-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, DWuL8YiR92u+2dAI2fNtMPq2ZkvZqos8pkLzWvvolt3OhLEDq7hB9ciEoOqQtwAv wKMCUPKF6sSjNvb71046Xw== 0000950148-94-000443.txt : 19941117 0000950148-94-000443.hdr.sgml : 19941117 ACCESSION NUMBER: 0000950148-94-000443 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941110 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KERR GROUP INC CENTRAL INDEX KEY: 0000055454 STANDARD INDUSTRIAL CLASSIFICATION: 3221 IRS NUMBER: 950898810 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07272 FILM NUMBER: 94558775 BUSINESS ADDRESS: STREET 1: 1840 CENTURY PARK EAST CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 310-556-2200 MAIL ADDRESS: STREET 1: 1840 CENTURY PARK EAST CITY: LOS ANGELES STATE: CA ZIP: 90067 FORMER COMPANY: FORMER CONFORMED NAME: KERR GLASS MANUFACTURING CORP DATE OF NAME CHANGE: 19920518 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1994 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission File Number 1 - 7272 ------------------- KERR GROUP, INC. - - - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 95-0898810 - - - ------------------------------------------ ------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1840 Century Park East, Los Angeles, CA 90067 - - - ------------------------------------------ ------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (310) 556-2200 ------------------------- - - - ------------------------------------------------------------------------------ Former name, former address and former fiscal year, if changed since last year. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No ____ The number of shares of Registrant's Common Stock, $.50 par value, outstanding as of October 31, 1994 was 3,677,095. - 1 - 2 KERR GROUP, INC. INDEX
Page No. -------- Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets - September 30, 1994 and December 31, 1993 3 - 4 Condensed Consolidated Statements of Earnings (Loss) - Three Months and Nine Months Ended September 30, 1994 and 1993 5 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1994 and 1993 6 Notes to Condensed Consolidated Financial Statements 7 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 10 Part II. Other Information 11
- 2 - 3 KERR GROUP, INC. Consolidated Balance Sheets As of September 30, 1994 and December 31, 1993 (in thousands except per share data)
(Unaudited) (Audited) September 30, December 31, Assets 1994 1993 - - - ------ ------------- ------------ Current assets Cash and cash equivalents $ 2,926 $ 11,329 Receivables-primarily trade accounts, less allowance for doubtful accounts of $724 at September 30, 1994 and $578 at December 31, 1993 21,618 13,533 Inventories Raw materials and work in process 10,453 8,906 Finished goods 18,685 19,126 -------- -------- Total inventories 29,138 28,032 Prepaid expenses and other current assets 1,955 2,527 Deferred income taxes 1,854 0 -------- -------- Total current assets 57,491 55,421 -------- -------- Property, plant and equipment, at cost 98,373 90,652 Accumulated depreciation and amortization (55,328) (50,228) -------- -------- Net property, plant and equipment 43,045 40,424 -------- -------- Goodwill and other intangibles, net of amortization of $2,388 at September 30, 1994 and $2,122 at December 31, 1993 6,788 6,645 Deferred income taxes 2,981 6,629 Other assets 4,125 4,201 Non-current assets related to discontinued operations 4,479 4,029 -------- -------- $118,909 $117,349 ======== ========
See accompanying notes to condensed consolidated financial statements. - 3 - 4 KERR GROUP, INC. Consolidated Balance Sheets (continued) As of September 30, 1994 and December 31, 1993 (in thousands except per share data)
(Unaudited) (Audited) September 30, December 31, Liabilities and Stockholders' Equity 1994 1993 - - - ------------------------------------ ------------- ------------ Current liabilities Short-term debt $ 1,000 $ 0 Accounts payable 10,461 9,573 Accrued expenses 7,594 9,089 -------- -------- Total current liabilities 19,055 18,662 -------- -------- Accrued pension liability 16,745 18,321 Other long-term liabilities 1,889 2,302 Senior long-term debt 50,000 50,000 Stockholders' equity Preferred Stock, 487 shares authorized and issued, at liquidation value of $20 per share 9,748 9,748 Common Stock, $ .50 par value per share, 20,000 shares authorized, 4,220 shares issued at September 30, 1994 and 4,210 shares issued at December 31, 1993 2,110 2,105 Additional paid-in capital 27,210 27,145 Retained earnings 11,971 9,420 Treasury Stock, 543 shares at cost (12,803) (12,803) Excess of additional pension liability over unrecognized prior service cost, net of tax benefits (6,835) (6,835) Notes receivable from ESOP Trusts (181) (716) -------- -------- Total stockholders' equity 31,220 28,064 -------- -------- $118,909 $117,349 ======== ========
See accompanying notes to condensed consolidated financial statements. - 4 - 5 KERR GROUP, INC. Condensed Consolidated Statements of Earnings (Loss) for the Three Months and Nine Months Ended September 30, 1994 and 1993 (in thousands except per share data)
(Unaudited) (Unaudited) Three Months Nine Months Ended September 30, Ended September 30, ------------------------- -------------------------- 1994 1993 1994 1993 --------- --------- ---------- ----------- Net sales $40,624 $34,448 $111,008 $99,235 Cost of sales 28,617 24,616 76,749 69,674 ------- ------- -------- ------- Gross profit 12,007 9,832 34,259 29,561 Selling, warehouse, general and administrative expense 8,559 7,594 25,337 22,915 Interest expense 1,263 1,457 3,727 4,473 Interest and other income (66) (199) (297) (671) ------- ------- -------- ------- Earnings before income taxes 2,251 980 5,492 2,844 Provision for income taxes 941 428 2,320 1,189 ------- --------- -------- ------- Earnings before extraordinary item 1,310 552 3,172 1,655 Extraordinary loss on retirement of debt 0 (1,300) 0 (1,300) ------- -------- -------- ------- Net earnings (loss) $ 1,310 $ (748) $ 3,172 $ 355 Preferred stock dividends 207 207 621 621 ------- -------- -------- ------- Net earnings (loss) applicable to common stockholders $ 1,103 $ (955) $ 2,551 $ (266) ======= ======== ======== ======= Net earnings (loss) per common share, primary and fully diluted: Earnings per common share before extraordinary item $ 0.30 $ 0.09 $ 0.69 $ 0.28 Extraordinary loss per common share on retirement of debt 0.00 (0.35) 0.00 (0.35) ------- -------- -------- ------- Net earnings (loss) per common share $ 0.30 $ (0.26) $ 0.69 $ (0.07) ======= ======== ======== =======
See accompanying notes to condensed consolidated financial statements. - 5 - 6 KERR GROUP, INC. Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1994 and 1993 (in thousands)
(Unaudited) Nine Months Ended September 30, --------------------------- 1994 1993 ------------ ---------- Cash flows provided (used) by operations - - - ---------------------------------------- Earnings before extraordinary item $ 3,172 $ 1,655 Add (deduct) noncash items included in net earnings Depreciation and amortization 5,773 5,541 Change in deferred income taxes 1,794 726 Reduction in long-term pension liability (1,576) (1,374) Other, net 225 (804) Changes in other operating working capital Receivables (8,085) (3,912) Inventories (1,106) (2,246) Prepaid expenses 594 (909) Accounts payable and accrued expenses 2,518 (962) -------- -------- Cash flows provided (used) by operations 3,309 (2,285) -------- -------- Cash flows provided (used) by investing activities - - - -------------------------------------------------- Capital expenditures (8,178) (5,542) Payments associated with relocation of home canning cap and lid operations (2,440) 0 Collection of accounts receivable, and payment of accounts payable and accrued and other expenses related to discontinued operations (1,802) (2,440) Other, net (276) (1,388) -------- -------- Cash flows used by investing activities (12,696) (9,370) -------- -------- Cash flows provided (used) by financing activities - - - -------------------------------------------------- Net borrowings under lines of credit 1,000 0 Issuance of Senior Notes 0 50,000 Extinguishment of Subordinated Debt 0 (41,131) Retirement of long-term debt 0 (1,000) Dividends paid (621) (621) Other 605 344 -------- -------- Cash flows provided by financing activities 984 7,592 -------- -------- Cash and cash equivalents - - - ------------------------- Decrease during the period (8,403) (4,063) Balance at beginning of the period 11,329 19,251 -------- -------- Balance at end of the period $ 2,926 $ 15,188 ======== ========
See accompanying notes to condensed consolidated financial statements - 6 - 7 KERR GROUP, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 1) General The condensed consolidated financial statements include the accounts of Kerr Group, Inc. and its wholly owned subsidiary (collectively referred to as the Company). In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Company as of September 30, 1994, the results of operations for the three months and nine months ended September 30, 1994 and 1993, and changes in cash flows for the nine months ended September 30, 1994 and 1993. The results of operations for the first nine months of 1994 are not necessarily indicative of the results to be expected for the full year. 2) Earnings Per Share Fully diluted earnings per common share reflect when dilutive, 1) the incremental common shares issuable upon the assumed exercise of outstanding stock options, and 2) the assumed conversion of the Preferred Stock and the elimination of the related Preferred Stock dividends. The calculation of fully diluted net earnings (loss) per common share for the three and nine months ended September 30, 1994 and 1993 was not dilutive. 3) Debt On May 2, 1994, the Company replaced its two existing unsecured $6,000,000 short-term lines of credit with two unsecured $10,000,000 short-term lines of credit. The lines of credit provide for the seasonal working capital needs of the Company. The $10,000,000 lines of credit are committed through April 30, 1995. One of the $10,000,000 lines of credit provides for borrowings to bear interest at either the prime rate of the lender or, alternatively, Eurodollar rate plus 1.5% and charges a facility fee of 0.5% per annum on the commitment. The other $10,000,000 line of credit provides for borrowings to bear interest at the prime rate of the lender and charges a facility fee of 0.75% per annum on the commitment. The lines of credit contain covenants identical to the Senior Notes. - 7 - 8 KERR GROUP, INC. Computation of Earnings (Loss) Per Common Share (in thousands except per share data)
(Unaudited) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------- -------------------- 1994 1993 1994 1993 ------ ------ ------ ------ Primary Net Earnings (Loss) Per Common Share Net earnings (loss) $1,310 $ (748) $3,172 $ 355 Less Preferred Stock dividends (207) (207) (621) (621) ------ ------ ------ ------ Net earnings (loss) applicable to primary earnings per common share $1,103 $ (955) $2,551 $ (266) ====== ====== ====== ====== Weighted average number of common shares outstanding 3,677 3,667 3,673 3,670 ====== ====== ====== ====== Primary net earnings (loss) per common share $ 0.30 $(0.26) $ 0.69 $(0.07) ====== ====== ====== ====== Fully Diluted Net Earnings (Loss) Per Common Share - - - -------------------------------------------------- Net earnings (loss) applicable to primary earnings per common share $1,103 $ (955) $2,551 $ (266) Add Preferred Stock dividends 207 207 621 621 ------ ------ ------ ------ Net earnings (loss) applicable to fully diluted earnings per common share $1,310 $ (748) $3,172 $ 355 ====== ====== ====== ====== Weighted average number of common shares outstanding 3,677 3,667 3,673 3,670 Common shares issuable upon assumed conversion of Preferred Stock 709 709 709 709 Incremental common shares issuable upon assumed exercise of outstanding stock options 22 8 22 8 ------ ------ ------ ------ Adjusted weighted average number of common shares outstanding 4,408 4,384 4,404 4,387 ====== ====== ====== ====== Fully diluted net earnings (loss) per common share: As computed $ 0.30 $(0.17) $ 0.72 $ 0.08 ====== ====== ====== ====== As reported(a) $ 0.30 $(0.26) $ 0.69 $(0.07) ====== ====== ====== ======
(a) The calculation of fully diluted net earnings (loss) per common share for the three and nine months ended September 30, 1994 and 1993 was not dilutive. -8- 9 KERR GROUP, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months and Nine Months Ended September 30, 1994 and 1993 Results of Operations Net sales for the three months ended September 30, 1994 were $40,624,000 as compared to $34,448,000 for the three months ended September 30, 1993, an increase of $6,176,000 or 17.9%. The increase in net sales for the three months ended September 30, 1994 over the comparable period in 1993 was due primarily to higher unit sales in the Consumer Products and Plastic Products Businesses. Net sales for the nine months ended September 30, 1994 were $111,008,000 as compared to $99,235,000 for the nine months ended September 30, 1993, an increase of $11,773,000 or 11.9%. The increase in net sales for the nine months ended September 30, 1994 over the comparable period in 1993 was due primarily to higher unit sales in the Plastic Products and Consumer Products Businesses. Cost of sales for the three months ended September 30, 1994 were $28,617,000 as compared to $24,616,000 for the three months ended September 30, 1993, an increase of $4,001,000 or 16.3%. Cost of sales for the nine months ended September 30, 1994 were $76,749,000 as compared to $69,674,000 for the nine months ended September 30, 1993, an increase of $7,075,000 or 10.2%. The increase for both periods in 1994 over comparable periods in 1993 was due primarily to higher unit sales. Gross profit as a percent of net sales for the three months ended September 30, 1994 increased to 29.6% as compared to 28.5% for the three months ended September 30, 1993. Gross profit as a percent of net sales for the nine months ended September 30, 1994 increased to 30.9% as compared to 29.8% for the nine months ended September 30, 1993. Selling, warehouse, general and administrative expenses increased $965,000 or 12.7% during the three months ended September 30, 1994, as compared to the same period in 1993. The increase for the three months was primarily due to salary and wage increases, higher bad debt expense, additional employees and higher legal and professional fees. Selling, warehouse, general and administrative expenses increased $2,422,000 or 10.6% during the nine months ended September 30, 1994, as compared to the same period in 1993. The increase for the nine months was primarily due to additional employees, higher bad debt expense, and salary and wage increases. Net interest expense decreased $61,000 and $372,000 during the three month and nine month periods ended September 30, 1994, respectively, as compared to the same periods in 1993, as a result of the refinancing of the Company's long-term debt on September 21, 1993. Earnings before income taxes increased $1,271,000 during the three months ended September 30, 1994, as compared to the same period in 1993 due to higher earnings in both the Consumer Products and Plastic Products Businesses. Earnings before income taxes increased $2,648,000 during the nine months ended September 30, 1994 as compared to the same period in 1993 due to higher earnings in both the Consumer Products and Plastic Products Businesses and lower interest expense as a result of the refinancing of the Company's long-term debt on September 21, 1993. Earnings of the Consumer Products Business increased significantly in the three month and nine month periods of 1994 as compared to the same periods in 1993 due to higher sales as a result of favorable weather and growing conditions in many areas of the country where the Company markets home canning supplies, compared to the adverse weather conditions experienced during 1993. The provision for income taxes increased $513,000 and $1,131,000 during the three month and nine month periods ended September 30, 1994, respectively, as compared to the same periods in 1993 due primarily to higher pretax earnings. - 9 - 10 The Company successfully completed the relocation of its home canning cap and lid manufacturing operations to Jackson, Tennessee during August 1994. The new facility is ultimately expected to result in improved efficiencies and cost reductions of approximately $3,000,000 pre-tax per year ($1,836,000 after-tax, or 50 cents per common share per year). In anticipation of the relocation, the Company produced home canning caps and lids in excess of normal requirements. As a result, the Company will not realize significant earnings improvement from the relocation until 1996, when inventories and production volume are at normal levels. The Company's sales and earnings are usually higher in the second and third quarters and lower in the first and fourth quarters because of the seasonal nature of the sales of home canning supplies. Extraordinary Loss During the third quarter of 1993, the Company incurred an after-tax loss of $1,300,000 or 35 cents per common share (primary and fully diluted) in connection with the refinancing on September 21, 1993 of its 13% Subordinated Notes and the termination of its revolving credit facility. The extraordinary loss included interest expense on the 13% Subordinated Notes from September 21, 1993 through December 15, 1993 (the date on which the Subordinated Notes were redeemed at par) and the write-off of unamortized debt fees and related costs. Financial Condition Cash flow was generated by operations in the nine months ended September 30, 1994 in the amount of $3,309,000 and used by operations in the nine months ended September 30, 1993 in the amount of $2,285,000. The comparable improvement in funds provided by operations is due primarily to higher pretax earnings and lower working capital requirements. Cash flow was used by investing activities in the nine months ended September 30, 1994 in the amount of $12,696,000 and in the nine months ended September 30, 1993 in the amount of $9,370,000, primarily related to capital expenditures and cash costs associated with discontinued operations and also in 1994 related to the Company's relocation of its home canning cap and lid operations. Cash flow was provided by financing activities in the nine months ended September 30, 1994 in the amount of $984,000 primarily attributable to borrowings under the Company's working capital lines of credit. Cash flow was generated by financing activities in the nine months ended September 30, 1993 in the amount of $7,592,000, primarily attributable to the sale of $50 million principal amount of unsecured Senior Notes to a group of insurance companies. A portion of the proceeds from that sale were deposited with a trustee to provide for the redemption of all of the $40,000,000 principal amount of 13% Subordinated Notes on December 15, 1993 when they became redeemable at par. The ratio of current assets to current liabilities at both September 30, 1994 and December 31, 1993 was 3.0. The ratio of total debt to total capitalization decreased to 62.0% at September 30, 1994 from 64.1% at December 31, 1993 due primarily to higher retained earnings of the Company. As of September 30, 1994, the Company had two unsecured $10,000,000 lines of credit with two banks to provide for the seasonal working capital needs of the Company. The lines of credit are committed through April 30, 1995. The lines of credit provide the Company with a source of working capital which the Company believes will be sufficient to meet its anticipated needs. At September 30, 1994, the Company had unused sources of liquidity consisting of cash and cash equivalents of $2,926,000, unused committed credit under bank lines of credit of $19,000,000, of which $11,068,000 could be borrowed under the terms of the Company's Senior Note Agreement, tax net operating loss carryforwards of $2,640,000 and certain tax credit carryforwards of $1,975,000. - 10 - 11 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a. Exhibits 10.3 Lease dated October 5, 1989 between Century 21 Associates, as lessor, and Santa Fe Plastic Corporation, as lessee. 10.4 Amended and restated lease dated as of May 16, 1994 between Phoenician Properties, as lessor, and Kerr Group, Inc., as lessee. 10.5 Amendment dated May 18, 1994 by and between Century 21 Associates and Kerr Group, Inc. related to lease dated October 5, 1989. 10.6 Lease agreement dated June 30, 1994 between Bowling Green-Warren County Industrial Authority IV, Inc. and Kerr Group, Inc. b. Reports on Form 8-K There were no reports filed on Form 8-K for the three months ended September 30, 1994. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KERR GROUP, INC. November 10, 1994 By /s/ D. Gordon Strickland ------------------------------- D. Gordon Strickland Senior Vice President, Finance, Chief Financial Officer November 10, 1994 By /s/ J. Stephen Grassbaugh ------------------------------- J. Stephen Grassbaugh Vice President, Controller, Chief Accounting Officer - 11 - EX-10.3 2 EX-10.3 TO FORM 10-Q 1 EXHIBIT 10.3 LEASE BETWEEN CENTURY 21 ASSOCIATES, AS LESSOR, AND SANTA FE PLASTIC CORPORATION, AS LESSEE DATED: OCTOBER 5, 1989 2 INDEX
Article No. Title Page - - - ----------- ----- ---- 1 Rent Payments; Additional Rent............................ 2 2 Repairs .................................................. 3 3 Compliance With Laws...................................... 4 4 Surrender At End Of Term.................................. 6 5 Mechanics' Liens.......................................... 7 6 Inspection by Lessor...................................... 8 7 Mortgaging................................................ 8 8 Indemnification Of Lessor................................. 11 9 Insurance; Restoration.................................... 12 10 Condemnation.............................................. 17 11 Assignment And Subletting................................. 18 12 Taxes..................................................... 20 13 Defaults.................................................. 22 14 No Reinstatement.......................................... 28 15 Subordination............................................. 29 16 Quiet Enjoyment........................................... 31 17 Successors And Assigns.................................... 31 18 Alterations............................................... 31 19 Notices................................................... 33 20 No Waiver................................................. 34 21 Remedies Cumulative....................................... 35 22 Entire Agreement.......................................... 36 23 Representations Of Lessor................................. 36 24 Indemnification Of Lessee................................. 37 25 Estoppel Certificates..................................... 38 26 Certain Definitions....................................... 39 27 Extension of Term......................................... 40 28 Purchase Option........................................... 40 29 Conditions Precedent...................................... 43 30 Hazardous Waste/Substances................................ 46 31 Signage................................................... 48 32 Purposes.................................................. 49
3 This Lease made this 5th day of October, 1989, between CENTURY 21 ASSOCIATES, a Tennessee general partnership, having its principal office at P.O. Box 200, Jackson, Tennessee 38302, attention Larry Becker ("Lessor") and Santa Fe Plastic Corporation, a California corporation, having its principal office at 9601 John Street, Santa Fe Springs, Caliornia 90670 ("Lessee"). WITNESSETH: Lessor leases to the Lessee, and the Lessee leases from the Lessor, the real property described in Exhibit "A" attached to and made a part of this Lease, together with all rights, privileges, easements, appurtenances and amenities belonging or in any way pertaining thereto, and together with a building containing 104,800 square feet constructed on the real property (the "Demised Premises"). To have and to hold for a term commencing on the date that the Lessee has received possession of the Demised Premises in accordance with the provisions of Article 29 (the "Commencement Date") and ending on the date that is thirteen (13) years after the Commencement Date (unless sooner terminated as hereinafter provided) at the net annual rental of Three Hundred Fourteen Thousand Four Hundred Dollars ($314,400.00) payable commencing upon the Commencement Date in equal monthly installments of Twenty Six Thousand Two Hundred Dollars $26,200.00) in advance on the first day of each month during the term. If the 4 Commencement Date does not occur on the first day of the month, Lessee shall pay rent for the fractional month on a per diem basis, calculated on the basis of a thirty (30) day month. The Lessor shall receive the net annual rental free from all taxes, assessments, charges, expenses, damages, repairs, maintenance and deductions of every description (except those damages or repairs caused by or resulting from acts of Lessor or its agents, contractors or employees), and Lessee shall pay all of these which, except for this Lease, would have been chargeable against the Demised Premises and payable by the Lessor. However, nothing contained in this Lease shall obligate Lessee to pay any interest or principal on any mortgage or other financing of Lessor's interest in the Demised Premises. Notwithstanding anything herein to the contrary, Lessee shall be entitled to an abatement of the first three (3) full months' rental payments. ARTICLE 1 RENT PAYMENTS; ADDITIONAL RENT 1.01. The Lessee will pay to the Lessor the rent reserved in this Lease, and all other sums that may become due or be payable by the Lessee under this Lease, at the time and in the manner provided in this Lease. All of such other sums to be paid may, at the Lessor's option, be deemed to be additional rent to be added to any fixed rent then due or thereafter falling due, - 2 - 5 and in the event of non-payment, the Lessor shall have all the rights and remedies provided by this Lease in the case of non-payment of rent or of a breach of condition. Rental payments shall be tendered in legal tender and lawful money of the United States at the office of Lessor or such other place as Lessor may designate in writing. Rental payments shall be without setoff, abatement, deduction or other reduction whatsoever. ARTICLE 2 REPAIRS 2.01. The Demised Premises, together with the sidewalks adjacent thereto, shall be kept in good order and repair by the Lessee at the Lessee's sole cost and expense, and the Lessee shall make all repairs and replacements, ordinary as well as extraordinary, foreseen and unforeseen, of every kind and nature whatsoever, including necessary interior and exterior roof and wall maintenance and repair, that may be necessary or required in or about the same so that at all times those buildings, improvements, and sidewalks shall be in good order, condition, and repair. The Lessor shall, to the extent possible, assign to the Lessee, on the Commencement Date all manufacturers' and builders' or contractors' warranties for the improvements and equipment located on, or installed in, the Demised Premises. - 3 - 6 ARTICLE 3 COMPLIANCE WITH LAWS 3.01. LESSEE'S OBLIGATION TO COMPLY WITH LAWS - Lessee covenants to comply with any and all laws, statutes, ordinances and regulations, federal, state, county or municipal, now or hereinafter in force applicable to the Demised Premises relating to the use or occupancy thereof or to the making of repairs thereto, or of changes, alterations or, improvements therein, ordinary or extraordinary, structural or otherwise, seen or unforeseen, including but not limited to the performance of any duty imposed upon the Lessor or Lessee by such laws, statutes, ordinances or regulations in respect to the sidewalks, curbs, streets or vaults adjacent to the Demised Premises. The Lessee also covenants to comply with any and all regulations and rules applicable to the Demised Premises issued by the Board of Fire Underwriters, or by any other body exercising similar functions, and insurance companies writing policies covering the Demised Premises which now or hereafter may become applicable to the Demised Premises. Lessee shall have the right to contest by appropriate legal proceedings diligently conducted in good faith, in the name of the Lessee, or Lessor (if legally required) or both (if legally required), without cost or expense to Lessor, the validity or application of any law, ordinance, order, rule, regulation or requirement of the nature referred to in this - 4 - 7 Article 3 and, if by the terms of any such law, ordinance, order, rule, regulation, or requirement, compliance therewith may legally be delayed pending the prosecution of any such proceeding, Lessee may delay such compliance therewith until the final determination of such proceeding. Lessee will indemnify Lessor against all adverse consequences of such contest, including court costs, interest, penalties or other expense including attorneys' fees. Lessee shall pay all costs, expenses, claims, fines, penalties and damages that may in any manner arise out of or be imposed because of the failure of Lessee to comply with this Article 3, and in any event agrees to indemnify the Lessor from all liability with reference to the same. The Lessor and Lessee shall each promptly give notice to the other in writing at the address listed in the Lease of any notice of violation received by the Lessee or Lessor, respectively. Without diminishing the obligation of the Lessee, if the Lessee shall at any time fail or neglect to comply, to the extent reasonably appropriate and as expeditiously as reasonably feasible, with any of said laws, rules, requirements, orders, directions, ordinances or regulations concerning or affecting the Demised Premises or the use and occupation thereof, or of any building thereof, as hereinbefore provided and, if a stay is necessary, shall have failed to obtain the stay or continuance thereof, the Lessor in addition to other remedies shall be at liberty, after ten (10) days prior written notice to Lessee, to - 5 - 8 comply therewith, and reasonable expenses consequent thereon shall be borne and paid by the Lessee; upon Lessee's failure so to pay, Lessor may pay the same and any payments so made by the Lessor, together with interest thereon to be computed at the rate of fourteen percent (14%) per annum from date of payment shall be considered as additional rent to be added to the installment of rent next accruing, and shall entitle the Lessor to enforce any of the terms, provisions, conditions and covenants herein contained that may be applicable to such rent. ARTICLE 4 SURRENDER AT END OF TERM 4.01. The Lessee will surrender and deliver up the Demised Premises, including, but not limited to, all buildings, improvements, hoists, pipes, plumbing, engines, electric wires, and fixtures used in connection with the operation of the Demised Premises (but no movable trade fixtures and equipment of occupants in possession of the Demised Premises) at the expiration of the term of this Lease or sooner termination, if the term, in good repair and condition, reasonable wear and tear thereof excepted. Notwithstanding the foregoing, the Lessee may, at its option, remove any furnishings, fixtures and equipment which it has installed (including, without limitation, any plumbing, pipes, wires, cables, or other apparatus in connection therewith). Upon any such removal, Lessee shall restore the - 6 - 9 Demised Premises to its original condition, reasonable wear and tear thereof excepted. All such removals and restoration shall be accomplished in a good workmanlike manner so as not to damage the primary structure or structural qualities of the buildings and other improvements which are a part of the Demised Premises. ARTICLE 5 MECHANICS' LIENS 5.01. Neither Lessor nor Lessee shall have the power to subject the Demised Premises or any interest in the Demised Premises to any mechanics' or other liens. If the mechanics' or other liens or order for the payment of money shall be filed against the Demised Premises or any building or improvement which is a part thereof by reason of or arising out of any labor or material furnished or alleged to have been furnished or to be furnished to or for the Lessor or the Lessee at the Demised Premises, or for or by reason of any change. alteration, or addition or the cost or expense thereof or any contract relating thereto, the party responsible for such lien (the "Responsible Party") shall cause the same to be cancelled and discharged of record, by bond or otherwise as allowed by law at the expense of the Responsible Party, within thirty-five (35) days after written demand therefor, and shall also defend on behalf of the party which is not responsible for such lien (the "Non-Responsible Party") at the Responsible Party's sole cost and expense, any - 7 - 10 action, suit or proceeding that may be brought thereon or for the enforcement of those liens, lien or orders, and the Responsible Party will pay any damages and satisfy and discharge any judgment entered therein and save harmless the Non-Responsible Party from any claim or damage resulting therefrom. ARTICLE 6 INSPECTION BY LESSOR 6.01. Lessee shall permit the Lessor and Lessor's agents to enter the Demised Premises, at reasonable hours and upon reasonable prior notice, to examine them. Lessee shall have the right to accompany or designate an agent to accompany Lessor on any examination of the Demised Premises made pursuant to this Article 6. ARTICLE 7 MORTGAGING 7.01. The term "Mortgage", whenever used herein, shall include whatever security instruments are used in the locale of the Demised Premises, such as, without limitation, deeds of trust, security deeds and conditional deeds, as well as financing statements, security agreements and other documentation required pursuant to the Uniform Commercial Code. Lessee and every successor and assignee of Lessee (including, but not limited to, - 8 - 11 any sublessee of Lessee, but only with Lessee's prior consent) is hereby given the right by Lessor in addition to any other rights herein granted, without Lessor's prior written consent, to mortgage its interests in this Lease and/or under a purchase money first or second leasehold Mortgage in connection with any sale of such interest, and assign this Lease, and any sublease(s) as collateral security for such Mortgage upon the condition that all rights acquired under such Mortgage shall be subject to all of the terms, covenants and conditions of this Lease, and to all rights and interests of lessor herein, none of which terms, covenants or conditions is or shall be waived by Lessor by reason of the right given so to mortgage such interest in this Lease, except as expressly provided herein. If Lessee and/or Lessee's successors and assigns (including, but not limited to, any sublessee of Lessee, but only with Lessee's prior consent) shall mortgage this leasehold, or any part or parts thereof, and if the holder of such Mortgage shall, within twenty (20) days of its execution, send to Lessor a true copy thereof, together with a notice specifying the name and address of the Mortgagee and the pertinent recording date with respect to such Mortgage, Lessor agrees that as long as any leasehold Mortgage shall remain unsatisfied of record or until a notice of satisfaction is given by the holder to Lessor, the following provisions shall apply: (a) Lessor shall, upon serving Lessee with any notice of default, simultaneously serve a copy of such notice upon the - 9 - 12 holder of such leasehold Mortgage. The leasehold Mortgagee shall thereupon have the same period, after service of such notice upon it, to remedy or cause to be remedied the defaults complained of, and Lessor shall accept such performance by or at the instigation of such leasehold Mortgagee as if the same had been done by Lessee; (b) Anything herein contained notwithstanding, while such leasehold Mortgage remains unsatisfied of record, or until written notice of satisfaction is given by the holder to Lessor, if any default shall occur which, pursuant to any provision of this Lease, entitles Lessor to terminate this Lease, and if before the expiration of ten (10) days from the date of the giving of notice of termination upon such leasehold Mortgagee, such leasehold Mortgagee shall have notified Lessor of its desire to nullify such