EXHIBIT 10.16
LEASE AGREEMENT
BETWEEN
MICHAEL GALLEN
AND
LAKELAND INDUSTRIES, INC.
DATED AS OF JULY 18, 2005
--------------------------------------
31 SOUTH STERLEY STREET
BOROUGH OF SHILLINGTON
COUNTY OF BERKS
COMMONWEALTH OF PENNSYLVANIA
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TABLE OF CONTENTS
-----------------
ARTICLE 1. DEMISE, DESCRIPTION, USE AND TERM
2
ARTICLE 2. RENT 3
ARTICLE 3. INSURANCE/INDEMNIFICATION
4
ARTICLE 4. WASTE AND NUISANCE 5
ARTICLE 5. REPAIRS AND MAINTENANCE
5
ARTICLE 6. LESSEE'S COMPLIANCE 6
ARTICLE 7. UTILITIES 6
ARTICLE 8. RULES AND REGULATIONS 6
ARTICLE 9. ALTERATIONS, IMPROVEMENTS AND
FIXTURES 6
ARTICLE 10. QUIET POSSESSION 7
ARTICLE 11. DELIVERY OF POSSESSION
7
ARTICLE 12. SURRENDER OF PREMISES
8
ARTICLE 13. DEFAULT 8
ARTICLE 14. INSPECTION BY LESSOR
10
ARTICLE 15. ASSIGNMENT AND SUBLEASE
11
ARTICLE 16. SECURITY DEPOSIT 11
ARTICLE 17. ESTOPPEL CERTIFICATE
12
ARTICLE 18. ENVIRONMENTAL MATTERS
12
ARTICLE 19 LIMITATION OF LIABILITY OF LESSOR
13
ARTICLE 20. MISCELLANEOUS 13
EXHIBIT "A" RULES AND REGULATIONS
1
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LEASE AGREEMENT
---------------
THIS LEASE
AGREEMENT ("Lease") is
made as of the 18th day of July, 2005,
by MICHAEL GALLEN ("Lessor"), an adult individual and citizen of the
Commonwealth of Pennsylvania, and
A N D
LAKELAND INDUSTRIES, INC., ("Lessee"), a
Delaware corporation.
Background
----------
The Lessor
is the owner of certain real property ("Property") situate at
31 South Sterley Street, Shillington, Berks County, Pennsylvania. A five (5)
story industrial building ("Building") is
located on the Property. The Property
and all improvements thereon owned by the Lessor,
including the
Building, are
hereinafter referred to as the "Leased
Premises".
Concurrently with the execution of this Lease, the Lessor, Mifflin
Valley,
Inc., a Pennsylvania corporation, the Lessee, and Mifflin Valley, Inc., a
Delaware corporation, have executed an
Asset Purchase Agreement ("Asset Purchase
Agreement").
The
Lessor and Lessee now
seek to perpetuate
in writing
their present
understanding and agreement.
NOW,
THEREFORE,
INTENDING TO BE LEGALLY BOUND HEREBY, the Lessor and
Lessee hereby agree as follows:
ARTICLE 1. DEMISE, DESCRIPTION, USE AND TERM
--------------------------------------------
1.1 The
duties and obligations
of both the Lessor and the Lessee pursuant
to this Lease are subject to and
contingent
upon closing
occurring under the
Asset Purchase Agreement; provided, however, that any default by the
Lessor or
Mifflin Valley, Inc., a Delaware
corporation, under the Asset Purchase Agreement
shall constitute a default by the Lessor
under this Lease and any default by the
Lessee or Mifflin Valley, Inc., a Delaware
corporation, under the Asset Purchase
Agreement shall constitute a Default (as hereinafter defined) by the Lessee
under this Lease.
1.2 The
Lessor hereby leases to the Lessee in accordance with the
provisions of this Lease, and the Lessee hereby leases from the Lessor in
accordance with the provisions of this
Lease, the Leased Premises.
1.3 The
Leased Premises shall be used for the manufacturing of protective
clothing.
1.4 The
initial term ("Initial Term") of this Lease shall be five (5)
years and shall begin on August 1, 2005, ("Commencement Date") and shall
terminate on July 31, 2010 ("Termination
Date").
1.5
Provided that no Default shall have occurred during the Initial Term,
the Lessee shall have the option
("Renewal Option") to extend this Lease for
a
period of five (5) years ("Renewal Term"),
which Renewal Term
shall commence on
August 1, 2010, and terminate on July 31,
2015.
