirements" shall mean the requirements of all
insurance policies maintained in accordance with this Lease.
"Intended Assignment Offer" shall mean Intended Assignment
Offer as defined in Paragraph 21.
"Land" shall mean the Land as defined in Paragraph 1.
"Law" shall mean any constitution, statute, rule of law, code,
ordinance, order, judgment, decree, injunction, rule, regulation, policy,
requirement or administrative or judicial determination, even if unforeseen or
extraordinary, of every duly constituted governmental authority, court or
agency, now or hereafter enacted or in effect.
"Lease" shall mean this Lease Agreement.
"Lease Year" shall mean, with respect to the first Lease Year,
the period commencing on the Commencement Date and ending at midnight on the
last day of the twelfth (12th) consecutive calendar month following the month in
which the Commencement Date occurred, and each succeeding twelve (12) month
period during the Term.
"Leased Premises" shall mean the Leased Premises as defined in
Paragraph 1.
"Legal Requirements" shall mean the requirements of all
present and future Laws (including but not limited to Environmental Laws) and
all covenants, restrictions and conditions now or hereafter of record which may
be applicable to
-6-
<PAGE> 9
Tenant or to any of the Leased Premises or Related Premises, or to the use,
manner of use, occupancy, possession, operation, maintenance, alteration, repair
or restoration of any of the Leased Premises or Related Premises, even if
compliance therewith necessitates structural changes or improvements or results
in interference with the use or enjoyment of any of the Leased Premises or
Related Premises.
"Lender" shall mean any person or entity (and their respective
successors and assigns) which may, after the date hereof, make a Loan to
Landlord or is the holder of any Note; provided that any Person who owns or
operates a business whose primary operation is the manufacturing of cans and/or
lids and/or plastic containers for third party users shall not be a Lender for
the purposes of this Lease as long as the foregoing is the primary business of
Tenant.
"Loan" shall mean any loan made by one or more Lenders to
Landlord, which loan is secured by a Mortgage and an Assignment and evidenced by
a Note.
"Monetary Obligations" shall mean Rent and all other sums
payable by Tenant under this Lease to Landlord, to any third party on behalf of
Landlord or to any Indemnitee.
"Mortgage" shall mean any mortgage or deed of trust from
Landlord to a Lender which (a) encumbers any of the Leased Premises and (b)
secures Landlord's obligation to repay a Loan, as the same may be amended,
supplemented or modified.
"Net Award" shall mean (a) the entire award payable to
Landlord or Lender by reason of a Condemnation whether pursuant to a judgment or
by agreement or otherwise, or (b) the entire proceeds of any insurance required
under clauses (i), (ii) (to the extent payable to Landlord or Lender), (iv), (v)
or (vi) of Paragraph 16(a), as the case may be, less any reasonable expenses
incurred by Landlord and Lender in collecting such award or proceeds.
"Non-Preapproved Assignee" shall mean Non-Preapproved Assignee
as defined in Paragraph 21(a).
"Note" shall mean any promissory note evidencing Landlord's
obligation to repay a Loan, as the same may be amended, supplemented or
modified.
"Offer Amount" shall mean with respect to the Leased Premises
or either Related Premises, as the case may be, the greater of (i) Fair Market
Value or (ii) the sum of the applicable Termination Value and any Prepayment
Premium which Landlord will be required to pay in prepaying or partially
prepaying any Loan with the proceeds of the Offer Amount.
-7-
<PAGE> 10
"Partial Casualty" shall mean any Casualty which does not
constitute a Termination Event.
"Partial Condemnation" shall mean any Condemnation which does
not constitute a Termination Event.
"Permitted Encumbrances" shall mean those covenants,
restrictions, reservations, liens, conditions and easements and other
encumbrances, other than any Mortgage or Assignment, listed on Exhibit "C"
hereto (but such listing shall not be deemed to revive any such encumbrances
that have expired or terminated or are otherwise invalid or unenforceable).
"Permitted Leasehold Mortgage" shall mean any first lien
leasehold mortgage, deed of trust, pledge or similar security device covering
all of Tenant's leasehold estate in the Leased Premises.
"Permitted Leasehold Mortgagee" shall mean any national
banking association, state chartered bank, savings and loan association,
insurance company, savings bank, foreign bank authorized to do business in the
United States, trust company, real estate investment trust, pension fund or
major investment bank, which shall have gross assets in excess of $250,000,000
and which shall be Tenant's senior secured lender.
"Person" shall mean an individual, partnership, association,
corporation or other entity.
"Preapproved Assignee" shall mean Preapproved Assignee as
defined in Paragraph 21(a).
"Preapproved Assignment" shall mean Preapproved Assignment as
defined in Paragraph 21(a).
"Prepayment Premium" shall mean any payment (other than a
payment of principal and/or interest which Landlord is required to make under a
Note or a Mortgage) by reason of any prepayment by Landlord of any principal due
under a Note or Mortgage that is made pursuant to Paragraphs 18, 21, 23 or 35 of
this Lease or that is a result of an Event of Default by Tenant hereunder, and
which may be (in lieu of such prepayment premium or prepayment penalty) a "make
whole" clause requiring a prepayment premium in an amount sufficient to
compensate the Lender for the loss of the benefit of the Loan due to prepayment,
provided that such payment shall be calculated on a principal amount equal to
the lesser of (i) $6,075,000 or (ii) the balance of the Note as of the date of
prepayment assuming the principal amount thereof amortizes on the basis of a
twenty (20) year amortization schedule where the first payment of principal is
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<PAGE> 11
made on the first day of the second calendar month following the closing of the
initial Loan.
"Present Value" of any amount shall mean such amount
discounted by a rate per annum which is the lower of (a) the Prime Rate at the
time such present value is determined or (b) eight percent (8%) per annum.
"Prime Rate" shall mean the interest rate per annum as
published, from time to time, in The Wall Street Journal as the "Prime Rate" in
its column entitled "Money Rate". The Prime Rate may not be the lowest rate of
interest charged by any "large U.S. money center commercial banks" and Landlord
makes no representations or warranties to that effect. In the event The Wall
Street Journal ceases publication or ceases to publish the "Prime Rate" as
described above, the Prime Rate shall be the average per annum discount rate
(the "Discount Rate") on ninety-one (91) day bills ("Treasury Bills") issued
from time to time by the United States Treasury at its most recent auction, plus
three hundred (300) basis points. If no such 91-day Treasury Bills are then
being issued, the Discount Rate shall be the discount rate on Treasury Bills
then being issued for the period of time closest to ninety-one (91) days.
"Rejection" shall mean Rejection as defined in Paragraph
18(c).
"Related Premises" shall mean either of the Menomonie Premises
and Oconomowoc Premises.
"Relevant Amount" shall mean the Termination Amount, the
Default Termination Amount or the Offer Amount, as the case may be.
"Relevant Date" shall mean (a) the date immediately prior to
the date on which the applicable Condemnation Notice is received, in the event
of a Termination Notice under Paragraph 18 which is occasioned by a Taking, (b)
the date immediately prior to the date on which the applicable Casualty occurs,
in the event of a Termination Notice under Paragraph 18 which is occasioned by a
Casualty, (c) the date when Fair Market Value is redetermined, in the event of a
redetermination of Fair Market Value pursuant to Paragraph 20(c), (d) the date
immediately prior to the date on which Tenant give to Landlord the Intended
Assignment Offer, (e) the date immediately prior to the Event of Default giving
rise to the need to determine Fair Market Value in the event Landlord provides
Tenant with notice of its intention to require Tenant to make a Termination
Offer under Paragraph 23(a)(iii), or (f) the date immediately prior to the date
on which the applicable Abandonment Notice is sent under Paragraph 35.
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<PAGE> 12
"Remaining Premises" shall mean the Related Premises which are
not Affected Premises under Paragraph 18 or Abandonment Premises under Paragraph
35.
"Rent" shall mean, collectively, Basic Rent and Additional
Rent.
"Retention Date" shall mean the later of the date on which the
amount of the Remaining Sum is finally determined or the date on which
Landlord's right to the Remaining Sum is finally determined.
"Site Assessment" shall mean a Site Assessment as defined in
Paragraph 10(c).
"State" shall mean the State of Wisconsin.
"Surviving Obligations" shall mean any obligations of Person
under this Lease, actual or contingent, which arise on or prior to the
expiration or prior termination of this Lease or which survive such expiration
or termination by their own terms.
"Taking" shall mean (a) any taking or damaging of all or a
portion of any of the Leased Premises (i) in or by condemnation or other eminent
domain proceedings pursuant to any Law, general or special, or (ii) by reason of
any agreement with any condemnor in settlement of or under threat of any such
condemnation or other eminent domain proceeding, or (b) any de facto
condemnation. The Taking shall be considered to have taken place as of the later
of the date actual physical possession is taken by the condemnor, or the date on
which the right to compensation and damages accrues under the law applicable to
the Related Premises.
"Term" shall mean the Term as defined in Paragraph 5.
"Termination Amount" shall mean the greater of (a) Fair Market
Value or (b) the sum of the applicable Termination Value and any Prepayment
Premium which Landlord will be required to pay in prepaying any Loan with
proceeds of the Termination Amount.
"Termination Date" shall mean the Termination Date as defined
in Paragraph 18.
"Termination Event" shall mean a Termination Event as defined
in Paragraph 18.
"Termination Notice" shall mean Termination Notice as defined
in Paragraph 18(a).
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<PAGE> 13
"Termination Value" shall mean the Termination Value described
in Exhibit "F" for the applicable Lease Year.
"Third Party Purchaser" shall mean the Third Party Purchaser
as defined in Paragraph 21(g).
3. Title and Condition.
(a) The Leased Premises are demised and let subject to
(i) the Mortgage and Assignment presently in effect, (ii) the rights of any
Persons in possession of the Leased Premises, (iii) the existing state of title
of any of the Leased Premises, including any Permitted Encumbrances, (iv) any
state of facts which an accurate survey or physical inspection of the Leased
Premises might show, (v) all Legal Requirements, including any existing
violation of any thereof, and (vi) the condition of the Leased Premises as of
the commencement of the Term, without representation or warranty by Landlord.
(b) Tenant acknowledges that the Leased Premises are in
good condition and repair at the inception of this Lease. LANDLORD LEASES AND
WILL LEASE AND TENANT TAKES AND WILL TAKE THE LEASED PREMISES AS IS. TENANT
ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER
CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE
MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF
THE LEASED PREMISES, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS
FITNESS, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY
OF THE MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT,
LATENT OR PATENT, (iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH
SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x) MERCHANTABILITY,
(xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY (xiv) OPERATION OR (xv) THE
EXISTENCE OF ANY HAZARDOUS SUBSTANCE; AND ALL RISKS INCIDENT THERETO ARE TO BE
BORNE BY TENANT. TENANT ACKNOWLEDGES THAT THE LEASED PREMISES ARE OF ITS
SELECTION AND TO ITS SPECIFICATIONS AND THAT THE LEASED PREMISES HAVE BEEN
INSPECTED BY TENANT AND ARE SATISFACTORY TO IT. IN THE EVENT OF ANY DEFECT OR
DEFICIENCY IN ANY OF THE LEASED PREMISES OF ANY NATURE, WHETHER LATENT OR
PATENT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT
THERETO OR FOR ANY DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT
LIABILITY IN TORT). THE PROVISIONS OF THIS PARAGRAPH 3(b) HAVE BEEN NEGOTIATED,
AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY
LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE LEASED PREMISES,
ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR
HEREAFTER IN EFFECT OR ARISING OTHERWISE.
(c) Tenant represents to Landlord that Tenant has
examined the title to the Leased Premises prior to the execution and delivery of
this Lease and has found the same to be
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satisfactory for the purposes contemplated hereby. Tenant acknowledges that (i)
fee simple title (both legal and equitable) to the Leased Premises is in
Landlord and that Tenant has only the leasehold right of possession and use of
the Leased Premises as provided herein, (ii) this Lease is a single Lease for
multiple properties and shall not be terminable with respect to less than all of
the Leased Premises or severable with respect to any one or more Related
Premises except as specifically provided herein, (iii) the Improvements conform
to all material Legal Requirements and all Insurance Requirements, (iv) all
easements necessary or appropriate for the use or operation of the Leased
Premises have been obtained, (v) all contractors and subcontractors who have
performed work on or supplied materials to the Leased Premises have been fully
paid, and all materials and supplies have been fully paid for, (vi) the
Improvements have been fully completed in all material respects in a workmanlike
manner of first class quality, and (vii) all Equipment necessary or appropriate
for the use or operation of the Leased Premises has been installed and is
presently fully operative in all material respects.
(d) Landlord hereby assigns to Tenant, without recourse
or warranty whatsoever, all warranties, guaranties, indemnities and similar
rights which Landlord may have against any manufacturer, seller, engineer,
contractor or builder in respect of any of the Leased Premises. Such assignment
shall remain in effect until an Event of Default (and provided that the same
shall be continuing) occurs or until the expiration or earlier termination of
this Lease, whereupon such assignment shall cease and all of said warranties,
guaranties, indemnities and other rights shall automatically revert to Landlord.
4. Use of Leased Premises; Quiet Enjoyment.
(a) Tenant may occupy and use the Menomonie Premises for
manufacturing and warehouse purposes and the Oconomowoc Premises for office
headquarters, research and development purposes, including laboratory and light
manufacturing use, and for no other purpose without Landlord's prior written
consent, which consent shall not be unreasonably withheld, delayed or
conditioned. Tenant shall not use or occupy or permit any of the Leased Premises
to be used or occupied, nor do or permit anything to be done in or on any of the
Leased Premises, in a manner which would or might (i) violate any Law or Legal
Requirement, (ii) make void or voidable or cause any insurer to cancel any
insurance required by this Lease, or make it difficult or impossible to obtain
any such insurance at commercially reasonable rates, (iii) cause structural
injury to any of the Improvements or (iv) constitute a public or private
nuisance or waste.
(b) Subject to the provisions hereof, so long as no Event
of Default has occurred and is continuing, Tenant shall
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quietly hold, occupy and enjoy the Leased Premises throughout the Term, without
any hindrance, ejection or molestation by Landlord with respect to matters that
arise after the date hereof, provided that Landlord or its agents may enter upon
and examine any of the Leased Premises at such reasonable times as Landlord may
select and upon reasonable notice to Tenant (except in the case of any
emergency, in which event no notice shall be required) for the purpose of
inspecting the Leased Premises, verifying compliance or non-compliance by Tenant
with its obligations hereunder and the existence or non-existence of an Event of
Default or event which with the passage of time and/or notice would constitute
an Event of Default, showing the Leased Premises to prospective Lenders and
purchasers and taking such other action with respect to the Leased Premises as
is permitted by any provision hereof.
5. Term.
(a) Subject to the provisions hereof, Tenant shall have
and hold the Leased Premises for an initial term (the "Initial Term", as
extended or renewed in accordance with the provisions hereof, being called the
"Term") commencing on the date hereof (the "Commencement Date") and ending on
the last day of the one hundred eightieth (180th) calendar month next following
the date hereof (the "Expiration Date").
(b) Provided that if, on or prior to the Expiration Date
or any other Renewal Date (as hereinafter defined) this Lease shall not have
been terminated pursuant to any provision hereof, then on the Expiration Date
and on the fifth (5th) and tenth (10th) anniversaries of the Expiration Date
(the Expiration Date and each such anniversary being a "Renewal Date"), Tenant
shall have the right to extend the Term for an additional period of five (5)
years, provided that Tenant shall notify Landlord in writing at least eighteen
(18) months prior to the next Renewal Date that Tenant is extending this Lease
as of the next Renewal Date for an additional five (5) years. Any such extension
of the Term shall be subject to all of the provisions of this Lease, as the same
may be amended, supplemented or modified. If requested by Landlord, Tenant shall
execute an amendment to the Memorandum of Lease evidencing any extension of the
Term.
(c) If Tenant does not exercise its option pursuant to
Paragraph 5(b) to extend the Term, then Landlord shall have the right during the
remainder of the Term then in effect and, in any event, Landlord shall have the
right during the last year of the Term, to (i) advertise the availability of any
of the Leased Premises for sale or reletting and to erect upon any of the Leased
Premises signs indicating such availability and (ii) show any of the Leased
Premises to prospective purchasers or tenants or their agents at such reasonable
times upon reasonable advance notice. In all events
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Landlord shall make all reasonable efforts to avoid interference with Tenant's
business operations.
6. Basic Rent. Tenant shall pay to Landlord, as annual rent
for the Leased Premises during the Term, the amounts determined in accordance
with Exhibit "D" hereto ("Basic Rent"), commencing on the first day of July,
1997, and continuing on the first day of each October, January, April and July
thereafter during the Term (each such day being a "Basic Rent Payment Date").
Each such rental payment shall be made, at Landlord's sole discretion, (a) to
Landlord at its address set forth above and/or to such one or more other
Persons, at such addresses and in such proportions as Landlord may direct by
fifteen (15) days' prior written notice to Tenant (in which event Tenant shall
give Landlord notice of each such payment concurrent with the making thereof),
and (b) by a check hand delivered at least five (5) business days before or
mailed at least ten (10) days before the applicable Basic Rent Payment Date.
Tenant shall also have the right to make payments of Basic Rent in Federal
Funds. Pro rata Basic Rent for the period from the date hereof through the last
day of the month hereof shall be paid on the date hereof.
