LEASE AGREEMENT

EXHIBIT 10.2

LEASE AGREEMENT

THIS LEASE AGREEMENT is made and entered into this            day of             , 2009, by BOSTWICK LABORATORIES, INC., a Delaware corporation (“Tenant”), and COMMONWEALTH BIOTECHNOLOGIES, INC., a Virginia corporation (“Landlord”).

In consideration of the rents hereinafter reserved and the agreements hereinafter set forth, Landlord and Tenant mutually agree as follows:

1. SUMMARY OF TERMS.

The following is a summary of the terms of this Lease. The terms used herein shall have the meanings as set forth in greater detail in the Sections, subsections, and paragraphs of this Lease that follow and shall be governed by and subject to such provisions.

1.1. Basic Rent: $579,492.00

1.2. Basic Rent Adjustment: 2.5% per annum.

1.3. Monthly Installment of Basic Rent: One-twelfth (1/12) of Basic Rent.

1.4. Notice Addresses:

 

1.5. Premises: That certain real property situated in the County of Chesterfield, Virginia on an approximately 4.592 acre parcel of land, commonly known as 601 Biotech Drive, Richmond, Virginia 23235, including, (i) all existing improvements located thereon, including, without limitation the existing free standing office building of approximately 32,194 square feet (the “Building”) and (ii) all existing exterior areas, including, without limitation, all parking lots, driveways, sidewalks, other paved areas, landscaped areas, and loading dock areas (the “Exterior Areas”). Landlord shall have access to the portions of the Building identified as Rooms 150, 151, 132, 133, 134, 194 and 197 for Landlord’s use in connection with its maintenance and administrative obligations under this Lease.

Notwithstanding the foregoing, Landlord and Tenant agree that for the one hundred eighty (180) day period commencing on the Commencement Date (the “Reservation Period”), Landlord shall have (i) exclusive access to the following areas of the Building: (i) those rooms of the Building identified and designated as Room Numbers 201, 203, 205, 207 and 107 (collectively, the “Reserved Rooms”) and non-exclusive access (ii) to such areas of the Building as are necessary to permit Landlord’s access to the Reserved Rooms and (iii) to such Exterior Areas as are necessary to permit Landlord’s use and enjoyment of the Reserved Rooms. Landlord shall have the option to extend the Reservation Period for an additional six (6) month period (the “Extended Reservation Period”) by delivery of written notice to Tenant on or before the date which is thirty (30) days prior to the expiration of the Reservation Period. During the Extended Reservation Period, the Tenant’s Monthly Installment of Basic Rent shall be reduced by $18 per square foot of the Reserved Rooms. On or before the expiration of the Reservation Period, or the Extended Reservation Period, if applicable, Landlord shall remove all personal property of the Landlord located in the Reserved Rooms.

1.6. Term or Lease Term: Five (5) years, plus such additional Extension Term as further described and defined in Section 3 below.

1.7. Landlord’s Agents: Landlord’s Agents shall mean Landlord’s agents, employees, contractors, licenses, and invitees.

1.8. Tenant’s Agents: Tenant’s Agents shall mean Tenant’s agents, employees, contractors, licenses, and invitees.

1.9. Deposit: $144,873

 

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1.10. Default Rate: Per annum interest rate listed as the base rate on corporate loans at large U.S. money center commercial banks as published from time to time under “Money Rates” in The Wall Street Journal plus three percent (3%), but in no event greater than the maximum rate permitted by law. In the event The Wall Street Journal ceases to publish such rates, Landlord shall choose at Landlord’s sole discretion a similar publication which publishes such rates.

2. LEASED PREMISES.

Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises.

3. TERM AND EXTENSION OPTIONS.

3.1. Term. The initial term of this Lease (the “Initial Term” and including any Extension Term as provided below, the “Term”) shall commence on the Commencement Date which shall be the date Tenant acquires the Premises from Landlord (the “Commencement Date”). The Initial Term shall be five (5) years, plus the part of the month, if any, from the Commencement Date through the last day of the month immediately prior to the first full calendar month of the Initial Term. The Initial Term shall end at midnight on the last day of the Initial Term (the “Termination Date”), unless earlier terminated pursuant to any other provision of this Lease or pursuant to law.