notice and shall have paid to Lessor all basic rent and additional rent and other charges herein provided for which are then in default, and shall have complied or shall commence complying with all of the other requirements of this Lease (except as provided in paragraph (c) of this Article), if any are then in default, and shall prosecute the same to completion with reasonable diligence, then in such event, Lessor shall not be entitled to terminate this Lease and any notice of termination theretofore given shall be void and of no effect; - 10 - 13 (c) The leasehold Mortgagee shall be given notice of any arbitration proceedings by the parties hereto, and shall have the right to intervene therein and be made a party to such proceedings, and the parties hereto do hereby consent to such intervention. In the event that the leasehold Mortgagee shall not elect to intervene or become a party to such proceedings, the leasehold Mortgagee shall receive notice of, and a copy of any award or decision made in said arbitration proceedings; and (d) Lessor shall, upon request, execute, acknowledge and deliver to each leasehold Mortgagee, an agreement prepared at the sole cost and expense of Lessee, in form reasonably satisfactory to such leasehold Mortgagee, between Lessor, Lessee and leasehold Mortgagee, agreeing to all of the provisions of this Article 7. The provisions of this Article 7 shall survive any termination of this Lease. ARTICLE 8 INDEMNIFICATION OF LESSOR 8.01. The Lessee shall exonerate, keep, save, hold harmless, protect and indemnify the Lessor from any and all losses, damages, claims, suits, liability and costs, including attorneys' fees, for anything and everything whatsoever (i) arising from or out of the occupancy of the Demised Premises by or under the Lessee, the Lessee's agents or servants, (ii) from - 11 - 14 any loss or damage arising from any fault or negligence by the Lessee, or (iii) from any failure on the Lessee's part to comply with any of the covenants, terms and conditions contained in this Lease. Lessee shall have no duties and responsibilities under this Article 8 for any losses, damages, claims, suits, liability or costs incurred by Lessor as a result of any acts of Lessor. ARTICLE 9 INSURANCE; RESTORATION 9.01. INSURANCE (a) During the term of this Lease, Lessee, at its sole cost and expense, shall carry and maintain the following types of insurance in the amounts specified: (i) fire and extended coverage insurance covering the Demised Premises against loss or damage by fire and against damage by other risks now or hereafter embraced by the "extended coverage" so called, in amounts equal to the full cost of replacing the Demised Premises in the event of total destruction of same by fire or any other casualty with appropriate riders to compensate for the effect of inflation on such replacement cost. - 12 - 15 (ii) comprehensive public liability insurance including property damage, insuring the Lessor and the Lessee against liability for injury to persons or property occurring in or about the Demised Premises or arising out of the ownership, maintenance or use or occupancy thereof. The liability under such insurance shall not be less than One Million Dollars ($1,000,000.00) for any one accident and not less than Five Million Dollars ($5,000,000.00) in the aggregate for all accidents in any one year period. (iii) business interruption insurance against loss of rent or rental value due to fire, including extended coverage endorsement, in an amount equal to the annual rent for the Demised Premises plus the estimated amount of real estate taxes and any other expenses connected with the Demised Premises payable by the Lessee. (c) All policies of insurance shall provide by endorsement that any loss shall be payable to the Lessor or Lessee as their respective interests may appear at the time of the loss or payable to any mortgagee of Lessor under the standard - 13 - 16 mortgage clause, if such mortgagee requires. All such policies shall further provide that not less than thirty (30) days written notice shall be given to Lessor and Lessee before such policy may be cancelled or changed to reduce insurance provided thereby. Lessee shall provide Lessor with a duplicate policy of each insurance policy evidencing such endorsement(s) together with evidence satisfactory to Lessor that payment of all premiums thereon has been made. (d) Each of Lessor and Lessee hereby releases the other from any and all liability or responsibility to the other or any person or entity claiming through or under them by way of subrogation or otherwise for any loss or damage to property caused by fire or any other perils insured in policies of insurance covering such property, even if such loss or damage shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible, provided, however, that this release shall be applicable and in force and effect only with respect to loss or damage occurring during such times as the releasor's policies shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair said policies or prejudice the right of the releasor to recover thereunder and then only to the extent of the insurance proceeds payable under such policies. Each of Lessor and Lessee agrees that it will request its - 14 - 17 insurance carriers to include in its policies such a clause or endorsement. (e) In the event that Lessee fails to provide or to keep in force the insurance required by this Article 9, Lessor shall furnish Lessee with written notice of failure to provide or keep in force such insurance, and if Lessee fails to furnish satisfactory evidence of such insurance within five (5) days of receipt of such notice, Lessor may, if it elects, procure such insurance and all premiums advanced by Lessor shall be repaid by Lessee, on demand, together with interest at the rate of 14% per annum from date of advance until paid. 9.02. If any buildings at any time on the Demised Premises shall be damaged or destroyed by any cause whatsoever, during the term of this Lease, the Lessee shall give immediate notice thereof to Lessor and, with reasonable promptness, repair and replace the same at its expense, utilizing the insurance proceeds paid to the Lessee in conjunction with such damage or destruction so that the buildings upon the Demised Premises after that repair and replacement shall be at least equal in value to the buildings existing immediately prior to such occurrence and as nearly similar to such buildings in character as shall be practicable and reasonable. Before beginning such repair or rebuilding, or letting any contracts in connection therewith, Lessee shall submit for Lessor's approval, which approval Lessor - 15 - 18 shall not unreasonably withhold or delay, complete and detailed plans and specifications thereof. 9.03. The Lessee shall not be entitled to any abatement of rent except to the extent to which Lessor shall have received a net sum as proceeds of any loss or business interruption insurance maintained by Lessee, nor shall its obligations under this Lease be terminated during the term of this Lease, notwithstanding any destruction or damage to the Demised Premises by any cause whatsoever, unless resulting from a defect in construction caused by Lessor or Lessor's agents, employees, contractors or suppliers. 9.04. In the event of damage to or destruction of any building upon the Demised Premises during the term of this Lease, Lessor agrees that Lessee shall be entitled to retain the insurance proceeds paid on account thereof. Such proceeds shall be received by the Lessee in trust to pay the cost of restoration, and shall not be commingled with any of Lessee's other funds. ARTICLE 10 CONDEMNATION 10.01. If any person or corporation, municipal, public, private, or otherwise shall at any time during the term of this Lease lawfully condemn and by reason thereof acquire title to - 16 - 19 Lessor's interest in the Demised Premises, in or by condemnation proceedings in pursuance of the law, general, special or otherwise, the Lessor shall be entitled to and shall, except as hereinafter provided, receive any award that may be made, including the award, if any, to the Lessee for the value of the unexpired term of this Lease, and the Lessee shall and does hereby assign and transfer to Lessor any award that may be so made to Lessee for any damages to the term of years set forth in this Lease. This assignment shall not include any award for taking of or damage to the trade fixtures of Lessee, or its subtenants. 10.02. In the event of a taking by condemnation as described in Article 10.01, this Lease shall continue, but the annual rental to be paid by the Lessee shall thereafter be reduced in proportion to the space taken by condemnation, and in such event the Lessor will apply (or cause to have applied) any sum awarded for damage to the building which is a part of the Demised Premises (but no portion of any award made for the taking of land) toward the cost of restoring that building as nearly as possible to the condition in which it was before that taking. The Lessor shall make that restoration and, upon payment of the award, shall apply (or cause to be applied) toward the cost of that restoration the said award. - 17 - 20 10.03. Should such taking of a portion of the building which is a part of the Demised Premises result in a loss of thirty-three and one-third percent (33-1/3%) or more of the ground floor area of the building which is a part of the Demised Premises, then Lessee, at its option, may cancel and terminate this Lease by furnishing written notice to Lessor of its intent to terminate and cancel the Lease must be furnished within sixty (60) days after vesting of title in the condemnor, and the Lease shall terminate within thirty (30) days from receipt by Lessor of such written notice. ARTICLE 11 ASSIGNMENT AND SUBLETTING 11.01. (a) Lessee shall not assign or sublet its interests, or any portion thereof, under this Lease without first obtaining Lessor's consent in writing, which consent shall not be unreasonably withheld or delayed. No consent in one instance shall prevent this provision from applying to each subsequent instance. Except as otherwise provided in section 11.01(c) of this Article 11, this provision shall apply to all transfers by operation of law, including but not limited to mergers or any change of ownership of fifty-one percent (51%) or more of the stock or beneficial interest of Lessee. - 18 - 21 (b) In the event Lessee should desire to assign this Lease or sublet the Demised Premises or any part thereof, Lessee shall give Lessor written notice of such desire (and the name of the proposed assignee or sublessee) at least sixty (60) days in advance of the date Lessee proposes to make such assignment or subletting. (c) If the entity to whom Lessee proposes to sublet or assign this Lease is a business entity related to Lessee (i.e., an entity controlling, controlled by or under common control with Lessee, where control is more than 50% of stock ownership or equity, as the case may be), Lessor's approval for such subletting or assignment shall not be required provided that the net worth of the related entity is substantially equal to or greater than that of Lessee. Lessee shall provide Lessor with proof of the related entity's net worth at the time of giving written notice of the proposed subletting or assignment of this Lease. (d) Lessor's approval in accordance with section 11.01(a) of this Article 11 shall be deemed given unless Lessee receives notice in writing of Lessor's disapproval within the ten (10) day period following expiration of said sixty (60) day period. (e) Subject to any applicable provisions of Article 15 and Article 26, Lessor may transfer, convey, assign or - 19 - 22 encumber its interest in this Lease at any time without Lessee's consent. ARTICLE 12 TAXES 12.01. The Lessee shall pay and discharge all duties, taxes, charges for water, sewer taxes, assessments and payments, extraordinary as well as ordinary, whether foreseen or unforeseen, as shall, during the term of this Lease, be laid, levied, assessed, or imposed upon the Demised Premises, or become due and payable, or liens upon the Demised Premises, or any part thereof, or any appurtenances thereto, the leasehold estate created by this Lease, the sidewalks or streets in front of or adjoining the Demised Premises, by virtue of any present or future law, order or ordinance of the United States of America, or of the city, county or other local government, or of any department, office or bureau thereof, or any other governmental authority. The duties, taxes, charges, assessments and payments described in this Article 12.01 are sometimes referred to herein collectively as "Impositions". 12.02. All Impositions shall be paid by the Lessee when they become due and payable without interest or penalty to the department, officer or bureau charged with the collection thereof. But nothing in this Lease shall require the Lessee to - 20 - 23 pay any inheritance, franchise, income, payroll, excise, gross receipts, privilege, rent, capital stock, estate or profit tax, or any tax of similar nature, that is or may be imposed upon the Lessor, unless those taxes shall be levied upon the rent reserved in this Lease in the place of taxes upon the Demised Premises. 12.03. All taxes, assessments, and water rents that are mentioned above to be paid by Lessee shall be prorated and adjusted for the fiscal years in which the term of this Lease begins and ends. 12.04. In the case of assessments for local improvements or betterments that are assessed or imposed during the term of this Lease and that may be payable in installments, Lessee shall only be obligated to pay the installments that fall due during the term of this lease. 12.05. The Lessee may contest or review by legal proceedings or in any manner that Lessee in its opinion shall deem advisable (which proceedings or other steps taken by Lessee, if instituted, shall be conducted diligently at its own expense and free of expense to the Lessor) any and all Impositions levied, assessed or imposed upon or against the Demised Premises or taxes in lieu thereof, required to be paid by Lessee under this Lease. No such contest or review shall be undertaken in a manner that exposes the Demised Premises or Lessor's interest therein to jeopardy. - 21 - 24 12.06. On or before the due date, Lessee shall furnish to Lessor copies of official receipts of the appropriate taxing authority or other evidence satisfactory to the Lessor evidencing payment of taxes. Lessee upon request of Lessor will promptly exhibit to Lessor all paid bills for water rates and assessments, which bills after inspection by the Lessor shall be returned to the Lessee. In the event the Lessor shall receive any notice, correspondence, bill, audit or similar documentation from any entity regarding the Impositions, the Lessor shall deliver same to the Lessee within five (5) days of the Lessor's receipt thereof. ARTICLE 13 DEFAULTS 13.01. Each of the following shall be deemed a default by Lessee and a breach of this Lease: (a) Lessee's failure to pay any installment of rent, which failure persists after the expiration of fifteen (15) days from receipt by Lessee of written notice from Lessor advising of such failure to pay; (b) Lessee's failure to pay any additional rent, which failure persists after the expiration of fifteen (15) days from receipt by Lessee of written notice from Lessor advising of such failure to pay; - 22 - 25 (c) Lessee's failure to observe or perform any of its obligations under the other terms, covenants or conditions of this Lease, which failure persists after the expiration of thirty (30) days from the date Lessor gives written notice to Lessee calling attention to the existence of that failure, but, if the matter that is the subject of the notice is of such a nature that it cannot be reasonably corrected within thirty (30) days then no default shall be deemed to have occurred if Lessee promptly, upon the receipt of notice, commences the curing of the default and diligently prosecutes the same to completion. However, if the default is one relating to a matter that exposes space occupants or the public to a danger to safety or health of which the public authorities have given due notice to Lessee, then such shorter notice to Lessee, whether written or otherwise, shall be sufficient as the circumstances demand with the responsibility of Lessee to take corrective measures forthwith. The right to cure provided herein does not grant Lessee any license or privilege to allow the Demised Premises to be without the insurance coverage provided for in Article 9 and failure promptly to comply with Article 9 shall entitle the Lessor to place immediately the necessary insurance, and the cost thereof shall be additional rent and collectible as such. (d) The adjudication of Lessee in an involuntary bankruptcy proceeding and such adjudication is not vacated within sixty (60) days; the taking by Lessee of the benefit of any other - 23 - 26 insolvency act or procedure, which term includes any form of proceeding for reorganization or arrangement or rearrangement under the Bankruptcy Code as well as an assignment for the benefit of creditors; or the appointment of a receiver for Lessee and such receiver remains undischarged for sixty (60) days. 13.02. Should Lessee default as described in this Article 13, Lessor at any time thereafter may, at its option give Lessee ten (10) days written notice of intention to end the term of this Lease and thereupon at the expiration of those ten (10) days the term of this Lease shall expire as completely as if that date were the date definitely fixed in this Lease for the expiration of the term and Lessee will then quit and surrender the Demised Premises to Lessor, but Lessee shall remain liable as provided in this Article 13. Lessee hereby expressly waives any right under the common law to demand for rent by the Lessor prior to termination of this Lease in accordance with this Article 13, provided, however, that this waiver does not waive or diminish Lessee's rights under this Article 13. 13.03. If the notice provided for in Article 13.02 shall have been given and the term of this Lease shall expire as described in that Article 13.02, or if the Lease shall be taken from the Lessee as a result of any execution against Lessee in any proceeding in which the Lessee shall have no appeal or further appeal, then Lessor may without notice re-enter the - 24 - 27 Demised Premises either by force or otherwise and dispossess Lessee by summary proceedings or otherwise, and Lessee or other occupant or occupants of the Demised Premises will remove their effects and hold the Demised Premises as if this Lease had not been made, and Lessee waives the service of notice of intention to re-enter or to institute legal proceedings to that end. In case of any default, re-entry, expiration or dispossession by summary proceedings or otherwise: (a) Rent shall become due thereupon and be paid up to the time of that re-entry, dispossession or expiration, together with any reasonable and customary expenses that Lessor may incur for legal expenses and attorneys' fees, including those incident to the recovery of possession, brokerage, and putting the Demised Premises in good order, or for preparing the same for re-rental; (b) Lessor may relet the Demised Premises or any part or parts thereof, either in the name of Lessor or otherwise, for a term or terms that may at Lessor's option be less than or exceed the period that would otherwise have constituted the balance of the term of this Lease and may grant reasonable and customary concessions or free rent without thereby in any way affecting Lessee's liability for the rental payable under this Lease for the period of concession or free rent; and - 25 - 28 (c) Lessee shall also pay Lessor as liquidated damages for the failure of Lessee to observe and perform Lessee's covenants any deficiency between the rent reserved in this Lease and the net amount, if any, of the rents collected by reason of the reletting of the Demised Premises for each month of the period that would otherwise have constituted the balance of the term of this Lease. (i) In computing liquidated damages there shall be added to the said deficiency any reasonable and customary expenses that Lessor may incur in connection with the recovery of possession of the Demised Premises and reletting, such as, but not limited to, legal expenses, attorneys' fees, brokerage, for keeping the Demised Premises in good order and for preparing the same for reletting. (ii) Any such liquidated damages shall be paid in monthly installments by lessee on the rent day specified in this Lease and any suit brought to collect the amount of the deficiency for any month shall not prejudice in any way the rights of Lessor to collect the - 26 - 29 deficiency for any subsequent month by a similar action or proceeding. 13.05. Lessor may make any alterations and decorations in the Demised Premises that Lessor, in its sole judgment, considers reasonably advisable and reasonably necessary for the purpose of reletting the Demised Premises. The making of these alterations of decorations shall not operate or be construed to release Lessee from any liability under this Article 13. 13.06. Lessor shall in no event be liable and Lessee's liability under this Article 13 shall not be affected or diminished in any way whatsoever for failure to relet the Demised Premises, or if the Demised Premises are relet, for failure to collect the rent thereof under such reletting. 13.07. In the event of a breach or threatened breach by Lessee of any of the covenants or provisions of this Lease, Lessor shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary disposes proceedings, or other remedies were not provided in this Lease. Mention in this Lease of any particular remedy shall not preclude Lessor from any other remedy, in law or in equity. 13.08. Any action taken by Lessor under this Article 13 shall not waive any right that Lessor would otherwise have against Lessee for rent reserved in this Lease or otherwise, and - 27 - 30 Lessee shall remain responsible to Lessor for any loss and damage suffered by Lessor by reason of Lessee's default or breach. The words "re-enter" and "re-entry" as used in this Lease are not restricted to their technical legal meanings. Lessor shall, at all times, use its best efforts to mitigate its damages under this Article 13. ARTICLE 14 NO REINSTATEMENT 14.01. (a) No receipt of monies by the Lessor from the Lessee after the lawful termination or cancellation of this lease, shall reinstate, continue or extend the term of this Lease, or affect any notice theretofore given to the Lessee, or waive the Lessor's right to enforce the payment of fixed or additional rent or rents then due, or thereafter falling due, or waive the Lessor's right to recover possession of the Demised Premises by proper suit, action, proceeding or remedy; (b) After the service of notice to terminate or cancel this Lease, or the commencement of suit, action or summary proceedings, or any other remedy, or after a final order or judgement for the possession of the Demised Premises, the Lessor may demand, receive and collect any monies due, or thereafter falling due, without in any manner affecting the notice, proceeding, suit, action, order or judgement. All such monies - 28 - 31 collected shall be deemed to be payments on the account of the use and occupation or the Lessee's liability under this Lease. 14.02. The Lessor's failure to enforce any term of this Lease, that is breached by the Lessee, after notice had, shall not be deemed to void or affect the right of the Lessor to enforce that term on the occasion of a subsequent default or breach. ARTICLE 15 SUBORDINATION 15.01. This Lease shall be subject and subordinate to any and all Institutional Mortgages (as defined in Article 25) that may now or hereafter affect the Lessor's interest in the real property of which the Demised Premises form a part, and of all renewals, modifications, consolidations, replacements and extensions thereof. This clause shall be self-operative and no further instruments of subordination shall be required. In confirmation of this subordination, Lessee shall execute promptly any certificate, subordination agreement or other document that Lessor or its lender may reasonably request. Lessee constitutes and appoints Lessor as Lessee's attorney-in-fact to execute any such certificate or certificates for and on behalf of the Lessee. 15.02. (a) The subordination described in Article 15.01 as it pertains to Institutional Mortgages hereafter made (which - 29 - 32 term includes any agreement modifying any Institutional Mortgage now in existence or hereafter made), is conditioned upon the agreement of the institutional mortgagee, to be delivered by it to Lessee, in which the institutional mortgagee agrees in substance that so long as Lessee is not in default: (i) The Lessee will not be disturbed in its possession by the holder of the mortgage; (ii) Lessee will not be joined in any action or proceeding to foreclose the mortgage by the holder thereof; and (iii) Casualty insurance proceeds and condemnation awards to which the holder of the mortgage is entitled under the terms of the mortgage will be applied towards restoration of the Demised Premises consistent with Articles 9 and 10 of this Lease, respectively, and shall be disbursed as provided for by those Articles. (b) The giving of any agreement as described in Article 15.02(a) by the mortgagee may be conditioned by it on the reciprocal agreement by the Lessee to attorn to the holder of the - 30 - 33 mortgage should it become vested with the Lessor's interest in the Demised Premises. ARTICLE 16 QUIET ENJOYMENT 16.01. The Lessee, upon paying the rent and performing its other obligations under this Lease shall and may, at all times during the term of this lease, peacably and quietly have, hold and enjoy the Demised Premises free of molestation by the Lessor. ARTICLE 17 SUCCESSORS AND ASSIGNS 17.01. The covenants and agreements contained in this Lease inure to the benefit of and are binding upon the parties to this Lease, their successors and assigns, but this Article 17 does not modify the provisions governing assignment, as elsewhere provided for in this Lease. ARTICLE 18 ALTERATIONS 18.01. Lessee may, without the consent of Lessor, but at its own cost and expense and in a good workmanlike manner, make nonmechanical or nonstructural alterations, additions or - 31 - 34 improvements to the Demised Premises subject to all conditions contained in Section 18.03 of this Article 18. Such nonmechanical or nonstructural alternations, additions or improvements shall comply with all applicable governmental laws, ordinances and regulations. 18.02. Lessee may, without the consent of Lessor, but at its own cost and expense and in a good workmanlike manner, make mechanical or structural alterations, additions or improvements to the Demised Premises subject to all conditions contained in Section 18.03 of this Article 18 if the cost of such mechanical or structural alterations does not exceed $200,000.00 and does not alter the roofline or exterior walls of the Demised Premises. Such mechanical or structural alterations, additions or improvements shall comply with all applicable governmental laws, ordinances and regulations. Lessor's prior written consent shall be required for all mechanical or structural alterations, additions or improvements exceeding $200,000.00 in cost, which consent shall not be unreasonably withheld. 18.03. Alterations, additions, improvements and partitions erected by Lessee shall be and remain the property of Lessee during the term of this Lease, and Lessee shall, unless Lessor otherwise elects as hereinafter provided, remove all such alterations, additions, improvements and partitions erected by Lessee and restore the Demised Premises to their original - 32 - 35 condition by the date of termination of this Lease; provided, however, that if Lessor so elects prior to termination of this Lease, such alterations, additions, improvements and partitions shall become the property of Lessor as of the date of termination and shall be delivered up to the Lessor with the Demised Premises. All shelves, bins, machinery and trade fixtures installed by Lessee shall be removed by Lessee prior to termination of this Lease if Lessee so elects and shall be removed if required by Lessor; upon any such removal Lessee shall restore the Demised Premises to the original condition. All such removals and restorations shall be accomplished in a good workmanlike manner so as not to damage the primary structure or structural qualities of the building and other improvements situated on the Demised Premises. ARTICLE 19 NOTICES 19.01. All notices to the parties shall be addressed to them at the respective addresses first given for them in this Lease, or to such other address, of which either of them, as the case may be, shall notify the other party and its attorney in the manner stated in this Article 19 for giving notice. Copies of all notices shall be furnished to the attorneys for the parties at the addresses hereinafter provided, or at such other addresses which either of such attorneys, as the case may be, shall notify - 33 - 36 the other party and its attorney in the manner stated in this Article 19 for giving notice. Copies of all notices shall also be then given to Kerr Glass Manufacturing Corporation, 1840 Century Park East, Los Angeles, California 90067, Attention: Corporate Secretary. NOTICES TO ATTORNEY'S FOR LESSOR AND LESSEE Lessor's Attorneys Lessee's Attorney - - - ------------------ ----------------- Lee J. Chase Joseph L. Broadwin Glankler, Brown, Gilliland, Wilkie, Farr & Gall Chase, Robinson & Raines One Citicorp Center 1700 One Commerce Square 153 East 53rd Street Memphis, Tennessee 38103 New York, New York 10022 The notices to the parties and copies of such notices to the attorneys for the parties must be given by either registered mail, return receipt requested, or by certified mail, return receipt requested. In the case of the former service of the notice shall be deemed completed upon the registration thereof with the postal authorities, and in the case of the latter upon the due mailing thereof. ARTICLE 20 NO WAIVER 20.01. The failure of the Lessor to insist in any one or more instances, upon a strict performance of any of the covenants of this Lease, shall not be construed as a waiver of or relinquishment for the future performance of that covenant, or - 34 - 37 the right to exercise that option, but the same shall continue and remain in full force and effect. The Lessor's receipt of net annual or additional rent, with knowledge of the breach of any covenant of this Lease, shall not be deemed a waiver of that breach, and no waiver by the Lessor of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by the Lessor. 20.02. The Lessor's receipt of any installment of the net annual rent under this Lease or of any additional rent shall not be a waiver of any net annual or additional rent then due. Lessor may, in its sole discretion, apply any payments made by Lessee to the satisfaction of any debt or obligation of Lessee to Lessor, regardless of Lessee's instructions as to the application of those payments, whether those instructions are endorsed on Lessee's check or otherwise. ARTICLE 21 REMEDIES CUMULATIVE 21.01. All of the rights and remedies given to the Lessor in this Lease for the recovery of the Demised Premises because of the default by the Lessee in the payment of any sums that may be payable pursuant to the terms of this Lease, or upon the breach of any of the terms of this Lease, or the right to re-enter and take possession of the Demised Premises upon the happening of any - 35 - 38 of the defaults or breaches of any of the covenants of this Lease, or the right to maintain any action for rent or damages and all other rights and remedies allowed at law or in equity, are reserved and conferred upon the Lessor as distinct, separate and cumulative remedies, and no one of them, whether exercised by the Lessor or not, shall be deemed to be in exclusion of any of the others. ARTICLE 22 ENTIRE AGREEMENT 22.01. This Lease contains the entire agreement between the parties, and any agreement hereafter made shall not operate to change, modify or discharge this Lease in whole or in part unless that agreement is in writing and signed by the party sought to be charged with it. ARTICLE 23 REPRESENTATIONS OF LESSOR 23.01. Lessor represents and warrants that: (a) The improvements on the Demised Premises have been constructed in compliance with all applicable laws, ordinances, regulations and restrictions affecting the Demised Premises. - 36 - 39 (b) All necessary permits and approvals necessary to construct the Demised Premises including, without limitation, certificates of occupancy, have been obtained. (c) All utilities necessary to service the Demised Premises are adequate for the permitted use thereof and have been connected. ARTICLE 24 INDEMNIFICATION OF LESSEE 24.01. Lessor shall indemnify Lessee from and hold Lessee harmless against all costs, legal expenses, liability, and other expenses, claims by any party or governmental entity, whether grounded in statutory or common law, for personal injury, wrongful death, property damage, economic loss, abatement, redemption, damage to natural resources, response costs, civil penalty, or any other claim, demand or notice arising out of or relating to (a) the generation, presence, handling, treatment, storage or disposal of any solid waste, hazardous waste, hazardous substance, toxic substance, contaminant, or pollutant, or any other environmental condition, on, at, beneath, or near the property, provided such generation, presence, handling, treatment, storage or - 37 - 40 disposal occurred prior to the Commencement Date of this Lease and (i) was due to the acts of Lessor or its agents or employees; or (ii) was due to the acts of third parties, provided that Lessor had knowledge of such acts prior to the Commencement Date of this Lease. 24.02. Lessee shall have the right to terminate this Lease in the event Lessee determines in its reasonable discretion that the condition for which Lessee is entitled to indemnification under section 24.01 of this Article 24 materially and adversely affects the operation of Lessee's business or the health or safety of Lessee's employees. ARTICLE 25 ESTOPPEL CERTIFICATES 25.01. The Lessee agrees at any time and from time to time upon not less than twenty (20) days prior written request by the Lessor, to execute, acknowledge and deliver to Lessor a statement in writing certifying that this Lease is unmodified and in full force and effect (or if there have been modifications that the same is in full force and effect as modified and stating the modifications) and the dates to which the rent and other charges have been paid in advance, if any, it being intended that - 38 - 41 any such statement delivered pursuant to this Article 24 may be relied upon by prospective purchasers of Lessor's interest or mortgagees of Lessor's interest or assignees of any mortgage upon Lessor's interest in the Demised Premises. ARTICLE 26 CERTAIN DEFINITIONS 26.01. The term "Lessor" as used in this Lease means only the owner of the current interest of the Lessors in the Demised Premises or, as the case may be, the successor thereto from time to time. In the event of any transfer at any time of the interest of the Lessor to (i) an entity which is not controlled by Lessor, or (ii) an entity which is controlled by Lessor and with respect to (i) and (ii) has a net worth substantially equal to the net worth of Lessor, the transferor shall be and is entirely relieved of all convenants and obligations of the Lessor under this Lease, and shall be deemed and construed without further agreement between the parties or their respective successors in interest or between the parties and the transferee that the transferee of the Lessor's interest has assumed and agreed to carry out any and all convenants and obligations of the Lessor under this Lease, provided, however, that transferor shall remain liable of rights representations and warranties contained in this Lease of a period of one year from the date hereof. In the event of any transfer at any time of the interest of Lessor to an entity which - 39 - 42 is controlled by Lessor and has a net worth less than the net worth of Lessor, the transferor shall not be relieved from liability on the covenants and obligations of Lessor under the Lease. 