7. Additional Rent.
(a) Tenant shall pay and discharge, as additional rent
(collectively, "Additional Rent"):
(i) except as otherwise specifically provided
herein, all costs and expenses of Tenant, Landlord and any other Persons
specifically referenced herein which are incurred in connection or associated
with (A) the ownership, use, non-use, occupancy, possession, operation,
condition, design, construction, maintenance, alteration, repair or restoration
of any of the Leased Premises, (B) the performance of any of Tenant's
obligations under this Lease, (C) any sale or other transfer of any of the
Leased Premises to Tenant under this Lease, (D) any Condemnation proceedings,
(E) the adjustment, settlement or compromise of any insurance claims involving
or arising from any of the Leased Premises, (F) the prosecution, defense or
settlement of any litigation involving or arising from any of the Leased
Premises, this Lease, or the sale of the Leased Premises to Landlord, (G) the
exercise or enforcement by Landlord, its successors and assigns, of any of its
rights under this Lease, (H) any amendment to or modification or termination of
this Lease made at the request of Tenant, (I) Costs of Landlord's counsel
incurred in connection with the preparation, negotiation and execution of this
Lease, or incurred in connection with any act undertaken by Landlord (or its
counsel) at the request of Tenant, or incurred in connection with any act of
Landlord performed on behalf of Tenant following a default by Tenant, (J) the
reasonable internal Costs of Landlord incurred in connection with any act
undertaken by Landlord at the request of Tenant or Tenant's failure to act
promptly in an emergency
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situation, and (K) any other items specifically required to be paid by Tenant
under this Lease;
(ii) after the date all or any portion of any
installment of Basic Rent is due and not paid, an amount equal to four percent
(4%) of the amount of such unpaid installment or portion thereof ("Late
Charge"), provided, however, that (A) with respect to the first late payment of
all or any portion of any installment of Basic Rent in any consecutive twelve
(12) month period, the Late Charge shall not be due and payable unless the Basic
Rent has not been paid within five (5) days' following written notice from
Landlord and (B) if Tenant exercises its remedy under Paragraph 23(a)(iv)
hereof, the Late Charge shall not be payable on the accelerated Basic Rent;
(iii) in addition to the amounts payable under
clauses 7(a)(ii) and (iv) a sum equal to any additional sums (including any late
charge payable on the portion of Basic Rent equal to installments of principal
and interest on the then outstanding Loan, default penalties, interest and fees
of Lender's counsel) which are payable by Landlord to any Lender under any Note
by reason of Tenant's late payment or non-payment of Basic Rent or by reason of
an Event of Default, provided, however, that Tenant shall not be required to pay
an amount equal to any late fee payable by Landlord to a Lender if, under clause
(ii) above, Tenant pays any past due installment of Basic Rent within any grace
period permitted in (and as limited by) clause (ii) above, and, provided
further, that Tenant shall receive as a credit against any late charge or
default interest payable on the then outstanding Loan equal to the product of
(i) the sum of the Late Charge and the amount paid pursuant to clause 7(a)(iv)
and (ii) the ratio of the amount of the Loan and the Acquisition Cost; and
(iv) interest at the rate (the "Default Rate")
of four percent (4%) over the Prime Rate per annum on the following sums until
paid in full: (A) all overdue installments of Basic Rent from the respective due
dates thereof, (B) all overdue amounts of Additional Rent relating to
obligations which Landlord shall have paid on behalf of Tenant, from the date of
payment thereof by Landlord, and (C) all other overdue amounts of Additional
Rent, from the date when any such amount becomes overdue.
(b) In no event shall Additional Rent include costs
incurred by Landlord or Lender for insurance in excess of the insurance required
under Paragraph 16 hereof, costs and expenses incurred by Landlord for property
management or administration of this Lease or other costs and expenses of
Landlord or Lender related to the conduct of their business generally or matters
relating to investor relations, nor shall Tenant be liable for amounts incurred
by Landlord if Landlord has exceeded its authority under this Lease in incurring
such costs.
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(c) Tenant shall pay and discharge (i) any Additional
Rent referred to in Paragraph 7(a)(i) when the same shall become due, provided
that amounts which are billed to Landlord or any third party, but not to Tenant,
shall be paid within ten (10) days after Landlord's demand for payment thereof,
and (ii) any other Additional Rent, within ten (10) days after Landlord's demand
for payment thereof.
(d) In no event shall amounts payable under Paragraph
7(a)(ii), (iii) and (iv) exceed the maximum amount permitted by applicable Law.
8. Net Lease; Non-Terminability.
(a) This is a net lease and all Monetary Obligations
shall be paid without notice or demand and without set-off, counterclaim,
recoupment, abatement, suspension, deferment, diminution, deduction, reduction
or defense (collectively, a "Set-Off").
(b) Except as otherwise expressly provided herein, this
Lease and the rights of Landlord and the obligations of Tenant hereunder shall
not be affected by any event or for any reason, including the following: (i) any
damage to or theft, loss or destruction of any of the Leased Premises, (ii) any
Condemnation, (iii) Tenant's acquisition of ownership of any of the Leased
Premises other than pursuant to an express provision of this Lease, (iv) any
default on the part of Landlord hereunder or under any Note, Mortgage,
Assignment or any other agreement, (v) any latent or other defect in any of the
Leased Premises, (vi) the breach of any warranty of any seller or manufacturer
of any of the Equipment, (vii) any violation of Paragraph 4(b) or any other
provision of this Lease by Landlord, (viii) the bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution or
winding-up of, or other proceeding affecting Landlord, (ix) the exercise of any
remedy, including foreclosure, under any Mortgage or Assignment, (x) any action
with respect to this Lease (including the disaffirmance hereof) which may be
taken by Landlord, any trustee, receiver or liquidator of Landlord or any court
under the Federal Bankruptcy Code or otherwise, (xi) any interference with
Tenant's use of the Leased Premises, (xii) market or economic changes or (xiii)
any other cause, whether similar or dissimilar to the foregoing, any present or
future Law to the contrary notwithstanding.
(c) The obligations of Tenant hereunder shall be
separate and independent covenants and agreements, all Monetary Obligations
shall continue to be payable in all events (or, in lieu thereof, Tenant shall
pay amounts equal thereto), and the obligations of Tenant hereunder shall
continue unaffected unless the requirement to pay or perform the same shall have
been terminated pursuant to an express provision of this Lease,
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provided that Tenant shall not be obligated to pay double installments of Rent.
All Rent payable by Tenant hereunder shall constitute "rent" for all purposes
(including Section 502(b)(6) of the Bankruptcy Code).
(d) Except as otherwise expressly provided herein, Tenant
shall have no right and hereby waives all rights which it may have under any Law
(i) to quit, terminate or surrender this Lease or any of the Leased Premises, or
(ii) to any Set-Off of any Monetary Obligations.
9. Payment of Impositions.
(a) Tenant shall, before interest or penalties are due
thereon, pay and discharge all taxes (including real and personal property,
franchise, sales and rent taxes), all charges for any easement or agreement
maintained for the benefit of any of the Leased Premises, all assessments and
levies, all permit, inspection and license fees, all rents and charges for
water, sewer, utility and communication services relating to any of the Leased
Premises, all ground rents, if any, and all other public charges whether of a
like or different nature, even if unforeseen or extraordinary, imposed upon or
assessed against (i) Tenant, (ii) Tenant's possessory interest in the Leased
Premises, (iii) any of the Leased Premises, (iv) Landlord as a result of or
arising in respect of the acquisition, ownership, occupancy, leasing, use,
possession or sale of any of the Leased Premises, any activity conducted on any
of the Leased Premises, or the Rent, or (v) any Lender by reason of any Note,
Mortgage, Assignment or other document evidencing or securing a Loan and which
(as to this clause (v)) Landlord has agreed to pay (collectively, the
"Impositions"); provided, that nothing herein shall obligate Tenant to pay (A)
income, franchise, excess profits or other taxes of Landlord (or Lender) which
are determined on the basis of Landlord's (or Lender's) net income or net worth
(unless such taxes are in lieu of or a substitute for any other tax, assessment
or other charge upon or with respect to the Leased Premises which, if it were in
effect, would be payable by Tenant under the provisions hereof or by the terms
of such tax, assessment or other charge and such taxes are determinable without
regard to any other properties owned by Landlord or Lender), (B) any estate,
inheritance, succession, gift or similar tax imposed on Landlord or (C) any
capital gains tax imposed on Landlord in connection with the sale of the Leased
Premises to any Person. If any Imposition may be paid in installments without
penalty, Tenant shall have the option to pay such Imposition in installments; in
such event, Tenant shall be liable only for those installments which accrue or
become due and payable during the Term. Tenant shall prepare and file all tax
reports required by governmental authorities which relate to the Impositions.
Tenant shall deliver to Landlord (1) copies of all settlements and notices
pertaining to the Impositions which may be issued by any governmental authority
within thirty (30)
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Business Days after Tenant's receipt thereof, (2) receipts for payment of all
taxes required to be paid by Tenant hereunder within thirty (30) days after the
due date thereof and (3) receipts for payment of all other Impositions within
thirty (30) Business Days after Landlord's request therefor.
(b) Landlord shall have the right if required by a Lender
and, in any event, during the occurrence of an Event of Default to require
Tenant to pay to Lender on behalf of Landlord or if not required by the Lender
to a fiduciary ("Corporate Fiduciary") selected by Landlord and reasonably
acceptable to Tenant an additional monthly sum (each an "Escrow Payment")
sufficient to pay the Escrow Charges (as hereinafter defined) as they become
due. As used herein, "Escrow Charges" shall mean real estate taxes on the Leased
Premises or payments in lieu thereof and premiums on any insurance required by
this Lease. Landlord shall reasonably determine the amount of the Escrow Charges
and of each Escrow Payment. The Escrow Payments may be commingled with other
funds of Landlord or other Persons and no interest thereon shall be due or
payable to Tenant. Landlord shall apply the Escrow Payments to the payment of
the Escrow Charges in such order or priority as Landlord shall determine or as
required by law. If at any time the Escrow Payments theretofore paid to Landlord
shall be insufficient for the payment of the Escrow Charges, Tenant, within ten
(10) days after Landlord's demand therefor, shall pay the amount of the
deficiency to Landlord upon providing to Tenant reasonable proof of such
insufficiency.
10. Compliance with Laws and Easement Agreements; Environmental
Matters.
(a) Tenant shall, at its expense, comply with and conform
to, and cause any other Person occupying any part of the Leased Premises to
comply with and conform to, all Insurance Requirements and Legal Requirements
(including all applicable Environmental Laws). Tenant shall not at any time (i)
cause, permit or suffer to occur any Environmental Violation or (ii) permit any
sublessee, assignee or other Person occupying the Leased Premises under or
through Tenant to cause, permit or suffer to occur any Environmental Violation.
(b) Tenant, at its sole cost and expense, will at all
times promptly and faithfully abide in all material respects by, discharge and
perform all of the covenants, conditions and agreements contained in any
Easement Agreement on the part of Landlord or the occupier to be kept and
performed thereunder. Tenant will not alter, modify, amend or terminate any
Easement Agreement, give any consent or approval thereunder, or enter into any
new Easement Agreement without, in each case, prior written consent of Landlord
which shall not be unreasonably withheld or delayed.
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(c) In connection with any sale or financing of the
Leased Premises, or if required by a Lender, or if Landlord or Lender have
reasonable cause to believe that an Environmental Violation exists and, in any
event, during the final eighteen (18) months of the Term, Tenant shall permit
such persons as Landlord may designate (with the approval of Tenant so long as
no Event of Default exists, such approval not be unreasonably withheld or
delayed) ("Site Reviewers") to visit the Leased Premises and perform, as agents
of Tenant, environmental site investigations and assessments ("Site
Assessments") on the Leased Premises for the purpose of determining whether
there exists on the Leased Premises any Environmental Violation or any condition
which could result in any Environmental Violation. Landlord shall give Tenant
prior notice of any Site Assessment, and any such Site Assessments may include
both above and below the ground testing for Environmental Violations and such
other tests as may be necessary, in the opinion of the Site Reviewers, to
conduct the Site Assessments. Tenant shall supply to the Site Reviewers such
historical and operational information regarding the Leased Premises as may be
reasonably requested by the Site Reviewers to facilitate the Site Assessments,
and shall make available for meetings with the Site Reviewers appropriate
personnel having knowledge of such matters. The cost of performing and reporting
Site Assessments shall be allocated as follows: Tenant shall pay the cost if an
Environmental Violation is found to exist or if a Site Assessment or update to
the most current Environmental Assessment is required by the Lender that makes
the initial Loan as a condition to making such Loan; Landlord and Tenant shall
split equally the cost of the Site Assessments conducted during the final
eighteen (18) months of the Term except that if any an Environmental Violations
exist and the Site Reviewers estimate that the cost to remediate any such
Environmental Violations will be in excess of $25,000, Tenant shall pay all of
the costs of any Site Assessments in addition to the Phase I Site Assessment
that are recommended by the Site Reviewers. The cost of performing all other
Site Assessments shall be paid by Landlord.
(d) If an Environmental Violation occurs or is found to
exist and, in the opinion of the Site Reviewer, the cost of remediation of the
same is likely to exceed $150,000, Tenant shall provide to Landlord, within ten
(10) Business Days after Landlord's request therefor, adequate financial
assurances as reasonably determined by Landlord that Tenant will effect such
remediation in accordance with applicable Environmental Laws.
(e) During the last eighteen (18) months of the Term
Landlord and Tenant agree that they shall cause to be conducted Site Assessments
at the Leased Premises. If an Environmental Violation occurs or is found to
exist and the Term would otherwise terminate or expire, then, Landlord and
Tenant shall enter into a License Agreement pursuant to which Landlord shall
grant to Tenant and its consultants a license to enter the applicable Related
Premises for the purpose of implementing a
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remediation plan prepared by the Site Reviewers. Such license agreement shall be
on such terms and conditions as Landlord shall reasonably require.
(f) If Tenant fails to comply with any requirement of any
Environmental Law in connection with any Environmental Violation which occurs or
is found to exist, Landlord shall have the right (but no obligation) to take any
and all actions as Landlord shall deem necessary or advisable in order to cure
such Environmental Violation if, within thirty (30) days following written
notice from Landlord, Tenant fails to take any and all actions as Landlord shall
reasonably deem necessary or advisable in order to cure such Environmental
Violation. In no event shall Landlord have any obligation to take any action to
cure any Environmental Violation.
(g) Tenant shall notify Landlord promptly after becoming
aware of any Environmental Violation (or alleged Environmental Violation) or
noncompliance with any of the covenants contained in this Paragraph 10 and shall
forward to Landlord promptly upon receipt thereof copies of all orders, reports,
notices, permits, applications or other communications relating to any such
violation or noncompliance.
(h) All future leases, subleases or concession agreements
relating to the Leased Premises entered into by Tenant shall contain covenants
of the other party thereto which are substantially identical to the covenants
contained in this Paragraph 10.
(i) Tenant shall comply with the requirements set forth
in Exhibit "G" within the time periods set forth therein.
(j) Notwithstanding anything in this Lease to the
contrary, Tenant shall not be liable for any Environmental Violation relating to
a Hazardous Condition first arising from an event or condition concerning the
presence of Hazardous Substances affecting the Leased Premises to the extent
such Hazardous Substances were first introduced to the Leased Premises (i)
subsequent to the expiration or termination of the Lease or (ii) following the
date upon which Tenant is dispossessed or removed from occupancy by Landlord
pursuant to Paragraph 23.
11. Liens; Recording.
(a) Tenant shall not, directly or indirectly, create or
permit to be created or to remain and shall promptly discharge or remove any
lien, levy or encumbrance on any of the Leased Premises or on any Rent or any
other sums payable by Tenant under this Lease, other than any Mortgage or
Assignment, the Permitted Encumbrances, the Permitted Leasehold Mortgage, and
any mortgage, lien, encumbrance or other charge created by or resulting solely
from any act or omission of Landlord. NOTICE IS
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HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR
MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR TO ANYONE HOLDING OR
OCCUPYING ANY OF THE LEASED PREMISES THROUGH OR UNDER TENANT, AND THAT NO
MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH
TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO ANY OF THE LEASED PREMISES.
LANDLORD MAY AT ANY TIME POST ANY NOTICES ON THE LEASED PREMISES REGARDING SUCH
NON-LIABILITY OF LANDLORD.
(b) Tenant shall execute, deliver and record, file or
register (collectively, "record") all such instruments as may be required or
permitted by any present or future Law in order to evidence the respective
interests of Landlord and Tenant in any of the Leased Premises, and shall cause
a memorandum of this Lease (or, if such a memorandum cannot be recorded, this
Lease), and any supplement hereto or thereto, to be recorded in such manner and
in such places as may be required or permitted by any present or future Law in
order to protect the validity and priority of this Lease.
12. Maintenance and Repair.
(a) Tenant shall at all times maintain each Related
Premises and the Adjoining Property in as good repair and appearance as each is
in on the date hereof, ordinary wear and tear excepted, and fit to be used for
their intended use in accordance with the better of the practices generally
recognized as then acceptable by other companies in its industry or observed by
Tenant with respect to the other real properties owned or operated by it, and,
in the case of the Equipment, in as good mechanical condition as it was on the
later of the date hereof or the date of its installation, except for ordinary
wear and tear. Tenant shall take every other action reasonably necessary or
appropriate for the preservation and safety of each Related Premises. Tenant
shall promptly make all Alterations of every kind and nature, whether foreseen
or unforeseen, which may be required to comply with the foregoing requirements
of this Paragraph 12(a). Landlord shall not be required to make any Alteration,
whether foreseen or unforeseen, or to maintain any of the Related Premises or
Adjoining Property in any way, and, to the extent permitted by Law, Tenant
hereby expressly waives any right which may be provided for in any Law now or
hereafter in effect to make Alterations at the expense of Landlord or to require
Landlord to make Alterations. Any Alteration made by Tenant pursuant to this
Paragraph 12 shall be made in conformity with the provisions of Paragraph 13.