3.2 Extension Options. Landlord hereby grants to Tenant one option to extend the Term for a period of five (5) years (“ Extension Term ”), commencing upon the expiration of the Initial Term. Provided that (i) Tenant is not then in default under this Lease and no event has occurred which, with notice or the passage of time or both, would constitute a default by Tenant under this Lease (provided, however, in the event Tenant has failed two times in any twelve month period during the Term of this Lease to pay Basic Rent timely as required pursuant to Section 13.1(a) below, Landlord shall have the right to approve or deny Tenant’s request to extend the Term of this Lease), and (iii) at the time of Tenant’s exercise of the Extension Term, there has been no material adverse change in Tenant’s financial condition, Tenant may exercise the foregoing option by written notice to Landlord at least twelve (12) months prior to the expiration of the Initial Term.

If the Initial Term is extended by reason of the foregoing, all of the terms and conditions of this Lease shall continue in full force and effect to the end of the Extension Term, except that the Basic Annual Rent for each year of the Extension Term shall represent an increase of 2.5% over the Basic Annual Rent for the previous year.

4. RENT.

4.1. Basic Rent. Tenant shall pay to Landlord during the Term of this Lease the Basic Rent, payable in advance in equal Monthly Installments of Basic Rent, without notice, demand, abatement, deduction or set-off, on the first day of each and every calendar month during the Term of this Lease; provided, however, that if the Term of this Lease shall commence on a day other than the first day of a month, the first payment shall include any prorated Basic Rent for the period from the Commencement Date to the first day of the first full calendar month of the Term. “Rental Year” is defined as each twelve (12) full calendar month period occurring during the Term of this Lease, with the first Rental Year commencing as of the Commencement Date and including any initial partial calendar month.

 

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4.2. Basic Rent Adjustment. Commencing with the second Rental Year and continuing each Rental Year thereafter for the remainder of the Term, including any Extension Term, the Basic Rent shall be increased by an amount equal to the product of the Basic Rent Adjustment and the Basic Rent paid by Tenant during the Rental Year preceding each annual increase.

4.3. Late Charge. If Tenant fails to make any payment of Basic Rent on or before the date when payment is due and such failure continues for five (5) days after the date when such payment is due, then Tenant shall pay to Landlord, as Additional Rent, a late charge to cover extra administrative costs and loss of use of funds equal to five percent (5%) of the amount due for the month or portion thereof that such amount is past due and, additionally, such unpaid amounts shall bear interest at the Default Rate from the due date thereof to the date of payment. Tenant further shall be responsible for the payment of any reasonable legal expenses and management fees incurred by Landlord in collecting any delinquent Rent due hereunder.

4.4. Payment. All Basic Rent, adjusted Rent and Additional Rent (as hereinafter defined) shall be paid to Landlord by Tenant when due, without deduction or offset, in lawful money of the United States, at Landlord’s address for Notice or such other place as Landlord may from time to time designate in writing.

4.5. Survival. The obligation of Tenant with respect to the payment of past due Basic Rent, adjusted Rent and Additional Rent shall survive the termination of this Lease.

4.6. Additional Rent. The term “Additional Rent” shall include, but not be limited to (i) the late payment fee, if any, under Section 4.3; (ii) taxes; (iii) insurance premiums; and (iv) all other costs and expenses which Tenant assumes, agrees or is required to pay to Landlord pursuant to this Lease. In the event of nonpayment of Additional Rent, Landlord shall have all the rights and remedies herein provided for in case of nonpayment of Rent.

4.7. Deposit. Landlord hereby acknowledges receipt from Tenant of the Deposit. In no instance shall the amount of such Deposit be considered a measure of liquidated damages. Landlord may apply all or any part of the Deposit in total or partial satisfaction of any Event of Default by Tenant. The application of all or any part of the Deposit to any Event of Default of Tenant under this Lease shall not deprive Landlord of any other rights or remedies Landlord may have nor shall such application by Landlord constitute a waiver by Landlord. If all or any part of the Deposit is applied to an obligation of Tenant under this Agreement due to an Event of Default then Landlord shall have the right to call upon Tenant to restore the Deposit to its original amount in cash by giving written notice to Tenant, in which case Tenant shall immediately restore the Deposit. The Deposit does not have to be held by Landlord in an interest-bearing or segregated account. Landlord shall be entitled to the full use of the Deposit plus accrued interest, if any, upon an Event of Default by Tenant. It is understood and agreed that should Landlord convey its interest under this Lease, the Deposit may be turned over by Landlord to Landlord’s grantee or transferee, and upon any such delivery of the Deposit, Tenant hereby releases Landlord herein named of any and all liability with respect to the Deposit, its application and return, and Tenant

 

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agrees to look solely to such grantee or transferee, provided that such transferee assumes the obligations of Landlord under this Lease. This provision shall also apply to subsequent grantees and transferees. Within thirty (30) days after the expiration of the Term, Landlord will return to Tenant the balance of the Deposit not previously applied as provided herein.