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1.6 The
exclusive method of
exercising the Renewal Option shall be by the
giving by the Lessee of notice of such
exercise to the Lessor as provided in
Section 20.6 of this Lease, at least two
hundred seventy (270) days prior to the
end of the Initial Term.
1.7 In the
event that the Lessee shall exercise its Renewal Option: (a)
The Lessee shall pay to the Lessor Rent (as
hereinafter
defined) in
accordance
with the provisions of Section 2.1 of this
Lease; and
(b) All other terms and conditions contained in this Lease shall
be
applicable
throughout the Renewal
Term and binding upon the Lessee to the
same
extent that such terms and conditions were applicable and binding
during the
Initial Term.
1.8 Each
twelve (12) month
period of the Initial Term commencing on the
anniversary of the Commencement Date and each twelve (12) month
period of the
Renewal Term, if applicable, commencing on the anniversary of
the Commencement
Date is hereinafter referred to as "Lease Year".
As hereinafter
used, "Term"
shall mean the Initial Term and, if
applicable, the Renewal Term.
ARTICLE 2. RENT
---------------
2.1 The
Lessee shall pay to the Lessor at its offices set forth in
Section
20.6 of this Lease or at such other place
as the Lessor shall
designate to the
Lessee from time to time in writing,
as rent ("Rent"), payable without prior
notice or demand and without setoff or
deduction of any nature, as follows:
(a) During the first
Lease Year of the Term
hereof, twelve (12)
equal,
consecutive monthly installments in the amount of Four Thousand
Six
Hundred
Thirty and 00/100 Dollars ($4,630.00) each, in advance,
the first
such
payment becoming due
and payable on the
Commencement Date and
each
successive
monthly payment becoming due and payable on the same day
of
each of
the next eleven (11) months thereafter.
(b) For each Lease Year of the Initial Term hereof following the
first
Lease Year, and for each Lease Year of the Renewal Term, if
applicable, there
shall be an increase in Rent ("Rent Increase"), which
Rent
Increase shall be three and one half percent (3.5%) of the Rent
applicable
to the immediately preceding Lease Year.
2.2 As
used herein, "Expenses" shall mean any and all assessments,
costs,
premiums, taxes, utility charges and all
other expenses of any and every nature
pertaining or related to the Leased
Premises or the
maintenance,
occupation,
repair or operation of the Leased
Premises other than
(a) principal,
interest
and other amounts owing with respect to loans to
Lessor secured in
whole or in
part by the Leased Premises, and (b) all Capital Expenditures (as hereinafter
defined) except those Capital Expenditures which are caused, in whole or in
part, (i) by any act or omission of the Lessee or any of its shareholders,
directors, officers, employees, agents, contractors or
representatives or (ii)
by any Default by Lessee. As used herein, "Capital Expenditures" means any
expenditures which, under generally accepted accounting principals and
practices, would be characterized as
Capital Expenditures.
2.3 The
Lease shall be
considered
a "triple net lease". Upon demand
therefore, the Lessee shall pay all Expenses
billed directly to the
Lessee and
reimburse the Lessor for all Expenses paid by the Lessor during the Term,
except, however, that Lessor shall make every effort to have such invoices
billed directly to Lessee and paid directly
by Lessee where appropriate.
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2.4 Any
amounts owing by the
Lessee under this
Lease other than Rent are
hereinafter referred to as "Additional
Rent".
2.5 In the
absence of
manifest error, all determinations made by the
Lessor under or pursuant to this Article
shall be final and conclusive.
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ARTICLE 3. INSURANCE/INDEMNIFICATION
------------------------------------
3.1
Throughout the Term hereof, the Lessee shall maintain with a
good and
responsible company or companies doing
insurance business in the Commonwealth of
Pennsylvania and reasonably acceptable to the Lessor public
liability insurance
in the minimum amount per occurrence of One Million Dollars ($1,000,000.00)
combined single limit coverage for loss from an accident
resulting in
bodily
injury to or death of persons and Five
Hundred Thousand
Dollars ($500,000.00)
for loss from an accident resulting in damage to or destruction of property,
naming the Lessor as an additional named
insured.
3.2 At the
beginning of each Lease Year the Lessee shall provide the
Lessor with a certificate or certificates of insurance evidencing the
maintenance of the insurance coverages
referred to in Section 3.1 hereof.