(b) If any Improvement, now or hereafter constructed,
shall (i) encroach upon any setback or any property, street or right-of-way
adjoining any of the Leased Premises, (ii) violate the provisions of any
restrictive covenant affecting any of the Leased Premises, (iii) hinder or
obstruct any easement or right-of-way to which any of the Leased Premises is
subject or
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(iv) impair the rights of others in, to or under any of the foregoing, Tenant
shall, promptly after receiving notice or otherwise acquiring knowledge thereof,
either (A) obtain from all necessary parties waivers or settlements of all
claims, liabilities and damages resulting from each such encroachment,
violation, hindrance, obstruction or impairment, whether the same shall affect
Landlord, Tenant or both, or (B) take such action as shall be reasonably
necessary to remove all such encroachments, hindrances or obstructions and to
end all such violations or impairments, including, if necessary, making
Alterations.
13. Alterations and Improvements.
(a) Tenant shall have the right, without having obtained
the prior written consent of Landlord and Lender, to make (i) Alterations or a
series of related Alterations that, as to any such Alterations or series of
related Alterations, do not cost in excess of $375,000 with respect to any
Related Premises and (ii) to install Equipment in the Improvements or accessions
to the Equipment that, as to such Equipment or accessions, do not cost in excess
of $375,000, so long as at the time of construction or installation of any such
Equipment or Alterations no Event of Default exists and the value and utility of
the Leased Premises is not diminished thereby. If the cost of any Alterations,
series of related Alterations, Equipment or accessions thereto is in excess of
$375,000, the prior written approval of Landlord and Lender shall be required,
such approval not to be unreasonably withheld, delayed or conditioned. Tenant
shall not construct upon the Land any additional buildings without having first
obtained the prior written consent of Landlord and Lender, such consent not to
be unreasonably withheld or delayed.
(b) If Tenant makes any Alterations pursuant to this
Paragraph 13 or as required by Paragraph 12 or 17 (such Alterations and actions
being hereinafter collectively referred to as "Work"), then (i) the market value
of the Leased Premises shall not be lessened by any such Work or its usefulness
impaired, (ii) all such Work shall be performed by Tenant in a good and
workmanlike manner, (iii) all such Work shall be expeditiously completed in
compliance with all Legal Requirements, (iv) all such Work shall comply with the
requirements of all insurance policies required to be maintained by Tenant
hereunder, (v) if any such Work involves the replacement of Equipment or parts
thereto, all replacement Equipment or parts shall have a value and useful life
equal to the greater of (A) the value and useful life on the date hereof of the
Equipment being replaced or (B) the value and useful life of the Equipment being
replaced immediately prior to the occurrence of the event which required its
replacement (assuming such Replaced Equipment was then in the condition required
by this Lease), (vi) Tenant shall promptly discharge or remove all liens filed
against any of the Leased Premises arising out of
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such Work, (vii) Tenant shall procure and pay for all permits and licenses
required in connection with any such Work, (viii) all such Work shall be the
property of Landlord and shall be subject to this Lease, and Tenant shall
execute and deliver to Landlord any document reasonably requested by Landlord
evidencing the assignment to Landlord of all estate, right, title and interest
(other than the leasehold estate created hereby) of Tenant or any other Person
thereto or therein, and (ix) Tenant shall comply, to the extent requested by
Landlord or required by this Lease, with the provisions of Paragraphs 12(a) and
19(a), whether or not such Work involves restoration of the Leased Premises.
14. Permitted Contests. Notwithstanding any other provision of
this Lease, Tenant shall not be required to (a) pay any Imposition, (b)
discharge or remove any lien referred to in Paragraph 11 or 13 or (c) take any
action with respect to any encroachment, violation, hindrance, obstruction or
impairment referred to in Paragraph 12(b) (such non-compliance with the terms
hereof being hereinafter referred to collectively as "Permitted Violations"), so
long as at the time of such non-compliance no Event of Default exists and so
long as Tenant shall contest, in good faith, the existence, amount or validity
thereof, the amount of the damages caused thereby, or the extent of its or
Landlord's liability therefor by appropriate proceedings which shall operate
during the pendency thereof to prevent or stay (i) the collection of, or other
realization upon, the Permitted Violation so contested, (ii) the sale,
forfeiture or loss of any of the Leased Premises or any Rent to satisfy or to
pay any damages caused by any Permitted Violation, (iii) any interference with
the use or occupancy of any of the Leased Premises, (iv) any interference with
the payment of any Rent, or (v) the cancellation or increase in the rate of any
insurance policy or a statement by the carrier that coverage will be denied.
Tenant shall provide Landlord security which is satisfactory, in Landlord's
reasonable judgment, to assure that such Permitted Violation is corrected,
including all Costs, interest and penalties that may be incurred or become due
in connection therewith. While any proceedings which comply with the
requirements of this Paragraph 14 are pending and the required security is held
by Landlord, Landlord shall not have the right to correct any Permitted
Violation thereby being contested unless Landlord is required by law to correct
such Permitted Violation and Tenant's contest does not prevent or stay such
requirement as to Landlord. Each such contest shall be promptly and diligently
prosecuted by Tenant to a final conclusion, except that Tenant, so long as the
conditions of this Paragraph 14 are at all times complied with, has the right to
attempt to settle or compromise such contest through negotiations. Tenant shall
pay any and all losses, judgments, decrees and Costs in connection with any such
contest and shall, promptly after the final determination of such contest, fully
pay and discharge the amounts which shall be levied, assessed, charged or
imposed or be determined to be payable therein or in
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connection therewith, together with all penalties, fines, interest and Costs
thereof or in connection therewith, and perform all acts the performance of
which shall be ordered or decreed as a result thereof. No such contest shall
subject Landlord to the risk of any criminal liability. Landlord shall join in
and cooperate with Tenant in any such contests.
15. Indemnification.
(a) Tenant shall pay, protect, indemnify, defend, save
and hold harmless Landlord, Lender and all other Persons described in Paragraph
30 (each an "Indemnitee") from and against any and all liabilities, losses,
damages (including punitive damages), penalties, Costs (including reasonable
attorneys' fees and costs), causes of action, suits, claims, demands or
judgments of any nature whatsoever, howsoever caused, unless caused by the gross
negligence or willful misconduct of the Indemnitee requesting indemnification,
without regard to the form of action and whether based on strict liability,
negligence or any other theory of recovery at law or in equity, arising from (i)
any matter (except for a matter between Landlord and Lender that is not a result
of an act or failure to act by Tenant as required by the terms of this Lease or
in any document between Tenant and Lender or executed by Tenant in favor of
Lender or between Landlord and its shareholders) pertaining to the acquisition
(or the negotiations leading thereto), ownership, leasing, use, non-use,
occupancy, operation, management, condition, design, construction, maintenance,
repair or restoration of any of the Leased Premises or Adjoining Property, (ii)
any casualty in any manner arising from any of the Leased Premises or Adjoining
Property, whether or not Indemnitee has or should have knowledge or notice of
any defect or condition causing or contributing to said casualty, (iii) any
violation by Tenant of any provision of this Lease, any contract or agreement to
which Tenant is a party, any Legal Requirement or any Permitted Encumbrance or
any encumbrance Tenant consented to or the Mortgage or Assignment, (iv) any loss
or reduction of rental income or proceeds from sale attributable to the
existence of an Environmental Violation at the expiration or sooner termination
of the Term, or (v) any alleged, threatened in writing or actual Environmental
Violation, including (A) liability for response costs and for costs of removal
and remedial action incurred by the United States Government, any state or local
governmental unit or any other Person, or damages from injury to or destruction
or loss of natural resources, including the reasonable costs of assessing such
injury, destruction or loss, incurred pursuant to Section 107 of CERCLA, or any
successor section or act or provision of any similar state or local Law, (B)
liability for costs and expenses of abatement, correction or clean-up, fines,
damages, response costs or penalties which arise from the provisions of any of
the other Environmental Laws and (C) liability for personal injury or property
damage arising under any statutory or common-law tort theory, including damages
assessed for the
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maintenance of a public or private nuisance or for carrying on of a dangerous
activity.
(b) In case any action or proceeding is brought against
any Indemnitee by reason of any such claim, (i) Tenant may, except in the event
of a conflict of interest or a dispute between Tenant and any such Indemnitee or
during the continuance of an Event of Default, retain its own counsel and defend
such action (it being understood that Landlord may employ counsel of its choice
to monitor the defense of any such action) or (ii) such Indemnitee shall notify
Tenant to resist or defend such action or proceeding by retaining counsel
reasonably satisfactory to such Indemnitee, and such Indemnitee will cooperate
and assist in the defense of such action or proceeding if reasonably requested
to do so by Tenant. In the event of a conflict of interest or dispute or during
the continuance of an Event of Default, Landlord shall have the right to select
counsel, and the reasonable cost of such counsel shall be paid by Tenant.
(c) The obligations of Tenant under this Paragraph 15
shall survive any termination, expiration or rejection in bankruptcy of this
Lease.
16. Insurance.
(a) Tenant shall maintain the following insurance on or
in connection with the Leased Premises:
(i) Insurance against physical loss or damage
to the Improvements and Equipment as provided under a standard "All Risk"
property policy including but not limited to flood (to the extent that a Related
Premises is in a flood zone) and earthquake coverage in amounts not less than
the actual replacement cost of the Improvements and Equipment. Such policies
shall contain Replacement Cost and Agreed Amount Endorsements and shall contain
deductibles of not more than $50,000, except if the Silgan Containers
Corporation is the Tenant, the deductible may be up to and including $250,000
per occurrence; provided that Landlord and Lender shall not unreasonably
withhold or delay consent to any request for an increase in the amount of such
deductible and shall base their response on a review of, among other things, the
creditworthiness of Tenant.
(ii) Commercial General Liability Insurance and
Business Automobile Liability Insurance (including Non-Owned and Hired
Automobile Liability) against claims for personal and bodily injury, death or
property damage occurring on, in or as a result of the use of the Leased
Premises, in an amount not less than $15,000,000 per occurrence/annual aggregate
and all other coverage extensions that are usual and customary for properties of
this size and type provided, however, that the Landlord shall
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have the right to require such higher limits as may be reasonable and customary
for properties of this size and type.
(iii) Worker's compensation insurance covering
all persons employed by Tenant in connection with any work done on or about any
of the Leased Premises for which claims for death, disease or bodily injury may
be asserted against Landlord, Tenant or any of the Leased Premises or, in lieu
of such Worker's Compensation Insurance, a program of self-insurance complying
with the rules, regulations and requirements of the appropriate agency of the
State or States in which the Leased Premises are located.
(iv) Comprehensive Boiler and Machinery
Insurance on any of the Equipment or any other equipment on or in the Leased
Premises in an amount not less than $10,000,000 per accident for damage to
property. Such policies shall include at least $10,000,000 per accidence for
Off-Premises Service Interruption, Expediting Expenses, Ammonia Contamination,
and Hazardous Materials Clean-up Expense and may contain a deductible not to
exceed $50,000, except if the Silgan Containers Corporation is the Tenant, the
deductible may be up to and including $250,000.
(v) Business Income/Extra Expense Insurance to
include loss of rents at limits sufficient to cover 100% of the annual rent
payable to Landlord with a period of indemnity not less than one year from time
of loss. Such insurance shall name Landlord as additional insured solely with
respect to Rent payable to or for the benefit of Landlord under this Lease
Agreement.
(vi) During any period in which substantial
Alterations at any Related Premises are being undertaken, builder's risk
insurance covering the total completed value including any "soft costs" with
respect to the Improvements being altered or repaired (on a completed value,
non-reporting basis), replacement cost of work performed and equipment, supplies
and materials furnished in connection with such construction or repair of
Improvements or Equipment, together with such "soft cost" endorsements and such
other endorsements as Landlord may reasonably require and general liability,
worker's compensation and automobile liability insurance with respect to the
Improvements being constructed, altered or repaired.
(vii) Such other insurance on or in connection
with any of the Leased Premises (or such other terms with respect to any
insurance required pursuant to this Paragraph 16, including without limitation
amounts of coverage, deductibles (which shall be considered on, among other
things, the creditworthiness of the Tenant), form of mortgagee clause) as
Landlord or Lender may reasonably require, which at the time is usual and
commonly obtained in connection with properties similar
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in type of building size, use and location to the Leased Premises.
(b) The insurance required by Paragraph 16(a) shall be
written by companies which have a Best's rating of A:X or above and are licensed
to issue insurance in, and approved to write insurance policies by, the State
Insurance Department for the states in which the Leased Premises are located.
The insurance policies (i) shall be on customary terms and (ii) shall be in
amounts reasonably sufficient at all times to satisfy any coinsurance
requirements thereof. The insurance referred to in Paragraphs 16(a)(i),
16(a)(iv) and 16(a)(vi) shall name Landlord as Owner and Lender as loss payee
and Tenant as its interest may appear. The insurance referred to in Paragraph
16(a)(ii) shall name Landlord and Lender as additional insureds, and the
insurance referred to in Paragraph 16(a)(v) shall name Landlord as insured and
Lender and Landlord as loss payee. If said insurance or any part thereof shall
expire, be withdrawn, become void, voidable, unreliable or unsafe for any
reason, including a breach of any condition thereof by Tenant or the failure or
impairment of the capital of any insurer, or if for any other reason whatsoever
said insurance shall become reasonably unsatisfactory to Landlord, Tenant shall
immediately obtain new or additional insurance reasonably satisfactory to
Landlord.
(c) Each insurance policy referred to in clauses (i),
(iv), (v) and (vi) of Paragraph 16(a) shall contain standard non-contributory
mortgagee clauses in favor of and reasonably acceptable to Lender. Each policy
required by any provision of Paragraph 16(a), except clause (iii) thereof, shall
provide that it may not be cancelled except after thirty (30) days' prior notice
to Landlord and Lender. Each such policy shall also provide that any loss
otherwise payable thereunder shall be payable notwithstanding (i) any act or
omission of Landlord or Tenant which might, absent such provision, result in a
forfeiture of all or a part of such insurance payment, (ii) the occupation or
use of any of the Leased Premises for purposes more hazardous than those
permitted by the provisions of such policy, (iii) any foreclosure or other
action or proceeding taken by Lender pursuant to any provision of the Mortgage,
Note, Assignment or other document evidencing or securing the Loan upon the
happening of an event of default therein or (iv) any change in title to or
ownership of any of the Leased Premises.
(d) Tenant shall pay as they become due all premiums for
the insurance required by Paragraph 16(a), shall renew or replace each policy
and deliver to Landlord evidence of the payment of the full premium therefor or
installment then due at least thirty (30) days prior to the expiration date of
such policy, and shall promptly deliver to Landlord all original certificates of
insurance.
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(e) Anything in this Paragraph 16 to the contrary
notwithstanding, any insurance which Tenant is required to obtain pursuant to
Paragraph 16(a) may be carried under a "blanket" or umbrella policy or policies
covering other properties or liabilities of Tenant, provided that such "blanket"
or umbrella policy or policies otherwise substantially comply with the
provisions of this Paragraph 16 and provided further that Tenant shall provide
to Landlord a Statement of Values which shall be reviewed annually and amended
as necessary based on Replacement Cost Valuations. The original certificate of
insurance for each such "blanket" or umbrella policy shall promptly be delivered
to Landlord.
(f) Tenant shall have the replacement cost and insurable
value of the Improvements and Equipment determined from time to time as required
by the replacement cost and agreed amount endorsements and shall deliver to
Landlord the new replacement cost and agreed amount endorsement or certificate
evidencing such endorsement promptly upon Tenant's receipt thereof.
(g) Tenant shall promptly comply with and conform to (i)
all provisions of each insurance policy required by this Paragraph 16 and (ii)
all requirements of the insurers thereunder applicable to Landlord, Tenant or
any of the Leased Premises or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration or repair of any of the Leased Premises, even
if such compliance necessitates Alterations or results in interference with the
use or enjoyment of any of the Leased Premises.
(h) Tenant shall not carry separate insurance concurrent
in form or contributing in the event of a Casualty with that required in this
Paragraph 16 unless (i) Landlord and Lender are included therein as named
insureds, with loss payable as provided herein, and (ii) such separate insurance
complies with the other provisions of this Paragraph 16. Tenant shall
immediately notify Landlord of such separate insurance and shall deliver to
Landlord the original policies or certified copies therefor.
(i) All policies shall contain effective waivers by the
carrier against all claims for insurance premiums against Landlord and shall
contain full waivers of subrogation against the Landlord.
(j) All proceeds of any insurance required under
Paragraph 16(a) shall be payable as follows:
(i) Except for proceeds payable to a Person
other than Landlord, Tenant or Lender, all proceeds of insurance required under
clauses (ii), (iii), (iv), (v) and (vii) of Paragraph 16(a) and proceeds
attributable to the general
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liability coverage provisions of Builder's Risk insurance under clause (vi) of
Paragraph 16(a) shall be payable to Landlord or, if required by the Mortgage, to
Lender.