4.8. Triple Net Lease. Except for the obligations of Landlord expressly set forth herein, this Lease is a “triple net lease” and Landlord shall receive the Basic Rent as net income from the Premises, not diminished by any expenses other than payments under any mortgages, and Landlord is not and shall not be required to render any services of any kind to Tenant unless expressly provided for herein. The term “Rent” as used in this Lease means the Basic Rent, Additional Rent, real estate taxes, maintenance expenses and any other sums payable by Tenant to Landlord or any other person or entity pursuant to this Lease, all of which shall be deemed Rent for purposes of Landlord’s rights and remedies with respect thereto.

5. TAXES, ASSESSMENTS AND UTILITIES.

5.1. Taxes and Assessments. Tenant shall pay (i) all real estate and property taxes assessed against the Premises to Landlord or to the appropriate locality if so directed by Landlord immediately upon receipt of an invoice therefore and (ii) all assessments by the property association under the Gateway Centre Office Park Protective Covenants dated December 29, 1997 recorded at Deed Book 3186 Page 727, of Chesterfield County, Virginia land records (the “Restrictive Covenants”).

5.2 Utilities. Tenant shall pay directly for all charges for electricity, water, sewer, heat, gas and/or any other utility which is metered to the Premises. Tenant shall have all meters serving the Premises placed in Tenant’s name as of the date Tenant takes occupancy of the Premises. Any payments made by Landlord due to Tenant’s failure to pay a utility bill are to be reimbursed by Tenant within ten (10) days of notice, and shall accrue interest at the Default Rate, pro-rated from the date of payment by Landlord to the date of reimbursement. The Landlord shall not be liable for failure to furnish, or for suspension or delays in furnishing, any of the above services to the Premises caused by breakdown, maintenance or repair work or strike, riot, civil commotion, or any cause or reason whatever beyond the control of the Landlord unless the interruption of services is caused solely by Landlord’s gross negligence and Tenant is unable to operate its business in the Premises, in which case the Rent shall abate for the period of time that such services are interrupted.

6. USE, CARE AND REPAIR OF PREMISES BY TENANT.

6.1 Permitted Uses. Tenant shall use and occupy the Premises solely for laboratory and/or office purposes in accordance with applicable zoning regulations and for no other purpose. Tenant shall not do, or permit anything to be done in or on the Premises, or bring or keep anything therein which will, in any way, obstruct, injure, or interfere with the rights of Landlord or other tenants, or conflict with the laws, rules or regulations of any federal, state or county authority. Furthermore, the Premises shall not be used in any way which may violate any Certificate of Occupancy or other governmental requirements or restrictions of record or violate or conflict with any insurances relating to or insuring the Premises.

 

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6.2 Care of Premises.

Notwithstanding anything to the contrary contained herein, the Tenant, at its sole cost, will keep, maintain and preserve the Premises in a first class condition. The Tenant, at its sole cost and expense, will (i) make all repairs and replacements and fix all damage to the exterior of the Premises (including, but not limited to, the roof, gutters, downspout and outside walls, windows, doors, parking area and grounds), (ii) provide window washing for the interior of the Premises, (iii) make all repairs and replacements and fix all damage to the interior of the Premises and any installations, improvements, equipment or facilities therein, including but not limited to interior walls, doors and windows, floors, floor coverings, light bulbs, plumbing fixtures, and electrical fixtures, (iv) repair or replace any broken windows, (v) repair damage to the or Premises caused by the negligence or willful misconduct of the Tenant or its employees, agents, guests or invitees during the Term and (vi) maintain parking and landscape areas, lighting, sidewalks and driveways. Tenant, at its sole cost, will also keep, maintain and preserve the heating, ventilation and air conditioning system and equipment (“HVAC”) in good order and repair and shall at all times keep in full force and effect a customary HVAC preventative maintenance contract with a licensed contractor, which contract and contractor shall be acceptable to Landlord in all respects. Tenant shall comply with all laws, ordinances, rules or regulations of any governmental authority and the Restrictive Covenants required of either the Landlord or the Tenant relative to the repair, maintenance and replacement in the Premises.