26.02. An "Institutional Mortgage" is a mortgage held by an institutional Lender on the interest of the Lessor in the real property constituting the Demised Premises. ARTICLE 27 EXTENSION OF TERM 27.01. Provided the Lessee is not then in default, the Lessee shall have the right to extend the term of this Lease for one twelve (12) year period as hereinafter provided. The net annual rental during such renewal period shall be Three Hundred Sixty-One Thousand, Five Hundred Sixty Dollars ($361,560.00). The Lessee shall have the right to exercise such renewal option by written notice to the Lessor not later than one year prior to the commencement date of the proposed renewal term. The Lessee shall exercise the option to renew by giving notice (the "Renewal Option Notice") to the Lessor in accordance with Article 19. - 40 - 43 ARTICLE 28 PURCHASE OPTION 28.01. The Lessor grants to Lessee the option to purchase the Demised Premises in accordance with the provisions of this Lease, so long as the Lessee is not in default at the time it exercises the option. 28.02. The purchase price for the Demised Premises shall be Two Million Five Hundred Eighty-Seven Thousand Dollars ($2,587,000.00). The Lessee shall be entitled to apply ten percent (10%) of the aggregate of all net annual rent payments made to the Lessor during the term of this Lease and any extensions thereof at the time the option is exercised as a credit toward the purchase price. The Lessee shall have the right to exercise such purchase option by written notice to the Lessor at least thirty (30) days prior to the date of closing of such purchase; provided, however, that any notice of intent to purchase given by Lessee during the final year of the initial thirteen year term of this Lease must be given at least twelve months prior to the expiration of such initial term, and any notice of intent to purchase given by Lessee during the final year of the twelve (12) year extension term of this Lease must be given at least twelve (12) months prior to the expiration of such extension term. The Lessee shall exercise the option to purchase - 41 - 44 by giving notice (the "Purchase Option Notice") to the Lessor in accordance with Article 19. 28.03. The purchase price shall be payable in lawful money of the United States to the Lessor by the Lessee at the close of escrow as provided in Section 22.05 of this Article 28. 28.04. The Lessor shall deliver to the Lessee an executed Special Warranty deed in recordable form conveying fee simple title to the Demised Premises. Title to the Demised Premises shall be conveyed by the Lessee free and clear of all liens, encumbrances, convenants, conditions, restrictions, easements and rights of way of record, leases or other tenancy agreements, and other matters of record except (i) current taxes, a lien not yet delinquent, (ii) those portions of current assessments not yet due and payable (iii) anything of record or not of record that in any way affects title to the premises resulting from the acts or omissions of the Lessee, (iv) any covenants, conditions, restrictions, easements, rights of way of record, and leases or other tenancy agreements existing at the commencement of the term, and (v) subleases covering portions of the Demised Premises executed by the Lessee during the term. 28.05. The sale shall be consummated through an escrow with title company selected by the Lessee. Escrow shall be deemed to be closed pursuant to this Article 28.05 on the date the deed conveying fee simple title to the Demised Premises to - 42 - 45 the Lessee is recorded. At the close of escrow, the title company must be prepared to issue an ALTA Owner's Title Insurance Policy in the amount of the purchase price insuring title to the Demised Premises vested in the Lessee, subject only to the matters set forth in Article 28.04. Each party shall select and bear all costs of its attorneys at closing. ARTICLE 29 CONDITIONS PRECEDENT 29.01. Lessor agrees to complete, and this Lease is subject to and conditioned upon the Lessor's completing, construction of the improvements to be located on the Demised Premises in accordance with the requirements of the work summary attached hereto as Exhibit "B" (the "Lessor's Work"). The Lessee shall perform the work and supply the materials set forth on the work summary attached hereto as Exhibit "C" (the "Lessee's Work"), and this Lease shall not be conditioned upon completion of the Lessee's Work. The Lessee's Work includes certain electrical work on the Demised Premises as described in Exhibit "B" hereto. Upon (i) satisfactory completion of the electrical work which is a part of the Lessee's Work, Lessor shall pay Lessee the sum of $300,000 for completion of such electrical work. Such $300,000 amount is a negotiated sum and shall be payable upon - 43 - 46 completion of such electrical work irrespective of the actual "out of pocket" costs to Lessee for such electrical work. Lessee shall be responsible for all costs and expenses of all Lessee's Work other than the electrical work. The Lessor shall submit all proposed building specifications (the "Specifications") to Lessee for Lessee's review and written approval. If Lessee determines that the Specifications are not acceptable, Lessee shall so notify Lessor, and Lessor shall revise them to so conform and shall resubmit the Specifications to Lessee for review and approval, provided, however, that in no event shall Lessor be required to incur cost and expenses in excess of One Million Nine Hundred Three Thousand Two Hundred Forty-One Dollars ($1,903,241.00) which amount is not intended to include and is in excess of the $300,000 specified above in this Section 29.01 to complete the Lessor's Work. The initial review by Lessee of the Specifications shall be carried out within fourteen (14) days of the date of submission thereof by Lessor and any subsequent review by Lesse of any revisions thereto shall be carried out within fourteen (14) days of Lessor's submission of such revision. If Lessee has not notified Lessor of its determination within the fourteen (14) day period, Lessee shall be deemed to have disapproved the Specifications or any revisions thereof, Lessor shall have fourteen (14) days after a disapproval of the Specifications or any revision thereof to resubmit a modification thereof. - 44 - 47 29.02. Lessor shall make a good faith effort to cause the Demised Premises to be available for occupancy by the Lessee on or before January 2, 1990. Demised Premises are not available for occupancy by Lessee on or before January 2, 1990, Lessor shall pay a penalty of $1,250.00 per day, which may be offset against Leessee's first rent payment due under this lease, for each day after January 2, 1990 that Leesee is unable to occupy the Demised Premises. If the Demised Premises are not available for occupancy by the Lessee on or before February 1, 1990, then the Lessee shall have the right to cancel this Lease by written notice to the Lessor. The penalties and the right to cancel this Lease which are provided for in this Article 28 shall - 45 - 48 not apply if the delay or delays in construction are a result of the acts of Lessee's agents, employees, contractors, subcontractors or suppliers. ARTICLE 30 HAZARDOUS WASTES/SUBSTANCES 30.01. The term "Hazardous Substances," as used in this Lease, shall mean pollutants, contaminants, toxic or hazardous wastes, or any other substances, (including, without limitation, asbestos and raw materials which include hazardous constituents), the removal of which or the use of which is restricted, prohibited or penalized by any "environmental law," which term shall mean any Federal, State or local law, regulation, or ordinance relating to pollution or protection of the environment. Lessee hereby agrees that (i) no activity will be conducted on the Demised Premises by Lessee, its agents, employees, sublessees, invitees or any other party entering the Demised Premises with the consent or knowledge of Lessee during the term hereof that will produce any Hazardous Substance, except for such activities that are part of the ordinary course of Lessee's business activities (the "Permitted Activities") provided said Permitted Activities are conducted in accordance with all environmental laws; (ii) the Demised Premises will not be used by Lessee, its agents, employees, sublessees, invitees or any other party entering the Demised Premises with the consent or knowledge - 46 - 49 of Lessee during the term hereof in any manner for the storage of any Hazardous Substances except for the temporary storage of such materials that are used in the ordinary course of Lessee's business (the "Permitted Materials") provided such Permitted Materials are properly stored in a manner and location meeting all Environmental Laws; (iii) no portion of the Demised Premises will be used by Lessee, its agents, employees, sublessees, invitees or any other party entering the Demised Premises with the consent or knowledge of Lessee during the term hereof as a landfill or dump; (iv) Lessee will not during the term hereof install any underground tanks of any type without the prior written consent of Lessor, which shall not be unreasonably withheld provided that Lessee complies with all applicable laws regarding such underground tanks. Lessee shall remove any such underground tanks at the expiration of the term of this Lease unless Lessee obtains Lessor's written consent to allow the underground tank or tanks to remain on the Demised Premises after that date; (v) Lessee will not during the term hereof cause any surface or subsurface conditions to exist or to come into existence that constitute, or with the passage of time may constitute, a public or private nuisance; (vi) Lessee will not during the term hereof permit any Hazardous Substances to be brought onto, stored, processed, disposed of on, released, discharged from (including ground water contamination) or otherwise handled on the Demised Premises, except for the - 47 - 50 Permitted Materials described below, and if so brought or found located thereon, the same shall be immediately removed, with proper disposal, and all required cleanup procedures shall be diligently undertaken pursuant to all Environmental Laws. Lessee shall immediately notify Lessor should Lessee become aware of any Hazardous Substance or other environmental problem or liability with respect to the Demised Premises. If, at any time during or after the term of the Lease, the Demised Premises is found to be so contaminated or subject to said conditions, Lessee agrees to indemnify and hold Lessor (and any mortgagee and trustee under any deed of trust or mortgage on the Demised Premises) harmless from all claims, demands, actions, liabilities, costs, (including reasonable attorney's fees), expenses, damages and obligations of any nature arising from or as a result of the actions or omissions of the Lessee, its agents, employees, sublessees, invitees or any other party entering the Demised Premises with the consent or knowledge of Lessee during the term hereof, but not further or otherwise. The foregoing indemnifications shall survive the termination or expiration of this Lease. ARTICLE 31 SIGNAGE 31.01. Lessee shall have the right, subject to Lessor's prior written approval, which approval shall not be unreasonably withheld, to place on or in the Demised Premises such signs - 48 - 51 conforming to all laws and municipal regulations as it deems necessary and proper in the conduct of its business. ARTICLE 32 PURPOSE 32.01. Lessee agrees that it shall not use or suffer the Demised Premises to be used for any unlawful purposes or any purposes which violate any public or private zoning, land use or other applicable covenants, restrictions, regulations or ordinances. The Demised Premises leased hereunder are to be used by Lessee for office, warehouse, light manufacturing of plastics and such other purposes that are usual and normal in connection with Lessee's current business operations, and no other purpose. LESSOR: CENTURY 21 ASSOCIATES a Tennessee general partnership BY: /s/ L.P. BECKER ----------------------------- LESSEE: SANTA FE PLASTIC CORPORATION a California corporation BY: /s/ D.G. STRICKLAND ----------------------------- ATTEST: /s/ L.R. KNIPPLE ------------------------- CORPORATE SECETARY - 49 - 52 GUARANTY The undersigned, KERR GLASS MANUFACTURING CORPORATION, a Delaware corporation, hereby irrevocably guarantees to Lessor, its successors and assigns, the full and due performance by the Lessee, and its successors and assigns, all of the terms, obligations, covenants and agreements under the foregoing Lease on the part of Lessee to be observed or performed including the full and punctual payment by Lessee of all rent, and other sums of money, as and when they become due and payable by Lessee as provided in the Lease, during the full term of the Lease, including any extensions or renewals thereof. GUARANTOR: KERR GLASS MANUFACTURING CORPORATION By: /s/ D.G. STRICKLAND ------------------------------------ Attest: /s/ L.R. KNIPPLE -------------------------------- Corporate Secretary STATE OF CALIFORNIA COUNTY OF LOS ANGELES Personally appeared before me, Carla E. Andrews, a Notary Public, D. G. Strickland, with whom I am personally acquainted and who acknowledged that he executed the within instrument for the purposes therein contained, and who further acknowledged that he is the Sr. VP, Finance of the Guarantor and is authorized by the Guarantor to execute this instrument on behalf of the Guarantor. Witness my hand, at office, this 29th day of Sept. 1989. /s/ CARLA E. ANDREWS ------------------------------- Notary Public My Commission Expires: Jan. 7th 1992 - - - --------------------- [SEAL] - 50 - 53 STATE OF TENNESSEE COUNTY OF MADISON Personally appeared before me, Teresa A. Dunn, a Notary Public, Larry P. Becker, with whom I am personally acquainted and who acknowledged that he executed the within instrument for the purposes therein contained, and who further acknowledged that he is the Partner of the Lessor and is authorized by the Lessor to execute this instrument on behalf of the Lessor. Witness my hand, at office, the 5th day of October, 1989. /s/ TERESA A. DUNN ------------------------------ Notary Public My Commission Expires: 3/21/93 - - - --------------------- STATE OF CALIFORNIA COUNTY OF LAS ANGELES Personally appeared before me, Carla E. Andrews, a Notary Public, D. G. Strickland, with whom I am personally acquainted and who acknowledged that he executed the within instrument for the purposes therein contained, and who further acknowledged that he is the Sr. VP Finance CEO of the Lessee and is authorized by the Lessee to execute this instrument on behalf on the Lessee. Witness my hand, at office, this 29th day of Sept., 1989. /s/ CARLA E. ANDREWS ------------------------------ Notary Public My Commission Expires: Jan. 7, 1992 - - - --------------------- [SEAL] - 51 - 54 Lying in Madison County, Jackson, Tennessee in Madison West Industrial Park, and beginning at an iron pin set in the North margin of Lower Brownsville Road, which point is the Southeast corner of this tract and the Southwest corner of Metamora Plastics; thence, from the point of beginning and with the North margin of Lower Brownsville Road, South 87 degrees 58 minutes West 583.69 feet to a point; thence, with a curve having a radius of 40 feet for a length of 62.12 feet to a point in the East margin of Industrial Park Road; thence, with the East margin of Industrial Park Road, North 3 degrees 03 minutes west 892.48 feet to an iron pin set at the Southwest corner of Tabuchi; thence, with the South line of Tabuchi, North 87 degrees 58 minutes East 622.99 feet to an iron pin set at the Northwest corner of Metamora Products; thence, with the West line of Metamora Products, South 3 degrees 03 minutes East 931.78 feet to the point of beginning containing 13.32 acres. Included in the above description, but to be expressly excluded, is the following described tract to be used for railroad purposes: BEGINNING at the Northwest corner of above described tract at an iron pin set in the East margin of Industrial Park Road, which point is the Southwest corner of Tabuchi; thence, from the point of beginning and with South line of Tabuchi, North 87 degrees 58 minutes East 90.7 feet to a point in the East margin of railroad right-of-way; thence, South 3 degrees 03 minutes East 931.78 feet to a point in the North margin of Lower Brownsville Road; thence, with same, South 87 degrees 58 minutes west 51.41 feet to a point; thence, with a curve having a radius of 40 feet in a Northwesterly direction and along said curve for a distance of 62.12 feet to a point in the East margin of Industrial Park Road; thence, with same, North 3 degrees 03 minutes West 892.48 feet to the point of beginning, containing 1.94 acres. Description from survey of Tony M. Reasons, R.L.S., Tenn. Reg. No. 508. Being a portion of the property conveyed to Madison County, Tennessee by Deed of Hugh Pearson, et al, dated May 15, 1975, appearing of record in Deed Book 313, page 321, in the Register's Office of Madison County, Tennessee. EXHIBIT "A" - REAL PROPERTY DESCRIPTION - 55 OUTLINE SPECIFICATIONS PROPOSED MANUFACTURING FACILITY SCP CORPORATION JACKSON, TENNESSEE May 10, 1989 SUMMARY OF WORK: The scope of work included in our proposal consists of the installation of concrete floors, office finishes, outside improvements, mechanical and fire protection systems to the existing building located on Lower Brownsville Road in the Madison West Industrial Park. The proposed facility shall consist of an existing building with a 100,000 S.F. manufacturing and warehouse area and a 4,800 S.F. office area. The clear height of the building to the bottom of the steel structure is 24'-0" at the low or eaves side. This building consists of a free standing steel frame with 8'-0" high block masonry wainscot and 24 gauge prefinished siding for the perimeter walls. The prefinished siding is lined with 2" thick vinyl faced insulation. The block masonry wainscot and the office perimeter walls are finished with "dryvit" synthetic plaster applied to plastic foam insulation. The roofing for building is a 45 mil EPDM ballasted roof system. A 48" high draft curtain will be provided dividing the building into 25,000 S.F. areas. The draft curtains will be built using 28 gauge corrugated metal attached to the truss girders. Included within the manufacturing area is a shipping office with toilet room and one set of remote toilet rooms, for the plant personnel, sized to accommodate 115 employees working two shifts. The plant toilet rooms will be located in the southwest corner of the building adjacent to the lunchroom. They will have masonry perimeter walls and a metal roof. The interior finish shall consist of ceramic tile floor and wainscot, epoxy paint on walls above wainscot and a 2' x 4' moisture resistant lay-in ceiling. Toilet partitions and toilet accessories are included. The interior side of the exterior masonry wainscot shall be painted. The structural steel in the warehouse and manufacturing is to be painted. The office finish allowance of $44,400 anticipates carpet floors, drywall partitions finished with paint and vinyl wall covering, 2' x 4' lay-in acoustical ceiling, doors and frames. The office rest room walls, finishes, and accessories are a part of this allowance. The rest room plumbing and plumbing fixtures are included in the base bid. EXHIBIT "B" - LESSOR'S WORK - 56 We have included nine shipping doors, eight levelers and shelters, and one drive-in door. The nine shipping doors will be 8'-6" x 9'-0" metal sectional vertical lift doors. The dock shelters will be Frommelt Model WG402 and the dock levelers will be Rite Hite Model ST968 of 25,000 lb. capacity. The one drive-in door will be 12'-0" x 14'-0" metal sectional vertical lift door. The drives and parking will be asphalt paving. The truck drives will have 8" gravel base and 3 1.2" asphalt topping. The automobile parking will have 6" gravel base and 2" asphalt topping. We have provided for parking cf 80 cars. The eight loading doors will have a concrete apron slab extending 50' from the building. The ninth loading door will have a 50' long ramp. A 24' wide paved road will be provided around the building connecting the two loading areas. A 500 S.F. concrete slab for pallet storage will be provided adjacent to the north loading area. The manufacturing area will have a 6" thick floor slab consisting 4,000 psi concrete reinforced with #3 reinforcing steel at 20" o.c. both ways. The office area floor slab will be 4" thick with 4,000 psi concrete unreinforced. We have not included any thickened slabs or equipment bases for any production machines. The chiller pad will be 6" thick with 4,000 psi concrete reinforced with #3 reinforcing at 20" o.c. both ways. The chiller pad will have a 6' high masonry wall on two sides and five 12' wide expanded metal gates. The silo pad will be 72' long x 20' wide with a 72' long x 12' wide pump pad along side making a 32' wide pad. The silo pad will be 3'-6" thick with 4,000 psi concrete and reinforced with #5's at 12" o.c. each way top and #8's at 12" o.c. each way bottom. The pump pad will be 8" thick of 4,000 psi concrete and reinforced with #4 reinforcing at 12" o.c. both ways. The silo and pump pads will be surrounded with a 6' high security fence with a 12' wide gate. The north concrete apron slab will extend across the 32' width of the silo pad for truck access. The 1,000 S.F. outside storage building will be an uninsulated pre- engineered building with a 6" thick concrete floor slab. The building will have a 14' clear height at the eaves and will have a 12' wide x 14' high door. HVAC: The office area will be air conditioned utilizing two 10 ton gas pack rooftop units. This should provide a comfort level of 78 degrees Fahrenheit in the summer and 72 degrees Fahrenheit in the winter. Plant air conditioning will be accomplished using 5 - 60 ton rooftop units placed two over the warehouse and three over the manufacturing. Air will be distributed utilizing factory concentric duct packages. The assumed heat gains are based on the 200 f.c. lighting required in the injection molding area and 500 square feet per ton in the remaining area of the plant. A thru-the-wall unit will be furnished in the receiving office. The plant toilet rooms and lunchroom will be air conditioned with a separate unit. - 2 - 57 PLUMBING: The office will be provided with plumbing fixtures to meet the code requirements of fifteen people. Copper water piping and PVC sewer piping will be furnished as required for their connection. A drinking fountain and mop sink will be furnished in the office rest room complex. Drinking fountains will also be provided near the plant rest rooms, near the shipping office, and near the injection molding machines. Plumbing fixtures of standard quality will be furnished for a unisex rest room in the receiving area. Finished rest room facilities will be furnished for 60 people on one shift. We will also provide one floor drain at the rear of the building for an air compressor to be furnished by others at a later date. We will provide a two inch water service to the building and distribute it to rest rooms and drinking fountains. A two inch valved connection is provided for future use. All sewer piping will be PVC and all water piping will be copper. We will provide hose bibbs at intervals around the perimeter of the building and at the loading docks. FIRE PROTECTION: We have included a new 8" tap to the 16" city main on either Lower Brownsville Road or Industrial Road. An above ground backflow preventer will be provided in a weather resistant enclosure. Three hydrants will be provided equally spaced along the north and east sides of the building. Each of the three sprinkler lead-ins will have a post indicator valve located approximately 40' from the building. The water supply in the Industrial Park is more than adequate to supply high density hydraulically calculated sprinkler systems. The pressures and supply at Madison West Industrial Park are 95 p.s.i. static, 93 p.s.i. residual flowing at 2,325 gallons per minute. The manufacturing area will be protected with a density of 0.18 GPM/S.F over the most remote 3,000 S.F. The warehouse will have a primary density of 0.66 GPM/S.F. over the most remote 1,000 S.F. and a secondary density of 0.40 GPM/S.F. over the most remote 3,725 S.F. The offices will be protected with a density of 0.12 GPM/S.F. over the most remote 3,000 S.F. ELECTRICAL: Our proposal does not include any electrical work. All electrical work will be performed by SCP Corporation. - 3 - 58 [LOGO] H and M CONSTRUCTION CO., INC. INTERNAL CORRESPONDANCE FROM: DON DANIELS DATE: 5-24-89 TO: DAVID FITE COPY TO: CURTIS CAIN AND RICHARD FITE SUBJECT: SCP CORPORATION JACKSON, TN The following is a recap of the changes requested by SCP Corporation during our meeting on April 19, 1989. 1. Move toilet rooms to southwest corner of the building and add a 34' long x 18' wide lunchroom. Included within this change will be the installation of a 32' long x 5' high window in the existing south wall of the lunchroom. A separate 3 ton air conditioning unit will be provided for this lunchroom. Add $40,327 Accepted 2. Add a 3' x 7' glass door in the west wall of the office building to match the existing door in the east wall of the office building. Included within this change is a 4' wide x 80' long sidewalk between the office building and the employees entrance. Add $6,789 Accepted 3. Change the block pilasters at the chiller pad from 4' to 2' making the chiller enclosure 72' x 20'. The chiller pad will remain 84' x 20'. Included within this change is changing the gates from wood to expanded metal. No change Accepted 4. Move the shipping office from its present location near Column Line 0-11 to a new location near Column Line G-11. No Change Accepted - EXHIBITED "B" - CONTINUED - 59 May 24, 1989 Page 2 5. Extend the truck asphalt paving at the north loading area to the west edge of the silo pad so that trucks can back up to silos. Add $5,500 Accepted 6. Extend truck asphalt paving from north drive to the 12' x 14' door on the north side of the building. Add $3,496 Accepted 7. Provide ladder to roof. Ladder may be interior or exterior. a. Exterior Ladder Add $2,396 Not Accepted b. Interior ladder, including roof hatch. Add $3,266 Accepted Total $59,378 SCP has also asked us to paint the structure for an additional amount of $55,000, as stated in our Outline Specifications dated March 8, 1989. They have also agreed to changing the HVAC system to 5 - 60 ton units for the additional amount of $25,000. Therefore, the new budget will be as follows: Budget (my memo to you dated 4-4-89) $1,763,863 Total Requested Changes (Item #1 - 7 above) 59,378 Add Painting Deck 55,000 Add for Changing HVAC to 5 - 60 ton Units 25,000 Revised Budget $1,903,241
In addition to the above, the following additional clarifications were offered in response to comments by SCP Corporation. 1. We do not include roof walkway treads to the HVAC units. 2. We do not include any electrical work in our proposal. 3. The office finish allowance does not include HVAC, plumbing or electrical work. The HVAC and plumbing cost for the office is in our base price. DD:ef 60 3262N EXHIBIT C - LESSEE'S WORK 1-1200 MLO 277/4BOV PANEL WITH 4-175A/3P BREAKERS, 2-50A/3P BREAKERS, AND 7 13A/3P BREAKERS. THIS PANEL IS LOCATED ALONG COLUMN LINE G NEAR THE CHILLER PAD. 1-800A MLO 277/4BOV PANELS ONE WEATHER PROOF LOCATED ON ROOF AT COLUMN 5D FOR AIR CONDITIONING USE. 2-400 A MLO 277/4BOV LOCATED ALONG COLUMN LINE G NEAR COLUMN 6 FOR PLANT AND WAREHOUSE LIGHTING USE AND A SECOND LOCATED NEAR THE OFFICE ALONG COLUMN LINE A AND BETWEEN COLUMNS 5 & 6. 1-100 A MLO 277/ABOV LOCATED NEAR OFFICE ALONG COLUMN LINE A FOR USE IN OFFICE LIGHTING AND SITE LIGHTING. 2-100 A MB 120/208BV PANELS ONE LOCATED NEXT TO EACH LIGHTING PANEL FOR RECEPTACLES AND POWER. - - - -FEEDERS FOR THE ABOVE PANELS ARE AS FOLLOWS 3000A - B RUNS OF 3 1/2" PVC CONDUIT WITH 4-500 MCM THW WIRE FOR EACH. 1200A - 3 RUNS 3" PVC CONDUIT WITH 3-400 MCM THW WIRE. 400A NEAR OFFICE 1 RUNS OF 3 1/2 PVC WITH 4-500 MCM WIRE. ALUMINUM CONDUIT WITH 3-500 MCM WIRE. ALL UNDERGROUND FEEDERS SHALL BE IN PVC CONDUIT AND ALL OVERHEAD FEEDERS SHALL IN RIGID ALUMINUM CONDUIT. - - - -120 VOLT CONVENIENCE RECEPTACLES ARE INCLUDED AT EACH MAN DOOR IN WAREHOUSE AND MANUFACTURING. IN ADDITION THE DOCK DOORS HAVE TWO DUPLEX RECEPTACLES BETWEEN EACH SET OF DOORS. RECEPTACLES SHALL BE INSTALLED USING USING EMT CONDUIT. - - - -ELECTRICAL CONNECTION ARE PROVIDED TO THE FOLLOWING EQUIPMENT: 3-UNIT HEATERS 2-EXHAUST FANS 5-60 TON ROOF TOP AIR CONDITIONING UNITS 1-2 TON ROOF TOP AIR CONDITIONING UNIT FOR CAFETERIA LIGHTING: - - - -LIGHTING LEVEL THROUGHOUT FACTORY ACHIEVED USING HUGBELL 1000 WATT HI BAY HIGH METAL HALIDE FIXTURES SPACED AS PER DRAWINGS. A LEVITON SWITCHING SYSTEM HAS BEEN PROVIDED AT THE EMPLOYEES ENTRANCE. WE DO NOT PROVIDE THESE FIXTURES. - - - -DOCK LIGHTS ARE INCLUDED ON ALL DOCK DOORS. EXHIBIT "C" LESSEE'S WORK 61 - - - -EMERGENCY LIGHTING USING 2-HEAD BATTERY PACK FIXTURES IS INCLUDED SPACED APPROXIMATELY 1 EVERY 12,000 S.F. - - - -EXIT LIGHTS ARE PROVIDED FOR EVERY EXTERIOR MAN DOOR - - - -LIGHTING SHALL BE INSTALLED USING EMT CONDUIT. SITE: - - - -4 - 30 FOOT PAINTED STEEL POLES WITH 400 WATT METAL HALIDE FIXTURES HAVE BEEN PROVIDED FOR PARKING LOT LIGHTING. - - - -SECURITY LIGHTING ON PERIMETER OF BUILDING IS PROVIDED USING 9-250 WATT METAL HALIDE WALL PACKS. - - - -CHILLER PAD LIGHTING WAS PROVIDED USING 3-250W METAL HALIDE WALL PACKS AND 4-175 WATT STANCHION MOUNTED FLOORS. OFFICE: - - - -WE PROVIDE A MINIMAL LIGHTING LEVEL (70-300 F.C.) FOR THE OFFICE AND A MINIMUM NUMBER OF RECEPTACLES. 62 [LETTERHEAD, KERR] June 27, 1989 Mr. Ken Baye Willkie, Farr & Gallagher One Citicorp Center 153 East 53rd. Street New York, New York 10022 RE: Jackson, Tennessee Environmental Indemnification Dear Ken: Attached for your information and files is a copy of the Environmental Indemnification signed by the County of Jackson, Tennessee. Very truly yours, Larry R. Knipple Corporate Secretary LRK/jtg:55 Attachment 63 [LETTERHEAD, MADISON COUNTY] June 26, 1989 Madison County Commission Jackson, Tennessee SCP Corporation 9601 John Street Santa Fe Springs, CA 90670 RE: Environmental Indemnification; Century 21 Associates/SCP Corporation Lease Gentlemen: Reference is made to the lease (the "Lease") dated May ___, 1989, between Century 21 Associates, as landlord (Century 21) and SCP Corporation, as tenant, ("SCP") for the real property described on Exhibit A hereto together with the improvements thereon (the "Property"). In consideration for SCP's lease of the Property from Century 21 pursuant to the Lease and other good and valuable consideration, the receipt of which is hereby acknowledged, the undersigned, being the prior fee owner of the Property, hereby indemnifies SCP from and holds SCP harmless against all costs, legal expenses, liability, and other expenses, claims by any party or governmental entity, whether grounded in statutory or common law, for personal injury, wrongful death, property damage, economic loss, abatement, remediation, damage to natural resources, response costs, civil penalty, or any other claim, demand or notice arising out of or relating to: (i) the generation, presence, handling, treatment, storage or disposal of any solid waste, hazardous waste, hazardous substance, toxic substance, contaminant, or pollutant, or any other environmental condition, on, at or beneath the property, provided such generation, presence, handling, treatment, storage or disposal occurred prior to the commencement of the Lease or due to the acts of the undersigned or its agents or employees; or 64 SCP Corporation June 26, 1989 Page Two (ii) the generation, handling, transportation, treatment, storage, or disposal of any solid waste, hazardous waste, hazardous substance, toxic substance, contaminant, or pollutant, from the property to or at another facility, site, or property, provided such generation, handling, transportation, treatment storage, or disposal occurred prior to the commencement of the Lease or due to the acts of the undersigned or its agents or employees. Sincerely, Madison County Commission By: /s/ J. ALEX LEECH -------------------------------- J. ALEX LEECH, County Executive Madison County, Tennessee EX-10.4 3 EX-10.4 TO FORM 10-Q 1 EXHIBIT 10.4 ________________________________________ AMENDED AND RESTATED LEASE BETWEEN PHOENICIAN PROPERTIES AS LESSOR, AND KERR GROUP, INC., AS LESSEE Dated as of May 16, 1994 ________________________________________ 2 INDEX
Article No. Title Page - - - ----------- ----- ---- 1 Term; Rent Payments; Additional Rent.......... 2 2 Repairs....................................... 4 3 Compliance With Laws.......................... 5 4 Surrender At End Of Term...................... 7 5 Mechanics' Liens.............................. 9 6 Inspection By Lessor.......................... 10 7 Taxes and Other Charges....................... 10 8 Indemnification Of Lessor..................... 12 9 Insurance; Restoration........................ 13 10 Condemnation.................................. 20 11 Assignment And Subletting..................... 22 12 Intentionally Deleted......................... 24 13 Defaults...................................... 24 14 No Reinstatement.............................. 30 15 Subordination................................. 31 16 Quiet Enjoyment............................... 33 17 Successors And Assigns........................ 33 18 Alterations................................... 34 19 Notices....................................... 36 20 No Waiver..................................... 37 21 Remedies Cumulative........................... 38
(i) 3 22 Entire Agreement.............................. 39 23 Intentionally Deleted......................... 39 24 Indemnification Of Lessee..................... 39 25 Estoppel Certificates......................... 41 26 Certain Definitions........................... 42 27 Extension Of Term............................. 42 28 Purchase Option............................... 43 29 Intentionally Deleted......................... 48 30 Hazardous Wastes/Substances................... 49 31 Signage....................................... 52 32 Purposes...................................... 53 33. Right to Create Encumbrances.................. 53 34. Arbitration................................... 54 35. Memorandum of Lease........................... 56 36. Phase 2 Work.................................. 57