3.3 With
respect to the insurance referred to in Section 3.1 hereof,
all
policies pertaining thereto shall expressly provide that the same may not
be
cancelled or altered without thirty (30) days' prior written notice to the
Lessor.
3.4 If the
Lessee shall fail to secure or maintain the insurance referred
to in Section 3.1 hereof, the Lessor shall
be permitted, but shall have no duty,
to obtain such insurance in the Lessee's
name or as the agent for the Lessee and
shall be compensated by the Lessee as Additional Rent for the cost of the
insurance premiums therefore immediately upon demand made by
the Lessor without
setoff or deduction, and all such amounts so paid by the Lessor
shall become
Additional Rent until paid to the Lessor by
the Lessee.
3.5 If the
Leased Premises
or the Building in which the same is
located
should be totally destroyed by fire, flood or other casualty, or if either
should be so damaged that rebuilding or
repair cannot reasonably be completed so
as to allow the Lessee to reasonably occupy
the Leased Premises for the purposes
provided in Section 1.2 hereof within ninety (90) working days
from the date of
the occurrence of said damage, and such destruction or damage has not been
caused by or resulted from any act or omission of the
Lessee, this Lease
shall
terminate and the Rent and Additional Rent shall be abated for the
unexpired
portion of this Lease, effective as of the date of such
destruction or
damage.
Other than for the termination and abatement of Rent and Additional Rent as
hereinabove set forth, the Lessee shall
have no other rights or remedies against
the Lessor on account of the
Lessee's inability to use and occupy the Leased
Premises.
3.6 If the
Leased Premises
or the Building in which the same is
situate
should be damaged by fire, flood or other casualty but such
damage has not been
caused by or resulted from any act or
omission of the Lessee, and such damage is
not to such an extent that rebuilding or repair cannot
reasonably be
completed
within ninety (90) working days from the
date of such damage,
this Lease shall
not terminate, but the Lessor at its sole cost and expense, shall proceed
forthwith to rebuild or repair the Leased
Premises or the
Building in which the
same is situate to substantially the condition in which the same
existed prior
to such damage. In the event of such damage to the Leased Premises or the
Building as aforesaid, Rent and Additional Rent shall be
abated for that period
of time during which the Lessee shall not be able to reasonably occupy the
Leased Premises for the purposes
provided in Section
1.2 hereof. In the
event
that Lessor should fail to complete such
rebuilding or repair within ninety (90)
working days from the date of the
occurrence of said damage, the Lessee may, at
its option, by giving written notice thereof to the Lessor,
terminate this
Lease, in which case the Rent and Additional Rent shall be abated for the
unexpired portion of this Lease,
effective as of the
date of such damage. Other
than for the termination and abatement of Rent and Additional Rent as
hereinabove set forth, the Lessee shall
have no other rights or remedies against
the Lessor for
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the failure by the Lessor to complete
such rebuilding or repair as aforesaid
within ninety (90) working days of the date
of the occurrence of
said damage or
on account of the Lessee's inability to use
and occupy the Leased Premises.
3.7 The
Lessee shall indemnify
and save the Lessor
harmless of and
from
any and all loss, damage, cost and expense, including reasonable attorneys'
fees, suffered or incurred by the Lessor
arising out of or pertaining to any act
or omission of any nature of the Lessee or
any of its
shareholders,
directors,
officers, agents, employees, invitees, contractors or
representatives resulting
in damage to or destruction of the Leased
Premises or the Property.
3.8
Notwithstanding
anything to the
contrary contained in
this Lease or
otherwise, the Lessee shall not be entitled to any abatement of Rent or
Additional Rent or termination of this Lease
in the event that any
destruction
or damage to the Leased Premises or the Building shall be caused by or result
from any act or omission of the Lessee or any of
its shareholders,
directors,
officers, agents, employees, invitees,
contractors or representatives.
3.9
Notwithstanding
anything to the
contrary contained in this Lease,
nothing contained in this Lease shall be deemed to
limit, negate or
otherwise
diminish any rights or remedies
which the Lessor shall
have against the Lessee
on account of any or omission by the Lessee which results in damage or
destruction to the Leased Premises or the
Building in which the same is situate.