Notwithstanding the foregoing, Tenant’s maintenance obligations hereunder shall not include: (1) repairs or replacements directly resulting from the negligence or willful misconduct of Landlord or Landlord’s Agents, (2) repairs or replacements for which Landlord may be reimbursed by any insurance required to be carried hereunder or actually carried by Landlord or (3) the costs in excess of One Thousand Five Hundred and No/100 Dollars ($1,500.00) per occurrence for repairs or replacements. Landlord shall be responsible for the cost of such maintenance and repairs in excess of One Thousand Five Hundred and No/100 Dollars ($1,500.00), provided, however, that Landlord’s responsibility for maintenance and repairs in excess of Four Thousand and No/100 Dollars ($4,000.00) per occurrence be conditioned upon Tenant’s delivery of written evidence from a commercial contractor reasonably acceptable to Landlord that such maintenance or repairs are necessary to maintain the Premises in a first class condition. In no event shall Tenant be liable for more than (i) One Hundred Twenty-Five Thousand and No/100 Dollars ($125,000.00) in maintenance and repairs to the Premises during the Initial Term and (ii) One Hundred Twenty-Five Thousand and No/100 Dollars ($125,000.00) in maintenance and repairs to the Premises during the Extension Term.

6.3. Landlord and Tenant’s Right to Repair. Landlord or Tenant shall give the other party thirty (30) days written notice to commence to make repairs required by Section 6.2, and if the party responsible for making the repairs fails to commence to make such repairs within such time period, the party requesting the repairs may, at its option, make such repairs, and the party responsible for making the repairs shall pay the other party, on demand, the actual costs in making such repairs plus a fee of fifteen percent (15%)

 

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to cover overhead. Landlord has no obligation and has made no promise to alter, remodel, improve, repair, decorate, or paint the Premises or any part thereof, except as specifically set forth in this Lease.

6.4. Hazardous Materials. Tenant certifies, represents and warrants that it shall not generate, use, store or dispose of any Hazardous Materials in or about the Premises, other than in accordance with applicable laws. “Hazardous Materials” means (i) any “hazardous waste” as defined by the Resource Conservation and Recovery Act of 1976 (42 U.S.C. §6901 et seq .), as amended from time to time, and regulations promulgated thereunder; (ii) any “hazardous substance” as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601 et seq .), as amended from time to time, and regulations promulgated thereunder; (iii) any “regulated substance” as defined by the Code of Virginia of 1950, as amended, §62.1-44.34:8, and regulations promulgated thereunder; (iv) any “hazardous substance” as defined by the Virginia Waste Management Act, Code of Virginia of 1950, as amended, §10.1-1400, et seq ., and regulations promulgated thereunder; (v) any substance the presence of which on the Premises is prohibited by any law similar to those set forth in this definition; and (vi) any other substance which by law requires special handling in its collection, storage, treatment, or disposal. The within covenants shall survive the expiration of earlier termination of the Lease Term. Tenant hereby agrees that it shall be fully liable for all costs, expenses, damages or liabilities related to the use, storage and disposal of Hazardous Materials kept in or about the Premises by Tenant, whether or not the same may be permitted by this Lease, and Tenant shall give notice to Landlord within five (5) business days of becoming aware of any violation of the provisions of this Section 6.4, provided, however, in the case of an emergency, Tenant shall give immediate notice to Landlord of any violation of the provisions of this Section 6.4. Tenant shall defend (at Landlord’s option), indemnify and hold harmless Landlord and Landlord’s Agents from and against any claims, demands, administrative orders, judicial orders, penalties, fines, judgments, liabilities, settlements, damages, costs or expenses (including without limitation, loss or restriction on the use of rentable space or of any amenity of the Premises and sums paid in the settlement of claims, attorneys’ (limited to reasonable fees), consultants’ and experts’ fees, court costs and other litigation expenses) of whatever kind or nature, known or unknown, contingent or otherwise arising out of, or in any way related to the following , (i) the presence, disposal, storage, discharge, spill, release or threatened release of any such Hazardous Materials by Tenant that are on, from or affecting the soil, water, vegetation, buildings, personal property, persons, animals or otherwise or arise from a breach by Tenant of Tenant’s obligations under this Section; (ii) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to Tenant’s discharge of the Hazardous Materials or a breach by Tenant of Tenant’s obligations under this Section; (iii) any lawsuit brought or threatened, settlement reached or governmental or quasi-governmental order relating to the Tenant’s discharge of Hazardous Materials or a breach by Tenant of Tenant’s obligations under this Section; or (iv) any violation by Tenant of any laws applicable thereto. The provisions of this Section 6.4 shall be in addition to any other obligations and liabilities Tenant may have to Landlord at law, in equity or pursuant to this Lease and shall survive the transactions contemplated herein and shall survive the termination of this Lease.