(ii) Proceeds of insurance required under
clause (i) of Paragraph 16(a) and proceeds attributable to Builder's Risk
insurance (other than its general liability coverage provisions) under clause
(vi) of Paragraph 16(a) shall be payable by Landlord (or Lender) and applied as
set forth in Paragraph 17. Tenant shall apply the Net Award to restoration of
the Leased Premises in accordance with the applicable provisions of this Lease.
17. Casualty and Condemnation.
(a) If any Casualty to either of the Related Premises
occurs and the cost of restoration is reasonably estimated by Tenant to be in
excess of Fifty Thousand Dollars ($50,000), Tenant shall give Landlord and
Lender prompt notice thereof. So long as no Event of Default exists Tenant is
hereby authorized to adjust, collect and compromise all claims under any of the
insurance policies required by Paragraph 16(a) (except public liability
insurance claims payable to a Person other than Tenant, Landlord or Lender) and
to execute and deliver on behalf of Landlord all necessary proofs of loss,
receipts, vouchers and releases required by the insurers and Landlord shall have
the right to join with Tenant therein. Any final adjustment, settlement or
compromise of any such claim shall be subject to the prior written approval of
Landlord, which shall not be unreasonably withheld or delayed, and Landlord
shall have the right to prosecute or contest, or to require Tenant to prosecute
or contest, any such claim, adjustment, settlement or compromise. If an Event of
Default exists, Tenant shall not be entitled to adjust, collect or compromise
any such claim or to participate with Landlord in any adjustment, collection and
compromise of the Net Award payable in connection with a Casualty. Tenant agrees
to sign, upon the request of Landlord, all such proofs of loss, receipts,
vouchers and releases. Each insurer is hereby authorized and directed to make
payment under said policies, including return of unearned premiums, directly to
Landlord or, if required by the Mortgage, to Lender instead of to Landlord and
Tenant jointly, and Tenant hereby appoints each of Landlord and Lender as
Tenant's attorneys-in-fact to endorse any draft therefor. The rights of Landlord
under this Paragraph 17(a) shall be extended to Lender if and to the extent that
any Mortgage so provides.
(b) Tenant, immediately upon receiving a Condemnation
Notice, shall notify Landlord and Lender thereof. So long as no Event of Default
exists, Tenant is authorized to collect, settle and compromise the amount of any
Net Award and Landlord shall have the right to join with Tenant herein. If an
Event of Default exists, Landlord shall be authorized to collect,
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settle and compromise the amount of any Net Award and Tenant shall not be
entitled to participate with Landlord in any Condemnation proceeding or
negotiations under threat thereof or to contest the Condemnation or the amount
of the Net Award therefor. No agreement with any condemnor in settlement or
under threat of any Condemnation shall be made by Tenant without the written
consent of Landlord which shall not be unreasonably withheld, conditioned or
delayed. Subject to the provisions of this Paragraph 17(b), Tenant hereby
irrevocably assigns to Landlord any award or payment to which Tenant is or may
be entitled by reason of any Condemnation, whether the same shall be paid or
payable for Tenant's leasehold interest hereunder or otherwise; but nothing in
this Lease shall impair Tenant's right to any award or payment on account of
Tenant's trade fixtures, equipment or other tangible property which is not part
of the Equipment, moving expenses or loss of business, if available, to the
extent that and so long as (i) Tenant shall have the right to make, and does
make, a separate claim therefor against the condemnor and (ii) such claim does
not in any way reduce either the amount of the award otherwise payable to
Landlord for the Condemnation of Landlord's fee interest in the Leased Premises
or the amount of the award (if any) otherwise payable for the Condemnation of
Tenant's leasehold interest hereunder. The rights of Landlord under this
Paragraph 17(b) shall also be extended to Lender if and to the extent that any
Mortgage so provides.
(c) If any Partial Casualty (whether or not insured
against) or Partial Condemnation shall occur to either Related Premises, this
Lease shall continue, notwithstanding such event, and there shall be no
abatement or reduction of any Monetary Obligations. Promptly after such Partial
Casualty or Partial Condemnation, Tenant, as required in Paragraph 12(a), shall
commence and diligently continue to restore the Leased Premises as nearly as
possible to their value, condition and character immediately prior to such event
(assuming the Leased Premises to have been in the condition required by this
Lease). So long as no Event of Default exists, any Net Award up to and including
$375,000 shall be paid by Landlord to Tenant and Tenant shall restore the Leased
Premises in accordance with the requirements of Paragraph 13(b) of this Lease.
Any Net Award in excess of $375,000 shall (unless such Casualty resulting in the
Net Award is a Termination Event) be made available by Landlord (or Lender if
the terms of the Mortgage so require) to Tenant for the restoration of any of
the Leased Premises pursuant to and in accordance with and subject to the
provisions of Paragraph 19 hereof. If any Casualty or Condemnation which is not
a Partial Casualty or Partial Condemnation shall occur, Tenant shall comply with
the terms and conditions of Paragraph 18.
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18. Termination Events.
(a) If (i) all of either Related Premises shall be taken
by a Taking or (ii) any substantial portion of either Related Premises shall be
taken by a Taking or all or any substantial portion of either Related Premises
shall be totally damaged or destroyed by a Casualty and, in any such case,
Tenant certifies and covenants to Landlord that it will forever abandon
operations at the Related Premises, (any one or all of the Related Premises
described in the above clauses (i) and (ii) above being hereinafter referred to
as the "Affected Premises" and each of the events described in the above clauses
(i) and (ii) shall hereinafter be referred to as a "Termination Event"), then
(x) in the case of (i) above, Tenant shall be obligated, within forty-five (45)
days after Tenant receives a Condemnation Notice and (y) in the case of (ii)
above, Tenant shall have the option, within forty-five (45) days after Tenant
receives a Condemnation Notice or forty-five (45) days after the Casualty, as
the case may be, to give to Landlord written notice (a "Termination Notice") of
the Tenant's option to terminate this Lease as to the Affected Premises in the
form described in Paragraph 18(b).
(b) A Termination Notice shall contain (i) notice of
Tenant's intention to terminate this Lease as to the Affected Premises on the
first Basic Rent Payment Date which occurs at least ninety (90) days after the
Fair Market Value Date (the "Termination Date"), (ii) a binding and irrevocable
offer of Tenant to pay the Termination Amount and (iii) if the Termination Event
is an event described in Paragraph 18(a)(ii), the certification and covenant
described therein and a certified resolution of the Board of Directors of Tenant
authorizing the same. Promptly upon the delivery to Landlord of a Termination
Notice, Landlord and Tenant shall commence to determine Fair Market Value.
(c) If Landlord shall reject such offer to terminate this
Lease as to the Affected Premises by written notice to Tenant (a "Rejection"),
which Rejection shall contain the written consent of Lender, not later than
thirty (30) days following the Fair Market Value Date, then this Lease shall
terminate as to the Affected Premises on the Termination Date; provided that, if
any Basic Rent or Impositions remain unpaid as of the Termination Date, Landlord
may, at its option, extend the date on which this Lease may terminate as to the
Affected Premises to a date which is no later than the first Basic Rent Payment
Date after the Termination Date on which Tenant all past due Basic Rent and
Impositions are paid. Upon such termination (i) all obligations of Tenant
hereunder as to the Affected Premises shall terminate except for any Surviving
Obligations, (ii) Tenant shall immediately vacate and shall have no further
right, title or interest in or to any of the Affected Premises and (iii) the Net
Award shall be retained by Landlord.
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(d) Unless Tenant shall have received a Rejection not
later than the thirtieth (30th) day following the Fair Market Value Date,
Landlord shall be conclusively presumed to have accepted such offer. If such
offer is accepted by Landlord then, on the Termination Date, Tenant shall pay to
Landlord the Termination Amount and, if requested by Tenant, Landlord shall
convey to Tenant or its designee the Affected Premises or the remaining portion
thereof, if any, all in accordance with Paragraph 20 and in such event Landlord
shall have no further rights in and to the Net Award and shall cooperate with
Tenant to cause the Net Award to be delivered to Tenant. This obligation of
Landlord shall survive termination of this Lease.
(e) In the event of the termination of this Lease as to
the Affected Premises as hereinabove provided, this Lease shall remain in full
force and effect as to the Remaining Premises; provided, that the Basic Rent for
the Remaining Premises to be paid after such termination shall be the percentage
of the Basic Rent set forth on Exhibit "F" for the Remaining Premises.
19. Restoration.
(a) A Corporate Fiduciary (or Lender if required by any
Mortgage) shall hold any Net Award in excess of $375,000 in a fund (the
"Restoration Fund") and disburse amounts from the Restoration Fund only in
accordance with the following conditions:
(i) prior to commencement of restoration, the
architects, contracts, contractors, plans and specifications for the restoration
shall have been reasonably and promptly approved by Landlord;
(ii) at the time of any disbursement, no Event
of Default shall exist and no mechanics' or materialmen's liens shall have been
filed against any of the Leased Premises and remain undischarged or for which a
bond has been established;
(iii) disbursements shall be made from time to
time in an amount not exceeding the cost of the work completed since the last
disbursement, but not later than thirty (30) days following receipt of, (A)
reasonably satisfactory evidence, including architects' certificates, of the
stage of completion, the estimated total cost of completion and performance of
the work to date in a good and workmanlike manner in accordance with the
contracts, plans and specifications, (B) waivers of liens, (C) contractors' and
subcontractors' sworn statements as to completed work and the cost thereof for
which payment is requested, (D) a satisfactory bringdown of title insurance and
(E) other evidence of cost and payment so that Landlord and Lender can
reasonably verify that the amounts disbursed from time
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to time are represented by work that is completed, in place and free and clear
of mechanics' and materialmen's lien claims;
(iv) each request for disbursement shall be
accompanied by a certificate of Tenant, signed by the president or a vice
president of Tenant, describing the work for which payment is requested, stating
the cost incurred in connection therewith, stating that Tenant has not
previously received payment for such work and, upon completion of the work, also
stating that the work has been fully completed and to the best of such person's
knowledge, complies with the applicable requirements of this Lease;
(v) Landlord may retain ten percent (10%) of
the Restoration Fund until the restoration is fifty percent (50%) completed;
(vi) if the Restoration Fund is held by
Landlord, the Restoration Fund shall not be commingled with Landlord's other
funds and shall bear interest at a rate agreed to by Landlord and Tenant; and
(vii) such other reasonable and customary
conditions as Landlord or Lender may impose.
(b) Prior to commencement of restoration and at any time
during restoration, if the estimated cost of completing the restoration work
free and clear of all liens, as determined by Landlord, exceeds the amount of
the Net Award available for such restoration, unless prior to drawing or
continuing to draw funds from the Restoration Fund Tenant agrees to pay directly
to the contractor such shortfall (and provides to Landlord and Lender evidence
of such payment), the amount of such excess shall, upon demand by Landlord, be
paid by Tenant to Landlord to be added to the Restoration Fund. Any sum so added
by Tenant which remains in the Restoration Fund upon completion of restoration
shall be refunded to Tenant. For purposes of determining the source of funds
with respect to the disposition of funds remaining after the completion of
restoration, the Net Award shall be deemed to be disbursed prior to any amount
added by Tenant.
(c) If any sum remains in the Restoration Fund after
completion of the restoration and payment of all costs therefor and any refund
to Tenant pursuant to Paragraph 19(b), such sum shall be retained by Landlord
or, if required by a Note or Mortgage, paid by Landlord to a Lender.
20. Procedures Upon Purchase.
(a) If the Leased Premises or any of the Related Premises
are purchased by Tenant pursuant to any provision of this Lease, Landlord need
not convey any better title thereto
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than that which was conveyed to Landlord, and Tenant or its designee shall
accept such title, subject, however, to the Permitted Encumbrances and to all
applicable Laws, but free of the lien of and security interest created by any
Mortgage or Assignment and liens, exceptions and restrictions on, against or
relating to the Leased Premises or the applicable Related Premises to the extent
the same have been created by or resulted from acts or omissions of Landlord
after the date of this Lease, unless the same are Permitted Encumbrances or
customary utility easements benefiting the Leased Premises or were created with
the concurrence of Tenant or as a result of a default by Tenant under this
Lease.
(b) Upon the date fixed for any such purchase of the
Leased Premises or any of the Related Premises pursuant to any provision of this
Lease (any such date the "Purchase Date"), Tenant shall pay to Landlord, or to
any Person to whom Landlord directs payment, the Relevant Amount therefor
specified herein, in Federal Funds, less any credit of the Net Award received
and retained by Landlord or a Lender allowed against the Relevant Amount, and
Landlord shall deliver to Tenant (i) a special warranty deed which describes the
premises being conveyed and conveys the title thereto as provided in Paragraph
20(a), (ii) such other documents and instruments as shall be necessary to
transfer to Tenant or its designee any other property (or rights to any Net
Award not yet received by Landlord or a Lender) then required to be sold by
Landlord to Tenant pursuant to this Lease and (iii) any Net Award received by
Landlord or Lender , not credited to Tenant against the Relevant Amount and
required to be delivered by Landlord to Tenant pursuant to this Lease; provided,
that if any Monetary Obligations remain outstanding on such date, then Landlord
may deduct from the Net Award the amount of such Monetary Obligations. If on the
Purchase Date any Monetary Obligations remain outstanding and no Net Award is
payable to Tenant by Landlord or the amount of such Net Award is less than the
amount of the Monetary Obligations, then Tenant shall pay to Landlord on the
Purchase Date the amount of such Monetary Obligations. Upon the completion of
such purchase, this Lease and all obligations and liabilities of Tenant
hereunder with respect to the applicable Related Premises (but not with respect
to the Remaining Premises) shall terminate, except any Surviving Obligations.
(c) If the completion of such purchase shall be delayed
after (i) the Termination Date, in the event of a purchase pursuant to Paragraph
18 or, (ii) the date scheduled for such purchase, in the event of a purchase
under any other provision of this Lease then (x) Rent shall continue to be due
and payable until completion of such purchase and (y) if the delay continues for
more than six (6) months and such delay is not caused by Landlord and in
Landlord's reasonable judgment the Fair Market Value has increased by more than
3%, at Landlord's sole option, Fair Market Value shall be redetermined and the
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Relevant Amount payable by Tenant pursuant to the applicable provision of this
Lease shall be adjusted to reflect such redetermination. Landlord shall not be
deemed to have caused completion of such purchase to be delayed if it in good
faith disputes the process or methodology for determining Fair Market Value.
Landlord and Tenant each agree that following the determination of Fair Market
Value it will not delay for more than thirty (30) days the date fixed for any
such purchase.
(d) Any prepaid Monetary Obligations paid to Landlord
shall be prorated as of the Purchase Date, and the prorated unapplied balance
shall be deducted from the Relevant Amount due to Landlord; provided, that no
apportionment of any Impositions shall be made upon any such purchase.
21. Assignment and Subletting; Prohibition against Leasehold
Financing.
(a) (i) Tenant shall have the right, upon thirty (30)
days prior written notice to Landlord and Lender (which notice shall include, if
applicable, the financial information required under the following clause (C) in
form and substance satisfactory to Landlord and Lender) and provided an Event of
Default does not then exist, with no consent of Landlord or Lender being
required or necessary ("Preapproved Assignment") to assign this Lease by
operation of law or otherwise to any Person ("Preapproved Assignee") (A) that is
a wholly-owned subsidiary or an Affiliate of Tenant, or (B) that immediately
following such assignment will have a publicly traded unsecured senior debt
rating of "A" or better from Moody's Investors Services, Inc. ("Moody's") or a
rating of "A" or better from Standard & Poor's Corporation ("S&P"), and in the
event all of such rating agencies cease to furnish such ratings, then a
comparable rating ("Comparable Rating") by any rating agency reasonably
acceptable to Landlord and Lender or (C) if the transaction that gives rise to
the assignment of this Lease is a sale of all or substantially all of the assets
of Tenant, that immediately following such assignment and after giving effect
thereto (1) will have a publicly traded unsecured senior debt rating of "Baa" or
better from Moody's or a rating of "BBB-" from S&P or a Comparable Rating or (2)
will have on a proforma basis a Net Worth of not less than the Net Worth of
Tenant immediately prior to the assignment and will have a Fixed Charge Coverage
Ratio of not less than 1.75 to 1 measured by the proforma trailing four quarters
of the Preapproved Assignee after giving effect to the assignment. For the
purpose of this Paragraph 21(a)(i) the following terms shall have the following
meanings unless otherwise defined herein.
"EBIDTAR" for any period shall mean earnings from continuing
operations, exclusive or extraordinary items, if any, before interest expense,
depreciation, taxes, amortization
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expense (including amortization of debt issuance costs), rent and less capital
expenditures.
"Fixed Charge Coverage Ratio" shall mean the ratio of (a)
EBIDTAR to (b) Fixed Charges.
"Fixed Charges" for any period shall mean the sum of the total
interest expense for such period and rent or lease payments for such period,
determined in accordance with GAAP.
"Net Worth" shall mean, at any date, the net worth of Tenant
and the Net Worth of the proposed Preapproved Assignee under Paragraph
21(a)(i)(C)(2) above, in both instances determined in accordance with GAAP.