Exhibit A -- Land Exhibit B -- Approved Form of Subordination, Non-Disturbance and Attornment Agreement Exhibit C -- Approved Title Exceptions Exhibit D -- Phase 2 Work (ii) 4 This Amended and Restated Lease made as of the 16th day of May, 1994, between PHOENICIAN PROPERTIES, a Tennessee general partnership, having its principal office at 529 Old Hickory Boulevard, Jackson, Tennessee 38305 ("Lessor") and KERR GROUP, INC., a Delaware corporation, having its principal office at 1840 Century Park East, Los Angeles, California 90067 ("Lessee"). W I T N E S S E T H: WHEREAS, pursuant to that certain lease (the " Original Lease") dated as of May 14, 1993, Lessee leased from the Industrial Development Board of the City of Jackson (the "Board") that certain real property described on Exhibit A attached hereto and made part hereof, together with all rights, privileges, easements, appurtenances and amenities belonging or in any way pertaining thereto (collectively, the "Land"), together with a building containing approximately 166,400 square feet of area (the Land, together will all existing improvements are referred to collectively as the "Demised Premises"); and WHEREAS, as of even date herewith Lessor acquired from the Board fee simple title to the Demised Premises subject to the Original Lease; and WHEREAS, on and subject to the terms and conditions hereinafter set forth, Lessor and Lessee desire to amend and restate the Original Lease in its entirety. NOW THEREFORE, in consideration for the premises and other good and valuable consideration, the receipt and sufficiency whereof is hereby acknowledged, Lessor and Lessee agree as follows. 5 ARTICLE 1 TERM, RENT, PAYMENTS; ADDITIONAL RENT 1.01 Term. The term of this Lease (the "Term") shall begin as of the date hereof (the "Commencement Date") and, subject to the terms of Article 27 relating to possible extension and renewal of the Term, shall end on the last day of the month following the twentieth anniversary of the Commencement Date (the "Expiration Date") unless sooner terminated as hereinafter provided. 1.02 Rents. Lessee shall pay to Lessor a fixed annual rent (the "Rent") at the rate of: (a) Five Hundred Fifty-Six Thousand Eighty Dollars ($556,080) per year, payable in equal consecutive monthly installments of Forty-Six Thousand Three Hundred Forty Dollars ($46,340) per month, commencing on the Commencement Date, and to be paid in advance, and thereafter on the first day of each calendar month of the Term, and ending on April 30, 1999; (b) Five Hundred Seventy-Two Thousand Eight Hundred Eighty Dollars ($572,880) per year, payable in equal consecutive monthly installments of Forty-Seven Thousand Seven Hundred Forty Dollars ($47,740) per month, commencing on May 1, 1999 and ending on April 30, 2004; (c) Five Hundred Eighty-Nine Thousand Six Hundred and Eighty Dollars ($589,680) per year, payable in equal consecutive monthly installments of Forty-Nine Thousand One Hundred Forty -2- 6 Dollars ($49,140) per month, commencing on May 1, 2004 and ending on April 30, 2009; and (d) Six Hundred Six Thousand Four Hundred Eighty Dollars ($606,480) per year, payable in equal consecutive monthly installments of Fifty Thousand Five Hundred Forty Dollars ($50,540) per month, commencing on May 1, 2009 and ending on the Expiration Date. Rent payable on account of any partial calendar month during the term of this Lease, shall be prorated. 1.03 Net Rents Payable. Lessor shall receive all Rent free from all taxes, assessments, charges, expenses, damages, repairs, maintenance and deductions of every description, and except as expressly provided in this Lease, with no right of set-off, and Lessee shall pay all of the foregoing and other charges which, except for this Lease, would have been chargeable against the Demised Premises and payable by the Lessor. Notwithstanding the immediately preceding sentence, Lessor shall be solely responsible for any of the matters described in the preceding sentence caused or necessitated by, or resulting from, the negligence or acts of Lessor or its agents, contractors, employees or any other party for whom Lessor is legally responsible. Nothing contained in this Lease shall obligate Lessee to become directly obligated to pay any interest or principal on any mortgage or other financing of Lessor's interest in the Demised Premises (but nothing contained in this sentence shall abrogate Lessee's responsibility to tender rent -3- 7 to any Institutional Lender (as defined in Section 26.03) pursuant to the provisions of the Subordination, Non-Disclosure and Attornment Agreement attached hereto as Exhibit B), or any corporate, inheritance, franchise, income or similar tax assessed to Lessor. 1.04 Additional Rents. Lessee shall pay to Lessor the Rent and all other sums that may become due or be payable by the Lessee under this Lease, including, without limitation, taxes and insurance obligations of Lessee hereunder, at the time and in the manner provided in this Lease, all of which shall be deemed as Additional Rents, and in the event of nonpayment the Lessor shall have all the rights and remedies provided by this Lease. Rent shall be tendered in legal tender and lawful money of the United States at the office of Lessor or such other place as Lessor may designate in writing. Rental payments shall be without set-off, abatement, deduction or other reduction whatsoever except as expressly set forth in this Lease. ARTICLE 2 REPAIRS 2.01. The Demised Premises, together with the sidewalks adjacent thereto, if any, shall be kept in good order and repair by Lessee at Lessee's sole cost and expense, and Lessee shall make all repairs and replacements, ordinary as well as extraordinary, foreseen and unforeseen, of every kind and nature whatsoever, including necessary interior and exterior roof and wall maintenance -4- 8 and repair, that may be necessary or required in or about the same so that at all times those buildings, improvements, sidewalks, parking lots and other paved surfaces shall be in good order, condition, and repair. ARTICLE 3 COMPLIANCE WITH LAWS 3.01 Lessee covenants to comply with any and all applicable laws, statutes, ordinances, orders, rules, regulations and requirements of all federal, state and municipal governments, and the appropriate agencies, offices, departments, boards and commissions thereof (including without limitation all applicable zoning, building codes, and the Americans with Disabilities Act of 1990), and the board of fire underwriters and/or fire insurance rating organization or similar organization performing the same or similar functions (collectively, "Laws") applicable to the Demised Premises relating to the use or occupancy thereof or to the making of repairs thereto, or of changes, alterations or, improvements therein, ordinary or extraordinary, structural or otherwise, seen or unforeseen, including but not limited to the performance of any duty imposed upon Lessor or Lessee by such Laws in respect to the sidewalks, curbs, streets or vaults, if any, adjacent to the Demised Premises. Lessee shall have the right to contest by appropriate legal proceedings diligently conducted in good faith, in the name of Lessee, or Lessor (if legally required) or both (if -5- 9 legally required), without cost or expense to Lessor, the validity or application of any Law and, if by the terms of any such Law compliance therewith may legally be delayed pending the prosecution of any such proceeding, Lessee may delay such compliance therewith until the final determination of such proceeding. Lessee will indemnify Lessor against all adverse consequences of such contest, including court costs, interest, penalties or other expense including reasonable attorneys' fees. Lessee shall pay all costs, expenses, claims, fines, penalties and damages that may in any manner arise out of or be imposed because of the failure of Lessee to comply with this Article 3, and in any event agrees to indemnify the Lessor from all liability with reference to the same. Lessor and Lessee shall each promptly give notice to the other in writing of any (a) written notice of violation of Law or Environmental Law (as defined in Section 30.01) relating to the Demised Premises received by the Lessee or Lessor, respectively, or (b) event or occurrence, the existence of which is known by either Lessor or Lessee, which would constitute a reportable event or occurrence under any Environmental Law. Without diminishing the rights or obligation of Lessee, if Lessee shall at any time fail or neglect to comply, to the extent reasonably appropriate and as expeditiously as reasonably feasible, with any of said Laws or Environmental Laws, as hereinbefore provided and, if a stay is necessary, Lessee shall have failed to obtain the stay or continuance thereof, Lessor in addition to other remedies shall be -6- 10 at liberty, after ten (10) business days' prior written notice to Lessee and without unreasonable disruption to Lessee's business activities, to comply therewith, and reasonable expenses consequent thereon shall be borne and paid by Lessee; upon Lessee's failure so to pay, Lessor may pay the same and any payments so made by the Lessor, together with interest thereon to be computed at the prime rate of interest from time to time announced by Chase Manhattan Bank, N.A. (or its successor) plus 2% per annum from date of payment shall be considered as additional rent to be added to the installment of Rent next accruing, and shall entitle Lessor to enforce any of the terms, provisions, conditions and covenants herein contained that may be applicable to such Rent. Lessee agrees to defend, indemnify and hold harmless Lessor from and against all claims, losses, costs or expenses (including reasonable attorneys' fees) suffered or incurred by Lessee arising out of Lessor's exercise of its rights to comply set forth in the preceding sentence. ARTICLE 4 SURRENDER AT END OF TERM 4.01. On the Expiration Date or earlier termination date of this Lease, Lessee shall surrender the Demised Premises, including, but not limited to, all buildings, improvements, hoists, pipes, plumbing, engines, electric wires, and fixtures used in connection with the operation of the Demised Premises (but no trade fixtures -7- 11 and equipment of occupants in possession of the Demised Premises, provided that any damage to the Demised Premises resulting from such removal shall be repaired by Lessee) in good repair and condition, damage by fire or other casualty and reasonable wear and tear thereof excepted. In amplification of the foregoing, provided Lessee shall not then be in default beyond applicable notice and cure periods and Lessor has not exercised its right to terminate the Lease as set forth in Section 13.02, Lessee may, at its option, remove any furnishings, fixtures, equipment and personal property which have been installed by Lessee or anyone claiming through or under Lessee (including, without limitation, any plumbing, pipes, wires, cables, or other apparatus in connection therewith, however, excluding any such property or improvement installed as part of the Phase 2 Work (as defined in Article 36), unless and to the extent Lessee has paid for same in which event Lessee may at its option remove same). Upon any such permitted removal, Lessee shall restore the Demised Premises to its original condition, damage by fire or other casualty and reasonable wear and tear thereof excepted. All such removals and restoration shall be accomplished in a good and workmanlike manner so as not to damage the primary structure or structural integrity of the building and other improvements which are a part of the Demised Premises and shall not decrease the value of the Demised Premises except as to the value of the property the Lessee is permitted to remove and after such removal, if any, the primary structure on the Demised Premises -8- 12 still shall be eligible for a certificate of occupancy from the appropriate governmental authority. ARTICLE 5 MECHANICS' LIENS 5.01. Neither Lessor nor Lessee shall have the power to subject the Demised Premises or any interest in the Demised Premises to any mechanics' or other liens. If any mechanics' or other liens or order for the payment of money shall be filed against the Demised Premises or any building or improvement which is a part thereof by reason of or arising out of any labor or material furnished or alleged to have been furnished or to be furnished to or for Lessor or Lessee at the Demised Premises, or for or by reason of any change, alteration, or addition or the cost or expense thereof or any contract relating thereto, the party responsible for such lien (the "Responsible Party") shall cause the same to be cancelled and discharged of record, by bond or otherwise as allowed by law at the expense of the Responsible Party, within forty-five (45) days after written demand therefor, and shall also defend on behalf of the party which is not responsible for such lien (the "Non-Responsible Party") at the Responsible Party's sole cost and expense, any action, suit or proceeding that may be brought thereon or for the enforcement of those liens, lien or orders, and the Responsible Party will pay any damages and satisfy and discharge any judgment entered therein and save harmless the -9- 13 Non-Responsible Party from any claim or damage resulting therefrom including reasonable attorneys' fees and expenses incurred by the Non-Responsible Party in defending against any such lien or claim. Nothing herein shall be construed to create an agency on the part of Lessor or Lessee on behalf of the other for the contracting for labor or materials on the Demised Premises. ARTICLE 6 INSPECTION BY LESSOR 6.01. Lessee shall permit Lessor and Lessor's agents to enter the Demised Premises, during Lessee's normal business hours and upon reasonable prior notice, to examine same. Lessee shall have the right to accompany or designate an agent to accompany Lessor on any examination of the Demised Premises made pursuant to this Article 6. Lessor agrees to defend, indemnify and hold harmless Lessee from and against all claims, losses, costs or expenses (including reasonable attorneys' fees) suffered or incurred by Lessee arising out of Lessor's exercise of its entry rights under this Article 6. ARTICLE 7 TAXES AND OTHER CHARGES 7.01. Lessee agrees to pay and discharge punctually as and when the same shall become due and payable without penalty, all real estate taxes, personal property and income taxes, business and -10- 14 occupation taxes, occupational licenses, water charges, sewage charges and utility assessments, and all other governmental taxes, impositions and charges of every kind and nature, extraordinary or ordinary, general or special, foreseen or unforeseen, which at any time during the Term shall become due and payable by Lessor or Lessee and which shall be levied, assessed or imposed: (a) Upon, or which shall be or become liens upon, the Demised Premises or any portion thereof, or any interest of Lessor or Lessee therein or under this Lease or upon the rents payable hereunder; or (b) Upon or with respect to the construction, possession, operation, maintenance, alteration, repair, rebuilding, use or occupancy of the Demised Premises or any portion thereof. The obligations of Lessee hereunder shall be pursuant to any present or future laws, statutes, regulation or other requirement of any governmental authority, however, Lessee shall have no liability for any such tax, charge or assessment attributable to properties or operations of Lessor not involving the Demised Premises. It is the intention of the parties hereto that, insofar as the same may be lawfully done, Lessor shall be free from all costs, expenses and obligations with respect to any such taxes, charges, assessments or impositions, and that this Lease shall yield, net to Lessor, not less than the Rents reserved hereunder throughout the Term. Notwithstanding anything to the contrary contained in this Article 7, in no event shall Lessee be required -11- 15 to pay any corporate, inheritance, franchise, income or similar tax assessed against Lessor. Section 7.02. Lessee covenants to furnish to Lessor, promptly upon request, proof of the payment of any tax, assessment, and other governmental or similar charge, and any utility charges, which is payable by Lessee as provided in this Article. ARTICLE 8 INDEMNIFICATION OF LESSOR 8.01. Lessee shall defend, indemnify and hold harmless Lessor from and against any and all claims, losses, costs and expenses, including reasonable attorneys' fees, suffered or incurred by Lessor (i) arising from or out of the occupancy of the Demised Premises by or under Lessee, Lessee's agents or employees, (ii) from any loss or damage arising in connection with the Demised Premises from any fault or negligence by Lessee, or (iii) from any failure on Lessee's part to comply with any of the covenants, terms and conditions contained in this Lease required to be complied with by Lessee. Lessee shall have no duties and responsibilities under this Article 8 for any claims, losses, damages, claims, suits, liability, costs or expenses, including reasonable attorneys' fees incurred by Lessor as a result of any negligence or acts of Lessor, its employees, contractors, agents or any other party for whom Lessor is legally responsible. -12- 16 ARTICLE 9 INSURANCE; RESTORATION 9.01. INSURANCE (a) During the term of this Lease, Lessee, at its sole cost and expense, shall carry and maintain the following types of insurance in the amounts specified: (i) Fire and extended coverage insurance (including earthquake insurance, to the extent available) covering the Demised Premises against loss or damage by fir and against damage by other risks now or hereafter embraced by the "extend coverage" so called, in amounts equal to the full cost of replacing the Demise Premises in the event of total destruction of same by fire or any other casualty with appropriate riders to compensate for the effect of inflation on such replacement cost, with a deductible not to exceed $250,000. (ii) Comprehensive public liability insuranc including propert damage, insuring Lesso and Lessee against liability for injury to persons or property occurring in or about the Demised Premises or arising out of the -13- 17 ownership, maintenance or use or occupancy thereof. The liability under such insurance shall not be less than Two Million Dollars ($2,000,000.00) for any one accident and not less than Five Million Dollars ($5,000,000.00) in the aggregate for all accidents in any one year period; and (iii) Business interruption insurance against loss of rent or rental value due to fire including extended coverage endorsement in an amount equal to the annual rent for the Demised Premises plus the estimated amount of rea estate taxes and any other expenses connected with the Demised Premises payable by the Lessee. (c) All policies of insurance shall provide by endorsement that any loss shall be payable to Lessor or Lessee as their respectiv interes may appear at the time of the loss or payable to mortgagee of Lessor under the standard mortgage clause, if such mortgagee requires. All such policies shall further provide that not less than thirty (30) days written notice shall be given to Lessor, Lessee and the holder of an Institutional Mortgage before such policy may be cancelled changed to reduce insurance provided thereby. Lessee shall provide Lessor with either certificates evidencing such insurance, or duplicate -14- 18 policies of each insurance policy evidencing such endorsement(s) together with evidence satisfactory to Lessor that payment of all premiums thereon has been made. (d) Each of Lessor and Lessee hereby releases the other from any and all liability or responsibility to the other or any person or entity claiming through or under them by way of subrogation or otherwise for any loss or damage to property caused by fire or any other perils insured in policies of insurance covering such property, even if such loss or damage shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be legally responsible, provided, however, that this release shall be applicable and in force and effect only with respect to loss or damage occurring during such times as the releasor's policies shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair said policies or prejudice the right of the releasor to recover thereunder and then only to the extent of the insurance proceeds payable under such policies. Each of Lessor and Lessee agrees that it will request its insurance carriers to include in its policies such a clause or endorsement; if such clause or endorsement is unavailable the party unable to obtain same shall give the other party immediate written notice of such fact. (e) If Lessee fails to provide or to keep in force the insurance required by this Article 9, Lessor shall furnish Lessee with written notice of failure to provide or keep in force such -15- 19 insurance, and if Lessee fails to furnish satisfactory evidence of such insurance within five (5) business days of receipt of such notice, Lessor may, if it elects, procure such insurance and all premiums advanced by Lessor shall be repaid by Lessee, as additional rent, promptly following written request, together with annual interest at the lesser of the highest rate of interest permitted by Law, and the prime rate of interest from time to time charged by Chase Manhattan Bank, N.A. plus 2%. 9.02. Subject to the provisions of Section 9.04, if any buildings at any time on the Demised Premises shall be damaged or destroyed by any cause whatsoever, during the Term, Lessee shall give immediate notice thereof to Lessor and, with reasonable promptness, repair and replace the same at Lessee's expense, utilizing the insurance proceeds, if any, paid in conjunction with such damage or destruction so that the buildings upon the Demised Premises after that repair and replacement shall be at least equal in value to the buildings existing immediately prior to such occurrence and as nearly similar to such buildings in character as shall be practicable and reasonable. Before beginning such repair or rebuilding, or letting any contracts in connection therewith, Lessee shall submit complete detailed plans and specifications for Lessor's approval, which approval Lessor shall not unreasonably withhold, condition or delay. 9.03. Except as otherwise provided in Article 9, Lessee shall not be entitled to any abatement of Rent except to the extent to -16- 20 which Lessor shall have received a net sum as proceeds of any loss or business interruption insurance maintained by Lessee, nor shall its obligations to pay rent under this Lease be abated during the term of this Lease, notwithstanding any destruction or damage to the Demised Premises by any cause whatsoever. 9.04. In the event of damage to or destruction of any building upon the Demised Premises during the term of this Lease, Lessor and Lessee agree that Lessor's mortgagee, if an Institutional Lender shall be entitled to retain the insurance proceeds paid on account thereof; provided, however, if Lessee shall not then be in default beyond applicable notice and cure periods and Lessor has not exercised its right to terminate the Lease as set forth in Section 13.02, then as a condition thereto such proceeds shall be received by such mortgagee in trust to pay the cost of restoration, and shall not be commingled with any other funds of such mortgagee. In such event the mortgagee shall apply all insurance money received on account of such damage or destruction to pay the cost of the work and for the protection of the Demised Premises pending the completion of the work. If the estimated cost of the work is more than $150,000.00, the plans and specifications shall first be submitted to and approved in writing by Lessor and the holder of an Institutional Mortgage, which approvals shall not unreasonably be withheld, conditioned or delayed. The insurance funds shall be paid out, as provided below, -17- 21 from time to time as the work progresses, upon the written request of Lessee, which shall be accompanied by the following: (a) A certificate (the "Certificate") of the architect or engineer in charge of the work dated not more than ten (10) days before such request, stating that the requested sum either has been paid by Lessee or is justly due to contractors, subcontractors, materialmen, engineers, architects or other persons (whose names and addresses shall be stated) who have rendered services or furnished materials in connection with such work. The Certificate shall give a brief description of such services and materials, list the several amounts so paid or due to each such person, state the estimated fair value of the work at the date of requisition, and state that to the best knowledge of the certifying party no part of such expenditures has been or is being made the basis for any other request for payments. The certificate shall state also that, except for the amounts listed therein, the architect or engineer, after reasonable inquiry, knows of no outstanding indebtedness that is then due for labor, wages, materials, supplies, or services relating to such work and which, if unpaid, could become the basis of a mechanic's, materialmen's, or similar lien upon such work or the Demised Premises. The certificate shall also contain such other information regarding the work as shall be reasonably requested by Lessor's mortgagee; and (b) An affidavit sworn to by Lessee that all materials and property constituting the work described in the certificate are -18- 22 free and clear of all security interests, liens, charges, or encumbrances, except encumbrances securing indebtedness due to persons specified in such certificate which are to be discharged upon payment of such indebtedness; and (c) An affidavit, sworn to by Lessor, that to the best of Lessor's knowledge there exists no material default under the Lease. Upon compliance with the provisions of this Section, such mortgagee shall, out of the insurance money, pay to the persons named in such certificates the respective amounts stated to be due to them, or shall pay to Lessee the amounts stated to have been paid by Lessee. Upon completion of the work, Lessee shall cause to be filed a "notice of completion" in the Register's Office for Madison County, Tennessee, and to give such other notices as shall be required or permitted under TCA Section 66-11-101 et. seq. to determine the time period for filing of liens or other claims against the work. The final disbursement from the insurance funds for the work shall be withheld until the time period has expired for filing of claims against the work, but in no event longer than sixty (60) days following completion of the work. Section 9.05. If the insurance proceeds are insufficient to pay the cost of such restoration work, Lessee shall pay the deficiency. If the proceeds exceed the cost of such work, Lessee may retain the excess. Prior to commencement of the work, if the estimated cost of completing such work exceeds Two Hundred Thousand -19- 23 Dollars ($200,000) as reasonably estimated by Lessee's architect or engineer, and promptly following request of Lessor's mortgagee, Lessee shall require its contractor or subcontractor to furnish such payment and performance bonds as may be reasonably requested to insure payment for all aspects of the work and its proper completion. ARTICLE 10 CONDEMNATION 10.01. If any person or corporation, municipal, public, private, or otherwise shall at any time during the Term lawfully condemn and by reason thereof acquire title to Lessor's interest in the Demised Premises, in or by condemnation proceedings in pursuance of the law, general, special or otherwise, Lessor shall be entitled to and shall, except as hereinafter provided, receive any award that may be made, including the award, if any, to Lessee for the value of the unexpired term of this Lease, and Lessee shall and does hereby assign and transfer to Lessor any award that may be so made to Lessee for any damages to the term of years set forth in this Lease. This assignment shall not include any award for taking of, or damage to, the trade fixtures of Lessee or its subtenants, or for any moving expenses incurred by Lessee or its subtenants. 10.02. Subject to the provisions of Section 10.03, in the event of a taking by condemnation as described in Section 10.01, this Lease shall continue, but the Rent to be paid by Lessee shall -20- 24 thereafter be reduced in proportion to the space taken by condemnation, and in such event Lessor shall promptly restore the Building and other improvements located on the Demised Premises as nearly as possible to the condition in which same were in before that taking. It is agreed that Lessor's obligations pursuant to the immediately preceding sentence shall not be limited to the amount of such condemnation award. 10.03. Should such taking of a portion of the Building which is a part of the Demised Premises result in a loss of a portion of the total Land area such that Lessee's use of the remaining portion of the Demised Premises becomes economically unfeasible (as reasonably determined by Lessee, recognizing that the manufacturing portion of the Demised Premises is of critical importance to the Lessee and the distribution portion of the Demised Premises is not of critical importance), then Lessee, at its option, may cancel and terminate this Lease by furnishing written notice to Lessor of its intent to terminate and cancel the Lease, which notice must be furnished within sixty (60) days after vesting of title in the condemnor, and the Lease shall terminate within thirty (30) days from receipt by Lessor of such written notice. -21- 25 ARTICLE 11 ASSIGNMENT AND SUBLETTING 11.01. (a) Subject to the provisions of Section 11.01(c), Lessee shall not assign this Lease or sublet any portion of the Demised Premises without first obtaining Lessor's written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Irrespective of the foregoing, no consent in one instance shall prevent this provision from applying to each subsequent instance. This provision shall not apply to transfers of Lessee's stock or other beneficial interests, neither of which shall be deemed to be an assignment of this Lease requiring Lessor's consent. (b) If Lessee should desire to assign this Lease, or to sublet all or any portion of the Demised Premises, and in either such case in an instance where Lessor's consent is required under this Article 11, Lessee shall give Lessor written notice of such desire, which written notice shall include (i) the name of the proposed assignee or sublessee, (ii) to the extent available, a copy of the proposed assignee's or sublessee's profit and loss statement, balance sheet and, if said proposed assignee or sublessee is a publicly traded company, annual report, each for the previous three (3) years and (iii) a statement (including an environmental impact statement) setting forth the proposed assignee's or sublessee's use of the Demised Premises, at least twenty (20) business days in advance of the date Lessee proposes to -22- 26 make such assignment or subletting. Notwithstanding any such subletting or assignment, Lessee shall remain liable on all of its obligations under this Lease. (c) Notwithstanding the provision of Section 11.01(a), Lessor's consent shall not be required to any subletting of less than 25,000 square feet of the Demised Premises (either individually or in the aggregate). In addition, if the entity to whom Lessee proposes to sublet the Demised Premises or assign this Lease is an Affiliate (as hereinafter defined), Lessor's approval for such subletting or assignment shall not be required provided that Lessee remains primarily liable for the full performance of all of Lessee's obligations under this Lease. As used herein, "Affiliate" shall mean: (i) any entity that directly or indirectly controls, is controlled by, is under common control with, or owns a fifty percent (50%) or greater interest in, Lessee; (ii) any entity in which Lessee owns a fifty percent (50%) or greater interest, either directly or indirectly, or (iii) any entity which has acquired all or substantially all of the assets of Lessee by merger, consolidation, purchase or other transfer. (d) Lessor's approval in accordance with Section 11.01(a) shall be deemed given unless Lessee receives notice in writing of Lessor's disapproval within the twenty (20) business day period described in Section 11.01(b). If Lessor shall deny such approval, Lessor shall specify in detail its reasons for such denial. -23- 27 (e) Subject to any applicable provisions of Article 15, Article 27 and Article 28, Lessor may transfer, convey, assign or encumber its interest in this Lease at any time without Lessee's consent. Notwithstanding the foregoing, Lessor may not transfer, convey or assign its interest in this Lease to any entity, or any Affiliate of an entity, which is engaged in the same general business as Tenant. 11.02 Lessee, and any permitted sublessee of the entire Demised Premises or assignee of all of Lessor's right, title and interest under this Lease, shall furnish to Lessor, quarterly, copies of financial statements (including balance, profit and loss statements and such other schedules as may be reasonably requested by Lessor, as the same are customarily prepared by Lessee or such sublessee or assignee). ARTICLE 12 INTENTIONALLY DELETED ARTICLE 13 DEFAULTS 13.01. Each of the following shall be deemed a default by Lessee and a breach of this Lease: (a) Lessee's failure to pay any installment of rent, which failure persists after the expiration of five (5) days from receipt by Lessee of written notice from Lessor advising of such -24- 28 failure to pay. Notwithstanding the foregoing, no written notice shall be required if Lessor has, within any consecutive ten (10) month period, twice given written notice to Lessee under this subparagraph (a). Nevertheless, if Lessee shall thereafter pay rent on a timely basis for a period of eighteen (18) consecutive months, the provisions of the first sentence of this subparagraph shall again apply; (b) Lessee's failure to pay any additional rent, which failure persists after the expiration of ten (10) days from receipt by Lessee of written notice from Lessor advising of such failure to pay; (c) Lessee's failure to observe or perform any of its obligations under the other terms, covenants or conditions of this Lease, which failure persists after the expiration of thirty (30) days from the date Lessor gives written notice to Lessee calling attention to the existence of that failure, but, if the matter that is the subject of the notice is of such a nature that it cannot be reasonably corrected within thirty (30) days then no default shall be deemed to have occurred if Lessee promptly, upon the receipt of notice, commences the curing of the default and diligently prosecutes same to completion within a one hundred eighty (180) day period. However, if the default is one relating to a matter that exposes space occupants or the public to an imminent and substantial danger to safety or health of which the public authorities have given due notice to Lessee, then the cure period -25- 29 shall be the period of time permitted to Lessee under law to take corrective measures for which Lessee is responsible. The right to cure provided herein does not grant Lessee any license or privilege to allow the Demised Premises to be without the insurance coverage provided for in Article 9 and failure promptly to comply with Article 9 shall entitle Lessor to place immediately the necessary insurance, and the cost thereof shall be additional rent and collectible as such; or (d) The adjudication of Lessee in an involuntary bankruptcy proceeding and such adjudication is not vacated within ninety (90) days; the taking by Lessee of the benefit of any other insolvency act or procedure, which term includes any form of proceeding for reorganization or arrangement or rearrangement under the Bankruptcy Code as well as an assignment for the benefit of creditors; or the appointment of a receiver for Lessee and such receiver remains undischarged for ninety (90) days. 13.02. Should Lessee default as described in this Article 13, Lessor at any time thereafter may, at its option give Lessee five (5) days written notice of intention to end the term of this Lease and thereupon at the expiration of those five (5) days the term of this Lease shall expire as completely as if that date were the Expiration Date and Lessee will then quit and surrender the Demised Premises to Lessor, but Lessee shall remain liable as provided in this Article 13. -26- 30 13.03. If the notice provided for in Article 13.02 shall have been given and the term of this Lease shall expire as described in Article 13.02, or if the Lease shall be taken from Lessee as a result of any execution against Lessee in any proceeding in which Lessee shall have no appeal or further appeal, then Lessor may without notice re-enter the Demised Premises and dispossess Lessee by summary proceedings or otherwise, and Lessee or other occupant or occupants of the Demised Premises will remove their effects and hold the Demised Premises as if this Lease had not been made, and Lessee waives the service of notice of intention to re-enter or to institute legal proceedings to that end. 13.04. In case of any default, re-entry, expiration or dispossession by summary proceedings or otherwise: (a) Rent shall become due thereupon and be paid up to the time of that re-entry, dispossession or expiration, together with any reasonable and customary expenses that Lessor may incur for legal expenses and attorneys' fees, including those incident to the recovery of possession, brokerage, and putting the Demised Premises in good order, or for preparing the same for re-rental; and (b) Lessee shall pay to Lessor as damages sums equal to the Rent and the additional rent payable hereunder which would have been payable by Lessee had this Lease not so terminated, or had Lessor not so re-entered the Demised Premises, payable upon the due dates therefor specified in this Lease had this Lease been in full -27- 31 force and effect unless otherwise specified herein and until the Expiration Date, without obligation on the part of Lessor to file suit for the collection of damages on a monthly basis; provided, however, that if Lessor shall relet the Demised Premises during said period (it being agreed that Lessor shall be obligated to use its best efforts to relet the Demised Premises), Lessor shall credit Lessee with the net rents received by Lessor from such reletting, such net rents to be determined by first deducting from the gross rents as and when received by Lessor the expenses of reletting, including altering and preparing the Demised Premises for new tenants, brokers' commissions, and all other expenses properly chargeable against the Demised Premises and the rental therefrom; it being understood that any such reletting may be for a period shorter or longer than the remaining term of this lease. In no event shall Lessee be entitled to receive any excess of such net rents over the sums payable by Lessee to Lessor hereunder. Lessee shall not be entitled in any suit for the collection of damages pursuant to this Subsection to a credit in respect of any net rents from a reletting, except to the extent that such net rents are actually received by Lessor. If the Demised Premises or any part thereof be relet by Lessor for the unexpired portion of the Term, or any part thereof, before presentation of proof of such damages to any court, commission or tribunal, except as may be otherwise adjudicated by a court of competent jurisdiction, the amount of rent reserved upon such reletting shall, prima facie, be -28- 32 the fair and reasonable rental value for the Demised Premises, or part thereof, so relet during the term of the reletting. Any such damages shall be paid in monthly installments by Lessee on the rent day specified in this Lease and any suit brought to collect the amount of the deficiency for any month shall not prejudice in any way the rights of Lessor to collect the deficiency for any subsequent month by a similar action or proceeding. 