ARTICLE 4. WASTE AND NUISANCE
-----------------------------
4.1 The
Lessee shall not commit, or suffer to be committed,
any waste on
the Leased Premises, nor shall the Lessee maintain, commit or permit the
maintenance or commission of any nuisance on
the Leased Premises or
the use of
the Leased Premises for any unlawful
purpose.
ARTICLE 5. REPAIRS AND MAINTENANCE
----------------------------------
5.1 Lessee
acknowledges that the Lessee has carefully inspected the Leased
Premises and accepts the Leased Premises AS
IS.
-----
5.2 The
Lessee shall keep the
Leased Premises
in good order and
repair,
reasonable wear and tear excepted. The
Lessee shall repair or replace all broken
or damaged doors, windows, fixtures and other portions of the
Leased Premises.
Notwithstanding the foregoing, the Lessee shall have no duty to
make structural
repairs to the Leased Premises unless the damage thereto
has been caused by the
act or omission of the Lessee or any
failure by the Lessee to observe or perform
any of its duties or obligations under this
Lease.
5.3 The
Lessee shall not overload the floors nor install any heavy
machinery or other heavy equipment of any
kind without first obtaining the prior
written consent of the Lessor, which, if granted, may be conditioned upon the
moving of such machinery and equipment by skilled, licensed handlers and
installation and maintenance, at Lessee's sole cost and expense,
of special
reinforcing and settings adequate to absorb
and prevent noise and vibration.
5.4 The
Lessor shall repair
and maintain the Leased Premises at Lessor's
expense, except for any damage thereto caused by any act or omission of the
Lessee or any failure by the Lessee to observe
or perform any of its duties and
obligations under this Lease, in which event such damage shall be promptly
repaired to the Lessor's satisfaction at the sole cost and expense of the
Lessee, so that the Leased Premises shall
have:
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(a) effective
waterproofing
and weather protection of roof and
exterior
walls;
(b) plumbing facilities that substantially conform to applicable
law
in effect
at the time of installation;
(c) heating facilities which substantially conform with applicable
law at the
time of installation;
(d) electrical lighting, with wiring and electrical equipment,
which
substantially conform with applicable law at the time of
installation; and
(e) floors, stairways and railings maintained in good repair;
provided, however, that notwithstanding the foregoing
the Lessor shall have no
duty to make any repairs otherwise required
by this Section unless and until the
Lessor shall have received notice of the
need therefore from the Lessee.
ARTICLE 6. LESSEE'S COMPLIANCE
------------------------------
6.1 The
Lessee shall not at any time use or occupy the Leased Premises
nor
permit nor suffer the same to be used or
occupied in violation
of any statute,
ordinance or other requirement of any
local, state or
federal government or any
authority, agency or department thereof, and
in the event that any local, state
or federal government or any authority, agency or department thereof shall
hereafter at any time contend or declare by
notice, citation,
order or in any
other manner whatsoever that the Leased
Premises is used for a purpose which is
in violation of any statute, ordinance or other requirement, the Lessee shall
discontinue immediately such use of the
Leased Premises.
ARTICLE 7. UTILITIES
--------------------
7.1 As of
the date of this
Lease, the Leased
Premises is served by the
following utilities ("Utilities"):
electric, natural gas, public water,
public
sewer and telephone.
7.2
Notwithstanding anything to the contrary, the Lessor does not make
any
representations or warranties of any nature to the Lessee with
respect to the
existence, continued existence, quantity or quality of any
Utilities and shall
have no liability or responsibility for any diminution in, suspension of or
termination of any Utilities.
7.3 The
Lessee shall pay when due, directly to the suppliers thereof,
the
cost of all Utilities now or hereafter serving the Leased Premises which are
metered and billed directly to the
Lessee.
7.4
Immediately upon demand, the Lessee shall reimburse the Lessor for
the
cost of all Utilities now or hereafter
serving the Leased Premises which are not
separately metered and for which the Lessee is not separately billed by a
supplier of such Utilities. In the absence of manifest
error, the reasonable
determination by the Lessor as to the cost
of Utilities subject to reimbursement
by the Lessee shall be final and
conclusive.
ARTICLE 8. RULES AND REGULATIONS
--------------------------------
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8.1 The
rules and regulations
set forth on Exhibit
"A" which is attached
hereto and made a part hereof are part of this Lease with the same effect as
though contained herein in their entirety,
and the Lessee
covenants that said
rules and regulations shall be fully observed by the
Lessee throughout the Term
hereof and fully observed by each and every
employee of the Lessee and each and
every person on the Leased Premises by
permission or consent of the Lessee.