(ii) If, during the Initial Term, Tenant desires to
assign this Lease to a Person ("Non-Preapproved Assignee") who would not be a
Preapproved Assignee ("Non-Preapproved Assignment"), whether by operation of law
or otherwise, then Tenant shall, not less than ninety (90) days prior to the
date on which it desires to make a Non-Preapproved Assignment submit to Landlord
and Lender information regarding the following with respect to the
Non-Preapproved Assignee (collectively, the "Review Criteria"): (A) credit, (B)
capital structure, (C) management, (D) operating history, (E) proposed use of
the Leased Premises and (F) risk factors associated with the proposed use of the
Leased Premises by the Non-Preapproved Assignee, taking into account factors
such as environmental concerns, product liability and the like. Landlord and
Lender shall review such information and shall approve or disapprove the
Non-Preapproved Assignee no later than the thirtieth (30th) day following
receipt of all such information, and Landlord and Lender shall be deemed to have
acted reasonably in granting or withholding consent if such grant or disapproval
is based on their review of the Review Criteria applying prudent business
judgment.
(iii) If Landlord shall reject a Non-Preapproved
Assignment and Tenant desires to complete the Non-Preapproved Assignment, Tenant
shall have the right to make a rejectable offer (the "Intended Assignment
Offer") to purchase the Leased Premises for a purchase price equal to the Offer
Amount and to consummate the purchase price on the first Basic Rent Payment Date
occurring after the determination of Fair Market Value (the "Intended Assignment
Purchase Date"). Notwithstanding the foregoing, if the Intended Assignment Offer
is accepted by Landlord and the Non-Preapproved Assignment occurs on a date (the
"Assignment Date") that is prior to the Intended Assignment Purchase Date, then
no later than the Assignment Date, then on the Assignment Date Tenant shall
deposit in escrow with a Corporate Fiduciary an amount (the "Deposit Amount")
equal to one hundred five percent (105%) of the sum of the Termination Value and
any Prepayment Premium. The Deposit Amount shall be held by
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and invested by the Corporate Fiduciary at the direction of Landlord and the
Deposit Amount, together with any interest earned thereon, shall be applied on
the Intended Assignment Purchase Date to payment of the Offer Amount with any
balance returned to Tenant.
(iv) If Landlord shall reject the Intended
Assignment Offer by notice to Tenant, such notice to contain the written consent
of Lender to such rejection, no later than the thirtieth (30th) day following
receipt of the Intended Assignment Offer by Landlord, then this Lease shall
remain in full force and effect and Landlord and Lender shall be deemed to have
consented to the Non-Preapproved Assignment notwithstanding their initial
disapproval under Paragraph 21(a)(ii). Nothing provided herein shall constitute
a waiver by Landlord of the obligations of Tenant re comply with the
requirements of this Paragraph 21(a)(iv) if a subsequent Non-Preapproved
Assignment arises. No rejection of the Intended Assignment Offer shall be
effective for any purpose unless consented to in writing by Lender.
(v) Unless Landlord shall have rejected the Intended
Assignment Offer (a rejection by Landlord without the concurrence of Lender
shall be deemed acceptance) by the foregoing notice to Tenant not later than the
thirtieth (30th) day following receipt of the Intended Assignment Offer,
Landlord shall be conclusively presumed to have accepted the Intended Assignment
Offer. If the Intended Assignment Offer is accepted by Landlord, Tenant shall
pay to Landlord the Offer Amount (less the Deposit Amount and interest thereon
paid to Landlord) on the Intended Assignment Purchase Date and, provided that no
rent or any other charge is due and unpaid under this Lease as of the Intended
Assignment Purchase Date and Tenant is otherwise in compliance with the terms of
this Lease, Landlord shall convey to Tenant the Leased Premises in accordance
with the provisions of Paragraph 20 of this Lease.
(vi) During any Renewal Term, Landlord and Lender
shall not unreasonably withhold their consent to any request for a
Non-Preapproved Assignment.
(b) Tenant shall have the right, upon thirty (30) days
prior written notice to Landlord and Lender, to enter into one or more subleases
that demise, in the aggregate, up to but not in excess of twenty-five percent
(25%) of the gross space in the Improvements in each Related Premises with no
consent or approval of Landlord being required or necessary ("Preapproved
Sublet"); provided, however, that as long as the Agreement - New Lease undated
with Land O'Lakes, Inc. ("LOL") which is hereby approved by Landlord is in full
force and effect Tenant shall not have the right to sublease space in the
Menomonie Premises to any other Person and shall not increase the space leased
to LOL without the prior written approval of Landlord, such approval not to be
unreasonably withheld or delayed. Other than pursuant to a
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Preapproved Sublet, subleases for more than twenty-five percent (25%) of the
gross space in the Leased Premises shall not be permitted without the prior
written consent of Landlord, which consent shall be granted or withheld based on
a review of the Review Criteria. Landlord and Lender shall be deemed to have
acted reasonably in granting or withholding consent if such grant or disapproval
is based on their reasonable review of the Review Criteria applying prudent
business judgment.
(c) If Tenant assigns all its rights and interest under
this Lease, the assignee under such assignment shall expressly assume all the
obligations of Tenant hereunder, actual or contingent, including obligations of
Tenant which may have arisen on or prior to the date of such assignment, by a
written instrument delivered to Landlord at the time of such assignment. Each
sublease of any of the Leased Premises shall be subject and subordinate to the
provisions of this Lease. No assignment or sublease shall affect or reduce any
of the obligations of Tenant hereunder, and all such obligations shall continue
in full force and effect as obligations of a principal and not as obligations of
a guarantor, as if no assignment or sublease had been made. No assignment or
sublease shall impose any additional obligations on Landlord under this Lease.
(d) Tenant shall, within ten (10) days after the
execution and delivery of any assignment or sublease, deliver a duplicate
original copy thereof to Landlord which, in the event of an assignment, shall be
in recordable form.
(e) As security for performance of its obligations under
this Lease, Tenant hereby grants, conveys and assigns to Landlord all right,
title and interest of Tenant in and to all subleases now in existence or
hereafter entered into for any or all of the Leased Premises, any and all
extensions, modifications and renewals thereof and all rents, issues and profits
therefrom. Landlord hereby grants to Tenant a license to collect and enjoy all
rents and other sums of money payable under any sublease of any of the Leased
Premises, provided, however, during the continuation of an Event of Default that
Landlord shall have the absolute right at any time upon notice to Tenant and any
subtenants to revoke said license and to collect such rents and sums of money
and to retain the same. Tenant shall not accept any rents more than thirty (30)
days in advance of the accrual thereof nor do nor permit anything to be done,
the doing of which, nor omit or refrain from doing anything, the omission of
which, will or could be a breach of or default in the terms of any of the
subleases.
(f) (i) Tenant shall have the right to grant a first
lien Permitted Leasehold Mortgage on, or to pledge its leasehold interest in,
the Leased Premises to a Permitted Leasehold Mortgagee, but shall not have the
power to otherwise mortgage, pledge or otherwise encumber its interest under
this
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Lease or any sublease of the Leased Premises, and any other such mortgage,
pledge or encumbrance made in violation of this Paragraph 21 shall be void and
of no force and effect. Any entity that becomes a successor tenant under this
Paragraph 21(f) shall be required to comply with all of the terms of this Lease.
(ii) At no cost to Landlord, Landlord shall
reasonably cooperate with Tenant and such Permitted Leasehold Mortgagee in
connection with the granting and perfecting of any such Permitted Leasehold
Mortgage.
(iii) Landlord hereby agrees that upon the request
of Tenant, Landlord will enter into an agreement with a Permitted Leasehold
Mortgagee which agreement shall be in form and substance reasonably satisfactory
to Landlord and which shall provide, among other things, (A) that upon a default
on the part of Tenant pursuant to the terms and conditions of this Lease,
Landlord shall give notice of such default by Tenant in the manner provided in
Paragraph 24 to any Permitted Leasehold Mortgagee whose name and address has
been provided to Landlord, (B) that Permitted Leasehold Mortgagee shall have an
opportunity to cure any such default, which, in the case of a Monetary
Obligation, shall be a period of five (5) days longer than the time period
provided to Tenant, and (ii) in the case of all other defaults which are
reasonably capable of cure, ten (10) days longer than the cure period afforded
to Tenant pursuant to this Lease, and (C) that Landlord shall not enter into any
modification or amendment to this Lease without the written consent of the
Permitted Leasehold Mortgagee, which shall not be unreasonably withheld or
delayed.
(iv) Subject to the terms and conditions of this
Paragraph 21, Landlord shall recognize any designee of Permitted Leasehold
Mortgagee or purchaser at a foreclosure sale, whether such sale is public or
private, so long as such designee or purchaser qualifies as a Preapproved
Assignee or a Non-Preapproved Assignee that has been approved by Landlord and
Lender in accordance with the terms of Paragraph 21(a)(i) and (a)(ii) prior to
any foreclosure sale. In all other instances an Event of Default shall exist
upon consummation of such foreclosure unless the Permitted Leasehold Mortgagee
or said designee or purchaser makes the Intended Assignment Offer and otherwise
complies with the provisions of Paragraph 21(a)(iii), (iv) and (v).
(v) Notwithstanding anything herein to the contrary,
in no event shall any Permitted Leasehold Mortgagee have any liability to
Landlord pursuant to this Lease by reason of any Permitted Leasehold Mortgage
unless and until said Permitted Leasehold Mortgagee becomes the Tenant
hereunder.
(g) Subject to Tenant's rights under Paragraph 34,
Landlord may sell or transfer the Leased Premises at any time without Tenant's
consent to any third party (each a "Third Party
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Purchaser"), provided, that so long as no Event of Default exists either at the
time Landlord enters into an Agreement of Sale for the purchase of the Leased
Premises or on the date of conveyance to a Third Party Purchaser, Landlord shall
not sell the Leased Premises to any Person whose primary business is the
manufacturing of cans and/or lids and/or metal or plastic containers and/or lids
for third party users as long as the foregoing is the primary business of
Tenant. In the event of any such transfer, Tenant shall attorn to any Third
Party Purchaser as Landlord so long as such Third Party Purchaser and Landlord
notify Tenant in writing of such transfer and such Third Party Purchaser assumes
in writing the obligations of Landlord under this Lease whenever said
obligations occurred. At the request of Landlord, Tenant will execute such
documents confirming the agreement referred to above and such other agreements
as Landlord may reasonably request, provided that such agreements do not
increase the liabilities and obligations of Tenant hereunder.
22. Events of Default.
(a) The occurrence of any one or more of the following
(after expiration of any applicable cure period as provided in Paragraph 22(b))
shall, at the sole option of Landlord, constitute an "Event of Default" under
this Lease:
(i) a failure by Tenant to make any payment of
any Monetary Obligation, regardless of the reason for such failure;
(ii) a failure by Tenant duly to perform and
observe, or a violation or breach of, any other provision hereof not otherwise
specifically mentioned in this Paragraph 22(a);
(iii) any representation or warranty made by
Tenant herein or in any certificate, demand or request made pursuant hereto
proves to be incorrect, now or hereafter, in any material respect, including the
breach of a representation that contains a "knowledge" limitation;
(iv) a default beyond any applicable cure
period or at maturity by Tenant in any payment of principal or interest on any
obligations for borrowed money having a principal balance of $20,000,000 or more
in the aggregate, or in the performance of any other provision contained in any
instrument under which any such obligation is created or secured (including the
breach of any covenant thereunder), (x) if such payment is a payment at maturity
or a final payment, or (y) if an effect of such default is to cause such
obligation to become due prior to its stated maturity and the acceleration of
such obligation would have a material adverse effect on the ability of Tenant to
perform its obligations under this Lease;
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(v) a final, non-appealable judgment or
judgments for the payment of money in excess of $20,000,000 in the aggregate
shall be rendered against Tenant and the same shall remain undischarged for a
period of sixty (60) consecutive days and the payment of such judgment or
judgments would have a material adverse effect on the ability of Tenant to
perform its obligations under this Lease;
(vi) Tenant shall (A) voluntarily be
adjudicated a bankrupt or insolvent, (B) seek or consent to the appointment of a
receiver or trustee for itself or for any of the Related Premises, (C) file a
petition seeking relief under the bankruptcy or other similar laws of the United
States, any state or any jurisdiction, or (D) make a general assignment for the
benefit of creditors;
(vii) a court shall enter an order, judgment or
decree appointing, without the consent of Tenant, a receiver or trustee for it
or for any of the Related Premises or approving a petition filed against Tenant
which seeks relief under the bankruptcy or other similar laws of the United
States, any state or any jurisdiction, and such order, judgment or decree shall
remain undischarged or unstayed sixty (60) days after it is entered;
(viii) either of the Related Premises shall have
been vacated during the Initial Term except as permitted under, and subject to
the terms and conditions of Paragraph 35, or either of the Related Premises
shall have been abandoned;
(ix) Tenant shall be liquidated or dissolved or
shall begin proceedings towards its liquidation or dissolution;
(x) the estate or interest of Tenant in any of
the Related Premises shall be levied upon or attached in any proceeding and such
estate or interest is about to be sold or transferred or such process shall not
be vacated or discharged within ninety (90) days after it is made;
(xi) a failure by Tenant to perform or observe
beyond any applicable notice and grace period, or a violation or breach of, or a
misrepresentation by Tenant under, any provision of any Assignment or any other
document between Tenant and Lender, if such failure, violation, breach or
misrepresentation gives rise to a default beyond any applicable cure period with
respect to any Loan;
(xii) a failure by Tenant to maintain in effect
any license or permit necessary for the use, occupancy or operation of any of
the Related Premises; or
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(xiii) Tenant shall sell or transfer all or
substantially all of its assets unless this Lease shall be sold or assigned in
connection with such sale and such purchaser shall be either a Preapproved
Assignee or a Non-Preapproved Assignee that has been approved by Landlord and
Lender unless, in the latter case, Tenant has paid the Deposit Amount in
accordance with Paragraph 21(a)(iii).
(b) No notice or cure period shall be required in any one
or more of the following events: (A) the occurrence of an Event of Default under
clause (iv), (v), (vi), (vii), (viii), (ix), (x), (xi) or (xiii) of Paragraph
22(a); (B) an assignment or sublease entered into in violation of Paragraph 21;
or (C) the default is such that any delay in the exercise of a remedy by
Landlord could reasonably be expected to cause irreparable harm to Landlord. If
the default consists of the failure to pay any Monetary Obligation, including
Basic Rent, under clause (i) of Paragraph 22(a), the applicable cure period
shall be three (3) days from the date on which notice is given, but Landlord
shall not be obligated to give notice of, or allow any cure period for, any such
default more than one (1) time within any consecutive twelve (12) month period
for any category of Monetary Obligation. If the default consists of a default
under clauses (ii), (iii) or (xii) of Paragraph 22(a), other than the events
specified in clauses (B) and (C) of the first sentence of this Paragraph 22(b),
the applicable cure period shall be thirty (30) days from the date on which
notice is given or, if the default cannot be cured within such thirty (30) day
period and delay in the exercise of a remedy would not (in Landlord's reasonable
judgment) cause any material adverse harm to Landlord or any of the Leased
Premises, the cure period shall be extended for the period required to cure the
default (but such cure period, including any extension, shall not in the
aggregate exceed one hundred ten (110) days (provided, however, that no
extension shall be permitted of the default is the failure to provide any
insurance required by Paragraph 16(a)), provided that Tenant shall commence to
cure the default within the said thirty-day period and shall actively,
diligently and in good faith proceed with and continue the curing of the default
until it shall be fully cured.
23. Remedies and Damages Upon Default.
(a) If an Event of Default shall have occurred and is
continuing, Landlord shall have the right, at its sole option, then or at any
time thereafter, to exercise its remedies and to collect damages from Tenant in
accordance with this Paragraph 23, subject in all events to applicable Law,
without demand upon or notice to Tenant except as otherwise provided in
Paragraph 22(b) and this Paragraph 23.
(i) Landlord may give Tenant notice of
Landlord's intention to terminate this Lease on a date specified
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in such notice. Upon such date, this Lease, the estate hereby granted and all
rights of Tenant hereunder shall expire and terminate. Upon such termination,
Tenant shall immediately surrender and deliver possession of the Leased Premises
to Landlord in accordance with Paragraph 26. If Tenant does not so surrender and
deliver possession of all of the Leased Premises, Landlord may re-enter and
repossess any of the Leased Premises not surrendered, with legal process, by
peaceably entering any of the Leased Premises and changing locks or by summary
proceedings, ejectment or any other lawful means or procedure. Upon or at any
time after taking possession of any of the Leased Premises, Landlord may, by
peaceable means or legal process, remove any Persons or property therefrom.
Landlord shall be under no liability for or by reason of any such entry,
repossession or removal. Notwithstanding such entry or repossession, Landlord
may (A) exercise the remedy set forth in and collect the damages permitted by
Paragraph 23(a)(iii) or (B) collect the damages set forth in Paragraph 23(b)(i)
or 23(b)(ii).
(ii) Landlord may give Tenant notice of
Landlord's intention to terminate Tenant's occupancy of the Leased Premises and
to reenter and take possession of the Leased Premises or any part thereof (which
termination of occupancy and reentry shall not operate to terminate this Lease
unless Landlord expressly so elects in writing) and of any and all fixtures
which are located on the Leased Premises and owned by Landlord. Landlord shall
be under no liability for or by reason of any such entry, repossession or
removal. Notwithstanding such entry or repossession, Landlord may (A) exercise
the remedy set forth in and collect the damages permitted by Paragraph 23(a)(iv)
or (B) collect the damages set forth in Paragraph 23(b)(i) or 23(b)(ii).
(iii) After repossession of any of the Leased
Premises pursuant to clause (i) above, Landlord shall have the right to relet
any of the Leased Premises to such tenant or tenants, for such term or terms,
for such rent, on such conditions and for such uses as Landlord in its
reasonable discretion may determine, and collect and receive any rents payable
by reason of such reletting. Landlord may make such Alterations in connection
with such reletting as it may deem advisable in its reasonable discretion.