13.05. Lessor may make any alterations and decorations in the Demised Premises that Lessor in its judgment considers reasonably advisable and necessary for the purpose of reletting the Demised Premises. The making of these alterations or decorations shall not operate or be construed to release Lessee from any liability under this Article 13. 13.06. Lessor shall in no event be liable and Lessee's liability under this Article 13 shall not be affected or diminished in any way whatsoever for failure to relet the Demised Premises, or if the Demised Premises are relet, for failure to collect the rent thereof under such reletting; however, nothing contained in this Section 13.06 shall abrogate Lessor's obligation to use its best efforts to mitigate its damages. 13.07. In the event of a breach by Lessee of any of the covenants or provisions of this Lease, Lessor shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary dispossess proceedings, or other remedies were not provided in this Lease. Mention in this Lease of -29- 33 any particular remedy shall not preclude Lessor from any other remedy, at law or in equity. 13.08. Any action taken by Lessor under this Article 13 shall not waive any right that Lessor would otherwise have against Lessee for rent reserved in this Lease or otherwise, and Lessee shall remain responsible to Lessor for any loss and damage suffered by Lessor by reason of Lessee's default or breach. The words "re-enter" and "re-entry" as used in this Lease are not restricted to their technical legal meanings. Lessor shall, at all times, use its best efforts to mitigate its damages under this Article 13. ARTICLE 14 NO REINSTATEMENT 14.01. (a) No receipt of monies by Lessor from Lessee after the lawful termination or cancellation of this Lease shall reinstate, continue or extend the term of this Lease, or affect any notice theretofore given to Lessee, or waive Lessor's right to enforce the payment of Rent or additional rent then due, or thereafter falling due, or waive Lessor's right to recover possession of the Demised Premises by proper suit, action, proceeding or remedy; (b) After the service of notice to terminate or cancel this Lease, or the commencement of suit, action or summary proceedings, or any other remedy, or after a final order or judgment for the possession of the Demised Premises, Lessor may -30- 34 demand, receive and collect any monies due, or thereafter falling due, without in any manner affecting the notice, proceeding, suit, action, order or judgment. All such monies collected shall be deemed to be payments on the account of the use and occupation or Lessee's liability under this Lease. 14.02. Neither Lessor's nor Lessee's failure to enforce any term of this Lease, that is breached by the other, after notice had, shall not be deemed to void or affect the right of Lessor or Lessee, as applicable, to enforce that term on the occasion of a subsequent default or breach. ARTICLE 15 SUBORDINATION 15.01. Subject to the provisions of Section 15.02 of this Lease, this Lease shall be subject and subordinate to any present and all future first and second Institutional Mortgages (as defined in Section 26.02) that may thereafter affect Lessor's interest in the Demised Premises, and of all renewals, modifications, consolidations, replacements and extensions thereof. Lessor represents and warrants that, as of the date of this Lease, there are no non-Institutional Mortgages encumbering the Demised Premises. This clause shall be self-operative and no further instruments of subordination shall be required. In confirmation of this subordination, Lessee shall execute promptly any certificate, -31- 35 subordination agreement or other document that Lessor or its lender may reasonably request. 15.02. (a) The subordination described in Section 15.01 as it pertains to Institutional Mortgages now existing or hereafter made (which term includes any agreement modifying any Institutional Mortgage hereafter made), is conditioned upon the agreement of each Institutional Lender (as defined in Section 26.02 hereof), to be delivered by it to Lessee in form reasonably acceptable to Lessee (Lessee hereby approves the form of agreement attached hereto as Exhibit B), in which the Institutional Lender agrees in substance that so long as this lease shall be in full force and effect and Lessee shall not then be in default beyond applicable notice and cure periods, (i) except as set forth in this Section, the leasehold estate, possession and use of the Demised Premises in accordance with the terms of this Lease and all other rights and benefits of Lessee under this Lease (including, without limitation, the Purchase Option (as defined in Section 28.01) in accordance with the provisions of Article 28) shall not be interfered with or disturbed by any superior mortgagee or by reason of the subordination of this lease to its mortgage or any foreclosure or other proceedings for the enforcement of its mortgage or any transfer of Lessor's interest under this Lease pursuant to the taking of a deed or assignment in lieu of foreclosure (or similar device), (ii) Lessee shall not be bound to perform any covenant contained in this lease to a standard greater than that set forth -32- 36 in this lease by virtue of the inclusion in the mortgage or other agreements between Lessor and such Institutional Lender of any such greater standard, (iii) Lessee shall not be named or joined in any action or proceeding to foreclose any such mortgage (provided that Lessee may be named or joined if required by law and if such naming or joining of Lessee will not adversely affect Lessee's rights under this Lease), (iv) such action or proceeding shall not result in a cancellation or termination of the Term, and (v) if the holder of any such Institutional Mortgage becomes the owner of the fee or the assignee of any superior lease, this Lease shall continue in full force and effect as a direct lease between Lessee and the then owner of the fee or the then lessee of such superior lease, or the purchaser of the Land, upon all of the terms and conditions of this Lease (including, without limitation, the Purchase Option in accordance with the provisions of Article 28). ARTICLE 16 QUIET ENJOYMENT 16.01. Lessee, upon paying the rent and performing its other obligations under this Lease shall and may, at all times during the term of this Lease, peaceably and quietly have, hold and enjoy the Demised Premises free of molestation. -33- 37 ARTICLE 17 SUCCESSORS AND ASSIGNS 17.01. The covenants and agreements contained in this Lease inure to the benefit of and are binding upon the parties to this Lease, their successors and assigns, but this Article 17 does not modify the provisions governing assignment, as elsewhere provided for in this Lease. ARTICLE 18 ALTERATIONS 18.01. Lessee may, without Lessor's consent, but at its own cost and expense and in a good and workmanlike manner, make non-mechanical or non-structural alterations, additions or improvements to the Demised Premises subject to all conditions contained in Section 18.03. Such non-mechanical or non-structural alterations, additions or improvements shall comply with applicable Laws. 18.02. Lessee may, without the consent of Lessor, but at its own cost and expense and in a good and workmanlike manner, make mechanical or structural alterations, additions or improvements to the Demised Premises subject to all conditions contained in Section 18.03 if the cost of such mechanical or structural alterations does not exceed Two Hundred Thousand Dollars ($200,000) in the aggregate and does not (a) alter the roofline or exterior walls or affect the structural integrity of the Demised Premises and (b) cause a -34- 38 decrease in the value of the improvements at the Demised Premises. Such mechanical or structural alterations, additions or improvements shall comply with applicable Law. Lessor's prior written consent shall be required for all mechanical or structural alterations, additions or improvements exceeding Two Hundred Thousand Dollars ($200,000) in cost, which consent shall not be unreasonably withheld, conditioned or delayed. 18.03. So long as this lease shall be in full force and effect and Lessee shall not then be in default beyond applicable notice and cure periods and Lessor has not given a notice of its intention to terminate the Lease as set forth in Section 13.02, alterations, additions, improvements and partitions erected by Lessee shall be and remain the property of Lessee during the term of this Lease, and Lessee shall, unless Lessor otherwise elects as hereinafter provided, remove all such alterations, additions, improvements and partitions erected by Lessee and restore the Demised Premises to their original condition by the Expiration Date or earlier termination date of this Lease; provided, however, if Lessor so elects prior to termination of this Lease, such alterations, additions, improvements and partitions shall become the property of Lessor as of the date of termination and shall be delivered up to Lessor with the Demised Premises. Notwithstanding the foregoing, at Lessee's option all of Lessee's trade fixtures shall continue to be Lessee's property and may be removed by Lessee at any time. All shelves, bins, machinery and trade fixtures -35- 39 installed by Lessee shall be removed by Lessee prior to termination of this Lease if Lessee so elects and shall be removed if required by Lessor; upon any such removal Lessee shall restore the Demised Premises to the original condition. All such removals and restorations shall be accomplished in a good and workmanlike manner so as not to damage the primary structure or structural qualities of the building and other improvements situated on the Demised Premises. ARTICLE 19 NOTICES 19.01. All notices to the parties shall be addressed to them at the respective addresses first given for them in this Lease, or to such other address, of which either of them, as the case may be, shall notify the other party and its attorney in the manner stated in this Article 19 for giving notice. Copies of all notices shall be furnished to the attorneys for the parties at the addresses hereinafter provided, or at such other addresses which either of such attorneys, as the case may be, shall notify the other party and its attorney in the manner stated in this Article 19 for giving notice. Copies of all notices to Lessee shall also be given to Kerr Group, Inc., 1840 Century Park East, Los Angeles, California 90067, Attention: Corporate Secretary. Copies of all notices to Lessor shall also be given to Phonecian Properties, 529 Old Hickory -36- 40 Boulevard, Jackson, Tennessee 38305, Attention: Managing Partner. NOTICES TO ATTORNEYS FOR LESSOR AND LESSEE Lessor's Attorneys Lessee's Attorney William C. Bell, Esq. Steven J. Gartner, Esq. Rainey, Kizer, Butler, Reviere & Bell Willkie Farr & Gallagher 105 South Highland Street One Citicorp Center Jackson, Tennessee 38301 153 East 53rd Street New York, New York 10022 The notices to the parties and copies of such notices to the attorneys for the parties must be given by nationally recognized overnight courier service, registered mail, return receipt requested, or by certified mail, return receipt requested. In the case of service by overnight courier, service of the notice shall be deemed to have been completed upon the next business day following mailing. In the case of service by registered mail, service of the notice shall be deemed completed upon the registration thereof with the postal authorities, and in the case of service by certified mail upon the due mailing thereof. ARTICLE 20 NO WAIVER 20.01. The failure of either Lessor of Lessee to insist in any one or more instances, upon a strict performance of any of the -37- 41 covenants of this Lease, shall not be construed as a waiver of or relinquishment for the future performance of that covenant, or the right to exercise that option, but the same shall continue and remain in full force and effect. Lessor's receipt of Rent or additional rent, with knowledge of the breach of any covenant of this Lease, shall not be deemed a waiver of that breach, and no waiver by Lessor of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Lessor. 20.02. Lessor's receipt of any installment of the Rent under this Lease or of any additional rent shall not be a waiver of any Rent or additional rent then due. Lessor may, in its sole discretion, apply any payments made by Lessee to the satisfaction of any debt or obligation of Lessee to Lessor, regardless of Lessee's instructions as to the application of those payments, whether those instructions are endorsed on Lessee's check or otherwise. ARTICLE 21 REMEDIES CUMULATIVE 21.01. All of the rights and remedies given to Lessor in this Lease for the recovery of the Demised Premises because of the default by the Lessee in the payment of any sums that may be payable pursuant to the terms of this Lease, or upon the breach of any of the terms of this Lease, or the right to re-enter and take possession of the Demised Premises upon the happening of any of the -38- 42 defaults or breaches of any of the covenants of this Lease, or the right to maintain any action for rent or damages and all other rights and remedies allowed at law or in equity, are reserved and conferred upon the Lessor as distinct, separate and cumulative remedies, and no one of them, whether exercised by the Lessor or not, shall be deemed to be in exclusion of any of the others. ARTICLE 22 ENTIRE AGREEMENT 22.01. This Lease together with the Exhibits attached hereto contain the entire agreement between the parties with respect to the Demised Premises, and any agreement hereafter made shall not operate to change, modify or discharge this Lease in whole or in part unless that agreement is in writing and signed by the party sought to be charged with it. ARTICLE 23 INTENTIONALLY DELETED ARTICLE 24 INDEMNIFICATION OF LESSEE 24.01 Lessor shall defend, indemnify and hold harmless Lessee, it employees, agents, contractors and any other party for whom Lessee is legally responsible from and against all claims, losses, damages, suits, liens, liability, costs and expenses -39- 43 (including without limitation attorneys' fees) suffered or incurred as a result of any claim brought by any party or governmental entity, whether grounded in statutory or common law, for personal injury, wrongful death, property damage, economic loss, abatement, remediation, damage to natural resources, response costs, civil penalty, or any other claim, demand or notice arising out of or relating to the generation, presence, handling, treatment, storage or disposal of any solid waste, hazardous waste, hazardous substance, toxic substance, contaminant, or pollutant, or any other environmental condition, on, at, beneath, or near the property, provided such generation, presence, handling, treatment, storage or disposal was caused by the act or negligence of Lessor, its employees, agents, contractors or any other party for whom Lessor is legally responsible. 24.02 Lessee shall have the right to terminate this Lease in the event Lessee determines in its reasonable discretion that the condition for which Lessee is entitled to indemnification under Section 24.01 materially and adversely affects the operation of Lessee's business or the health or safety of Lessee's employees. If Lessee shall seek to exercise its termination rights under this Section 24.02 and Lessor disputes such right of Lessee to terminate this Lease, then, in such event, Lessee or Lessor shall submit the dispute to a court of competent jurisdiction, and receive a final non-appealable judgment thereon, prior to Lessee, in any manner, ceasing its obligations hereunder. -40- 44 ARTICLE 25 ESTOPPEL CERTIFICATES 25.01. Each party agrees, at any time and from time to time, as requested by the other party, upon not less than ten (10) days' prior notice, to execute and deliver to the other a statement certifying (a) that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the modifications) and whether any options granted to Lessee pursuant to the provisions of this lease have been exercised, (b) certifying the dates to which the Rent and additional rent have been paid and the amounts thereof, and stating whether or not, to the best knowledge of the signer, the other party is in default in performance of any of its obligations under this lease, and, if so, specifying each such default of which the signer may have knowledge, it being intended that any such statement delivered pursuant hereto may be relied upon by others with whom the party requesting such certificate may be dealing. Additionally, Lessee's and Lessor's statement shall contain such other information as shall be required by the holder or proposed holder of any superior mortgage or the lessor or proposed lessor under any superior lease. -41- 45 ARTICLE 26 CERTAIN DEFINITIONS 26.01. The term "Lessor" as used in this Lease shall mean Phoenician Properties ("Phoenician") and any future owner of fee title to the Demised Premises, it being agreed that no sale, transfer or other conveyance of all or any part of Phoenician's interest in the Demised Premises shall release Phoenician from the full and complete performance of all of Lessor's obligations under this Lease. 26.02. An "Institutional Mortgage" is a first or second mortgage or deed of trust held by an Institutional Lender and shall be in a form customarily used by such Institutional Lender in similar transactions, securing the interest of the Lessor in the real property constituting the Demised Premises. 26.03. An "Institutional Lender" is a commercial bank, savings and loan association, insurance company, pension or trust company, public corporation or governmental agency, municipality, county or subdivision thereof. ARTICLE 27 EXTENSION OF TERM 27.01. Provided Lessee has not received any notice of default which has not been waived or if Lessee shall have received a notice of default, the applicable cure period has not expired, Lessee shall have the right to extend the term of this Lease for two (2) -42- 46 ten (10) year periods as hereinafter provided (each a "Renewal Period"). Lessee shall exercise its option to renew by giving notice ("Renewal Notice") to Lessor in accordance with Article 19 at any time prior to the expiration of the then current term; provided, however, if requested by Lessor not less than eight (8) months nor more than ten (10) months prior to such expiration, Lessee agrees to exercise or refrain from exercising such option not later than six (6) months prior to the expiration of the then current term. The Rent during the first Renewal Period shall be Six Hundred Forty Thousand Eighty Dollars ($640,080) per year payable in equal consecutive monthly installments of Fifty Three Thousand Three Hundred and Forty Dollars ($53,340) per month and during the Second Renewal Period shall be Six Hundred Seventy Three Thousand Six Hundred Eighty Dollars ($673,680) per year, payable in equal consecutive monthly installments of Fifty Six Thousand One Hundred Forty Dollars ($56,140) per month. All of the terms, covenants and provisions of this Lease shall govern the rights and obligations of Lessor and Lessee during each of the Renewal Periods. ARTICLE 28 PURCHASE OPTION 28.01. Lessor grants to Lessee the option to purchase the Demised Premises in accordance with the provisions of this Article 28 (hereinafter, the "Purchase Option"). The Purchase Option may -43- 47 be exercised by Lessee at any time during the Term and prior to the expiration or termination thereof (or, if applicable, the Renewal Periods), by written notice to Lessor in accordance with Article 19, as further described in Section 28.02. 28.02. The purchase price for the Demised Premises (the "Purchase Price") shall be the greater of (a) the fair market value of the Demised Premises based on its present use, provided, that if by reason of a casualty or condemnation, Lessee shall then be obligated to repair any part of the Demised Premises, then the fair market value of the Demised Premises shall be based upon the condition the Demised Premises would be in if Lessee made such repairs, plus any diminution of value to the Demised Premises caused by the Lessee's failure to fulfill its obligations hereunder (other than its obligation to repair the Demised Premises arising by reason of a casualty or condemnation) (excluding all improvements to the Demised Premises made at Lessee's expense valued at the initial cost of said improvements less the amount of depreciation of said improvements calculated in accordance with generally accepted accounting principals (and provided, however, that improvements or repairs otherwise required to be done by Lessee under this Lease and the Phase 2 Work, shall be taken into account when determining the fair market value of the Demised Premises)) determined as of the date of Lessee's exercise of the Purchase Option (as determined by Arbitration pursuant to the provisions of Article 34) (the "Fair Market Value"), but if the -44- 48 Purchase Option is exercised prior to the twentieth (20th) anniversary of the Commencement Date in no event greater than $5,200,000.00 and (b) the First Tennessee Mortgage Amount (as hereinafter defined), plus, in either case, all amounts due under the Lease from the Lessee as Rent or Additional Rent or any amounts expended in furtherance of Lessee's obligations under this Lease to the extent such amounts have been paid by Lessor or the holder of the First Priority Mortgage (as hereinafter defined) on the date such Purchase Price is to be paid as evidenced by paid receipts. The "First Tennessee Mortgage Amount" shall mean the then outstanding unamortized principal balance of that certain mortgage by and between First Tennessee Bank National Association and Lessor dated on or about May 16, 1994 in the original principal amount of $3,800,000.00 (the "First Priority Mortgage") (as such mortgage and original principal amount will exist and expressly excluding any amendment or modification that shall increase the principal amount thereof or materially alter the amortization schedule of the loan secured by such mortgage) and any refinancing of the First Priority Mortgage, so long as the refinanced amount is not greater than the principal balance of the First Priority Mortgage at the time of the refinancing (but in no event greater than the original principal balance) and that the amortization schedule of the loan is not altered to require less amortization. Upon a foreclosure of the mortgagee's interest under any mortgage that would otherwise qualify under the definition of "First -45- 49 Tennessee Mortgage Amount", should the mortgagee be a successful bidder at the foreclosure sale, the "First Tennessee Mortgage Amount" shall mean the outstanding principal amount of such mortgage as of the moment preceding the extinguishment of the mortgage upon such successful foreclosure bid. In addition, if the Purchase Option is exercised prior to or on the twentieth anniversary of the Commencement Date and the Purchase Price is based upon the Fair Market Value not to exceed $5,200,000.00 and not based upon the First Tennessee Mortgage Amount, Lessee shall be entitled to apply ten percent (10%) of the aggregate of all Rent paid to Lessor during the term of this Lease at the time the Purchase Option is exercised, as a credit towards the Purchase Price provided, however, that in no event shall the Purchase Price be reduced to an amount below the First Tennessee Mortgage Amount should the First Priority Mortgage then exist. Lessee shall exercise the Purchase Option by giving written notice ("Purchase Option Notice") to Lessor in accordance with Article 19. 28.03. The Purchase Price shall be payable in lawful money of the United States to Lessor by Lessee at the close of escrow as provided in Section 28.05. 28.04. At the closing, which the parties agree shall occur on a mutually acceptable date and in all events within ninety (90) days following the date of Lessee's notice exercising the Purchase Option, Lessor shall deliver to Lessee an executed general warranty deed in recordable form conveying fee simple title to the Demised -46- 50 Premises together with all easements, mineral rights, rights to public roads and other interests appurtenant to the Demised Premises. Title to the Demised Premises shall be conveyed by Lessor to Lessee (or, at Lessee's option, to Lessee's designee) free and clear of all liens, encumbrances, covenants, conditions, restrictions, easements, rights of way, leases or other occupancy agreements, and other matters of record, except (i) current taxes, a lien not yet delinquent, (ii) those portions of current assessments not yet due and payable, (iii) matters (irrespective of whether of record) affecting title to the Demised Premises and created by Lessee, (iv) covenants, conditions, restrictions, easements, rights-of-way of record, and leases or other occupancy agreements existing on the Commencement Date (as conclusively indicated on Exhibit C attached hereto and made a part hereof), and (v) subleases covering portions of the Demised Premises entered into by Lessee (the matters described in (i) - (v) are referred to collectively as "Permitted Exceptions"). If there are any matters affecting the Demised Premises other than Permitted Exceptions, Lessor shall use its best efforts to remove same. If such matters are not removed prior to closing, Lessee may at its election either (i) rescind its Purchase Option Notice in which case this Lease shall remain in full force and effect, or (ii) receive a further credit against the Purchase Price in an amount equal to the resulting decrease in value to the Demised Premises, as reasonably determined by the parties provided, however, that in no event shall -47- 51 the Purchase Price be reduced to an amount below the First Tennessee Mortgage Amount should the First Priority Mortgage then exist. In the event of any dispute as to the amount of any such credit, the amount of such credit shall be determined by arbitration pursuant to Article 34. 28.05. The sale shall be consummated through an escrow with a title company selected by Lessee. Escrow shall be deemed to be closed pursuant to this Article 28.05 on the date the deed conveying fee simple title to the Demised Premises to Lessee is recorded. At the close of escrow, the title company must be prepared to issue the then most recent ALTA Owner's Title Insurance Policy in the amount of the purchase price insuring title to the Demised Premises vested in Lessee, subject only to the Permitted Exceptions. Each party shall select and bear all costs of its attorneys at closing, but all other closing costs (including without limitation any transfer taxes and title insurance premiums) shall be paid by the parties in accordance with the local commercial custom of Jackson, Tennessee. All items of Rent and additional rent shall be apportioned as of midnight the day preceding the closing. ARTICLE 29 INTENTIONALLY DELETED -48- 52 ARTICLE 30 HAZARDOUS WASTES/SUBSTANCES 30.01. The term "Hazardous Substances," as used in this Lease, shall mean pollutants, contaminants, toxic or hazardous wastes, or any other substances, (including, without limitation, asbestos and raw materials which include hazardous constituents), the removal, storage, transport or disposal of which or the use of which is restricted, prohibited or penalized by any "Environmental Law," which term shall mean any Law relating to pollution or protection of the environment. Lessee hereby agrees that during the Term (i) no activity will be conducted on the Demised Premises by Lessee, its agents, employees, sublessees, invitees or any other party entering the Demised Premises with the consent or knowledge of Lessee that will produce any Hazardous Substance, except for such activities that are part of the ordinary course of Lessee's (or its sublessees') business activities provided such activities are conducted in accordance with all Environmental Laws; (ii) the Demised Premises will not be used by Lessee, its agents, employees, sublessees, invitees or any other party entering the Demised Premises with the consent or knowledge of Lessee during the term hereof in any manner for the storage of any Hazardous Substances except for the storage of such materials that are used in the ordinary course of Lessee's (or its sublessees') business activities, provided all such Hazardous Substances are properly stored in a manner and location meeting all Environmental Laws; -49- 53 (iii) no portion of the Demised Premises will be used by Lessee, its agents, employees, sublessees, invitees or any other party entering the Demised Premises with the consent or knowledge of Lessee during the Term hereof as a landfill or dump; (iv) Lessee will not install any underground storage tanks of any type without the prior written consent of Lessor, which consent shall not be unreasonably withheld, conditioned or delayed, provided Lessee complies with all applicable Laws regarding such underground tanks (it being further agreed Lessee shall remove any such underground tanks at the expiration of the Term unless Lessee obtains Lessor's written consent to allow such underground tank(s) to remain on the Demised Premises after that date; (v) Lessee shall use commercially reasonable efforts to prevent any surface or subsurface conditions from coming into existence that constitute, or with the passage of time may constitute, a public or private nuisance; (vi) Lessee will use commercially reasonable effort to prevent any Hazardous Substances from being brought onto, stored, processed, disposed of on, released, discharged from (including ground water contamination) or otherwise handled on the Demised Premises, except in connection with Lessee's (or its sublessees') business activities, and if disposed of on, released or discharged from or on the Demised Premises, the same shall be immediately removed, with proper disposal, and all required cleanup procedures shall be diligently undertaken pursuant to all Environmental Laws. Lessee and Lessor shall each promptly notify the other in writing should -50- 54 Lessor or Lessee become aware of the presence, release or suspected release of any Hazardous Substance not otherwise permitted under this Lease or any other environmental problem or liability with respect to the Demised Premises. If, at any time during the Term or the five (5) year period following the expiration or earlier termination of the Term the Demised Premises are found to require remedial action under Environmental Laws as a result of (in whole or part) Lessee's activities at the Demised Premises or the act or activities of Lessee's agents, employees, contractors, subcontractors, suppliers, invitees, or licensees, Lessee agrees to indemnify and hold Lessor (and any mortgagee and trustee under any deed of trust or mortgage on the Demised Premises) harmless from all claims, demands, actions, liabilities, costs, (including reasonable attorney's fees), expenses, damages and obligations of any nature arising from or as a result of the actions or omissions of Lessee, its agents, employees, sublessees, invitees or any other party entering the Demised Premises with the consent or knowledge of Lessee during the Term hereof, but not further or otherwise. Within thirty (30) days prior to the expiration or termination of this Lease, Lessee shall commence, at its expense, a Phase 2 environmental assessment of the Demised Premises (the "Assessment") and to use its best efforts to cause same to be delivered to Lessor within sixty (60) days following the expiration or termination of this Lease. The Assessment shall be performed by a qualified environmental firm reasonably approved by Lessor. The Assessment -51- 55 will address specifically the presence or absence of reportable or actionable amounts of any Hazardous Substances on or within the Demised Premises. The Assessment shall run to the benefit of Lessor and any then Institutional Lender, and each of their successors and assigns. ARTICLE 31 SIGNAGE 31.01. Lessee shall have the right, subject to Lessor's prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed, to place on or about the Demised Premises such signage that Lessee deems necessary or desirable in the conduct of its business conforming to Laws. ARTICLE 32 PURPOSES 32.01. Lessee agrees that it shall not use or suffer the Demised Premises to be used for any unlawful purposes or any purposes which violate any public or private zoning, land use or other applicable covenants, restrictions, regulations or ordinances. The Demised Premises leased hereunder may be used by Lessee for general office use, warehouse use, distribution use, manufacturing use (including without limitation injection molding of plastic closures or manufacture of home canning metal caps and lids with platisol liners and related products), such other -52- 56 purposes that are usual and normal in connection with Lessee's current business operations, and for uses incidental to the foregoing and no other purpose. Even if Lessee is unable to use the Demised Premises for each of the uses described above due to no fault of Lessor, this Lease will continue in full force and effect in accordance with its terms. The preceding sentence is not intended to limit Lessee's rights in accordance with Section 10.03 in the event of a taking by condemnation. ARTICLE 33 RIGHT TO CREATE ENCUMBRANCES 33.01. Lessor agrees not to unreasonably withhold, condition or delay its consent to Lessee granting such utility, access and other reasonable customary easements encumbering the Demised Premises for the benefit of third parties as Lessee may reasonably deem necessary or desirable in connection with Lessee's activities and operations at the Demised Premises and the holder of an Institutional Mortgage shall also have such right to consent to such grant so long as such holder of an Institutional Mortgage does not unreasonably withhold, condition or delay its consent so long as such grant shall not diminish the value of the Demised Premises or impair the utility of the Demised Premises except, as to any of the foregoing, on a deminimis basis. Lessor agrees to promptly use commercially reasonable efforts to cause any lender (including without limitation any Institutional Lender) having a security -53- 57 interest in the Demised Premises to subordinate the lien of such lender's security interest to such easements, if so requested by Lessee. ARTICLE 34 ARBITRATION 34.01. Lessor and Lessee agree that any dispute under this Lease expressly stated to be settled by arbitration (including without limitation the determination of fair market value under Article 28) shall be settled pursuant to the procedures contained in this Article 34 ("Arbitration"). 