6.5. Surrender. At the expiration or earlier termination of the Term of this Lease, Tenant shall peaceably surrender the Premises in broom clean condition and good order and repair and otherwise in the same condition as the Premises were upon the commencement of this Lease, except (i) ordinary wear and tear, and (ii) damage by fire or other casualty to the extent there is actually paid to Landlord, to repair any damage to the Premises, sufficient net proceeds from the policies of insurance which Landlord maintains under the provisions of this Lease.

 

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6.6. Removal of Tenant’s Improvements. If, Landlord elects to require that alterations, installations, changes, replacements, additions or improvements to the Premises after the date of this Lease be removed at the termination of this Lease, then Tenant hereby agrees to cause the same to be removed at its sole cost and expense. If Tenant fails to remove the same, then Landlord may cause them to be removed at Tenant’s expense, and Tenant hereby agrees to reimburse Landlord for the cost of such removal, together with all and any damages which Landlord may suffer and sustain by reason of Tenant’s failure to remove the same. Alternatively, Landlord may elect that all or any of such alterations, installations, changes, replacements, additions to or improvements made by Tenant to the Premises shall remain at the termination of this Lease and not be removed. Notwithstanding the foregoing, Landlord’s election to require the removal of any alteration, installation, change, replacement, addition or improvement or to require that the same shall not be removed must be made at the time Tenant gives notice to Landlord of such improvement. Tenant shall surrender to Landlord all keys for the Premises at the place then fixed for the payment of Rent and shall notify Landlord in writing of all combinations or codes for any other locks or alarm systems, if any, installed in the Premises. Tenant’s obligations to observe and perform the covenants set forth in this Section 6.6 shall survive the expiration or earlier termination of this Lease.

6.7. Removal of Personal Property. At the expiration or earlier termination of the Term of this Lease, Tenant shall immediately remove all of Tenant’s Personal Property (defined in Section 8.3 herein) which it owns and is permitted to remove from the Premises under the provisions of this Lease and, failing to do so, Landlord at its option may either (i) cause that property to be removed at the risk and expense of Tenant (both as to loss and damage) in which case Tenant hereby agrees to pay all reasonable costs and expenses incurred thereby, including sums paid to store the property elsewhere, together with the costs of any repairs to the Premises caused by the removal of the property; (ii) upon five (5) days written notice to Tenant, which the parties agree is commercially reasonable, sell at public or private sale any or all of such property, whether exempt or not from sale under execution or attachment (such property being deemed charged with a lien in favor of Landlord for all sums due hereunder) with the proceeds to be applied as set forth in Subsection 13.2, or (iii) at Landlord’s option, title shall pass to Landlord. Notwithstanding the above, Landlord shall not be liable for and Tenant shall defend (at Landlord’s option), indemnify and hold Landlord harmless against any damage, destruction, or the removal by third parties of any property belonging to Tenant remaining in the Premises after the Lease expires or is terminated whether or not Landlord removes the property from the Premises into storage. Tenant shall be responsible for all expenses, costs and/or rent associated with Landlord’s storing any of Tenant’s property.