Notwithstanding any such reletting, Landlord may collect the damages set forth
in Paragraph 23(b)(ii).
(iv) Landlord may, upon notice to Tenant,
require Tenant to make an irrevocable offer to terminate this Lease in its
entirety for an amount (the "Default Termination Amount") specified in the next
sentence. The "Default Termination Amount" shall be the greatest of (A) the Fair
Market Value of the Leased Premises or (B) the sum of the Termination Value for
the Leased Premises and any Prepayment Premium which Landlord will be required
to pay in prepaying the Loan with proceeds of the Default Termination Amount or
(C) an amount equal
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to the Present Value of the entire Basic Rent from the date of such purchase to
the date on which the then Term would expire. Upon such notice to Tenant, Tenant
shall be deemed to have made such offer and shall, if requested by Landlord,
within ten (10) days following such request, deposit with Landlord as payment
against the Default Termination Amount the amount described in (B) above,
Landlord and Tenant shall promptly commence to determine Fair Market Value.
Within ten (10) days after the Fair Market Value Date, Landlord shall accept or
reject such offer. If Landlord accepts such offer then, on the tenth (10th)
business day after such acceptance, Tenant shall pay to Landlord the Default
Termination Amount and, at the request of Tenant, Landlord will convey the
Leased Premises to Tenant or its designee in accordance with Paragraph 20. Any
rejection by Landlord of such offer shall have no effect on any other remedy
Landlord may have under this Lease.
(v) Landlord may declare by notice to Tenant
the entire Basic Rent (in the amount of Basic Rent then in effect) for the
remainder of the then current Term to be immediately due and payable. Tenant
shall immediately pay to Landlord all such Basic Rent discounted to its Present
Value, all accrued Rent then due and unpaid, all other Monetary Obligations
which are then due and unpaid and all Monetary Obligations which arise or become
due by reason of such Event of Default (including any Costs of Landlord). Upon
receipt by Landlord of all such accelerated Basic Rent and Monetary Obligations,
this Lease shall remain in full force and effect and Tenant shall have the right
to possession of the Leased Premises from the date of such receipt by Landlord
to the end of the Term, and subject to all the provisions of this Lease,
including the obligation to pay all increases in Basic Rent and all Monetary
Obligations that subsequently become due, except that (A) no Basic Rent which
has been prepaid hereunder shall be due thereafter during the said Term and (B)
Tenant shall have no option to extend or renew the Term.
(b) The following constitute damages to which Landlord
shall be entitled if Landlord exercises its remedies under Paragraph 23(a)(i) or
23(a)(iii):
(i) If Landlord exercises its remedy under
Paragraph 23(a)(i) but not its remedy under Paragraph 23(a)(iii) (or attempts to
exercise such remedy and is unsuccessful in reletting the Leased Premises) then,
upon written demand from Landlord, Tenant shall pay to Landlord, as liquidated
and agreed final damages for Tenant's default and in lieu of all current damages
beyond the date of such demand (it being agreed that it would be impracticable
or extremely difficult to fix the actual damages), an amount equal to the
Present Value of the excess, if any, of (A) all Basic Rent from the date of such
demand to the date on which the Term is scheduled to expire hereunder in the
absence of any earlier termination, re-entry or repossession over
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(B) the then fair market rental value of the Leased Premises for the same
period. Tenant shall also pay to Landlord all of Landlord's reasonable Costs in
connection with the repossession of the Leased Premises and any attempted
reletting thereof, including all brokerage commissions, legal expenses,
reasonable attorneys' fees, employees' expenses, costs of Alterations and
expenses and preparation for reletting, provided, however, that such Costs shall
be allocated if a reletting extends beyond the stated expiration of the Term.
(ii) If Landlord exercises its remedy under
Paragraph 23(a)(i) or its remedies under Paragraph 23(a)(i) and 23(a)(iii), then
Tenant shall, until the end of what would have been the Term in the absence of
the termination of the Lease, and whether or not any of the Leased Premises
shall have been relet, be liable to Landlord for, and shall pay to Landlord, as
liquidated and agreed current damages on the date on which the same are due and
payable under the terms of this Lease all Monetary Obligations which would be
payable under this Lease by Tenant in the absence of such termination less the
net proceeds, if any, of any reletting pursuant to Paragraph 23(a)(iii), after
deducting from such proceeds all of Landlord's Costs (including the items listed
in the last sentence of Paragraph 23(b)(i) hereof) incurred in connection with
such repossessing and reletting; provided, that if Landlord has not relet the
Leased Premises, such Costs of Landlord shall be considered to be Monetary
Obligations payable by Tenant. Tenant shall be and remain liable for all sums
aforesaid, and Landlord may recover such damages from Tenant and institute and
maintain successive actions or legal proceedings against Tenant for the recovery
of such damages. Nothing herein contained shall be deemed to require Landlord to
wait to begin such action or other legal proceedings until the date when the
Term would have expired by its own terms had there been no such Event of
Default.
(c) Notwithstanding anything to the contrary herein
contained, in lieu of or in addition to any of the foregoing remedies and
damages, Landlord may exercise any remedies and collect any damages available to
it at law or in equity. If Landlord is unable to obtain full satisfaction
pursuant to the exercise of any remedy, it may pursue any other remedy which it
has hereunder or at law or in equity.
(d) Landlord shall not be required to mitigate any of its
damages hereunder unless required to by applicable Law. If any Law shall validly
limit the amount of any damages provided for herein to an amount which is less
than the amount agreed to herein, Landlord shall be entitled to the maximum
amount available under such Law.
(e) No termination of this Lease, repossession or
reletting of any of the Leased Premises, exercise of any remedy
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or collection of any damages pursuant to this Paragraph 23 shall relieve Tenant
of any Surviving Obligations.
(f) TO THE EXTENT PERMITTED BY LAW, LANDLORD AND TENANT
WAIVE ANY RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY REMEDY OR PROCEEDING
HEREUNDER.
(g) Upon the occurrence of any Event of Default, Landlord
shall have the right (but no obligation) to perform any act required of Tenant
hereunder and, if performance of such act requires that Landlord enter the
Leased Premises, Landlord may enter the Leased Premises for such purpose.
(h) No failure of Landlord (i) to insist at any time upon
the strict performance of any provision of this Lease or (ii) to exercise any
option, right, power or remedy contained in this Lease shall be construed as a
waiver, modification or relinquishment thereof. A receipt by Landlord of any sum
in satisfaction of any Monetary Obligation with knowledge of the breach of any
provision hereof shall not be deemed a waiver of such breach, and no waiver by
Landlord of any provision hereof shall be deemed to have been made unless
expressed in a writing signed by Landlord.
(i) to the extent permitted by Law, Tenant hereby waives
and surrenders, for itself and all those claiming under it, including creditors
of all kinds, (i) any right and privilege which it or any of them may have under
any present or future Law to redeem any of the Leased Premises or to have a
continuance of this Lease after termination of this Lease or of Tenant's right
of occupancy or possession pursuant to any court order or any provision hereof,
and (ii) the benefits of any present or future Law which exempts property from
liability for debt or for distress for rent.
(j) Except as otherwise provided herein, all remedies are
cumulative and concurrent and no remedy is exclusive of any other remedy. Each
remedy may be exercised at any time an Event of Default has occurred and is
continuing and may be exercised from time to time. No remedy shall be exhausted
by any exercise thereof.
24. Notices. All notices, demands, requests, consents, approvals,
offers, statements and other instruments or communications required or permitted
to be given pursuant to the provisions of this Lease shall be in writing and
shall be deemed to have been given and received for all purposes when delivered
in person or by Federal Express or other reliable 24-hour delivery service or
three (3) Business Days after being deposited in the United States mail, by
registered or certified mail, return receipt requested, postage prepaid,
addressed to the other party at its address stated above or when delivery is
refused. A copy of any notice given by Tenant to Landlord shall
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simultaneously be given by Tenant to Reed Smith Shaw & McClay, 2500 One Liberty
Place, Philadelphia, PA 19103, Attention: Chairman, Real Estate Department. For
the purposes of this Paragraph, any party may substitute another address stated
above (or substituted by a previous notice) for its address by giving fifteen
(15) days' notice of the new address to the other party, in the manner provided
above, and any notice received by counsel for any party shall be adequate notice
for purposes of this Lease.
25. Estoppel Certificate. At any time upon not less than ten (10)
Business Days' prior written request by either Landlord or Tenant (the
"Requesting Party") to the other party (the "Responding Party"), the Responding
Party shall deliver to the Requesting Party a statement in writing, executed by
an authorized officer of the Responding Party, certifying (a) that, except as
otherwise specified, this Lease is unmodified and in full force and effect, (b)
the dates to which Basic Rent, Additional Rent and all other Monetary
Obligations have been paid, (c) that, to the knowledge of the signer of such
certificate and except as otherwise specified, no default by either Landlord or
Tenant exists hereunder, (d) such other matters as the Requesting Party may
reasonably request, and (e) if Tenant is the Responding Party that, except as
otherwise specified, there are no proceedings pending or, to the knowledge of
the signer, threatened, against Tenant before or by an court or administrative
agency which, if adversely decided, would materially and adversely affect the
financial condition and operations of Tenant. Any such statements by the
Responding Party may be relied upon by the Requesting Party, any Person whom the
Requesting Party notifies the Responding Party in its request for the
Certificate is an intended recipient or beneficiary of the Certificate, any
Lender or their assignees and by any prospective purchaser or mortgagee of any
of the Leased Premises. Any certificate required under this Paragraph 25 and
delivered by Tenant shall state that, in the opinion of each person signing the
same, he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to the subject matter of such certificate,
and shall briefly state the nature of such examination or investigation.
26. Surrender. Upon the expiration or earlier termination of this
Lease, Tenant shall peaceably leave and surrender the Leased Premises to
Landlord in the same condition in which the Leased Premises was at the
commencement of this Lease, except as repaired, rebuilt, restored, altered,
replaced or added to as permitted or required by any provision of this Lease,
except for ordinary wear and tear and, if a Rejection is received by Tenant
under Paragraph 18, Casualty and Condemnation. Upon such surrender, Tenant shall
(a) remove from the Leased Premises all property which is owned by Tenant or
third parties other than Landlord and (b) repair any damage caused by such
removal. Property not so removed within ten (10) days following
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such expiration shall become the property of Landlord, and Landlord may
thereafter cause such property to be removed from the Leased Premises. The cost
of removing and disposing of such property and repairing any damage to any of
the Leased Premises caused by such removal shall be paid by Tenant to Landlord
upon demand. Landlord shall not in any manner or to any extent be obligated to
reimburse Tenant for any such property which becomes the property of Landlord
pursuant to this Paragraph 26.
27. No Merger of Title. There shall be no merger of the leasehold
estate created by this Lease with the fee estate in any of the Leased Premises
by reason of the fact that the same Person may acquire or hold or own, directly
or indirectly, (a) the leasehold estate created hereby or any part thereof or
interest therein and (b) the fee estate in any of the Leased Premises or any
part thereof or interest therein, unless and until all Persons having any
interest in the interests described in (a) and (b) above which are sought to be
merged shall join in a written instrument effecting such merger and shall duly
record the same.
28. Books and Records.
(a) Tenant shall keep adequate records and books of
account with respect to the finances and business of Tenant generally and with
respect to the Leased Premises, in accordance with GAAP and shall permit
Landlord and Lender by their respective agents, accountants and attorneys, upon
reasonable notice to Tenant, to visit the headquarters of Silgan Holdings, Inc.
("Holdings") to discuss the finances and business with the officers of Tenant or
Holdings, at such reasonable times as may be requested by Landlord.
(b) Prior to any assignment of Tenant's interest in this
Lease to any Person who is not an Affiliate of Silgan Containers Corporation or
an Affiliate of Holdings (unless such Affiliate prepares the financial
statements described in the following Paragraph 28(c)), Tenant shall deliver to
Landlord and to Lender within one hundred twenty (120) days of the close of each
fiscal year, annual unaudited financial statements of Tenant and all other
quarterly financial reports that Tenant prepares or causes to be prepared for
Persons unaffiliated with Tenant or Holdings. All financial statements of Tenant
shall be prepared in accordance with GAAP consistently applied, except that all
such unaudited statements shall be subject to normal year end adjustments and
footnotes shall not be required. All annual financial statements shall be
accompanied (i) by the certification of the Chief Financial Officer or other
responsible financial officer of Tenant, dated within five (5) days of the
delivery of such statement, stating that (A) such statements are true, correct
and complete, (B) the affiant knows of no Event of Default, or event which, upon
notice or the passage of time or both, would become an Event of Default which
has occurred and is
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continuing hereunder or, if any such event has occurred and is continuing,
specifying the nature and period of existence thereof and what action Tenant has
taken or proposes to take with respect thereto and (C) except as otherwise
specified in such affidavit, to the best of the affiant's knowledge that Tenant
has fulfilled all of its obligations under this Lease which are required to be
fulfilled on or prior to the date of such affidavit. Tenant shall also deliver
to Landlord annual audited and quarterly unaudited financial statements of
Holdings as soon as reasonably available following the close of each fiscal year
and fiscal quarter of Holdings.
(c) Following any assignment of Tenant's interest in this
Lease to any Person who is not an Affiliate of Silgan Containers Corporation or
an Affiliate of Holdings unless in either case such Affiliate prepares the
statements described in this Paragraph 28(c), such assignee, as Tenant, shall
deliver to Landlord and to Lender within one hundred twenty (120) days of the
end of each fiscal year, annual audited financial statements of such Tenant
prepared by nationally recognized independent certified public accountants.
Tenant shall also furnish to Landlord within sixty (60) days after the end of
each of the three remaining quarters unaudited financial statements and all
other quarterly reports of such Tenant, certified by such Tenant's chief
financial officer, and all filings, if any, of Form 10-K, Form 10-Q and other
required filings with the Securities and Exchange Commission pursuant to the
provisions of the Securities and Exchange Act of 1934, as amended, or any other
Law. All financial statements of such Tenant shall be prepared in accordance
with GAAP accompanied (i) by an opinion of said accountants stating that there
are no qualifications as to the scope of the audit and the audit was performed
in accordance with GAAP and (ii) by the affidavit of the chief financial officer
of such Tenant, dated within five (5) days of the delivery of such statement,
stating that the affiant knows of no Event of Default, or event which, upon
notice or the passage of time or both, would become an Event of Default which
has occurred and is continuing, specifying the nature and period of existence
thereof and what action such Tenant has taken or proposes to take with respect
thereto and except as otherwise specified in such affidavit, to the best of
affiant's knowledge that such Tenant has fulfilled all of its obligations under
this Lease which are required to be fulfilled on or prior to the date of such
affidavit.
(d) Landlord, Lender and their respective agents,
accountants and attorneys, shall consider and treat on a strictly confidential
basis any financial statements of Tenant pursuant to Paragraph 28(b) which are
delivered to or received by them and which are conspicuously stamped
"CONFIDENTIAL". Neither Landlord, Lender, nor their respective agents,
accountants and attorneys, shall disclose any information contained in such
financial statements to any other Persons without the prior written consent of
the President. Notwithstanding anything to the contrary, each of Landlord and
Lender agree to reveal such financial statements
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or any part thereof only to its agents, accountants, attorneys and employees who
need to know and have access to such financial statements for purposes of this
Lease and the related documents only.
The restrictions contained in this Paragraph 28(d) shall not prevent disclosure
by Landlord or Lender of any information in any of the following circumstances:
(i) Upon the order of any court or
administrative agency to the extent required by such order and not effectively
stayed or by appeal or otherwise, provided that the Landlord or Lender, as the
case may be, shall have provided Tenant with notice of any such order so that
Tenant may seek a protective order or other appropriate remedy (for which
Landlord and/or Lender agree to cooperate in all reasonable respects with the
Tenant in seeking a protective order or other appropriate remedy);
(ii) Upon the request, demand or requirement of
any regulatory agency or authority having jurisdiction over such party,
including the Securities and Exchange Commission (whether or not such request or
demand has the force of law), provided that the Landlord or Lender, as the case
may be, shall have provided Tenant with notice of any such request, demand or
requirement so that Tenant may seek a protective order, confidential treatment
of such information or other appropriate remedy (for which Landlord and/or
Lender agree to cooperate in all reasonable respects with the Tenant in seeking
a protective order, confidential treatment of such information or other
appropriate remedy);
(iii) That has been publicly disclosed other
than by breach of this Paragraph 28(d) by Lender or Landlord or by any other
Person who has been provided such information by Landlord or Lender; and
(iv) While an Event of Default exists, in
connection with the exercise of and only to the extent necessary to exercise any
right or remedy under this Lease or any other related document.
Landlord, Lender and Tenant agree that money damages may not be sufficient
remedy for any breach of this Paragraph (d) by it or any other Person (including
agents, attorneys, accountants and employees of Landlord and/or Lender) to whom
it discloses any of such information and that, in addition to all other remedies
(including monetary damages) which may be available, Tenant shall be entitled to
specific performance and injunctive or other equitable relief as a remedy for
any such breach.
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29. Determination of Value.