ARTICLE 9. ALTERATIONS, IMPROVEMENTS AND FIXTURES
-------------------------------------------------
9.1 The
Lessee shall make no alterations, additions or improvements in
or
to the Leased Premises without obtaining the prior written consent of the
Lessor, which shall not be unreasonably
withheld. In no event shall the Lessee
be permitted to make any alterations, additions or improvements in or to the
Leased Premises which would diminish the
value of the Leased Premises.
9.2 All
alterations,
additions and
improvements
to the Leased
Premises
shall be of first quality, shall be free of all liens and
encumbrances
except
for a lien on all assets of Lessee held by
Lessee's bank (except,
however, that
in no event shall Lessee's bank have any
lien, right,
title or interest in
any
alteration, addition or improvement to the
Leased Premises which
constitutes a
fixture or otherwise is affixed to the Leased
Premises or any part
thereof),
shall be completed in a good and
workmanlike manner, shall be made in accordance
with all applicable laws and governmental
rules and regulations
and shall be in
form satisfactory to the Lessor. In no event shall the Lessee cause
or permit
any mechanic's lien or claim ("Mechanic's Lien") to attach to the Leased
Premises or any part thereof by reason of
the construction of
any alterations,
additions or improvements to the Leased
Premises or any work related thereto.
9.3 At the
Lessor's option, upon
incorporation into the
Leased Premises,
all alterations, additions and improvements shall become the property of
the
Lessor and shall remain upon and be surrendered by the Lessee with the Leased
Premises. The Lessee shall indemnify and hold the Lessor
harmless of and
from
any and all loss, damage, cost and expense, including all fines, penalties,
reasonable attorneys' fees and court costs,
incurred by the Lessor
arising out
of or resulting from the construction of the alterations, additions and
improvements or any repairs to the Leased
Premises occasioned thereby.
9.4 In the
event that the Lessee shall make any alterations, additions or
improvements to the Leased Premises,
the Lessee shall
promptly pay when due all
contractors and materialmen who shall have
supplied labor, work
or materials to
the Lessee with respect to the Leased
Premises. In addition, the Lessee shall
take all other steps, including the timely filing of a
waiver against liens, as
permitted by applicable law, in form and substance
satisfactory
to the Lessor
("Waiver Against Liens"), in order to avoid the imposition of any Mechanic's
Lien upon or against the Leased Premises.
At least ten (10)
business days prior
to the initiation of any labor or work with respect to the alterations,
additions or improvements or the delivery of any materials to the Leased
Premises with respect thereto, the Lessee shall deliver to the
Lessor a Waiver
Against Liens, executed by the Lessee and by each
of its contractors.
In the
event that any Mechanic's Lien shall be filed with respect to the Leased
Premises for labor or work performed or materials supplied by or on behalf of
the Lessee with respect to the Leased
Premises, the Lessee
shall cause the same
to be discharged within thirty (30) days after the
Mechanic's
Lien has been
filed or formal notice of said lien has been issued, whichever shall first
occur, regardless of the validity or
invalidity of such Mechanic's Lien. Nothing
contained in this Lease or otherwise is intended to authorize
the Lessee to do
or cause any work or labor to be done or
any materials
to be supplied
for the
account of the Lessor, all of the same
being solely for the Lessee's account and
at the Lessee's sole risk, cost and
expense.
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ARTICLE 10. QUIET POSSESSION
----------------------------
10.1
This Lease and the tenancy of the Lessee hereunder shall be
subordinate to the mortgage liens of record as
of the date of this Lease and to
all amendments, consolidations, extensions, modifications and
renewals thereof
or pertaining thereto and to the mortgage liens of record arising out of or
pertaining to any refinancing with respect to any of the
foregoing,
and all
amendments, consolidations, extensions, modifications and renewals thereof
or
pertaining thereto, and to all advances hereafter made from time to time
upon
the security thereof. Upon demand by the Lessor,
the Lessee shall
execute and
deliver to the Lessor such instruments and assurances as the Lessor shall
reasonably require in order to evidence
such subordination.
10.2
Provided that no Default (as hereinafter defined) shall have
occurred, and subject to the other
provisions of this
Lease, the Lessee
shall
peaceably and quietly hold and enjoy the Leased
Premises for the Term hereof
without hi