7. LOSS, DAMAGE AND INJURY.

To the maximum extent permitted by law, Tenant shall occupy and use the Premises at Tenant’s own risk. All property of Tenant, its employees, agents or invitees, or of any other person located in or on the Premises, shall be and remain at the sole risk of Tenant or such employee, agent, invitee or other person. Subject to Landlord’s obligations under Section 6.2, Tenant hereby expressly

 

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agrees that Landlord and its agents, servants and employees shall not be liable or responsible for, and Tenant does hereby indemnify, defend (at Landlord’s option and with choice of counsel) and hold harmless Landlord from, any damage or injury to the person or property of Tenant, or its Agents, directly or indirectly caused by (a) dampness or water in any part of the Premises; (b) bursting, leaking or overflowing of water, sewer, steam, gas or sprinkler pipes and heating or plumbing fixtures; (c) air-conditioning or heating failures; (d) interference with light, air or other incorporeal hereditaments; (e) operations in the construction of any public or quasi-public work; (f) theft or other crime, whether violent or non-violent in nature; (g) fire, accident, natural disorder or other casualty; (h) latent or apparent defect or change of condition in the Premises; (i) the acts or omissions of other persons on the Premises; and (j) any other source, circumstance or cause whatsoever unless caused by the gross negligence of Landlord or its agents.

8. ALTERATIONS.

8.1. Alterations. Tenant shall not make or permit any other improvements, alterations, fixed decorations, substitutions or modifications, structural or otherwise, to the Premises (“Alterations”) without the prior written approval by Landlord of complete and final plans and specifications prepared and submitted by Tenant, which approval may not be unreasonably withheld, conditioned or delayed. All Alterations shall be made by Landlord or Tenant’s contractor (which has been approved by Landlord) at Tenant’s sole cost, payable by Tenant only after Tenant has obtained all necessary permits from governmental authorities for the Alterations. Notwithstanding anything to the contrary contained in this Section, Tenant shall have the right from time to time and at any time, without Landlord’s consent, to perform the following work within the Premises, provided such work does not affect the base building structure or systems, including but not limited to, the HVAC, mechanical, electrical and plumbing systems: (i) install, remove and relocate nonstructural office partitioning, (ii) paint and install wall coverings, (iii) install and remove office furniture, (iv) relocate electrical outlets, (v) install and remove work stations, (vi) install and remove Tenant’s equipment (including office equipment and laboratory equipment and instruments used in the operation of Tenant’s business) and perform cable pulls in connection therewith, and (vii) install and remove carpeting and other floor coverings.

If any mechanic’s lien is filed against the Premises for work or materials furnished to Tenant (other than by Landlord) the lien shall be discharged by Tenant within thirty (30) days after Tenant receives written notice of the lien, solely at Tenant’s expense, by either paying off or bonding off the lien. Should Tenant fail to discharge any lien within thirty (30) days of Tenants receipt of notice of its filing, then, in addition to Landlord’s other remedies, Landlord shall have the right, but not the obligation, to discharge said lien at Tenant’s expense and Tenant shall pay on demand, as Additional Rent, any amount plus the Default Rate paid by Landlord for the discharge or satisfaction of any such liens, and all attorney’s fees and other costs and expenses of Landlord reasonably incurred in defending any such action or in obtaining the discharge of such lien.

8.2. Title. Any Alterations, fixtures and improvements installed or located in the Premises by or on behalf of Landlord or Tenant, other than Tenant’s Personal Property, (a) shall immediately become the property of Landlord and (b) shall remain upon and be surrendered to Landlord with the Premises as a part thereof at the end of the Term. Notwithstanding the foregoing, Landlord may,

 

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upon notice to Tenant which notice shall be given simultaneously with Landlord’s approval for such Alteration, elect that any Alterations be removed at the end of the Term, and thereupon, Tenant shall, at Tenant’s sole expense, cause such Alterations to be removed and the Premises to be restored to their condition prior to the making of such Alterations, reasonable wear and tear excepted.

8.3. Tenant’s Personal Property. “Tenant’s Personal Property” shall mean all equipment, machinery, furniture and/or furnishings and/or other property now or hereafter installed or placed in or on the Premises by and at the sole expense of Tenant, provided that Tenant’s Personal Property shall specifically not include any property, fixtures, equipment, machinery, furniture and/or furnishings with respect to which Tenant has been granted a credit or allowance by Landlord such as tenant allowance, items or any items installed in the Premises by Landlord and which (a) is not used, or was not procured for use, in connection with the operation, maintenance, or protection of the Premises; (b) is removable without damage to the Premises and (c) is not a replacement of any property of Landlord which such replacement is made at Tenant’s expense or otherwise. Notwithstanding any other provision of this Lease, Tenant’s Personal Property shall not include any Alterations or any improvements or other property installed or placed in or on the Premises as part of tenant’s improvements nor any millwork or cabinetry, whether or not any such Alterations, improvements, millwork, cabinetry or other property were installed at Tenant’s expense. Tenant shall promptly pay all personal property taxes on Tenant’s Personal Property, as applicable. Tenant shall remove all Tenant’s Personal Property from the Premises at the termination of this Lease.