(a) Whenever a determination of Fair Market Value is
required pursuant to any provision of this Lease, such Fair Market Value shall
be determined in accordance with the following procedure:
(i) Landlord and Tenant shall endeavor to
agree upon such Fair Market Value within thirty (30) days after the date (the
"Applicable Initial Date") on which (A) Tenant provides Landlord with notice of
its intention to terminate this Lease and purchase the Affected Premises
pursuant to Paragraph 18, (B) Landlord provides Tenant with notice of its
intention to redetermine Fair Market Value pursuant to Paragraph 20(c), (C)
Landlord provides Tenant with notice of Landlord's intention to require Tenant
to make an offer to purchase the Leased Premises pursuant to Paragraph
23(a)(iii), (D) Tenant provides to Landlord an Intended Assignment Offer or (E)
Tenant provides to Landlord an Abandonment Notice. Upon reaching such agreement,
the parties shall execute an agreement setting forth the amount of such Fair
Market Value.
(ii) If the parties shall not have signed such
agreement within thirty (30) days after the Applicable Initial Date, Tenant
shall within forty (40) days after the Applicable Initial Date select an
appraiser and notify Landlord in writing of the name, address and qualifications
of such appraiser. Within ten (10) days following Landlord's receipt of Tenant's
notice of the appraiser selected by Tenant, Landlord shall select an appraiser
and notify Tenant of the name, address and qualifications of such appraiser.
Such two appraisers shall endeavor to agree upon Fair Market Value based on a
written appraisal made by each of them as of the Relevant Date (and given to
Landlord by Tenant). If such two appraisers shall agree upon a Fair Market
Value, the amount of such Fair Market Value as so agreed shall be binding and
conclusive.
(iii) If such two appraisers shall be unable to
agree upon a Fair Market Value within twenty (20) days after the selection of an
appraiser by Landlord, then such appraisers shall advise Landlord and Tenant of
their respective determination of Fair Market Value and shall select a third
appraiser to make the determination of Fair Market Value. The selection of the
third appraiser shall be binding and conclusive upon Landlord and Tenant.
(iv) If such two appraisers shall be unable to
agree upon the designation of a third appraiser within ten (10) days after the
expiration of the twenty (20) day period referred to in clause (iii) above, or
if such third appraiser does not make a determination of Fair Market Value
within twenty (20) days after his selection, then such third appraiser or a
substituted third appraiser, as applicable, shall, at the request
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of either party hereto (with respect to the other party), be appointed by the
President or Chairman of the American Arbitration Association in New York, New
York. The determination of Fair Market Value made by the third appraiser
appointed pursuant hereto shall be made within twenty (20) days after such
appointment.
(v) If a third appraiser is selected, Fair
Market Value shall be the average of the determination of Fair Market Value made
by the third appraiser and the determination of Fair Market Value made by the
appraiser (selected pursuant to Paragraph 29(a)(ii) hereof) whose determination
of Fair Market Value is nearest to that of the third appraiser. Such average
shall be binding and conclusive upon Landlord and Tenant.
(vi) All appraisers selected or appointed
pursuant to this Paragraph 29(a) shall (A) be independent qualified MAI
appraisers (B) have no right, power or authority to alter or modify the
provisions of this Lease, (C) utilize the definition of Fair Market Value set
forth in Paragraph 2 of this Lease, and (D) be registered in the State if the
State provides for or requires such registration.
(vii) If the determination of Fair Market Value
is required under Paragraph 23(a)(iii), the Cost of the procedure described in
this Paragraph 29(a) above shall be borne entirely by Tenant; in all other
instances the Cost shall be split equally between Landlord and Tenant.
(b) If, by virtue of any delay, Fair Market Value is not
determined by the expiration or termination of the then current Term, then the
date on which the Term would otherwise expire or terminate shall be extended
with respect to the Leased Premises or either Related Premises, as applicable,
to the date specified for termination in the particular provision of this Lease
pursuant to which the determination of Fair Market Value is being made.
(c) In determining Fair Market Value as defined in clause
(b) of the definition of Fair Market Value, the appraisers shall add (a) the
present value of the Rent for the remaining Term (with assumed increases in the
CPI to be determined by the appraisers) using a discount rate (which may be
determined by an investment banker retained by each appraiser) based on the
creditworthiness of Tenant and (b) the present value of the Leased Premises as
of the end of such Term. The appraisers shall further assume that no default
then exists under the Lease and that Tenant has complied (and will comply) with
all provisions of the Lease.
30. Non-Recourse as to Landlord. Anything contained herein to
the contrary notwithstanding, any claim based on or in respect of any liability
of Landlord under this Lease shall be
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enforced only against the Leased Premises and the income therefrom and not
against any other assets, properties or funds of (a) Landlord, (b) any director,
officer, general partner, limited partner, employee or agent of Landlord, or any
general partner of Landlord, any of its general partners or shareholders (or any
legal representative, heir, estate, successor or assign of any thereof), (c) any
predecessor or successor partnership or corporation (or other entity) of
Landlord, or any of its general partners, either directly or through Landlord or
its general partners or any predecessor or successor partnership or corporation
or their shareholders, officers, directors, employees or agents (or other
entity), or (d) any other Person (including Carey Property Advisors, Carey
Fiduciary Advisors, Inc., W.P. Carey & Co., Inc., W.P. Carey Incorporated and
any Person affiliated with any of the foregoing, or any director, officer,
employee or agent of any thereof).
31. Financing.
(a) Tenant agrees to pay concurrent with the funding of
the initial Loan, the sum of (i) the Cost of any environmental reports required
by the initial Lender and (ii) all other out-of-pocket Costs up to a maximum of
$175,000 incurred by Landlord in connection with the initial financing of the
Leased Premises, including, without limitation, the cost of appraisals, title
insurance, surveys, Landlord's and Lender's legal fees and expenses and Lender's
commitment fees.
(b) If Landlord desires to obtain or refinance any Loan,
Tenant shall negotiate in good faith with Landlord concerning any request made
by any Lender or proposed Lender for changes or modifications in this Lease,
provided, however, that Tenant shall have no obligation to modify this Lease.
However, Tenant shall agree, upon request of Landlord, to supply any such Lender
with such notices and information as Tenant is required to give to Landlord
hereunder and to extend the rights of Landlord hereunder to any such Lender and
to consent to such financing if such consent is requested by such Lender. Tenant
shall provide any other consent or statement and shall execute any and all other
documents that such Lender reasonably requires in connection with such
financing, including an environmental indemnity agreement and a subordination,
non-disturbance and attornment agreement, so long as the same do not materially
adversely affect in Tenant's reasonable judgment any right, benefit or privilege
of Tenant under this Lease or materially increase Tenant's obligations in
Tenant's reasonable judgment under this Lease. Except as provided in Paragraph
31(a) above, Landlord shall pay the reasonable costs and expenses of Tenant in
connection with any document, instrument or agreement that any Lender shall
require, and Tenant shall have no liability for costs incurred in connection
with any refinancing of the initial Loan or any future Loan.
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32. Subordination. This Lease and Tenant's interest hereunder
shall be subordinate to any Mortgage or other security instrument to a Lender
hereafter placed upon the Leased Premises by Landlord, and to any and all
advances made or to be made thereunder, to the interest thereon, and all
renewals, replacements and extensions thereof, provided that any such Mortgage
or other security instrument (or a separate instrument in recordable form duly
executed by the holder of any such Mortgage or other security instrument and
delivered to Tenant) shall provide for the recognition of this Lease and all
Tenant's rights hereunder unless and until an Event of Default exists and is
continuing. Any such subordination, nondisturbance and attornment agreement
shall be in form reasonably satisfactory to Tenant and, in any event, may
require Tenant to confirm that (a) Lender and its assigns will not be liable for
any misrepresentation, act or omission of Landlord and (b) Lender and its
assigns will not be subject to any counterclaim, demand or offsets which Tenant
may have against Landlord.
33. Tax Treatment; Reporting. Landlord and Tenant each
acknowledge that each shall treat this transaction as a true lease for state law
purposes and shall report this transaction as a Lease for Federal income tax
purposes. For Federal income tax purposes each shall report this Lease as a true
lease with Landlord as the owner of the Leased Premises and Equipment and Tenant
as the lessee of such Leased Premises and Equipment including: (1) treating
Landlord as the owner of the property eligible to claim depreciation deductions
under Section 167 or 168 of the Internal Revenue Code of 1986 (the "Code") with
respect to the Leased Premises and Equipment, (2) Tenant reporting its Rent
payments as rent expense under Section 162 of the Code, and (3) Landlord
reporting the Rent payments as rental income.
34. Right of First Refusal.
(a) Except as otherwise provided in clause (f) of this
Paragraph 34, and provided an Event of Default does not then exist, if Landlord
shall enter into a contract for the sale (the "Sale Contract") of the Leased
Premises with a Third Party Purchaser, which Sale Contract shall be conditioned
upon Tenant's failure to exercise its right under this Paragraph 34, Landlord
shall give written notice to Tenant of the Sale Contract, together with a copy
of the executed Sale Contract and the name and business address of the Third
Party Purchaser.
(b) For a period of fifteen (15) Business Days following
receipt of such notice, Tenant shall have the right and option, exercisable by
written notice to Landlord given within said fifteen (15) Business Day period,
to elect to purchase the Leased Premises at the purchase price and upon all the
terms and conditions set forth in such Sale Contract except that no
contingencies contained in such Sale Contract as to environmental
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assessments, engineering studies, inspection of the Leased Premises,
availability of financing, sale of other property, state of the title to or
encumbrances on the Leased Premises, or any other condition or contingency to
the Third Party Purchaser's obligation to purchase the Leased Premises which
pertains to the condition of the Leased Premises, the Third Party Purchaser's
ability to take certain action or any other factor beyond the control of
Landlord, shall apply to Tenant's obligation to purchase the Leased Premises
under this Paragraph 34, and Tenant shall be obligated to purchase the Leased
Premises without any such condition or contingency.
(c) If at the expiration of the aforesaid fifteen (15)
Business Day period Tenant shall have failed to exercise the aforesaid option,
Landlord may sell the Leased Premises to such Third Party Purchaser upon the
terms set forth in such contract.
(d) Except as otherwise specifically provided herein, the
closing date for any purchase of the Leased Premises by Tenant pursuant to this
Paragraph 34 shall be the earlier to occur of (i) ninety (90) days after the
date of Tenant's notice to Landlord of its intention to purchase the Leased
Premises upon the terms of a Sale Contract or (ii) the closing date provided in
such Sale Contract. At such closing Landlord shall convey the Leased Premises to
Tenant in accordance with, and Tenant shall pay to Landlord the purchase price
and other consideration set forth in, the applicable contract.
(e) Tenant shall have the right during the Term to
exercise the foregoing right of first refusal upon (i) each proposed sale of the
Leased Premises prior to the seventh (7th) anniversary of the date of this Lease
and (ii) commencing with the seventh (7th) anniversary of the date of this Lease
one (1) time during the balance of the Term; provided, that if, following
compliance with the procedure described in Paragraph 34(a), a Third Party
Purchaser does not purchase the Leased Premises, such event shall not count as
an exercise of Tenant's right of first refusal. Notwithstanding anything to the
contrary, if Tenant fails to exercise the right of first refusal granted
pursuant to this Paragraph 34, after the seventh (7th) anniversary of the date
of this Lease and the sale to the Third Party Purchaser is consummated or if
this Lease terminates or the Term expires, such right shall terminate and be
null and void and of no further force and effect. In such event Tenant shall
execute a quitclaim deed and such other documents as Landlord shall reasonably
request evidencing the termination of its right of first refusal.
(f) The provisions of this Paragraph 34 shall not apply
to or prohibit (i) any mortgaging, subjection to deed of trust or other
hypothecation of Landlord's interest in the Leased Premises, (ii) any sale of
the Leased Premises pursuant to a private power of sale under or judicial
foreclosure of any Mortgage or other security instrument or device to which
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Landlord's interest in the Leased Premises is now or hereafter subject, (iii)
any transfer of Landlord's interest in the Leased Premises to a Lender,
beneficiary under deed of trust or other holder of a security interest therein
or their designees by deed in lieu of foreclosure, (iv) any transfer of the
Leased Premises to any governmental or quasi-governmental agency with power of
condemnation, (v) any transfer of the Leased Premises to any Affiliate or
subsidiary of Landlord or CPA:10, or to any fund sponsored by W.P. Carey & Co.,
Inc., W.P. Carey Incorporated or any of their Affiliates, (vi) any Person to
whom Landlord sells all or substantially all of its assets, or (vii) any
transfer of the Leased Premises to any of the successors or assigns of any of
the Persons referred to in the foregoing clauses (i) through (iv).
35. Economic Abandonment.
(a) Provided that an Event of Default does not exist,
Tenant shall have the right at any time after the expiration of the fifth (5th)
Lease Year to terminate this Lease with respect to any Related Premises (any
such Related Premises, an "Abandonment Premises") that shall have become
uneconomic for Tenant's continued use and occupancy in its business operations
as determined by Tenant. In the event Tenant elects to exercise such right,
Tenant shall give notice (the "Abandonment Notice") to Landlord (with a copy to
Lender) of its intention so to terminate this Lease as to the Abandonment
Premises, no later than twelve (12) months prior to the date (the "Abandonment
Date") of such intended termination, which notice shall specify the Abandonment
Date and shall contain (a) an irrevocable offer of Tenant to terminate this
Lease as to the Abandonment Premises on the Abandonment Date for the Offer
Amount and (b) a certificate of Tenant (i) stating that the Abandonment Premises
are no longer economic for Tenant's continued use and occupancy in its business
operations, (ii) specifying in reasonable detail the reasons therefor and (iii)
certifying that Tenant then intends to abandon its operations at the Abandonment
Premises, which certificate shall be conclusively binding upon Landlord and
Tenant, and (c) a resolution of the Board of Directors of Tenant authorizing
such notice.
(b) Promptly upon the delivery of such notice from Tenant
to Landlord, Landlord and Tenant shall commence to determine such Fair Market
Value in accordance with the procedure specified in Paragraph 29.
(c) Landlord shall accept or reject such offer by notice
to Tenant given not later than thirty (30) days following the determination of
Fair Market Value. If Landlord shall reject such offer, which rejection shall
not be valid unless accompanied by the written consent of Lender thereto, then
upon (i) payment of all Rent and any other sums due and unpaid hereunder as of
the Abandonment Date and (ii) compliance by Tenant with all other
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obligations and liabilities under this Lease which have arisen on or prior to
the Abandonment Date, this Lease shall terminate as to the Abandonment Premises
on the Abandonment Date and Tenant shall immediately vacate and have no further
right, title, interest or liability (except for Surviving Obligations) in or to
any of the Abandonment Premises.
(d) After the Abandonment Date, whether or not Landlord
shall have accepted or rejected Tenant's offer, the terms of this Lease will
remain in full force and effect with respect to the remaining Related Premises
except that the Basic Rent will be the percentage of the then Basic Rent which
is allocated to the remaining Related Premises as set forth on Exhibit "F"
attached hereto and made a part hereof.
(e) Unless Landlord shall have rejected such offer by the
foregoing notice to Tenant not later than the thirtieth (30th) day following the
determination of Fair Market Value, Landlord shall be conclusively presumed to
have accepted such or if the rejection is not executed by Lender. If such offer
is accepted by Landlord, Tenant shall pay to Landlord the Offer Amount on the
Abandonment Date and, provided an Event of Default does not then exist
hereunder, at the request of Tenant, Landlord shall convey to Tenant the
Abandonment Premises in accordance with the provisions of Paragraph 20.
(f) Landlord shall have the right, at Landlord's sole
option, to treat any vacating or abandonment of the Abandonment Premises which
is prohibited pursuant to Paragraph 22(a)(viii) hereof as constituting an
election by Tenant of its rights under this Paragraph 35 and as an irrevocable
offer of Tenant to purchase the Abandonment Premises at the price and upon the
terms hereinabove more specifically provided.
36. Miscellaneous.
(a) The paragraph headings in this Lease are used only
for convenience in finding the subject matters and are not part of this Lease or
to be used in determining the intent of the parties or otherwise interpreting
this Lease.
(b) As used in this Lease, the singular shall include the
plural and any gender shall include all genders as the context requires and the
following words and phrases shall have the following meanings: (i) "including"
shall mean "including without limitation"; (ii) "provisions" shall mean
"provisions, terms, agreements, covenants and/or conditions"; (iii) "lien" shall
mean "lien, charge, encumbrance, title retention agreement, pledge, security
interest, mortgage and/or deed of trust"; (iv) "obligation" shall mean
"obligation, duty, agreement, liability, covenant and/or condition"; (v) "any of
the Leased Premises" shall mean "the Leased Premises or any part
-57-
<PAGE> 60
thereof or interest therein"; (vi) "any of the Land" shall mean "the Land or any
part thereof or interest therein"; (vii) "any of the Improvements" shall mean
"the Improvements or any part thereof or interest therein"; (viii) "any of the
Equipment" shall mean "the Equipment or any part thereof or interest therein";
and (ix) "any of the Adjoining Property" shall mean "the Adjoining Property or
any part thereof or interest therein".
(c) Any act which Landlord is permitted to perform under
this Lease may be performed at any time and from time to time by Landlord or any
person or entity designated by Landlord. Each appointment of Landlord as
attorney-in-fact for Tenant hereunder is irrevocable and coupled with an
interest. Except as otherwise specifically provided herein (including Paragraph
21 hereof), neither Landlord nor Tenant shall unreasonably withhold, delay or
condition its consent whenever such consent is required under this Lease. Time
is of the essence with respect to the performance by Tenant of its obligations
under this Lease.
(d) Landlord shall in no event be construed for any
purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant, operator, concessionaire or licensee of Tenant with respect to any of
the Leased Premises or otherwise in the conduct of their respective businesses.