34.02. In any circumstance for which Arbitration is specifically provided for hereunder, the party desiring Arbitration shall give notice to that effect to the other party and shall in such notice appoint a person as arbitrator on its behalf. Within ten (10) days after such notice, the other party by notice to the original party shall appoint a second person as arbitrator on its behalf. The arbitrators thus appointed shall appoint a third person, and such three arbitrators shall as promptly as possible determine such matter, provided, however, that: (a) if the second arbitrator shall not have been appointed within the ten (10) day period as aforesaid, the first arbitrator shall proceed to determine such matter and shall render his decision and award in writing within thirty (30) days after the expiration of said ten (10) day period; and -54- 58 (b) if the two arbitrators are appointed by the parties and shall be unable to agree, within ten (10) days after the appointment of the second arbitrator, upon the appointment of a third arbitrator, they shall give written notice to the parties of such failure to agree, and, if the parties fail to agree upon the selection of such third arbitrator within ten (10) days after the arbitrators appointed by the parties give notice as aforesaid, then within five (5) days thereafter either of the parties upon notice to the other party may request such appointment by the American Arbitration Association (or any successor organization), or in its absence, refusal, failure or inability to act, may apply to a local state court of competent jurisdiction for a court appointment of such arbitrator. 34.03. Each arbitrator shall be a qualified and impartial person who shall have had at least ten (10) years' experience in the calling connected with the matter of the dispute. 34.04. The Arbitration shall be conducted, to the extent consistent with this Article, in accordance with the then prevailing rules of the American Arbitration Association (or any successor organization). The arbitrators, if more than one, shall render their decision and award in writing, upon the concurrence of at least two of their number, within sixty (60) days after the appointment of the third arbitrator. Such decision and award or the decision and award of the single arbitrator as provided in Section 34.02(a) hereof, shall be final and conclusive on the -55- 59 parties, and counterpart copies thereof shall be delivered to each of the parties. In rendering such decision and award, the arbitrators shall not add to, subtract from or otherwise modify the provisions of this lease. Judgment may be had on the decision and award of the arbitrators so rendered in any court of competent jurisdiction. 34.05. Each party shall pay the fees and expenses of the one of the two original arbitrators appointed by or for such party, and the fees and expenses of the third arbitrator and all other expenses of the arbitration (other than the fees and disbursements of attorneys or witnesses for each party) shall be borne by the parties equally. ARTICLE 35 MEMORANDUM OF LEASE 35.01 At the request of either party, Lessor and Lessee shall promptly execute, acknowledge, deliver a memorandum with respect to this Lease sufficient for recording (the "Memorandum"), which shall contain in addition to the minimum applicable statutory requirements, reference to the Purchase Option. Such memorandum shall not in any circumstances be deemed to change or otherwise affect any of the obligations or provisions of this lease. Each party hereby authorizes the other to record the Memorandum against the Land. -56- 60 ARTICLE 36 PHASE 2 WORK 36.01 Lessee and Lessor hereby acknowledge that Lessee is in the process of performing improvement work to the Demised Premises (collectively, "Phase 2 Work") described generally on Exhibit D attached hereto and made a part hereof, in accordance with building plans and specifications which have been approved by Lessor. 36.02. Upon the completion of Phase 2 Work, Lessee shall be deemed to represent and warrant to Lessor that: (a) all Phase 2 Work has been constructed in compliance with all applicable Laws and Environmental Laws and all title encumbrances and other matters affecting the Land. (b) All permits and approvals necessary to construct the Phase 2 Work and to permit legal occupancy of the Phase 2 Work including, without limitation, certificates of occupancy, have been obtained. -57- 61 (c) All utilities necessary to service Phase 2 Work are adequate for the permitted use thereof, are being provided by public utility companies, and have been connected. IN WITNESS WHEREOF, Lessor and Lessee have set their respective hands as of the date first above written. LESSOR: PHOENICIAN PROPERTIES a Tennessee general partnership, By: /s/ LARRY A. BECKER ------------------- Name: Larry A. Becker Title: Managing Partner LESSEE: KERR GROUP, INC. a Delaware corporation By: /s/ LARRY R. KNIPPLE -------------------- Name: Larry R. Knipple Title: Vice President - Secretary -58- 62 STATE OF TENNESSEE COUNTY OF MADISON Personally appeared before me, Cynthia C. Friddle, a Notary Public, Larry R. Knipple, with whom I am personally acquainted and who acknowledged that he executed the within instrument for the purposes therein contained, and who further acknowledged that he is the Vice President-Secretary of the Lessee and is authorized by the Lessee to execute this instrument on behalf of the Lessee as the free act and deed of the Lessee. Witness my hand, at office, this 16th day of May, 1994. /s/ CYNTHIA C. FRIDDLE ---------------------- Notary Public My Commission Expires: October 23, 1995 63 STATE OF TENNESSEE COUNTY OF MADISON Personally appeared before me, Cynthia C. Friddle, a Notary Public, Larry P. Becker, with whom I am personally acquainted and who acknowledged that he executed the within instrument for the purposes therein contained, and who further acknowledged that he is the Managing Partner of the Lessor and is authorized by the Lessor to execute this instrument on behalf of the Lessor as the free act and deed of the Lessor. Witness my hand, at office, this 16th day of May, 1994. /s/ CYNTHIA C. FRIDDLE ---------------------- Notary Public My Commission Expires: October 23, 1995 64 EXHIBIT "A" Property Description LOCATED IN JACKSON, MADISON COUNTY, TENNESSEE: Beginning at the intersection of the North margin of Highway 70 with the East margin of Bobrick Drive, which point is the Southwest corner of the herein described tract: Thence, with the East margin of Bobrick Drive the following calls: North 08 degrees 04 minutes 49 seconds East 300.00 feet; North 82 degrees 04 minutes 48 seconds West 69.87 feet; North 08 degrees 04 minutes 49 seconds East 892.36 feet to the Southwest corner of the property of Madison County, Tennessee; Thence, with the South line of the property of Madison County, Tennessee, South 81 degrees 55 minutes 11 seconds East 1000.00 feet to the Northwest corner of the property of Allsteel Inc.; Thence, with the West line of the property of Allsteel Inc., South 08 degrees 04 minutes 49 seconds West 956.62 feet to a point in the North margin of Highway 70; Thence, with the North margin of Highway 70, South 83 degrees 52 minutes 11 seconds West 959.49 feet to the point of beginning, containing 24.37 acres. A-1 65 EXHIBIT "A" 1. Description of Property Subject to Lease: LOCATED IN JACKSON, MADISON COUNTY, TENNESSEE: Beginning at the intersection of the North margin of Highway 70 with the East margin of Bobrick Drive, which point is the Southwest corner of the herein described tract: Thence, with the East margin of Bobrick Drive the following calls: North 08 degrees 04 minutes 49 seconds East 300.00 feet; North 82 degrees 04 minutes 48 seconds West 69.87 feet; North 08 degrees 04 minutes 49 seconds East 892.36 feet to the Southwest corner of the property of Madison County, Tennessee; Thence, with the South line of the property of Madison County, Tennessee, South 81 degrees 55 minutes 11 seconds East 1000.00 feet to the Northwest corner of the property of Allsteel Inc.; Thence, with the West line of the property of Allsteel Inc., South 08 degrees 04 minutes 49 seconds West 956.62 feet to a point in the North margin of Highway 70; Thence, with the North margin of Highway 70, South 83 degrees 52 minutes 11 seconds West 959.49 feet to the point of beginning, containing 24.37 acres. Being the same property conveyed to Phoenician Properties by warranty deed from Industrial Development Board of the City of Jackson, recorded in the Register's Office of Madison County, Tennessee in Book ____, at Page ____. 2. Description of Lease Agreement: That certain Amended and Restated Lease bearing date of the ____ day of May, 1994, between Phoenician Properties, a Tennessee General Partnership, having its principal office at 529 Old Hickory Boulevard, Jackson, Tennessee 38305, as Lessor, and Kerr Group, Inc., a Delaware corporation having its principal office at 1840 Century Park East, Los Angeles, California 90067, as Lessee. A-1 66 Exhibit "B" to Amended and Restated Lease THIS INSTRUMENT PREPARED BY: David G. Williams Attorney at Law 2000 First Tennessee Building Memphis, Tennessee 38103 TENANT ESTOPPEL, SUBORDINATION, NON-DISTURBANCE, AND ATTORNMENT AGREEMENT THIS AGREEMENT Made and entered into as of the 16th day of May, 1994, by and between KERR GROUP, INC., a Delaware corporation, party of the first part, hereinafter "Tenant," and FIRST TENNESSEE BANK NATIONAL ASSOCIATION, a national banking association, party of the second part, hereinafter "Bank." RECITALS OF FACT Tenant has leased certain property (the "Property") located in Madison County, Tennessee, more particularly described in Exhibit "A," attached hereto and incorporated herein by reference under and pursuant to an Amended and Restated Lease (the "Lease") more particularly described in EXHIBIT "A." Phoenician Properties, a Tennessee General Partnership (the "Landlord"), is lessor under the Lease. The Bank has agreed to make a loan to Landlord in the principal sum of Three Million Eight Hundred Thousand Dollars ($3,800,000.00), evidenced by a note (the "Note") in such amount, and secured by a Tennessee Construction Deed of Trust With Security Agreement and Assignment of Rents and Leases (the "Mortgage") upon the Property. (The holder from time to time of said loan indebtedness is hereinafter sometimes referred to as "Lender".) One of the conditions of such loan by the Bank is the execution of this Agreement by the Tenant; and the Tenant is willing to execute this Agreement to enable such loan to be made. NOW, THEREFORE, in consideration of the premises, as set forth in the Recitals of Fact, the sum of Ten Dollars ($10.00) cash in hand paid to the Tenant, and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, it is agreed by the parties as follows: AGREEMENTS 1. Tenant hereby certifies, represents, and warrants to the Bank, as of the date hereof, that: 67 (a) The Lease is in full force and effect and has not been assigned, modified, supplemented or amended in any way; (b) The Lease represents the entire agreement between the parties as to the leasing of the Property; (c) There are no defaults by either Landlord or Tenant under the Lease; (d) No rent which is not yet due under the terms and provisions of the Lease has been paid; (e) There are no existing setoffs, counterclaims or credits against rentals due or to become due under the Lease, nor are there existing defenses against the enforcement of the Lease by the Landlord; (f) Tenant has no notice or knowledge of any prior assignment, hypothecation or pledge of the rents due under the Lease; (g) The original term of the Lease begins on May___, 1994, and ends on May 31, 2014; (h) The Tenant is currently in possession of the Property; and (i) All conditions of the Lease to be performed by Landlord which are necessary to the enforceability of the Lease have been satisfied, including, but not limited to, completion in accordance with approved plans and specifications of any improvements agreed to be made by the Landlord upon the Property. (j) The Mortgage qualifies as an "Institutional Mortgage" under the provisions of Section 26.02 of the Lease. 2. Tenant and Bank mutually covenant and agree that: (a) The Lease is and shall be in all respects subject and subordinate to the lien of the Mortgage and to all renewals, modifications, consolidations and extensions thereof, in whole or in part; (b) Provided that Tenant is not in default under the terms of the Lease (beyond the period, if any, given in the Lease for cure of such default), Tenant's rights and privileges under the Lease (including, but not limited to, Tenant's purchase option pursuant to Article 28 of the Lease), and Tenant's quiet possession and enjoyment of the Property, shall not be affected or disturbed by the exercise by Lender of any of its rights -2- 68 under the Mortgage, nor by any sale or foreclosure of the Property or deed-in-lieu thereof, or any similar proceedings or devices; (c) So long as the Tenant is permitted quiet enjoyment of the Property (and notwithstanding any foreclosure of the lien of the Mortgage), Tenant agrees, at the option and request of Lender, to attorn to the following persons upon the terms and conditions of the Lease for the remainder of the term thereof (whether original or renewal), with the same force and effect as if such persons were named as Landlord under the Lease: (i) the Lender when such Lender is in possession of the Property, whether by foreclosure of the Mortgage, deed-in-lieu of foreclosure or pursuant to any assignment of rents executed as additional security for the indebtedness evidenced by the Note; (ii) any receiver appointed to take possession of the Property; (iii) any party acquiring title to the Property by foreclosure, pursuant to the power of sale contained in the Mortgage or by deed-in-lieu of foreclosure, and his or its heirs, successors, and assigns; (d) Tenant will execute and deliver, upon request of Lender, an appropriate agreement of attornment in confirmation of its obligations hereunder; and (e) Lender shall have no obligation to perform as landlord under the Lease until such time as Lender enters into possession of the Property and requests attornment by Tenant; such obligation shall continue only with respect to those obligations accruing during the period in which Lender remains in possession of the Property; and Tenant's recourse against Lender for any non-performance of its obligations as landlord under the Lease for such period of time shall be limited to Lender's interest in the Property. Tenant shall not, however, be bound to perform any covenant contained in the Lease to a standard greater than that set forth in the Lease by virtue of the inclusion in the Mortgage or other agreements between the Landlord and the Bank of any such greater standard. 3. Tenant acknowledges that as additional security for the indebtedness evidenced by the Note, Landlord has assigned, or will assign, to Bank, all rents, issues and profits arising from the Property, including the rents under the Lease. So long as any part of said indebtedness remains unpaid Tenant agrees with Bank that: (a) Tenant will not prepay any rent due under the Lease more than one (1) month in advance; -3- 69 (b) Upon written notice from Lender to Tenant, Tenant will pay to Lender all rent and other sums thereafter due under the Lease; (c) Tenant will not consent to any reduction of the rent set forth in the lease, to any other amendment or modification of the terms and provisions thereof, or to any cancellation or surrender of the Lease, without the prior written consent of Lender; (d) Tenant will, concurrently with serving same upon Landlord, send to Lender a copy of any notice of default or demand that Landlord cure any default, which notice or demand is given or made to Landlord pursuant to or concerning the provisions of the Lease; (e) In the event of any default by Landlord under the Lease, Lender shall have the same period of time and opportunity as given to Landlord to cure said default, plus an additional twenty (20) days, and, in any event, no less than forty-five (45) days after Tenant's notice to Lender of such default, before Tenant shall be entitled to declare a termination or cancellation of the Lease. In the event of a default by Landlord under the Lease which is not susceptible of cure by Lender, Tenant will not terminate the Lease by reason of such default if Lender shall, as promptly as practicable, (if applicable) seek to lift any automatic stay resulting from a bankruptcy proceeding, shall proceed with foreclosure of the Mortgage or the obtaining of a deed in lieu of foreclosure, and shall thereafter diligently attempt to effect such cure at the earliest possible time. 4. All notices or demands hereunder shall be in writing and shall be deemed to have been sufficiently given or served for all purposes when presented personally or sent by registered or certified mail to any party hereto at the address set forth below or at such other address as any party shall subsequently designate in writing: TENANT: Kerr Group, Inc. 1840 Century Park East Los Angeles, California 90067 BANK: First Tennessee Bank National Association 165 Madison Avenue Memphis, Tennessee 38103 Attention: Commercial Real Estate Division COPY TO: Heiskell, Donelson, Bearman, Adams, Williams & Caldwell 2000 First Tennessee Building Memphis, Tennessee 38103 Attention: David G. Williams -4- 70 5. Landlord joins herein for the purpose of consenting and agreeing to all of the terms and provisions hereof, insofar as its rights are or may be affected hereby. 6. This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto, and their respective heirs, successors and assigns. This Agreement may be executed in multiple counterparts, all of which, taken together, shall constitute but one document. IN WITNESS WHEREOF, the parties hereto have executed this Agreement (or have caused this Agreement to be executed by their respective officers, duly authorized to do so), on the day and year first above written. ATTEST: KERR GROUP, INC. _______________________ By:_______________________________ Corporate Secretary Title:____________________________ TENANT FIRST TENNESSEE BANK NATIONAL ASSOCIATION By:_______________________________ Title:____________________________ LENDER PHOENICIAN PROPERTIES, a Tennessee General Partnership By:_______________________________ Larry P. Becker, Managing Partner LANDLORD -5- 71 STATE OF TENNESSEE COUNTY OF MADISON Before me, ________________________, a Notary Public in and for the State and County aforesaid, personally appeared ___________________________, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, acknowledge himself (or herself) to be the _______________________ of KERR GROUP, INC., the within-named bargainor a corporation, and that _ he as such _______________________, being duly authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by _____ self as such ________________________. WITNESS my hand and seal at office, on this the ____ day of May, 1994. _______________________________ Notary Public My Commission Expires: ______________________ STATE OF TENNESSEE COUNTY OF _______________________ Before me, __________________________, a Notary Public in and for the State and County aforesaid, personally appeared _________________________, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath, acknowledged _____ self to be the _________________________ of FIRST TENNESSEE BANK NATIONAL ASSOCIATION, the within-named bargainor, a national banking association, and that _ he as such ____________________ executed the foregoing instrument for the purposes therein contained, by signing the name of the association by ____self as such ____________________. WITNESS my hand and seal at office, on this ____ day of May, 1994. ____________________________ Notary Public My Commission Expires: ______________________ -6- EX-10.5 4 EX-10.5 TO FORM 10-Q 1 EXHIBIT 10.5 AMENDMENT TO LEASE THIS AMENDMENT TO LEASE (the "Amendment") made and entered into this 18th day of May, 1994, by and between Century 21 Associates, a Tennessee general partnership having its principal office at P.O. Box 200, Jackson, Tennessee 38305 ("Lessor"), and Kerr Group, Inc., a Delaware corporation having its principal office at 1840 Century Park East, Los Angeles, California 90067 ("Lessee"). W I T N E S S E T H: WHEREAS, pursuant to that certain lease (the "Lease") dated October 5, 1989 between Lessor, as lessor, and Santa Fe Plastic Corporation, as tenant ("Santa Fe"), Santa Fe leased certain property and improvements located at 1005 Lower Brownsville Road, Jackson, Tennessee and more particularly described in the Lease; WHEREAS, pursuant to that certain Assignment and Assumption of Lease dated as of July 6, 1990, Santa Fe assigned to Lessee all its right, title and interest as lessee under the Lease to Lessee; WHEREAS, Lessor and Lessee amended the Lease pursuant to that certain Amendment to Lease (the "February 4th Amendment") dated February 4, 1994 and that certain Amendment to Lease (the "February 9th Amendment") dated February 9, 1994; WHEREAS, pursuant to that certain Amendment to Lease (the "March 31st Amendment") dated March 31, 1994, Lessor and Lessee agreed to amend the Lease in certain respects and declared both the February 4th Amendment and February 9th Amendment to be null and void; WHEREAS, Lessor and Lessee desire to restate the March 31st Amendment in its entirety; and WHEREAS, capitalized terms used herein that are not defined herein shall have the respective meanings given such terms in the Lease. NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Lessor has contracted for the construction of an approximately 93,000 square foot expansion to the leased premises 2 (the "Expansion"), such work to be performed by Lessor at its sole cost and expense. On the date of substantial completion of the Expansion (the "Extended Commencement Date"); that is, the state in the progress of the construction when the construction of the Expansion is sufficiently complete (including without limitation complying with the standards of Section 1(f) of this Amendment) so that Lessee can occupy or utilize the Expansion for its intended use without material interference from Lessor or any party performing the construction of the Expansion (should the parties fail to agree upon when said construction is substantially complete, the matter shall be determined by Arbitration (as defined in Section 1(j) of this Amendment)), then the following modifications to the Lease will thereafter go into effect: (a) The description of the Demised Premises is modified to reflect the additional square footage of 93,000 to the area of the building, bringing the total area of the building to 197,800 square feet. A scope of work and list of drawings delineating the additional square footage is attached to this Amendment as Exhibit "A". (b) The term of the Lease is extended beginning on the Extended Commencement Date and ending on the date that is thirteen (13) years after such date, it being agreed that all references in the Lease to the "term" or "initial term" shall mean the period commencing on the Extended Commencement Date and ending on the 13th anniversary of the Extended Commencement Date. The net annual rental payable from the Extended Commencement Date through the balance of the term is changed to Six Hundred Twenty-One Thousand Ninety Two and No/100 Dollars ($621,092.00), payable in equal monthly installments of Fifty-One Thousand Seven Hundred Fifty-Eight and no/100 Dollars ($51,758.00) each in advance on the first day of each month during the term. If the Extended Commencement Date does not occur on the first day of the month, Lessee shall pay rent for the fractional month on a per diem basis, calculated on the basis of a thirty (30) day month. (c) Section 11.01(e) is modified by adding the following sentence at the end thereof: "Notwithstanding the foregoing, Lessor may not transfer, convey or assign its interest in this Lease to any entity, or any affiliate of any entity which is engaged in the same general business as Lessee." -2- 3 (d) Article 27 EXTENSION OF TERM is modified to reflect the new annual rental for the 12 year renewal period of Seven Hundred Ten Thousand One Hundred Two and No/100 Dollars ($710,102.00). (e) Section 28.02 is modified by deleting the first and second sentences thereof and inserting the following sentences in their place: "If the purchase option is exercised during the initial thirteen (13) year term of this Lease, the purchase price for the Demised Premises (the "Purchase Price") shall be Five Million Two Hundred Thousand Dollars ($5,200,000) and if the purchase option is exercised during the twelve (12) year renewal period, the Purchase Price shall be the fair market value of the Demised Premises based on its present use (excluding all improvements to the Demised Premises made at Lessee's expense valued at the initial cost of said improvements less the amount of depreciation of said improvements calculated in accordance with generally accepted accounting principals (and provided, however, that improvements or repairs otherwise required to be done by Lessee under this Lease, shall be taken into account when determining the fair market value of the Demised Premises)) determined as of the date of Lessee's exercise of the Purchase Option (as determined by Arbitration pursuant to the provisions of Article 33). In addition, if the Purchase Option is exercised during the initial thirteen (13) year term of this Lease, Lessee shall be entitled to apply ten percent (10%) of the aggregate of all net annual rent payments paid to Lessor during the term of this Lease at the time the Purchase Option is exercised, as a credit towards the Purchase Price." (f) Lessor represents, warrants and covenants that all work in connection with the Expansion (collectively, "Expansion Work") shall be completed promptly, in a good and workmanlike manner, free of all liens, using first-class new materials, in at least the same quality as the construction of the existing building, and otherwise reasonably acceptable to Lessee. Lessor shall on the Extended Commencement Date assign to Lessee all manufacturers' and builders' or contractors' warranties for all improvements and equipment located on, or installed in, the Expansion. Lessor represents, warrants and covenants that all Expansion Work shall be performed and completed in accordance with plans and specifications reasonably approved in writing by -3- 4 Lessee, and in all events in full compliance with all applicable laws, ordinances, orders, rules, regulations and requirements of any nature. Notwithstanding the provisions of Section 9.01 and 9.02 of the Lease, prior to the date of delivery of the Expansion to Lessee, all risk of loss concerning the Expansion Work shall be borne by Lessor, and Lessor shall be fully and solely responsible for carrying "all-risk" casualty insurance, builder's risk and worker's compensation insurance with respect to the Expansion Work, and shall at all times maintain such insurance prior to the date of final completion of the Expansion Work. (g) Lessee shall have the right to prepare and deliver to Lessor a "punch-list" not later than 90 days following final completion of the Expansion noting any deficiencies with the Expansion Work. Lessor agrees to promptly correct any items noted on Lessee's punch-list within 60 days of receipt thereof. If all such punch-list items are not corrected within such 60-day period, Lessee may at its election perform same and deduct from the net annual rent thereafter coming due Lessee's out-of-pocket costs and expenses incurred in connection with the performance of such work. (h) Upon the date of substantial completion of the Expansion, Lessor shall be deemed to have made with respect to the Expansion and the Expansion Work each of the representations and warranties contained in Section 23.01(a), (b) and (c) of the Lease. (i) Lessor agrees to fully defend, indemnify and hold harmless Lessee from and against all claims, losses, costs and expenses (including without limitation, reasonable attorneys' fees) suffered or incurred by Lessee, or any party Lessee is legally responsible for, arising as a result of the intentional act or negligence of Lessor, or its agents or contractors, in connection with the performance of the Expansion Work. In connection with the performance of the Expansion Work, Lessor agrees to use, and to cause its agents and contractors to use, all commercially reasonable efforts to minimize interruption of Lessee's business activities within the Demised Premises. -4- 5 (j) The following Article 33 is hereby inserted after Article 32 of the Lease: "ARTICLE 33 ARBITRATION 33.01. Lessor and Lessee agree that any dispute under this Lease expressly stated to be settled by arbitration (including without limitation the determination of fair market value under Article 28) shall be settled pursuant to the procedures contained in this Article 33 ("Arbitration"). 33.02. In any circumstance for which Arbitration is specifically provided for hereunder, the party desiring Arbitration shall give notice to that effect to the other party and shall in such notice appoint a person as arbitrator on its behalf. Within ten (10) days after such notice, the other party by notice to the original party shall appoint a second person as arbitrator on its behalf. The arbitrators thus appointed shall appoint a third person, and such three arbitrators shall as promptly as possible determine such matter, provided, however, that: (a) if the second arbitrator shall not have been appointed within the ten (10) day period as aforesaid, the first arbitrator shall proceed to determine such matter and shall render his decision and award in writing within thirty (30) days after the expiration of said ten (10) day period; and (b) if the two arbitrators are appointed by the parties and shall be unable to agree, within ten (10) days after the appointment of the second arbitrator, upon the appointment of a third arbitrator, they shall give written notice to the parties of such failure to agree, and, if the parties fail to agree upon the selection of such third arbitrator within ten (10) days after the arbitrators appointed by the parties give notice as aforesaid, then within five (5) days thereafter either of the parties upon notice to the other party may request such appointment by the American Arbitration Association (or any successor organization), or in its absence, refusal, failure or inability to act, may apply to a local state court of competent jurisdiction for a court appointment of such arbitrator. 33.03. Each arbitrator shall be a qualified and impartial person who shall have had at least ten (10) years' current -5- 6 experience in the City of Jackson, State of Tennessee in the calling connected with the matter of the dispute. 33.04. The Arbitration shall be conducted, to the extent consistent with this Article, in accordance with the then prevailing rules of the American Arbitration Association (or any successor organization). The arbitrators, if more than one, shall render their decision and award in writing, upon the concurrence of at least two of their number, within sixty (60) days after the appointment of the third arbitrator. Such decision and award or the decision and award of the single arbitrator as provided in Section 33.02(a) hereof, shall be final and conclusive on the parties, and counterpart copies thereof shall be delivered to each of the parties. In rendering such decision and award, the arbitrators shall not add to, subtract from or otherwise modify the provisions of this Lease. Judgment may be had on the decision and award of the arbitrators so rendered in any court of competent jurisdiction. 33.05. Each party shall pay the fees and expenses of the one of the two original arbitrators appointed by or for such party and the fees and disbursements of attorneys or witnesses for such party, and the fees and expenses of the third arbitrator and all other expenses of the arbitration shall be borne by the parties equally." 2. This Amendment supersedes the February 4th Amendment, the February 9th Amendment and the March 31st Amendment. Upon the execution of this Amendment, the February 4th Amendment, the February 9th Amendment and the March 31st Amendment shall be and are null and void and of no further force and effect. -6- 7 3. Except as expressly amended hereby, the Lease and all of the terms, covenants and conditions thereof shall remain in full force and effect. IN WITNESS WHEREOF, the parties have executed this Amendment the day and date first shown above. CENTURY 21 ASSOCIATES By: /s/ LARRY P. BECKER _________________________________ Larry P. Becker, Managing Partner KERR GROUP, INC. By: /s/ LARRY R. KNIPPLE ___________________________________________ Larry R. Knipple, Vice President, Secretary -7- 8 Exhibit A Scope of Work -8- 9 EXHIBIT "A" SUMMARY OF WORK KERR GROUP, INC. PLASTIC PRODUCTS DIVISION PROPOSED 93,000 SF WAREHOUSE ADDITION, PLANT OFFICES, AND BREAKROOM ADDITION JACKSON, TENNESSEE JANUARY 10, 1994 REVISED APRIL 28, 1994 OVERVIEW: The scope of work included in our proposal consists of the construction of a 93,000 SF warehouse addition to the existing building located at 1005 Lower Brownsville Road, Jackson, Tennessee. Note: Alternate #9 changed the building size from 98,000 SF to 93,000 SF. We also propose to construct approximately 1,900 SF of new rooms in the existing plant with concrete storage mezzanines above. WAREHOUSE: The warehouse addition will be built on the north side of the existing building as shown on facility floor plan, A-1.1. The roof will slope northward from the existing building to the new north wall. The existing 12' x 14' overhead door will be relocated to the new warehouse. One new dock door, dock leveler, and dock shelter will be provided. The perimeter walls will consist of an 8'-0" high, block masonry wainscot with 24 gauge, prefinished siding and vinyl backed insulation above. The outside of the wainscot at the two side walls will be finished with dryvit to match the existing building. The interior face of the wainscots will be painted as will the exterior of the rear wainscot. All structural steel, girts, and the bottom of the roof deck will be field painted. The warehouse will be provided with heating and ventilation systems. The existing compressor building will be left intact and enclosed within the new structure. NEW BREAKROOM AND PLANT OFFICES: The proposed rooms in the existing plant consist of a meeting room/breakroom, four offices, and one toilet room. These areas will be constructed of concrete block walls with bar joist framing and concrete mezzanines above for storage. The mezzanines will not be provided with stairs or railing. These new rooms will be provided with heating and air conditioning systems. 