8.4. Construction Requirements for Alterations. Any improvements, Alterations, fixed decorations, modifications, structural or otherwise, to the Premises performed by or on behalf of Tenant, with or without the consent of Landlord as provided herein, shall be made (i) in a good, workmanlike, first-class and prompt manner; (ii) using new materials only; (iii) by a licensed contractor and in accordance with plans and specifications, as required, reasonably approved in writing by Landlord; (iv) in accordance with Applicable Laws and requirements of any insurance company or self insurance insuring the Premises; and (v) after obtaining a commercially reasonable workman’s compensation insurance policy. Landlord’s consent to making any such improvements, alterations or modifications shall be deemed not to constitute Landlord’s consent to subject its interest in the Premises to a lien, which may be filed in connection therewith. In addition, notwithstanding whether or not Landlord approves or disapproves such plans and specifications or the actual construction of the improvements, alterations or modifications, Tenant, and not Landlord, shall be responsible for compliance with all Applicable Laws with regard to such plans and specifications and the construction of the improvements, alterations or modifications. Further, Landlord’s approval of such plans and specifications and the construction of such improvements, alterations or modifications shall create no responsibility or liability on the part of Landlord for their completeness, design sufficiency or compliance with all Applicable Laws. Tenant shall notify Landlord of the date construction is scheduled to begin and shall arrange for periodic inspections by Landlord of the job progress to ensure compliance with the approved plans and specifications. Landlord and Landlord’s Agents shall have the right (but not the obligation) to inspect the construction of the improvements, alterations or modifications. Landlord shall have the right at any time before, during or after construction to require Tenant to furnish such further assurances against mechanic’s liens, including, but not limited to, releases or waiver of liens signed by all contractors, subcontractors and suppliers, and affidavits executed by Tenant, Tenant’s contractor or architect that all charges for labor and materials have been paid.

 

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9. INSURANCE.

9.1. Tenant’s Insurance. At all times after the commencement of the Term and throughout the Term of this Lease, Tenant will carry and maintain, at its expense:

(a) Comprehensive general liability insurance, including insurance against assumed or contractual liability under this Lease, against any liability arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto, to afford protection with limits of not less than $2,000,000 each occurrence for bodily injury and property damage liability, $2,000,000 each incident for personal injury liability, $2,000,000 products and completed operations aggregate, and $2,000,000 general aggregate. The general aggregate limit should apply separately to each location owned or rented to the Tenant;

(b) All-risk property insurance, including theft coverage and business interruption coverage, written at replacement cost value and with replacement cost endorsement, covering all of Tenant’s Personal Property in the Premises (including, without limitation, inventory, trade fixtures, floor coverings, furniture and other property removable by Tenant under the provisions of this Lease) and all leasehold improvements and alterations installed in the Premises by or on behalf of Tenant; and

(c) Worker’s compensation or similar insurance in form and amounts required by law.

9.2. Tenant’s Contractor’s Insurance. Tenant shall require any contractor of Tenant performing work on or about the Premises to carry and maintain specific to the work being performed, at no expense to Landlord:

(a) Commercial general liability insurance, including contractor’s liability coverage, contractual liability coverage, completed operations coverage, broad form property damage endorsement and contractor’s protective liability coverage, to afford protection, with limits of not less than $2,000,000 each occurrence for bodily injury and property damage liability, $2,000,000 each incident for personal injury liability, $2,000,000 products and completed operations aggregate, and $2,000,000 general aggregate;

(b) Business automobile liability insurance with limits of not less than $500,000 per accident for bodily injury and property damage liability; and

(c) Worker’s compensation or similar insurance in form and amounts required by law.

9.3. Tenant’s Architect/Engineer Insurance. Tenant shall require any architect or engineer of Tenant performing work relating to the Premises to carry and maintain specific to the work being performed professional liability insurance with limits not less than $2,000,000 general aggregate.