(e) This Lease and any documents which may be executed by
Tenant on or about the effective date hereof at Landlord's request constitute
the entire agreement between the parties and supersede all prior understandings
and agreements, whether written or oral, between the parties hereto relating to
the Leased Premises and the transactions provided for herein. Landlord and
Tenant are business entities having substantial experience with the subject
matter of this Lease and have each fully participated in the negotiation and
drafting of this Lease. Accordingly, this Lease shall be construed without
regard to the rule that ambiguities in a document are to be construed against
the drafter.
(f) This Lease may be modified, amended, discharged or
waived only by an agreement in writing signed by the party against whom
enforcement of any such modification, amendment, discharge or waiver is sought.
(g) The covenants of this Lease shall run with the land
and bind Tenant, its successors and assigns and all present and subsequent
encumbrancers and subtenants of any of the Leased Premises, and shall inure to
the benefit of Landlord, its successors and assigns. If there is more than one
Tenant, the obligations of each shall be joint and several.
(h) Notwithstanding any provision in this Lease to the
contrary, all Surviving Obligations of Tenant shall
-58-
<PAGE> 61
survive the expiration or termination of this Lease with respect to any Related
Premises.
(i) If any one or more of the provisions contained in
this Lease shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Lease, but this Lease shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
(j) All exhibits attached hereto are incorporated herein
as if fully set forth.
(k) This Lease shall be governed by and construed and
enforced in accordance with the Laws of the State.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
duly executed under seal as of the day and year first above written.
LANDLORD:
CAN (WI) QRS 12-34, INC.,
a Wisconsin corporation
By: _________________________________
First Vice President
ATTEST: TENANT:
SILGAN CONTAINERS CORPORATION,
a Delaware corporation
By: ______________________________ By: _________________________________
Title: ___________________________ Title: ______________________________
[Corporate Seal]
-59-
<PAGE> 62
EXHIBIT A
Oconomowoc Premises:
Parcel Three (3) of Certified Survey Map No. 8005, being a redivision of Parcel
Three (3) of Certified Survey Map No. 8004, being a redivision of Parcel Two (2)
of Certified Survey Map No. 7410, being a redivision of Parcel Two (2) of
Certified Survey Map No. 6786, being a part of the Northeast one-quarter (1/4),
Northwest one-quarter (1/4), Southeast one-quarter (1/4) and Southwest
one-quarter (1/4) of the Northwest one-quarter (1/4) of Section Fifteen (15),
and Parcel Three (3) of Certified Survey Map No. 6554, being a part of the
Northwest one-quarter (1/4) and the Southwest one-quarter (1/4) of the Northwest
one-quarter (1/4) of Section Fifteen (15), Township Seven (7) North, Range
Seventeen (17) East, in the City of Oconomowoc, Waukesha County, State of
Wisconsin recorded in the Office of the Register of Deeds for Waukesha County,
recorded on May 3, 1996 in Volume 69 of Certified Survey Maps, Pages 196 to 199
inclusive, as Document No. 2121036.
SAID LANDS ARE ALSO DESCRIBED AS:
Parcel Three (3) of CERTIFIED SURVEY MAP NO. 8055, being a redivision of Parcel
Three of Certified Survey Map No. 8044, being a redivision of Parcel Two (2) of
Certified Survey Map No. 7410, being a redivision of Parcel Two (2) of Certified
Survey Map No. 6786, being a part of the Northeast one-quarter (1/4), Northwest
one-quarter (1/4), Southeast one-quarter (1/4) and Southwest one-quarter (1/4)
of the Northwest one-quarter (1/4) of Section Fifteen (15), and Parcel Three (3)
of Certified Survey Map No. 6554, being a part of the Northwest one-quarter
(1/4) and the Southwest one-quarter (1/4) of the Northwest one-quarter (1/4) of
Section Fifteen (15), in Township Seven (7) North, Range Seventeen (17) East, in
the City of Oconomowoc, County of Waukesha, State of Wisconsin, bounded and
described as follows: Commencing at the Northwest corner of said Northwest 1/4
Section; thence South 01(degree) 16' 53" West along the West line of said 1/4
Section 1625.06 feet to a point; thence South 89(degree) 06' 49" East 1480.80
feet to a point; thence North 01(degree) 28' 09" East 160.46 feet to a point;
thence South 87(degree) 52' 44" East 326.06 feet to the point of beginning of
the lands to be described; thence continuing South 87(degree) 52' 44" East
411.00 feet to the Westerly line of Corporate Center Drive; thence South
02(degree) 07' 15" West along said Westerly line 211.95 feet to a point; thence
Southerly 308.78 feet along said Westerly line and the arc of a curve whose
center lies to the Northwest, whose radius is 338.00 feet and whose chord bears
South 28(degree) 17' 30.5" West 298.15 feet to a point; thence South 54(degree)
27' 46" West along said Westerly line 103.48 feet to a point; thence Westerly
207.28 feet along said Westerly line and the arc of a curve whose center lies to
the Northwest, whose radius is 393.42 feet and whose chord bears South
69(degree) 33' 22" West 204.89 feet to a point; thence North 01(degree) 20' 55"
East 621.43 feet to the point of beginning.
<PAGE> 63
EXHIBIT A
Known as 1190 Corporate Center Drive.
Tax Key No. Part of ococ 634-999-036
<PAGE> 64
Menomonie Premises:
PARCEL A
Lot Twenty-four (24) of Certified Survey Map No. 670, as recorded in Volume 3 of
Survey Maps, Page 64; Being a part of Lot Twenty-one (21) of Certified Survey
Map No. 511; Being a part of the Southwest Quarter (SW-1/4) of the Northwest
Quarter (NW-1/4) and the Northwest Quarter (NW-1/4) of the Northwest Quarter
(NW-1/4) of Section Twenty (20), Township Twenty-eight (28) North, Range Twelve
(12) West, CITY OF MENOMONIE, Dunn County, Wisconsin.
ADDRESS OF PROPERTY: 1416 Indianhead Drive NE
Menomonie, WI 54751
TAX PARCEL NO. 251-1005-10 aka M1220-0221-A
PARCEL B
Lot Thirteen (13) of Certified Survey Map No. 510, as recorded in Volume 2 of
Survey Maps, Page 240; Being a part of the West One-half (W-1/2) of the
Northwest Quarter (NW-1/4) of Section Twenty (20), Township Twenty-eight (28)
North, Range Twelve (12) West, CITY OF MENOMONIE, Dunn County, Wisconsin;
EXCEPT the South 40 feet thereof which was formerly the North One-half (N-1/2)
of the vacated Public Street previously abutting this Lot.
ALSO
Lot Twenty-five (25) of Certified Survey Map No. 670, as recorded in Volume 3 of
Survey Maps, Page 64; Being a part of Lot Twenty-one (21) of Certified Survey
Map No. 511; Being a part of the West One-half (W-1/2)of the Northwest Quarter
(NW-1/4) of Section Twenty (20), Township Twenty-eight (28) North, Range Twelve
(12) West, CITY OF MENOMONIE, Dunn County, Wisconsin.
ADDRESS OF PROPERTY: 1416 Indianhead Drive NE
Menomonie, WI 54751
<PAGE> 65
TAX PARCEL NOS. 251-1005-06 aka M1220-0213
251-1005-10-005 aka M1220-0221-C
PARCEL C
Lots Seven (7) and Eight (8) of Certified Survey Map No. 512, as recorded in
Volume 2 of Survey Maps, Page 242; Being a part of the Southwest Quarter
(SW-1/4) of the Northwest Quarter (NW-1/4) of Section Twenty (20), Township
Twenty-eight (28) North, Range Twelve (12) West, CITY OF MENOMONIE, Dunn County,
Wisconsin.
ADDRESS OF PROPERTY: 1409 Indianhead Drive NE
Menomonie, WI 54751
TAX PARCEL NO. 251-1005-02 aka M1220-0207
<PAGE> 66
EXHIBIT B
MACHINERY AND EQUIPMENT
All fixtures, machinery, apparatus, equipment, fittings and
appliances of every kind and nature whatsoever now or hereafter affixed or
attached to the Leased Premises (except as hereafter provided), including all
electrical, anti-pollution, heating, lighting (including hanging fluorescent
lighting), incinerating, power, air cooling, air conditioning, humidification,
sprinkling, plumbing, lifting, cleaning, fire prevention, fire extinguishing and
ventilating systems, devices and machinery and all engines, pipes, pumps, tanks
(including exchange tanks and fuel storage tanks), motors, conduits, ducts,
steam circulation coils, blowers, steam lines, compressors, oil burners,
boilers, doors, windows, loading platforms, lavatory facilities, stairwells,
fencing (including cyclone fencing), passenger and freight elevators, overhead
cranes and garage units, together with all additions thereto, substitutions
therefor and replacements thereof required or permitted by this Lease.
Excluding all personal property and all trade fixtures,
machinery, office, manufacturing and warehouse equipment of Tenant which are not
necessary to the operation, as buildings, of the buildings which constitute part
of the Leased Premises, including specifically without limitation the following:
Oconomowoc Premises:
1. Boiler for Process Area
2. 61 tracked shelving units located in Temperature
Storage Rooms
3. One 40 degree temperature storage unit
4. One 120 degree temperature storage unit
5. All laboratory cabinetry and fixtures including exhaust
hoods
6. One air compressor with dryer
Menomonie Premises:
1. Propane storage tanks (fuel for lift trucks)
2. Compressors, Dryers, Storage tanks and Controls for
compressed air system.
3. Phone system.
4. Racks and shelves for spare parts and tools storage.
<PAGE> 67
EXHIBIT C
PERMITTED ENCUMBRANCES
Oconomowoc Premises:
1. General and real estate taxes for the year 1997, not yet
due and payable.
2. Reservation for utility easement as shown on the recorded
plat of Certified Survey Map No. 8005. Said easement was also shown on the
recorded Certified Survey Map Nos. 7410, 6786, 6657 and 6555 which said premises
were formerly a part, and as shown on the ALTA/ACSM Land Title Survey prepared
by Donald C. Chaput dated April 11, 1997 and being Survey No. 157102.
3. Reservation for drainage easement as shown on the recorded
plat of Certified Survey Map No. 8005. Said easement was also shown on the
recorded Certified Survey Map Nos. 7410, 6786, 6657 and 6555 which said premises
were formerly a part, and as shown on the ALTA/ACSM Land Title Survey prepared
by Donald C. Chaput dated April 11, 1997 and being Survey No. 157102.
4. Utility easement recorded on July 29, 1950 in Volume 524 of
Deeds, Page 313, as Document No. 340756.
5. Restrictions, conditions, covenants, provisions, easement,
obligations, repurchase rights and assessments contained in a Declaration of
Protective Covenants for Oconomowoc Corporate Center recorded on November 29,
1990 in Reel 1257, Image 977, as Document No. 1624247.
6. Tax Incremental District Development Agreement recorded on
November 29, 1990 in Reel 1257, Image 879, as Document No. 1624246.
7. Rights of parties in possession.
Menomonie Premises:
1. All assessments and taxes due in 1998 and thereafter, not
yet due and payable.
2. Taxes due in 1997 for the year 1996 are postponed; balance
due July 31, 1997.
<PAGE> 68
EXHIBIT C
3. The lien of special taxes or assessments, if any, due in
1998 and thereafter, not yet due and payable.
4. Easement to construct, operate and maintain lines for the
transmission of electrical energy as granted to Northern States Power Company,
dated May 16, 1974 and recorded March 8, 1979, in Vol. 284 Records, Page 230, as
Document #327564.
5. Avigation Easement as shown on Map of Survey recorded
August 16, 1993, in Vol. 514 Records, Page 216, as Document #404895, and as
shown on Map of Survey by Cedar Corp. dated April 17, 1997, last revised May 5,
1997.
6. Avigation Easement as shown on Map of Survey recorded
August 16, 1993, in Vol. 514 Records, Page 218, as Document #404896, and as
shown on Map of Survey by Cedar Corp. dated April 17, 1997, last revised May 5,
1997.
7. Building setback lines as shown on Map of Survey by Cedar
Corp. dated April 17, 1997, last revised May 5, 1997.
8. Rights of parties in possession.
<PAGE> 69
EXHIBIT D
BASIC RENT PAYMENTS
1. Basic Rent. Subject to the adjustments provided for in
Paragraphs 2, 3 and 4 below, Basic Rent payable in respect of the Term shall be
$893,200 per annum, payable quarterly in advance on each Basic Rent Payment
Date, in equal installments of $223,300 each.
2. CPI Adjustments to Basic Rent. The Basic Rent shall be
subject to adjustment, in the manner hereinafter set forth, for increases in the
index known as United States Department of Labor, Bureau of Labor Statistics,
Consumer Price Index, All Urban Consumers, United States City Average, All
Items, (1982-84=100) ("CPI") or the successor index that most closely
approximates the CPI. If the CPI shall be discontinued with no successor or
comparable successor index, Landlord and Tenant shall attempt to agree upon a
substitute index or formula, but if they are unable to so agree, then the matter
shall be determined by arbitration in accordance with the rules of the American
Arbitration Association then prevailing in New York City. Any decision or award
resulting from such arbitration shall be final and binding upon Landlord and
Tenant and judgment thereon may be entered in any court of competent
jurisdiction. In no event will the Basic Rent as adjusted by the CPI adjustment
be less than the Basic Rent in effect for the five (5) year period immediately
preceding such adjustment.
3. Effective Dates of CPI Adjustments. Basic Rent shall not be
adjusted to reflect changes in the CPI until the fifth (5th) anniversary of the
Basic Rent Payment Date on which the first full monthly installment of Basic
Rent shall be due and payable (the "First Full Basic Rent Payment Date"). As of
the fifth (5th) anniversary of the First Full Basic Rent Payment Date and
thereafter on the tenth (10th) and, if the initial Term is extended, on the
fifteenth (15th), twentieth (20th), twenty-fifth (25th) and thirtieth (30th)
anniversaries of the First Full Basic Rent Payment Date, Basic Rent shall be
adjusted to reflect increases in the CPI during the most recent five (5) year
period immediately preceding each of the foregoing dates (each such date being
hereinafter referred to as the "Basic Rent Adjustment Date").
4. Method of Adjustment for CPI Adjustment.
(a) As of each Basic Rent Adjustment Date when the
average CPI determined in clause (i) below exceeds the Beginning CPI (as defined
in this Paragraph 4(a)), the Basic Rent in effect immediately prior to the
applicable Basic Rent Adjustment Date shall be multiplied by a fraction, the
numerator of which shall be the difference between (i) the average CPI for the
three (3) most recent calendar months (the "Prior Months")
<PAGE> 70
ending prior to such Basic Rent Adjustment Date for which the CPI has been
published on or before the forty-fifth (45th) day preceding such Basic Rent
Adjustment Date and (ii) the Beginning CPI, and the denominator of which shall
be the Beginning CPI. An amount equal to the lesser of (A) the product of such
multiplication or (B) the product of the Basic Rent in effect immediately prior
to such Basic Rent Adjustment Date multiplied by 21.66% shall be added to the
Basic Rent in effect immediately prior to such Basic Rent Adjustment Date. As
used herein, "Beginning CPI" shall mean the average CPI for the three (3)
calendar months corresponding to the Prior Months, but occurring five (5) years
earlier. If the average CPI determined in clause (i) is the same or less than
the Beginning CPI, the Basic Rent will remain the same for the ensuing five (5)
year period.
(b) Notice of the new annual Basic Rent shall be
delivered to Tenant on or before the tenth (10th) Business Day preceding each
Basic Rent Adjustment Date.
(c) Effective as of a given Basic Rent Adjustment Date,
Basic Rent payable under this Lease until the next succeeding Basic Rent
Adjustment Date shall be the Basic Rent in effect after the adjustment provided
for as of such Basic Rent Adjustment Date.
<PAGE> 71
EXHIBIT E
PERCENTAGE ALLOCATION OF BASIC RENT
<TABLE>
<S> <C>
Menomonie Premises 48%
Oconomowoc Premises 52%
100%
----
</TABLE>
If either of the Related Premises ceases to be subject to this Lease, the
percentage shown on this Exhibit "F" for the remaining Related Premises which
remains subject to this Lease shall be 100%.
<PAGE> 72
EXHIBIT F
TERMINATION VALUES
<TABLE>
<CAPTION>
Lease Year Termination Value
<S> <C>
1 $8,523,000
2 $8,523,000
3 $8,523,000
4 $8,523,000
5 $8,523,000
6 $8,405,000
7 $8,365,500
8 $8,340,250
9 $8,310,500
10 $8,288,000
11 $8,255,500
12 $8,233,000
13 $8,228,000
14 $8,173,000
15 and thereafter $8,140,000
</TABLE>
The Termination Value allocable to the Menomonie Premises shall be 48% of the
applicable Termination Value specified above, and the Termination Value
allocable to the Oconomowoc Premises shall be 52% of the applicable Termination
Value specified above.
<PAGE> 73
EXHIBIT G
POST-CLOSING OBLIGATIONS
Oconomowoc Premises.
No later than September 1, 1997 Tenant shall cause a sealant material
to be placed in the gap between the floor and the walls in the hazardous
materials storage room to reduce the likelihood of any release to soil or
groundwater as recommended by Park Corporation in the Phase I Reports dated
April 17, 1997 ("Park Recommendation").
Menomonie Premises.
No later than September 1, 1997 Tenant shall implement the Park
Recommendation for secondary containment around hazardous materials storage
areas.