10 A more detailed description of the scope of the proposed work follows. DIV.I - GENERAL REQUIREMENTS: A. GENERAL CONDITIONS: The general conditions include jobsite supervision, temporary office trailers, tools and equipment, all as necessary to construct the project. DIV.II - SITE DEVELOPMENT: A. SITE GRADING: The site grading work shall consist of clearing the site of vegetation and topsoil in the vicinity of the building addition, excavation and filling as necessary to achieve finish grades. Any excess soil will be bermed at the northwest corner of the site at the contractor's option. Disturbed areas will be seeded. B. ASPHALT PAVING: Heavy duty asphalt will consist of 8" crushed stone base, 1 1/2" asphaltic binder and 1 1/2" asphalt surface. This will be used for paved truck traffic areas. Light duty paving will be used for the parking lot expansion and consists of 6" stone base and 2" asphalt surface. The gravel fire truck lane will consist of 8" thick, crushed stone. The proposed paving locations are indicated on the horizontal layout. C. CONCRETE PAVING: A 50' x 14' concrete apron shall be provided at the new loading docks. The concrete apron shall be built using 4,000 psi concrete and reinforced with #3 reinforcing steel spaced at 18" on center each way. DIV.III -CONCRETE: A. BUILDING FLOOR SLABS AND FOUNDATIONS: Foundations shall consist of reinforced spread footings under building columns and continuous footings under exterior walls. All concrete used in foundation work is 3,000 psi at 28-days compressive strength. The warehouse will have a 6" thick concrete floor slab with #3 reinforcement at 18" on center each direction. Construction joints shall be doweled type. All concrete used on floor slab work is 4,000 psi at 28-days compressive strength. All floor slabs will be sealed with acrylic sealer. B. MISCELLANEOUS CONCRETE ITEMS: Miscellaneous concrete items included are: * Dock leveler pit (1 each) * Lightpole bases (3 each) * 6"0 concrete filled pipe bollards (10 each) * 4 - concrete stoops at exterior man doors * 1 set of concrete steps with handrails at the truck dock * 1 concrete pad for relocation of the transformer Page 2 11 DIV. IV - MASONRY: The masonry work includes an 8" thick block masonry wainscot (8'-0" high) around the perimeter of the addition except at the new loading dock. The masonry wainscot at the new loading dock shall be 15'-4" high. The masonry walls at the new rooms in the existing building will extend to 11'-4" A.F.F. DIV. V - METALS: Roof framing is joist and joist girders supported by wide flange columns. The bay spacings will be 40' x 41'-8", except for the bays along the west wall which will be approximately 20'x 41'-8". The roof deck will be 22 gauge, Type "B". Draft curtains will be provided at two locations running east-west, totalling 522 LF. Miscellaneous steel will be provided for handrails at the dock stairs, dock pit edge angle, pipe bollards, and overhead channel door frames. DIV. VI - CARPENTRY: The carpentry work consists of the necessary pressure treated wood blocking required to properly tie-in the roofing system to the building. DIV. VII - MOISTURE PROTECTION: A. ROOFING: Roof membrane shall be Firestone Tire & Rubber Company's loose laid, ballasted system. Thickness of membrane to be 0.045". The ballast shall be double thickness at the perimeter of the building. The gutters, downspouts, and gravel guard shall be prefinished to match the wall panels. Perimeter rock is per F.M. 1-29. B. WALL PANELS: The metal wall panels shall be 24 gauge, inverted "R" type exterior wall panels. Color to match existing building. The metal wall panels shall be lined on the inside with 2" thick, vinyl backed, fiberglass insulation. DIV. VIII - DOORS, WINDOWS AND GLASS: A. HOLLOW METAL: All man doors shall be hollow metal with 16 gauge frames and 1 3/4" thick, 18 gauge doors. Five view windows with hollow metal frames will be provided at the breakroom and new plant offices as shown on the plans. B. FINISH HARDWARE: The hardware for the doors includes hinges, exit devices for exterior doors, closers where required, kick plates, threshold, weather stripping and other items for a complete installation. Page 3 12 C. SPECIAL DOORS: One existing 12' x 14' door will be relocated to the new east wall. One new 8'-6" x 9', vertical lift, manual, overhead door to match the existing dock doors will be provided at the new loading dock. DIV. IX - FINISHES: A. PAINTING: The interior surface of the masonry wainscot, the new shipping office walls, the new toilet room walls, and the new breakroom walls shall be painted. The structural steel, roof framing, bottom of roof deck and columns shall also be painted. All painting work shall match existing. B. DRYVIT: The exterior of the block wainscot of the new east and west walls will be covered with dryvit. Color is to match the existing building. The exterior of the north (rear) wall wainscot will be painted. C. ACOUSTIC CEILING: Acoustic ceilings shall be provided for the new offices, new toilet room, and new breakroom. The ceiling tile shall be a general purpose, 24" x 48" tile in a lay-in grid. D. FLOOR COVERINGS: The floors of the new offices and new breakroom shall be covered with vinyl composition tile. Vinyl base will be provided at these rooms also. DIV. X - SPECIALTIES: A. TOILET ACCESSORIES: Chrome plated toilet accessories will be provided for the one new toilet room. DIV. XI - EQUIPMENT: A. DOCK LEVELERS AND DOCK SHELTERS: One new dock leveler to match the existing ones will be provided as follows. Rite-Hite, Model ST968 mechanical dock levelers complete as follows: * 6'x 8' * 25,000 lbs. capacity * Perimeter PT-2 weatherseals * Two bumpers each B. DOCK SEALS: One new dock shelter to match the existing ones will be provided as follows. Frommelt, Model WG-402-V, truck dock shelters with 40 oz. vinyl material. Units project 24" from building wall. Page 4 13 DIV. XII - FURNISHINGS: None provided. DIV. XIII - SPECIAL CONSTRUCTION: None provided. DIV. XIV - CONVEYING SYSTEMS: None provided. DIV. XV - MECHANICAL: Our scope of work includes but is not necessarily limited to the following: 1. Furnish and install a warehouse area ventilation system to provide (6) air changes per hour. This system shall consist of roof mounted exhaust fans with makeup air coming through the dock doors and wall louvers. 2. Revise the existing compressor room ventilation system to provide (20) air changes per hour. This system shall consist of a roof mounted exhaust fan with makeup air coming through a supply fan. The existing compressor heat recovery duct shall be vented to outside. 3. Furnish and install a warehouse area heating system to maintain 60 degrees F at 0 degrees F outside. The system shall consist of suspended gas fired and gravity vented unit heaters with thermostats and a spark ignited pilot. 4. Revise the existing rest room ventilation system at the shipping/receiving office as required. System shall consist of fan, ductwork and air distribution devices as required to conform to SBC requirements. 5. Furnish and install a shipping and receiving office HVAC system. System shall consist of (2) 1 ton through wall units. 6. Furnish and install meeting/breakroom HVAC system. The area shall be served by a 6 ton packaged, electrical cooling/gas heating rooftop unit complete with thermostat, economizer and barometric relief. Air distribution shall be as required. 7. Revise existing air distribution at the Q.A. office to allow for the lab partition. 8. Furnish and install natural gas piping to provide natural gas to all contractor furnished gas appliances. The 5 psi main will be taken over at the existing gas entrance. It is assumed that the existing utilities are adequate for the expansion. 9. Furnish and install a plumbing system as required. System shall include domestic cold and hot water and sanitary drainage to (1) water closet, (1) lavatory, and (1) floor drain at the shipping area. Page 5 14 FIRE PROTECTION 1. INTERIOR: Three wet systems designed to provide an initial density of .66 gpm/sq. ft. over the most remote 1,000 sq. ft. with a 750 gpm hose allowance and a secondary density of .40 gpm/sq. ft. over the most remote 3,725 sq. ft. with a 750 gpm hose allowance. We have included the following at each riser: 1 - alarm valve with trim; 1 - water motor alarm; 1 - retard chamber; 1 - electric flow switch; 1 - spare head cabinet and head wrench. The existing system riser #1 will be relocated to the east wall of the proposed addition. A 6" bulk main will be run overhead to supply existing system #1. 2. HOSE STATIONS: Included are ten 1 1/2" hose stations with 100' of 1 1/2" hose and adjustable nozzle. Note: Additional hose stations may be required due to final aisle layout. 3. IN-PLANT OFFICES, BREAKROOM: .12 gpm/sq. ft. over the most remote 3,000 sq. ft. with a 250 gpm hose allowance. 4. UNDERGROUND: 8" C-900 PVC pipe. DIV. XVI - ELECTRICAL: 1. RELOCATION OF EXISTING SERVICE. We shall provide for the relocation of the existing switchboard feeders and associated transformers. This shall require routing the primary to a new location and re-feeding the existing switchgear. This shall be accomplished with a minimum of shutdown time for the plant. 2. WAREHOUSE: A. SERVICE: We shall provide for the extension of the existing service or provide for a new service to this building. The building shall have a 1,000 amp service provided for building services, including lighting, receptacles, and HVAC equipment. We do not provide for the connection of any owner's equipment in this proposal. We shall provide a 1,000 amp main switchboard with breakers for all branch circuits, including (2) lighting panels, (2) receptacles low voltage panels, and (1) power panel for fans and other HVAC equipment. Page 6 15 3. LIGHTING: Lighting for the facility shall be provided, utilizing 400 watt metal halide high bay fixtures spaced so as to obtain 30 footcandles of light. We shall provide swing arm type dock lights at each dock door. Exterior lighting shall consist of wall mounted, 400 watt fixtures spaced approximately 90' apart. We shall relocate the bug lighting around the perimeter of the owner's property. We do not include the cost of providing additional bug lights that may be required. We include three additional pole mounted, 400 watt H.P.S. fixtures in the parking lot area. Exit and emergency lighting shall be provided as required to meet local code. In addition, we shall provide 10% of the high bay fixtures with a quartz re-strike feature. 4. DEVICES: We shall provide a receptacle at every other column throughout the facility. In office areas we shall provide receptacles as previously stated. 5. SYSTEMS: We include an allowance of $5,000 for extending the existing A.D.T. fire alarm system to cover the new addition. 6. BREAKROOM AND OFFICES: The new breakroom and office areas shall be provided with fluorescent lighting, using 2' x 4' lay-in fixtures, arranged so as to provide 80 footcandles of light. Receptacles shall be provided at the rate of one per each interior wall in private offices and per code requirements elsewhere. Each private office shall be provided with a telephone outlet and a data outlet. Switching for lighting shall be provided as required. It is assumed that power is available for the new construction and that we shall not be required to provide a new panel at these locations. Note: See the attached Schedule of Alternates for information on revisions to the above described Summary of Work. Page 7 16 ACCEPTED ALTERNATES KERR GROUP, INC. PLASTIC PRODUCTS DIVISION JACKSON, TN (THROUGH) March 31, 1994 BASE BID: All sitework and construction of a 93,000 SF warehouse addition. $ 1,713,000 ALTERNATE #1: Construction of new meeting room/breakroom, 4 plant offices, and 1 bathroom with storage mezzanines above, all within the existing building. Add +$ 116,000 ALTERNATE #6: Provide (1) additional door, (1) view window and (1) sliding pass window at the shipping office. Add +$ 2,100 ALTERNATE #7a: Provide (6) new bug attractor lights to match the existing fixtures and complete the design around the new addition. These pole mounted fixtures shall be spaced in a similar manner to the existing fixtures and routed with the existing fixtures that are to be re-located. Add +$ 12,000 17 ALTERNATE #7c: Provide totally enclosed fixtures in the warehouse in lieu of open high bay fixtures. This would replace the fixtures in the warehouse with a fixture that is fully gasketed and should greatly reduce the requirements for bug removal. Add +$ 5,500 ALTERNATE #8: Provide cigarette smoke venting at the breakroom and two air curtains at the doorways between the existing plant and new warehouse. Add +$ 10,600 ALTERNATE #9: Provide one water fountain at Column 4.5-N in the new warehouse. The waste water from this will be pumped to the gravity line. Add +$ 5,300 ALTERNATE #10: Pave fire road with 2,440 S.Y. of heavy duty paving in lieu of crushed stone driveway. Add +$ 12,500 ALTERNATE #11a: Add one entrance with 164 S.Y. of light duty paving and a 24" culvert with end sections at the proposed parking lot. Widen existing entrance at the east side of the existing entrance. Add +$ 9,000 ALTERNATE #12: Demolish 110'plus/minus of existing asphalt driveway between the existing driveway and parking lot, regrade and reseed the area. Add +$ 3,700 Page 2 18 ALTERNATE #13: Shorten bay size between Column Lines R & S from 40'-7" to 20'-7". This reduces the building size by approximately 5,000 S.F. Deduct <$ 34,387> ALTERNATE #14: Extending existing 8' high block wall to the roof deck for 261 LF in order to create a 2-hour fire partition between the existing building and the proposed warehouse. Includes two rolling steel fire doors and two 5' x 4' fire shutters at view windows. Add +$ 62,000 ALTERNATE #15: Provide fire protection coverage as follows in lieu of system previously quoted. INTERIOR - Three wet systems utilizing early suppression fast response sprinklers (ESFR) are designed to provide 50 psi minimum operating pressure at the most remote twelve sprinklers, flowing four sprinklers on three lines. HOSE STATIONS - Included are ten 1-1/2" hose stations with 100' of 1-1/2" hose and adjustable nozzle. Note: Additional hose stations may be required due to final aisle layout. UNDERGROUND - 8" C-900 PVC pipe will be extended on the north side of proposed addition and connected to the 12" city main. Add +$ 44,102 TOTAL OF BASE BID AND ALTERNATES NOS. 1, 6, 7a, 7c, 8, 9, 10, 11a, 12, 13, 14, 15. +$1,961,415 Page 3 19 DRAWING LIST KERR GROUP, INC. PLASTIC PRODUCTS DIVISION JACKSON, TN APRIL 28, 1994
CIVIL CE-1.0 SITE PLAN ARCHITECTURAL A1.1 FACILITY FLOOR PLAN A1.2 WAREHOUSE ADDITION ENLARGED AREA FLOOR A1.3 ENLARGED AREA FLOOR PLAN A2.1 DOOR & FINISH SCHEDULES A3.1 BUILDING ELEVATIONS A4.1 WALL SECTIONS A4.2 WALL SECTIONS A7.1 FACILITY ROOF PLAN A7.2 FLASHING DETAILS STRUCTURAL C1.1 FOUNDATION PLAN C1.2 MEZZANINE FOUNDATION PLANS C2.1 FOUNDATION DETAILS C2.2 SECTIONS & DETAILS S1.1 ROOF FRAMING PLAN S1.2 MEZZANINE FRAMING PLANS S1.3 ELEVATIONS S2.1 SECTIONS & DETAILS S3.1 WAREHOUSE ADDITION ROOF OPENING PLAN MECHANICAL SU-1.1 SITE UTILITIES PLAN M3.1 WAREHOUSE ADDITION PLUMBING PLAN M3.2 ENLARGED AREAS PLUMBING PLAN M4.1 FACILITY HVAC PLAN M4.2 WAREHOUSE ADDITION ENLARGED AREA HVAC M4.3 ENLARGED AREAS HVAC PLAN M4.4 HVAC NOTES, DETAILS & SCHEDULES M4.5 COMPRESSOR ROOM HV PLAN M5.1 FACILITY FIRE PROTECTION/SPRINKLER REQUIREMENT PLAN ELECTRICAL E2.1 WAREHOUSE ADDITION LIGHTING PLAN E2.2 ENLARGED AREAS LIGHTING PLANS E3.1 WAREHOUSE ADDITION POWER PLAN E3.2 ENLARGED AREAS POWER PLAN E4.1 PANELBOARD SCHEDULES
EX-10.6 5 EX-10.6 TO FORM 10-Q 1 LEASE AGREEMENT BOWLING GREEN - WARREN COUNTY INDUSTRIAL AUTHORITY IV, INC. and KERR GROUP, INC. 2 BOWLING GREEN-WARREN COUNTY INDUSTRIAL AUTHORITY IV, INC. KERR GROUP, INC. LEASE AGREEMENT TABLE OF CONTENTS ARTICLE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 (a) Acquisition and Construction Costs. . . . . . . . . . . 1 (b) Additional Consideration. . . . . . . . . . . . . . . . 2 (c) Business Days . . . . . . . . . . . . . . . . . . . . . 2 (d) Design/Builder. . . . . . . . . . . . . . . . . . . . . 2 (e) Design/Builder Contract . . . . . . . . . . . . . . . . 2 (f) Expiration Date . . . . . . . . . . . . . . . . . . . . 3 (g) Hazardous Material. . . . . . . . . . . . . . . . . . . 3 (h) Improvements. . . . . . . . . . . . . . . . . . . . . . 3 (i) Extension Terms. . . . . . . . . . . . . . . . . . . . 3 (j) Initial Term . . . . . . . . . . . . . . . . . . . . . 3 (k) Land. . . . . . . . . . . . . . . . . . . . . . . . . . 3 (l) Landlord . . . . . . . . . . . . . . . . . . . . . . . 3 (m) Lenders . . . . . . . . . . . . . . . . . . . . . . . . 3 (n) Lease Year. . . . . . . . . . . . . . . . . . . . . . . 3 (o) Loan Documents. . . . . . . . . . . . . . . . . . . . . 3 (p) Loans . . . . . . . . . . . . . . . . . . . . . . . . . 4 (q) Plans and Specifications. . . . . . . . . . . . . . . . 4 (r) Premises. . . . . . . . . . . . . . . . . . . . . . . . 4 (s) Rent Commencement Date. . . . . . . . . . . . . . . . . 4 (t) Term. . . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 DEMISE OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 CONSTRUCTION OF IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . 5 (a) Construction. . . . . . . . . . . . . . . . . . . . . . 5 (b) Construction Supervision. . . . . . . . . . . . . . . . 5 (c) Excess Costs. . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 USE OF PREMISES; HAZARDOUS MATERIALS . . . . . . . . . . . . . . . . 6 (a) Use . . . . . . . . . . . . . . . . . . . . . . . . . . 6 (b) Hazardous Material. . . . . . . . . . . . . . . . . . . 6
3 ARTICLE 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 INITIAL LEASE TERM; POSSESSION;. . . . . . . . . . . . . . . . . . . . . 9 OPTION FOR EXTENSION TERM(S) . . . . . . . . . . . . . . . . . . . . . . 9 (a) Term; Effective Date. . . . . . . . . . . . . . . . . . . . 9 (b) Possesion . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 RENT; OPTION TO PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . 9 (a) Absolute Triple Net Lease . . . . . . . . . . . . . . . . . 9 (b) Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . 10 (c) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 11 (d) Option to Purchase. . . . . . . . . . . . . . . . . . . . . 11 ARTICLE 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 RESTRICTION ON TRANSFER; TERMINATION BY TENANT . . . . . . . . . . . . . 12 (a) Transfer of Landlord's Interest . . . . . . . . . . . . . . 12 (b) Termination by Tenant; Landlord's Cure Period . . . . . . . 13 ARTICLE 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 MAINTENANCE OF LEASE PREMISES. . . . . . . . . . . . . . . . . . . . . . 13 (a) Maintenance . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 (a) Public Liability Insurance. . . . . . . . . . . . . . . . . 14 (b) Property Damage, Physical Damage and Fire Insurance. . . . . . . . . . . . . . . . . . . . . 14 (c) Builders Risk Insurance . . . . . . . . . . . . . . . . . . 15 (d) Limitations . . . . . . . . . . . . . . . . . . . . . . . . 15 (e) Certificates of Insurance . . . . . . . . . . . . . . . . . 15 (f) Mortgagee Policy. . . . . . . . . . . . . . . . . . . . . . 15 (g) Insurer's Waiver of Subrogation . . . . . . . . . . . . . . 16 ARTICLE 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ALTERATIONS; IMPROVEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ASSIGNMENT; SUBLETTING; ALIENATION . . . . . . . . . . . . . . . . . . . 17 ARTICLE 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 (a) By Tenant . . . . . . . . . . . . . . . . . . . . . . . . . 17 (b) By Landlord . . . . . . . . . . . . . . . . . . . . . . . . 18
4 ARTICLE 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 DEFAULT; TERMINATION OF LEASE BY LANDLORD; REMEDIES. . . . . . . . . . . 19 (a) Termination at End of Term. . . . . . . . . . . . . . . . . 19 (b) Default By Tenant . . . . . . . . . . . . . . . . . . . . . 19 (c) Re-Entry. . . . . . . . . . . . . . . . . . . . . . . . . . 20 (d) Acceleration of Rent. . . . . . . . . . . . . . . . . . . . 20 (e) Effect of Termination . . . . . . . . . . . . . . . . . . . 21 ARTICLE 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 HOLDOVER; SURRENDER OF PREMISES. . . . . . . . . . . . . . . . . . . . . 21 (a) Holdover . . . . . . . . . . . . . . . . . . . . . . . . . 21 (b) Surrender. . . . . . . . . . . . . . . . . . . . . . . . . 21 (c) Landlord's Inspection. . . . . . . . . . . . . . . . . . . 22 ARTICLE 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 UTILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 TAXES AND ASSESSMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE 18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 DESTRUCTION BY FIRE OR CASUALTY. . . . . . . . . . . . . . . . . . . . . 25 (a) Partial Damage. . . . . . . . . . . . . . . . . . . . . . . 25 (b) Substantial Damage. . . . . . . . . . . . . . . . . . . . . 25 (c) Personalty Proceeds . . . . . . . . . . . . . . . . . . . . 26 ARTICLE 19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 (a) Taking. . . . . . . . . . . . . . . . . . . . . . . . . . . 26 (b) Compensation Award. . . . . . . . . . . . . . . . . . . . . 27 ARTICLE 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 SUBORDINATION, ATTORNMENT AND NONDISTURBANCE . . . . . . . . . . . . . . 27 (a) Tenant's Instruments. . . . . . . . . . . . . . . . . . . . 27 (b) Landlord's Instruments. . . . . . . . . . . . . . . . . . . 28 ARTICLE 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 ACCESS TO LEASED PREMISES. . . . . . . . . . . . . . . . . . . . . . . . 28 (a) By Landlord . . . . . . . . . . . . . . . . . . . . . . . . 28 (b) By Prospective Tenants. . . . . . . . . . . . . . . . . . . 28
5 ARTICLE 22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 PARTIES' REMEDIES CUMULATIVE; NO WAIVER OR FORBEARANCE; SEVERABILITY . . . . . . . . . . . . . . . . . 29 ARTICLE 23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 LANDLORD'S COVENANT OF QUIET ENJOYMENT . . . . . . . . . . . . . . . . . 30 ARTICLE 24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 TENANT'S COVENANTS AND DISCLOSURES . . . . . . . . . . . . . . . . . . . 30 (a) Employees . . . . . . . . . . . . . . . . . . . . . . . . . 30 (b) Compliance Review Disclosures . . . . . . . . . . . . . . . 31 (c) Financial Disclosure. . . . . . . . . . . . . . . . . . . . 31 (d) Improvements Constructed by Tenant. . . . . . . . . . . . . 31 (e) Jobs Incentive Program. . . . . . . . . . . . . . . . . . . 32 ARTICLE 25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 INTEREST ON PAST DUE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . 32 ARTICLE 26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 TITLES OF ARTICLES . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE 27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 FORCE MAJEURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE 28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 RECORDING OF MEMORANDUM OF LEASE . . . . . . . . . . . . . . . . . . . . 33 ARTICLE 29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 ARTICLE 30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . 35 EXHIBIT 1(k). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6 INDUSTRIAL IV - KERR GROUP LEASE AGREEMENT THIS LEASE AGREEMENT ("Lease") is made and entered into on this the 30th day of June, 1994 at Bowling Green, Warren County, Kentucky, by BOWLING GREEN-WARREN COUNTY INDUSTRIAL AUTHORITY IV, INC., a Kentucky corporation, 812 State Street, Bowling Green, Kentucky 42101, hereinafter referred to as "Landlord"; and KERR GROUP INC., a Delaware corporation, 1840 Century Park East, Los Angeles, California 90067 hereinafter referred to as "Tenant". WHEREAS, Landlord desires to lease to Tenant and Tenant desires to lease from Landlord, certain real property, Improvements and facilities described herein; and WHEREAS, Landlord has engaged the services of a contractor to design and build Improvements upon the premises to be leased; and WHEREAS, the parties desire to set forth and be bound by their agreements herein; NOW THEREFORE, for and in consideration of the mutual promises of the parties to this Agreement the legal sufficiency of which is hereby acknowledged, the parties agree as follows: ARTICLE 1 DEFINITIONS The following terms shall have the following meanings in this Lease: (a) Construction Costs: Shall mean all costs of constructing the Improvements including without limitation, title insurance premiums, permitting, platting, appraisal, recording, surveying, engineering, drainage plan fees, inspection fees, accounting, attorney and other 1 7 professional fees and costs in connection therewith. Attorney and professional fees together with construction interest and other costs are herein described as "soft costs" as follows: Construction interest. . . . . . . . . . . . . $175,000.00 Attorneys fees . . . . . . . . . . . . . . . . 19,000.00 Title insurance. . . . . . . . . . . . . . . . 8,000.00 Environmental Audit. . . . . . . . . . . . . . 2,000.00 Appraisal. . . . . . . . . . . . . . . . . . . 10,000.00 Survey . . . . . . . . . . . . . . . . . . . . 1,000.00 Miscellaneous. . . . . . . . . . . . . . . . . 10,000.00
To the extent such soft costs shall exceed the aggregate of the foregoing, Tenant shall reimburse Landlord for such soft costs. (b) Additional Consideration: (i) The County of Warren will provide an amount not to exceed Fifty Thousand Dollars ($50,000.00) to the Landlord for the construction of a rail spur in a form reasonably acceptable to Tenant. (ii) Warren County will pay for the construction of an industrial access road up to Fifteen Hundred (1,500) feet in length. (iii) Tenant will receive a five year moratorium on Tenant's requirement to pay city ad valorem property taxes. (c) Business Days: All days other than Saturdays, Sundays and legal holidays. (d) Design/Builder: Owens Engineering and H & M Construction Company, Inc. (e) Design/Builder Contract: The contract between Landlord and Tenant and the Design/Builder for designing and building the Improvements, which contract shall be in form and substance acceptable to Landlord and Tenant. A copy of this Contract shall be delivered to the Landlord within ten (10) days following execution of this Lease. 2 8 (f) Expiration Date: As defined in Article 5(a) hereof. (g) Hazardous Material: As defined in Article 4(b) hereof. (h) Improvements: The manufacturing plant and related buildings located on the Land. (i) Extension Terms: As defined in Article 5(a) hereof. (j) Initial Term: As defined in Article 5(a) hereof. (k) Land: Lot 9, Section 4 of the South Central Kentucky Industrial Park in Bowling Green, Kentucky, comprised of 25.115 acres, as more particularly described in Exhibit 1(k) attached hereto and made a part hereof for all purposes. (l) Landlord: Bowling Green-Warren County Industrial Authority IV, Inc. (m) Lenders: Collectively the entities providing the Loans to the Landlord, being i) Kentucky Development Finance Authority ("KDFA") by virtue of its loan in the principal amount of $700,000.00 (the "Loan"); ii) Trans Financial Bank, N.A. by virtue of its loan in the principal amount of $4,335,000.00, (the "TFB Loan"); and (n) Lease Year: Shall mean the twelve (12) month period commencing on the first day of the month following the Rent Commencement Date and ending on the last day of the twelfth (12th) full calendar month thereafter, and each such successive 12- month period. (o) Loan Documents: The written documents evidencing and relating to the Loans, including without limitation loan agreements, promissory notes, mortgages and/or other agreements securing the Loans and occupational tax credits. 3 9 (p) Loans: Collectively the loans obtained by Landlord from the Lenders to finance the construction costs in the maximum principal amount of $5,035,000.00. (q) Plans and Specifications: The proposal, drawings, specifications, cost estimates and documents prepared by the Design/Builder for the design and building of the Improvements approved by Landlord and Tenant pursuant to Article 3(a) hereof. (i) Permitted Exceptions: As defined in Article 6(d). (r) Premises: Collectively, the Land and the Improvements. (i) Purchase Option: As defined in Article 6(d), if so exercised in accordance with the terms of its Lease. (s) Rent Commencement Date: The earlier of June 1, 1995, or the date when Tenant commences business in the ordinary course following the completion of all Improvements or the issuance of a certificate of occupancy. If the Rent Commencement Date is other than the first day of the month, the first rental payment due under this Lease shall be pro-rated to the first day of the following month. Landlord and Tenant each covenant to execute a written agreement stipulating the Rent Commencement Date when it has been determined. The Rent Commencement Date is conditioned upon the delivery to Tenant and/or completion of all Additional Consideration in a form satisfactory to Tenant. (t) Term: The Initial Term and both Extension Terms. ARTICLE 2 DEMISE OF PREMISES Landlord leases to Tenant and Tenant leases from Landlord the Premises, together with rights of use, where applicable, to common areas, and any additions or Improvements made 4 10 during the term or any renewal term of this Lease, and Landlord, in consideration of rents, covenants and agreements hereafter set forth to be observed and/or performed on the part of the Tenant, agrees to lease the Premises to the Tenant. ARTICLE 3 CONSTRUCTION OF IMPROVEMENTS (a) Construction. Landlord and Tenant shall within thirty (30) days of execution of this Lease agree upon the Plans and Specifications. The Plans and Specifications may be altered, amended or modified by Tenant with the consent of Landlord, and such alteration, amendment or modification shall not increase the cost of the construction of the Improvements and that notice of such alteration, amendment or modification shall promptly be provided to Landlord and its Lenders. Tenant will only be responsible for those costs attributable solely to change orders requested by Tenant. Landlord shall within 30 days of execution of this Lease enter into the Design/Builder Contract with the Design/Builder for the design and building of the Improvements in accordance with the Plans and Specifications of this Lease. The Design/Builder Contract shall be in the form of the Standard Form of Agreement between Owner and Design/Builder (AIA Document A191-1985, part 2 and addendum "A") or such form as is mutually agreed upon by Landlord, Tenant and Tenant's Lenders. It is anticipated that the Construction Costs will not exceed $4,803,500.00. (b) Construction Supervision. Landlord shall designate a representative of Tenant to act on Landlord's behalf with respect to designing and building of the Improvements pursuant to the terms of the Design/Builder Contract. Said representative shall be available to Design/Builder on an ongoing basis during construction of the Improvements, and shall promptly 5 11 render decisions to Design/Builder pertaining to the design and building process and any modifications thereof, subject to Article 3(a) hereof. (c) Excess Costs. Tenant shall be responsible for and shall pay all Construction Costs which shall exceed the Contract amount of $4,803,500.00 between Landlord and H&M Construction. ARTICLE 4 USE OF PREMISES; HAZARDOUS MATERIALS (a) Use. The Tenant shall use and occupy the Premises for the purpose of manufacturing and distribution of manufactured products, office use, storage, warehousing and related activities. In connection with the use and occupancy of the Premises, Tenant shall comply in all material respects with all applicable rules, regulations and requirements of any federal, state or local governmental authority and the rules, regulations and requirements of fire rating organizations or will obtain insurance insuring over such requirements. (b) Hazardous Material: (i) As used herein, the term "Hazardous Material" means (a) any "hazardous waste" as defined by the Resource Conservation and Recovery Act of 1976 (42 USC Section 6901 et seq.), as amended from time to time, and regulations promulgated thereunder; or (b) any "hazardous substance" as defined by the Comprehensive Environmental Response, Compensation and Liability Act (42 USC Section 9601 et seq.) and regulations promulgated thereunder, (c) any "hazardous chemical substance or mixture" described in the Toxic Substances Control Act (15 USC 2601, et seq.); or (d) any substance that is or becomes regulated by any federal, state or local governmental authority as a hazardous waste or hazardous substance; any of which is 6 12 brought upon, kept or stored upon the Premises by Tenant. (ii) Tenant shall not cause or permit any Hazardous Material to be brought upon, kept or used in or about the Premises by its agents, employees, contractors or invitees, except for such Hazardous Material as is used or consumed in Tenant's or its sublessees' business and/or is necessary for the manufacture of its or their products. (iii) Any Hazardous Materials permitted on the Premises by Tenant as provided herein and all containers therefor, shall be used, kept, stored and disposed of in material compliance with all federal, state and local laws and regulations applicable to such Hazardous Material. (iv) Tenant shall be fully liable for all costs and expenses related to the use, generation, transport, handling, storage, disposal and cleanup or detoxification of Hazardous Material on the Premises by Tenant or its employees or agents, including without limitation all damages to Landlord directly or indirectly arising from these activities. The Tenant shall promptly give notice to Landlord of any violation of the provisions of this Article or of any citation or written notice received by Tenant from any federal, state or local governmental authority. After the date of this Lease except to the extent caused by Landlord or its employees, agents or contractors, Tenant shall defend, indemnify and hold harmless Landlord and its agents, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses (including, without limitation, reasonable attorneys' fees, court costs and litigation expenses) of whatever kind or nature, arising out of or in any way related to (a) the presence, use, disposal, transport, release, or threatened release of any such Hazardous Material that is on, from or affecting the soil, water, vegetation, buildings, personal property, persons, animals or otherwise 7 13 which Hazardous Material was not present on the Premises prior to the date of this Lease; (b) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to the presence, use, disposal, transport, release or threatened release of Hazardous Material not present on the Premises prior to the Rent Commencement Date; (c) any lawsuit brought or threatened, or government order relating to that Hazardous Material not present on the Premises prior to the date of this Lease, or (d) any violation of any laws applicable thereto. (v) Landlord and Tenant shall each promptly notify the other in writing should Landlord or Tenant become aware of or receives any written notice of any complaint, order, citation or notice with regard to air emissions, water discharges, noise emissions, or any other environmental, health, or safety matter affecting the Premises from any person or entity including without limitation the Kentucky Cabinet for Natural Resources and Environmental Protection or the United States Environmental Protection Agency. Landlord and Tenant shall provide the other with a copy of any written environmental disclosure voluntarily made or required to be made by such party to any local, state or federal governmental authority during the Term of this Lease. (vi) In consideration of Tenant's agreements relating to Hazardous Material as set forth above, Landlord warrants and agrees that upon the date of this Lease, the Premises shall be free of any and all Hazardous Material. Landlord agrees to defend, indemnify and hold harmless Tenant from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses, of whatever kind or nature, arising out of or in any way related to any Hazardous Material in, on, or under the Premises prior to the date of this Lease). 8 14 (vii) Tenant's and Landlord's agreements relating to Hazardous Materials shall survive the termination of this Lease. ARTICLE 5 INITIAL LEASE TERM; POSSESSION; OPTION FOR EXTENSION TERM(S) (a) Term; Effective Date. This Lease shall be effective upon its execution by Landlord and Tenant. The initial rental term shall be for a period of fifteen (15) years (the "Initial Term") beginning with the Rent Commencement Date and ending on the last day of the 180th full calendar month thereafter (as same may be extended, the "Expiration Date"). In addition, provided Tenant is not in default beyond notice and grace periods in any material respect hereunder, Tenant shall have the option to extend the term for two (2) consecutive five (5) year periods (the "Extension Terms"). To exercise this Option, Tenant shall give Landlord written notice no later than ninety (90) days prior to the end of the Initial Term and the first Extension Term. (b) Possession. Tenant may enter into possession of the Premises on or before the Rent Commencement Date for the purpose of installing Tenant's fixtures and equipment; provided, however, that any such entry shall not unreasonably interfere with the construction of the Improvements. Such entry shall be under all of the terms and conditions of this Lease. ARTICLE 6 RENT; OPTION TO PURCHASE (a) Absolute Triple Net Lease. Landlord and Tenant acknowledge that this Lease is a "TRIPLE NET" Lease. Therefore, all costs, expenses and charges relating to the Premises for 9 15 periods after the Rent Commencement Date, except as expressly provided herein, shall be paid by Tenant. Notwithstanding the foregoing, nothing contained in this Lease shall obligate Tenant to become directly obligated to pay any interest or principal on any mortgage or other financing of Landlord's interest in the Premises. (b) Base Rent. The initial monthly base rent (the "Base Rent") to be paid by Tenant is $50,239.00. The Base Rent shall be fixed for the first five (5) Lease Years and adjusted thereafter every five years in accordance with the financing provided by Trans Financial Bank, N.A. which provides an adjustable interest rate equal to the 5 year United State Treasury Bill interest rate plus 300 basis points; by way of example the following schedule indicates per square foot rents applicable at various interest rates beginning with the interest rate of 6.25%.
BANK SQUARE INTEREST FOOT RATE(1) RATE(2) -------- ------- 6.25 3.04 7.25 3.21 8.25 3.39 9.25 3.58 10.25 3.76 11.25 3.95 12.25 4.16
- - - ------------------ (1) This Rate is U.S. Treasury Bill rate plus 300 basis points. (2) Includes the KDFA Loan. 10 16 Landlord may not vary the amortization schedule without the written consent of Tenant. To the extent that Construction Costs are below the Contract amount of $4,803,500.00, the Base Rent shall be reduced by an amount equal to the amount of such reduced costs calculated on a per square foot basis. (c) Payment. The Base Rent shall be paid in equal monthly installments in advance upon the first business day of each and every calendar month during the Term hereof, and shall be payable at the office of the Landlord, or its designee. (d) Option to Purchase. Landlord does hereby grant to Tenant an Option to Purchase the Premises (the "Purchase Option") at any time for a purchase price equal to the greater of (x) the fair market value of the Premises based on its present use and subject to the provisions of this Lease (excluding the value of all improvements to the Premises made at Tenant's expense) determined as of the date of Tenant's exercise of the Purchase Option ; (y) the then outstanding unamortized principal balance of the Loans (as such original principal amounts existed on the date of this Lease and expressly excluding any increases in the principal amounts thereof); and (z) in no event shall the net purchase price payable to Landlord be less than $300,000.00. At the end of the fifteenth (15) Lease Year, the Option Price shall be $1.5 million. To exercise this Purchase Option, Tenant shall give at least ninety (90) days written notice to Landlord, and promptly after giving such notice Tenant shall obtain an appraisal of the Premises at Tenant's expense. At closing, Landlord shall provide to Tenant a deed of general warranty in recordable form conveying fee simple title to the Premises together with all easements, mineral rights, rights to public roads and other interests appurtenant to the Premises, free and clear of all liens and encumbrances granted or permitted by Landlord, except for matters appearing of record 11 17 as of the date of the Lease, and such other easements for utilities and sewer lines which Landlord may grant from time to time which will not materially impair the use or value of the Premises, and subject to any liens or encumbrances created or caused by Tenant (the "Permitted Exceptions"). At the closing of title, the title company selected by Tenant must be prepared to issue the then most recent ALTA Owner's Title Insurance Policy in the amount of the purchase price insuring title to the Premises vested in Tenant, subject only to the Permitted Exceptions. In the event Tenant exercises this Option, Base Rent shall be paid up to the day of closing. Each party shall select and bear all costs of its attorneys at closing, but all other closing costs (including without limitation any transfer taxes and title insurance premiums) shall be paid by the parties in accordance with local custom. ARTICLE 7 RESTRICTION ON TRANSFER; TERMINATION BY TENANT (a) Transfer of Landlord's Interest. Landlord shall give notice to Tenant of any transfer, sale, assignment or conveyance of its interest in the Premises; but shall not be required to obtain Tenant's consent thereto. If Landlord shall transfer, sell, assign or convey its interest in the first five years of the Initial Term, Landlord shall assume all of Tenant's obligations to pay any city ad valorem property taxes and other taxes and fees during the five year period which would not otherwise be payable if such transfer had not taken place. Notwithstanding the foregoing, no such transfer, sale, assignment or conveyance shall be effective unless and until the transferee, purchaser or assignee executes and delivers to Tenant a written agreement assuming Landlord's obligations hereunder. 12 18 (b) Termination by Tenant; Landlord's Cure Period. Tenant may terminate this Lease in the event of any material default by Landlord in the performance of any material term or covenant of this Lease which continues for thirty (30) days after written notice to Landlord specifying such default and setting forth Tenant's intention to terminate this Lease is received by Landlord. Notwithstanding the foregoing, it shall not be an event of default and a termination shall not occur if said default is not capable of being cured within the thirty (30) day period and Landlord has commenced to cure the default during the said period, and diligently pursues such cure to completion.. ARTICLE MAINTENANCE OF LEASED PREMISES (a) Maintenance. After the Rent Commencement Date, Tenant covenants and agrees to keep and maintain the roof, parking lot and other exterior portions of the Premises and to make any reasonably necessary structural repairs to the interior of the Premises except such repairs required as the result of damage arising by acts or omissions of the Landlord or of the Design/Builder. Landlord agrees to use its best efforts to effect remedies against the Design/Builder. Damage arising by acts or omissions of Landlord shall be repaired upon written notice by Tenant to Landlord and Landlord, in addition to its other rights and remedies, shall be entitled to the cure period in Article 7(b) hereof. Tenant further covenants and agrees to keep and maintain in good order, condition and repair the Premises and every part thereof including without limitation any exterior and interior portions of all doors, door checks, windows, plate glass, and all plumbing and sewage facilities within the Premises including free flow up to the main sewer line up to the boundary of the Premises, fixtures, heating, air conditioning and 13 19 electrical equipment, including mechanical or electrical repairs to the exterior of the building and parking lot, and interior walls, floors and ceilings, including compliance with applicable building codes relative to fire extinguishers. Tenant shall perform all snow removal, lawn care and landscaping necessary to maintain the Premises in a neat and safe condition. If Tenant refuses or neglects to commence said maintenance or repairs within fifteen (15) days of the date Tenant receives written notice from Landlord, Landlord may, but shall not be required to do so, make said repairs or maintenance and Tenant shall pay the costs thereof to Landlord upon demand. ARTICLE 9 INSURANCE (a) Public Liability Insurance. From and after the Rent Commencement Date Tenant shall procure and keep in effect general liability, public liability, and worker's compensation liability insurance of not less than $1,000,000.00 combined single limit per occurrence effective upon the Rent Commencement Date. (b) Property Damage, Physical Damage and Fire Insurance. Tenant at Tenant's sole cost and expense, shall keep the Improvements now or hereafter located on the Premises insured pursuant to the so-called extended coverage policy available from time to time with an earthquake endorsement, if available at commercially reasonably rates in a blanket policy in an amount not less than $30,000,000.00, or the replacement cost of the Improvements. Such insurance shall be so issued as to cover the interests of Landlord, Lenders, and Tenant, as their interests appear, and shall provide that in the case of loss or damage the proceeds thereof shall be payable jointly to Lenders, Landlord and Tenant as their respective interests may appear at the time of the loss. If Tenant exercises the Purchase Option to purchase the Premises pursuant to Article 6(d), then 14 20 Landlord shall turn over to Tenant, at closing thereof, the insurance proceeds not used, if any, to repair or replace any damage to the Premises which may have occurred during the Term hereof. In addition, Tenant shall obtain such insurance at its own option and cost as Tenant deems necessary to insure Tenant's leasehold improvements, equipment and other personal property located at the Premises, and all losses for such insurance shall be payable solely to Tenant. (c) Builders Risk Insurance. Tenant will provide at Tenant's sole cost and expense Builders Risk Insurance Coverage between the commencement of construction of the Improvements and the Rent Commencement Date. (d) Limitations. Each insurance policy required by this Article 9 must be by an insurance company having an A.M. Best rating of not less than "A". Each policy shall name Lenders as additional insureds, and provide that all provisions shall operate as if there were a separate policy insuring Lenders. Each policy shall provide thirty (30) days written notice to Landlord and the Lenders prior to its cancellation. Notwithstanding the foregoing, Tenant shall have the right to self-insure the workers compensation coverage required in Article 9(a) hereof. (e) Certificates of Insurance. Tenant shall deliver to Landlord certificates of insurance upon execution of this Lease. Tenant shall deliver certificates of renewal to Landlord for each policy prior to their respective expiration dates. In the event that Tenant fails to provide any of the insurance herein, Landlord may procure or renew such insurance, and any amounts paid by Landlord for such insurance shall be immediately due and payable as additional rent by Tenant. (f) Mortgagee Policy. Upon written request of Landlord, Tenant shall cause its insurer to issue a mortgagee policy of insurance in the names of Lenders which requires that all notices furnished to Tenant shall likewise be furnished to Landlord's Lenders. 15 21 (g) Insurer's Waiver of Subrogation. Each policy of insurance referred to herein shall provide a waiver and release by the insurer of any and all claims, demands, suits, actions and rights, (including, without limitation, any and all rights of subrogation) which said insurer might otherwise have against Landlord and/or Tenant as a result of any acts or omissions of Landlord and/or Tenant. ARTICLE 10 ALTERATION; IMPROVEMENTS Tenant may, without the consent of Landlord, make mechanical or structural alterations, improvements and/or additions to the Premises or any part thereof provided such alterations, improvements and/or additions are in accordance with all applicable laws, are made at the expense of Tenant, and each repair item does not cost more than Two Hundred Thousand Dollars ($200,000). Landlord's prior written consent shall be required for all mechanical or structural alterations, improvements and/or additions exceeding Two Hundred Thousand Dollars ($200,000.00) in cost per item, which consent shall not be unreasonably withheld, conditioned or delayed. At termination of this Lease, or within fifteen (15) days thereafter, Tenant shall, if Tenant so elects, promptly remove the additions, improvements, fixtures and installations which were placed in or on the Premises by Tenant, and repair any damage occasioned by such removal. In the event of making such alterations, improvements and/or additions as herein provided, Tenant further agrees to indemnify and save harmless the Landlord from all expense, liens, claims or damages to either persons or property arising out of, or resulting from the undertaking or making of said alterations, additions and improvements. Any additions, improvements, fixtures and installations which Tenant elects not to remove from the Premises shall become property of the Landlord. 16 22 ARTICLE 11 ASSIGNMENT; SUBLETTING; ALIENATION Tenant may at any time during the Term of this Lease assign, sublet, transfer, convey or otherwise alien any or all of its rights under this Lease to its parent corporation, any company owned or controlled by Tenant or its parent company, any company into which Tenant shall merge or consolidate, any company purchasing substantially all of the assets of Tenant located in Bowling Green, Kentucky, any partnership in which Tenant its parent company or any company owned or controlled by Tenant or its parent company is or may become a partner; provided, however, that any such assignment of rights, sublease, or other alienation shall not relieve Tenant from liability for payment of rent or from compliance with the terms, conditions and covenants of this Lease unless agreed to in writing by Landlord. Tenant shall have the right, upon notice to and with consent of Landlord, to pledge, encumber or otherwise assign its leasehold interest herein as security for the payment of any indebtedness of Tenant. Any assignment by Tenant of any or all of its rights under this Lease or subletting by Tenant to any party other than those parties described in this Article will require the written consent of the Landlord which shall not be unreasonably withheld, conditioned or delayed. The acceptance of rent from any other person or entity shall not be deemed to be a waiver of any of the provisions of this Lease or to be a consent to the assignment of this Lease, subletting of the Premises, or other alienation by Tenant. ARTICLE 12 INDEMNITY (a) By Tenant. Tenant covenants and agrees that it will protect, save and keep the Landlord harmless and indemnified against and from any penalty, damage or charges imposed for 17 23 any violation of any law or ordinance occurring on or after the Rent Commencement Date, whether occasioned by the act or omission of Tenant or those holding under Tenant, and that Tenant will at all times protect, indemnify, save and keep harmless the Landlord against and from all claims, loss, cost, damage or expense including reasonable attorney's fees arising out of or from any accident or other occurrence on or about the Premises occurring on or after the Rent Commencement Date causing injury to any person or property whomsoever excepting those claims, losses, costs, damages or expenses caused or created by Landlord or Landlord's employees or agents; and will protect, indemnify, save and keep harmless the Landlord against and from any and all claims and against and from any and all loss, cost, damage or expense, including reasonable attorney fees, arising out of any material failure of Tenant in any respect to comply with and perform all the requirements and provisions of this Lease from and after the Rent Commencement Date. (b) By Landlord. Landlord covenants and agrees that it will protect, save and keep the Tenant harmless and indemnified against and from any penalty, damage or charges imposed for any violation of any law or ordinance, whether occasioned by the act or omission of Landlord or those holding under Landlord and that Landlord will protect, indemnify, save and keep harmless the Tenant against and from any and all claims, loss, cost, damage or expense, including reasonable attorney fees, arising out of Landlord's act or omissions or out of any material failure of Landlord to comply with and perform all the requirements and provisions of this Lease. 18 24 ARTICLE 13 DEFAULT; TERMINATION OF LEASE BY LANDLORD; REMEDIES (a) Termination at End of Term. Unless otherwise sooner terminated as elsewhere herein provided, this Lease shall terminate upon the expiration of the Initial Term or any Extension Term thereof. (b) Default by Tenant. The following shall constitute a default by Tenant which, if not cured within the applicable time permitted below, shall give rise to Landlord's remedies set forth hereinbelow, which shall be in addition to all other remedies available to Landlord in law or in equity: (i) Failure to make when due any payment of rent, unless such failure is cured within five (5) days after notice of default. (ii) Failure to observe or perform any of the other terms of this Lease within 30 days after written notice to Tenant; provided, however, if such failure cannot be cured within said 30 day period, Tenant commences such cure and thereafter diligently pursues said cure to completion; including without limitation failure to keep and maintain the Premises in good repair; (iii) Abandonment of Premises, or vacation of all or a substantial portion of the premises for more than fifteen (15) consecutive days; casualty or condemnation shall not constitute abandonment for purposes of this Lease (iv) Making a general assignment for the benefit of Tenant's creditors; (v) Filing by or against Tenant of a petition in bankruptcy or a petition for reorganization or under any law relating to bankruptcy which is not discharged within ninety (90) days of the filing thereof; 19 25 (vi) Appointment of a trustee or receiver to take possession of substantially all Tenant's assets located on the Premises where possession is not restored within ninety (90) days; (vii) Attachment, execution or other judicial seizure of substantially all of Tenant's assets located on the Premises; (viii) Tenant's insolvency or admission of inability to pay its debts as they mature; or (ix) If any representation, warranty or other statement of fact contained herein shall be materially false or misleading when made. (c) Re-Entry. In the event of any uncured default by Tenant whether or not Landlord terminates this Lease, Landlord may without notice enter upon the Premises and the Improvements thereon, either with or without process of law, and at its election remove all persons therefrom and hold the Premises as if this Lease had not been made; however, before such entry, Landlord must give Tenant notice of Landlord's intention and an opportunity to exercise Tenant's Purchase Option. (d) Acceleration of Rent. In the event of default by Tenant unless cured as described above, then the rent for the balance of the Initial Term or the Extension Term or any remaining part thereof at the option of Landlord shall be due and payable as if by the terms of this Lease it were payable in advance, and Landlord may immediately proceed to distrain, collect, or bring action for the whole rent or any part thereof as if such were in arrears. In case of termination necessitated by Tenant's uncured default, Landlord shall be entitled to recover from Tenant all loss of rents and other reasonable and customary costs and expenses Landlord may incur by reason of such termination, including but not limited to the costs of repairing and restoring the Premises to rentable condition, costs of renting the Premises to another tenant, loss or diminution of rents and other damages; and all 20 26 reasonable attorney fees and expenses incurred in enforcing any of the terms of this Lease. Landlord shall use its best efforts to relet the Premises and shall credit Tenant with the net rents received by Landlord from such reletting. (e) Effect of Termination. Nothing contained herein shall be construed as giving Tenant, after the Lease has been terminated, any right, title or interest whatsoever in or to the Premises or as giving or reserving to Tenant any right of any kind whatever under this Lease, or in or to the Premises. Upon termination of the Lease any and all interest of Tenant therein shall forthwith cease and terminate and no compensation, damage or allowance therefor shall be made to Tenant nor shall Tenant be entitled thereto. Provided, however, in the event of such termination Tenant shall be allowed a reasonable time not exceeding 30 days to remove from the Premises any and all of Tenant's personal property. ARTICLE 14 HOLDOVER; SURRENDER OF PREMISES (a) Holdover. In the event Tenant remains in possession of the Premises after the Initial Term or any Extension Term of this Lease, Tenant shall be deemed a tenant from month to month only, at 120% of the monthly rental on the date of expiration of the Initial Term or Extension Term; and governed in all respects, except as to duration of the term, by the provisions of this Lease. (b) Surrender. Tenant covenants and agrees to deliver up and surrender to the Landlord possession of the Premises upon expiration of this Lease, or its earlier termination as herein provided, in as good condition and repair as the same shall be on the Rent Commencement Date of this Lease, ordinary wear and tear excepted. Tenant shall at Tenant's expense repair all damage to the Premises caused by Tenant's removal so as to restore the Premises to the condition in which they were prior to 21 27 the installation of the articles so removed, ordinary wear and tear excepted. Notwithstanding the foregoing, Tenant will not remove any structural item, but Tenant may, at Tenants option, remove trade fixtures. (c) Landlord's Inspection. Landlord shall have ten (10) Business Days from the expiration or termination of this Lease to conduct an inspection to determine if the Premises are in a condition of compliance with the terms of this Lease. To the extent Landlord's requirements for restoration require Tenant to remain longer in the Premises than the Expiration Date, Tenant is not obligated to pay Base Rent. Failure to notify Tenant in writing within said 10 Business Days of any unperformed obligations or covenants of Tenant in connection with this Lease will be deemed to be an acceptance of the surrendered Premises by Landlord. ARTICLE 15 NOTICES Any notice which Landlord or Tenant may be required to give to the other party shall be in writing and shall be personally delivered or sent by certified mail, return receipt requested, or by nationally recognized overnight courier service and mailed to the other party at the address specified herein, or to such other address as either party shall have designated in writing to the other, and the time of the rendition of such notice shall be upon personal delivery or three days after being deposited in an official United States Post Office, certified mail, return receipt requested, postage prepaid, or upon the next Business Day following mailing if sent by overnight courier: To Landlord: Bowling Green-Warren County Industrial Authority IV, Inc. 812 State Street Bowling Green, KY 42101 Attn: Dennis Griffin 22 28 With copies to: Trans Financial Bank, N.A. 500 East Main P.O. Box 90001 Bowling Green, KY 42102-9001 Attn: Tommy Cole Stephen B. Catron Catron, Kilgore & Begley P. O. Box 280 918 State Street Bowling Green, KY 42102-0280 To Tenant: Kerr Group, Inc. 1840 Century Park East Los Angeles, CA 90067 Attn: Larry Knipple With copy to: Steven J. Gartner, Esq. Willkie Farr & Gallagher One Citicorp Center 153 East 53rd Street New York, NY 10022 Refusal to accept a notice delivered by Certified Mail shall be deemed receipt thereof effective on the date of refusal or the date said notice is returned unclaimed. ARTICLE 16 UTILITIES Tenant covenants and agrees to pay for all public utility services rendered or furnished to the Premises on and after the date of this Lease, including heat, water, gas, electricity, sewer rental and the like, together with all taxes levied or other charges on such utilities. All utilities servicing the Premises shall be separately metered to Tenant or its successors in interest. In no event shall Landlord be liable for the quality, quantity, failure or interruption of such service to the Premises, unless caused by Landlord or Landlord's employees or agents. 23 29 ARTICLE 17 TAXES AND ASSESSMENTS After the date of this Lease, Tenant, as part of the consideration for this Lease and in addition to the rentals hereinabove provided for, will, as the same become due and payable, pay all taxes and assessments, licenses, fees, charges and levies, general and special, and other charges and burdens of any and every kind that are now or hereafter levied or imposed upon the Premises or upon any part thereof, which are imposed, levied or assessed by a governmental taxing authority, and which are payable by Landlord after acquisition of title by Landlord, and Tenant will promptly upon request, supply Landlord with receipts or other data satisfactory to Landlord showing the payment of the same. Notwithstanding the foregoing, in no event shall Tenant be required to pay any corporate, inheritance, franchise, income or similar tax assessed against Landlord. Tenant shall have the right to contest any taxes or assessments imposed upon the Premises during the Term hereof and Landlord shall cooperate in the prosecution of such contest. The parties acknowledge that at the date of this Lease, pursuant to KRS 152.910 and KRS 152.920, the Premises is exempt from real estate taxation of the City of Bowling Green so long as it is owned by Landlord and used as an industrial development site. Tenant's abatement will continue for the first five years of the Initial Term. If Landlord shall transfer, sell, assign or convey its interest in the first five years of the Initial Term, Landlord shall assume all of Tenant's obligations to pay any city property taxes and other taxes and fees during the five year period which would not otherwise be payable if such transfer had not taken place. 24 30 ARTICLE 18 DESTRUCTION BY FIRE OR CASUALTY (a) Partial Damage. Except as provided in (b) below, if the Premises shall be partially damaged by fire or other cause without the fault or neglect of Tenant, the damages shall be repaired by and at the expense of Tenant, and until such repairs shall be made, the rent shall be abated according to the part of the Premises which is unusable by Tenant. All insurance proceeds in respect of such damage shall be paid to Tenant for restoration of the Premises. If such partial damage is due to the fault or neglect of Tenant, the damages shall be repaired by and at the expense of Tenant, but there shall be no apportionment or abatement of rent. No penalty or default hereunder shall accrue for delay which may arise by reason of adjustment of fire insurance on the part of Landlord or Tenant. The obligations of the Tenant under this paragraph shall be limited to such insurance proceeds as are payable to Tenant by reason of the loss. (b) Substantial Damage. If the Premises are substantially damaged or are rendered substantially untenantable by fire or other casualty, the Landlord shall, within thirty (30) days of such casualty, determine whether to restore or rebuild the Premises and give Tenant written notice thereof. If the Landlord decides that the Premises shall not be rebuilt, the Lease shall thereupon terminate, and Tenant's liability for rent shall cease as of the date of such casualty. If the Landlord decides that the Premises shall be repaired or rebuilt, then Landlord shall immediately commence such repair or rebuilding, and shall use all reasonable efforts to substantially complete all such repairs within one hundred-eighty (180) days from the date of such casualty, and Tenant's liability for rent shall abate from the date of the casualty until the date on which the Premises shall have been rebuilt and are usable by Tenant. All insurance proceeds in respect of such damage shall be paid to Landlord for 25 31 restoration of the Premises. All obligations of the Landlord shall be limited to such insurance proceeds as may be payable by reason of the loss. In the event Landlord determines not to rebuild the Premises, rent shall abate as of the date of the casualty, and all insurance proceeds shall be paid as follows: (i) first, to the Lenders, the unpaid principal and accrued interest on the Loans; (ii) second, to the Landlord, the cost of restoring the Land to a safe and neat condition; and (iii) the balance, if any, to Tenant. (c) Personalty Proceeds. Notwithstanding the foregoing, neither Landlord nor its Lenders shall have any right, claim or interest in the insurance proceeds paid in respect of Tenant's equipment, inventory or other personal property; or additions, improvements or alterations installed on the Premises by Tenant. ARTICLE 19 CONDEMNATION (a) Taking. If the whole or a substantial portion of the Premises shall be condemned or taken either permanently or temporarily for any public or quasi-public use or purpose under any statute or by right or by private purchase in lieu thereof, then and in that event, to the extent not previously terminated, this Lease shall terminate as of the date of possession of the Premises by such condemning authority, and Tenant shall be released of any further obligations hereunder including the responsibility to pay rent. In the event less than a substantial portion of the Premises shall be so taken but the Premises, in Tenant's sole determination, are not usable by Tenant, Tenant, at its option, may cancel and terminate this Lease by furnishing written notice to Landlord of its intent to terminate and cancel the Lease, which notice must be furnished within sixty (60) days after the date of possession of the Premises by such condemning authority and the Lease shall terminate within thirty (30) days from 26 32 receipt by Landlord of such written notice. In the event less than a substantial a portion of the Premises shall be so taken, but in Tenant's sole determination, the Premises are usable by the Tenant, the Lease shall continue in full force and effect, provided that the rent shall be reduced proportionately based on the useability of the remainder of the Premises. Provided, in no event shall the Base Rent be reduced below the amount of the debt service to the Lenders. "Substantial portion" shall be deemed to mean twenty percent (20%) of the designated manufacturing floor area of the Premises. (b) Compensation Award. In the event the Premises or any part thereof shall be permanently taken or condemned or transferred by agreement in lieu of condemnation for any public or quasi-public purpose by any competent authority during any Term of this Lease, the compensation award therefor shall be paid as follows: (i) First, to the Tenant, if Tenant has not terminated the Lease as provided herein, the amounts reasonably necessary to restore the balance of the Premises; (ii) Second, to the Lenders, the unpaid principal and accrued interest on the Loans; (iii) Third, to Landlord, the value of Landlord's reversionary interest in the portion of the Premises which exceeds the sums paid to the Lenders under (ii), above, and (iv) The balance, if any, to Tenant. Tenant shall be entitled to pursue and collect a compensation award for the value of its leasehold interest including extension Terms and purchase option, relocation expenses, and the value of the fixtures, additions and alterations and other equipment installed by Tenant in the Premises. ARTICLE 20 SUBORDINATION, ATTORNMENT AND NONDISTURBANCE (a) Tenant's Instruments. Tenant covenants and agrees to execute and deliver upon request of Landlord such instrument(s) subordinating this Lease to the rights of the Lenders; provided, however, that any such agreement or subordination shall provide that, so long as Tenant is 27 33 not in default of this Lease, any mortgagee to whose interest this Lease shall become subordinate shall not disturb the Tenant's peaceful and lawful possession or other rights under this Lease. In the event of a sale or assignment of Landlord's interest in the Premises, Tenant shall attorn to and recognize such purchaser as Landlord under this Lease, provided that such sale or assignment is made subject to this Lease and the rights of Tenant in the Premises. (b) Landlord's Instruments. The Landlord agrees to execute and deliver, upon the reasonable request of Tenant, an instrument stating that this Lease is in full force and effect; the date through which the last rent has been paid; the amount of rent currently then being paid and whether or not the Tenant is in breach of any other terms and conditions of this Lease. ARTICLE 21 ACCESS TO LEASED PREMISES (a) By Landlord. Tenant agrees to permit, in case of due cause and receipt of notification at least forty-eight (48) hours in advance, or in case of emergency with as much prior notice as is reasonable under the circumstances, any of the Landlord's agents to inspect or examine the Premises and to permit at any reasonable time Landlord to make such repairs, which Tenant has filed so to do in accordance with Article 8 without the same being construed as an eviction of Tenant in whole or in part; and the rent shall in nowise abate while such repairs are being made by reason of loss or interruption of the business of Tenant because of the prosecution of such work. Due to the proprietary nature of Tenant's business, Landlord's officers, employees, agents or contractors will enter into a nondisclosure agreement acceptable to Tenant prior to entry and/or the performance of such work hereunder, if requested by the Tenant. 28 34 (b) By Prospective Tenants. For a period of ninety (90) days prior to expiration of the Term of this Lease, Landlord shall have the right, upon giving Tenant forty-eight (48) hours notice, to enter upon the Premises during normal business hours for the purpose of exhibiting the same to prospective tenants or purchasers. During said period Landlord may place signs in, or upon the Premises to indicate the same are for rent or sale, which signs shall not be removed, obliterated or hidden by Tenant but which signs shall be located as to not interfere with the operations of Tenant on the Premises. Due to the proprietary nature of Tenant's business, in the event that Tenant is still in operation at the time when such Premises are exhibited to prospective tenants or purchasers, Landlord shall obtain a nondisclosure agreement acceptable to Tenant from such prospective tenant or purchaser prior to exhibiting the Premises, if requested by the Tenant. ARTICLE 22 PARTIES' REMEDIES CUMULATIVE; NO WAIVER OR FORBEARANCE; SEVERABILITY Except insofar as this is inconsistent with or contrary to any other provision of this Lease, no right or remedy herein conferred upon or reserved to either party is intended to be exclusive of any other right or remedy, and each and every right and remedy given hereunder or now or hereafter existing at law or in equity or by statute shall be cumulative. Except to the extent that either party may have otherwise agreed in writing, no waiver by such party of any violation or nonperformance by the other party of any of its obligations, agreements or covenants hereunder shall be deemed to be a waiver of any subsequent violation or nonperformance of the same or any other covenant, agreement or obligations, nor shall any forbearance by either party to exercise a remedy for any such violation or 29 35 nonperformance by the other party be deemed a waiver by such party of its rights or remedies with respect to such violation or nonperformance. If any provision of this Lease or the application thereof to any person or circumstance should, for any reason and to any extent, be invalid, unenforceable or illegal, the remainder of this Lease and the application of such provision to other persons or circumstances shall not be affected thereby, but rather shall be enforced to the greatest extent permitted by law and a rapid remedy or replacement shall be sought for the provision found to be invalid, unenforceable or illegal. ARTICLE 23 LANDLORD'S COVENANT OF QUIET ENJOYMENT Landlord, for itself and for and on behalf of all its mortgagees, covenants and agrees that Tenant shall, at all times during said Term, have the peaceable and quiet enjoyment and possession of the Premises without any manner of hindrance from Landlord or any persons lawfully claiming through Landlord, except as to such portion of the Premises as shall be taken under the power of eminent domain. Landlord agrees to use its best efforts after request by Tenant to obtain written confirmation of such right of quiet enjoyment from all current mortgagees, if any, and from all future mortgagees of Landlord. ARTICLE 24 TENANT'S COVENANTS AND DISCLOSURES Tenant covenants with and warrants to Landlord the following: (a) Employees. Tenant shall, within 3 years of the Rent Commencement Date, create jobs for 75 full time equivalent employees; and during the remaining term and extension terms, maintain an annual average of 75 full time equivalent employees. Tenant acknowledges that any 30 36 downward deviation from said full time equivalent employees will alter the financing of the Construction Costs and Tenant agrees to be responsible for and make up any deficit in the financing of the Construction Costs caused by a decrease in the number of full time equivalent employees as it shall relate to the KDFA Loan. Landlord has an option to require Tenant to prepay all or any portion of the KDFA Loan which shall be deemed an acceleration in Rent. (b) Compliance Review Disclosures. Tenant shall provide to Landlord copies of written semi-annual compliance reviews of its water and/or waste treatment procedures by a reputable engineering firm, within 10 days of receipt thereof by Tenant, to commence within six months of the Rent Commencement Date. Tenant shall bear the cost of such reviews throughout the Term of this Lease. (c) Financial Disclosure. Throughout the Term of this Lease, Tenant shall at Tenant's cost provide to Landlord the following: (i) Copies of quarterly and annual financial statements in the same general format as those distributed to others having a similar need to know consisting of the balance sheet, statement of income, statement of cash flows, copies of the operating statements and the management discussion and analysis letter for the entire Kerr Group, Inc. within 120 days of the end of any fiscal year or within 60 days of the end of any fiscal quarter. (ii) Copies of all Securities and Exchange Commission filings within ten (10) days of any filing. (d) Improvements Constructed by Tenant. Tenant shall at its cost construct improvements to the Premises of not less than $500,000.00, which shall be specifically identified in a List provided to Landlord by Tenant along with evidence of costs of each such improvement within 31 37 ninety (90) days of the Rent Commencement Date. All items on this List shall become the property of Landlord upon termination of this Lease, notwithstanding any other conditions of this Lease; however, all equipment is to become the property of Tenant. (e) Jobs Incentive Program. Tenant will supply the necessary information as required by the City of Bowling Green in order to assist Landlord in obtaining a Jobs Incentive Program loan; provided however, that Tenant shall have no liability, direct or indirect, for such loan. ARTICLE 25 INTEREST ON PAST DUE OBLIGATIONS Except as expressly provided herein, any amount due to Landlord or Tenant not paid within ten (10) days after the date due shall bear interest at the Trans Financial Bank's (or its successor) prime rate plus 1% from date due until paid in full. Payment of such interest shall not excuse or cure any default by Tenant hereunder. ARTICLE 26 TITLES OF ARTICLES The titles of the articles and sections throughout this Lease are for convenience of reference only, and the words contained therein shall in no way be held to explain, modify, amplify or aid in the interpretation, construction or meaning of the provisions of this Lease. ARTICLE 27 FORCE MAJEURE If either Landlord or Tenant is prevented or hindered from timely satisfying the terms or conditions of this Lease because of a shortage or inability to obtain materials or equipment, strikes or other labor difficulties, governmental restrictions, fire, casualty, acts 32 38 of God, or any other cause outside that party's reasonable control, said party shall be permitted an extension of time of performance by the number of days during which such performance was prevented or hindered. This provision shall not affect the Rent Commencement Date or Tenant's obligation to begin paying Base Rent on that date. ARTICLE 28 RECORDING OF MEMORANDUM OF LEASE Neither party shall record this Lease. However, the parties agree to execute a memorandum of this Lease in recordable form, provided that such memorandum shall disclose only the description of the Premises, the length of the Initial Term and Extension Term, the purchase option and the names of the parties. The cost of such recording shall be borne by the Tenant. ARTICLE 29 ENTIRE AGREEMENT This writing contains the entire agreement between the parties hereto with respect to the leasing of the Premises and shall be governed by and construed in accordance with the laws of the Commonwealth of Kentucky; and no agent, representative, salesman or officer of either Tenant or Landlord has authority to make or has made any statement, agreement or representations, either oral or written, in connection herewith, modifying, adding to or changing the terms and conditions herein set forth. No dealings between the parties or custom shall be permitted to contradict, vary, add to or modify the terms hereof. No modification of this Lease shall be binding unless such modification shall be in writing and signed by the parties hereto. 33 39 ARTICLE 30 COMPLIANCE WITH LAWS Landlord represents and warrants to Tenant that the Premises are in full compliance with all applicable laws, statutes, ordinances, orders, rules, regulations and requirements of all federal, state and municipal governments, and the appropriate agencies, offices, departments, boards, and commissions thereof. IN WITNESS WHEREOF, the Landlord and Tenant have caused this Lease to be signed by their duly authorized representatives, in duplicate, this the 30th day of June, 1994. TENANT: KERR GROUP, INC. By: /s/ D. G. STRICKLAND -------------------------------------- D. G. STRICKLAND Senior Vice President, Finance STATE OF KENTUCKY ) ) SS COUNTY OF WARREN ) The foregoing Lease was subscribed and sworn to before me this 30th day, of June, 1994, by D. G. Strickland to me personally known, the Senior Vice President, Finance, Kerr Group, Inc., a corporation, and that said instrument was signed on behalf of said corporation by proper authority and the instrument was the act of the corporation for the purposes stated above. -------------------------------------- NOTARY PUBLIC Commission Expires: 1-28-97 34 40 LANDLORD: BOWLING GREEN-WARREN COUNTY INDUSTRIAL AUTHORITY IV, INC. By: /s/ DENNIS GRIFFIN -------------------------------------- DENNIS GRIFFIN, President COMMONWEALTH OF KENTUCKY ) ) SS COUNTY OF WARREN ) The foregoing Lease was subscribed and sworn to before me this 30th day, of June, 1994, by Dennis Griffin to me personally known, the President of Bowling Green-Warren County Industrial Authority IV, Inc., a corporation, and that said instrument was signed on behalf of said corporation by proper authority and the instrument was the act of the corporation for the purposes stated above. -------------------------------------- NOTARY PUBLIC My Commission Expires: 1-28-97 35 41 Exhibit 1(k) Diagram of property under lease excerpted from Plat Book 25 page 124 which shows the property boundaries and the planned location of the railroad right-of-way for the rail spur. EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) AND CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1994 JAN-01-1994 SEP-30-1994 2,926 0 22,342 724 29,138 57,491 98,373 55,328 118,909 19,055 50,000 2,110 0 9,748 19,362 118,909 111,008 111,305 76,749 76,749 25,337 0 3,727 5,492 2,320 3,172 0 0 0 3,172 0.69 0.69
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