 

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9.4. Provisions for all Insurance Policies. All policies required herein shall be maintained with companies (except in the event of self-insurance) and shall be in a form reasonably acceptable to Landlord and will be written as primary policy coverage and not contributing with, or in excess of, any coverage which Landlord shall carry. Tenant shall deposit the policy or policies of such required insurance or certificates thereof or satisfactory evidence of self insurance in a form acceptable to Landlord with Landlord prior to the Commencement Date, which policies (except in the event of self insurance) shall include Landlord or its designee as additional insured as their interests may appear as to coverage under Subparagraph 9.1.a. and as loss payee as to coverage under Subparagraph 9.1.b., and shall also contain a provision stating that such policy or policies shall not be canceled, non-renewed, or materially reduced in coverage except after thirty (30) days’ written notice, said notice to be given in the manner required by this Lease to Landlord. All such policies of insurance or self insurance shall be effective as of the date Tenant occupies the Premises and shall be maintained in force at all times during the Term of this Lease and all other times during which Tenant shall occupy the Premises. In the event of damage to or destruction of the Premises and the termination of this Lease by Landlord or Tenant pursuant to Section 10, Tenant agrees that it will pay Landlord all of Tenant’s insurance proceeds relating to Tenant’s Improvements and Alterations made in the Premises by or on behalf of Tenant.

Landlord shall not be required to carry insurance of any kind on Tenant’s improvements installed within the Premises by or on behalf of Tenant or on any other property of Tenant, and Landlord shall not be obligated to repair any damage thereto or replace the same.

Upon request of Landlord, if required by Landlord’s Mortgagees (as hereinafter defined,) Tenant shall be required to increase the limits of the insurance policies required herein to such reasonable amounts as customarily required under commercial leases for property located in Chesterfield, Virginia.

9.5. Tenant’s Failure to Insure. If Tenant shall fail to obtain or maintain insurance as required under this Section 9, Landlord may, but shall not be obligated to, obtain such insurance, and in such event, Tenant agrees to pay, as Additional Rent, the premium(s) for such insurance upon demand by Landlord.

9.6. Waiver of Subrogation. Landlord and Tenant for themselves and anyone claiming by or through them, respectively (whether by subrogation or otherwise), each release the other from any and all liability for any loss or damage to real or personal property caused by fire or by any of the extended coverage or supplementary contract casualties, even if such fire or other casualty shall have been caused by the fault or negligence of the other, or anyone for whom such other 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 time as the releasor’s insurance policies contain a clause or endorsement to the effect that any such release shall not adversely affect or impair said insurance policies (or self insurance) or prejudice the right of the releasor to recover thereunder. Landlord and Tenant each agree that it will request its insurance carriers to include in its policies such a clause or endorsement. If extra costs shall be charged therefore, each party shall advise the other thereof and the amount of the extra cost, and the other party, at its election, may, but shall not be obligated to, pay the same.

 

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9.7. Landlord’s Insurance. Landlord shall obtain and maintain in Landlord’s fire insurance policies throughout the Term of this Lease, provisions to the effect that such policies shall not be invalidated should the insured waive, in writing, prior to a loss, any or all right of recovery against any party for loss occurring to the Premises. Such policy shall neither be invalidated by any foreclosure or other proceeding or notices thereof relating to the Building(s) or the Premises or any interest therein. Upon Tenant’s written request which may be submitted to Landlord one time in any given Lease year, an authorized officer of Landlord shall provide to Tenant a letter or written certification indicating that the insurance required by this Lease to be maintained by Landlord is in full force and effect pursuant to the terms hereof. No such policy shall contain a provision relieving the issuer thereof of liability for any loss by reason of the existence of other insurance policies covering the Building against the peril involved; however, if other insurance then exists which covers the loss of damage, Landlord’s insurance carrier will respond to claims as an excess carrier. The policy of insurance shall specify the waivers of subrogation and right of recovery as hereinafter described.

Throughout the Lease term, (i) Landlord shall carry comprehensive general liability in an amount not less than $1,000,000 combined single limit for bodily injury and property damage, with excess liability coverage of not less than $5,000,000 and (ii) Landlord shall insure in an amount not less than the full value against loss due to fire or other casualties included in standard extended coverage insurance policies, as the case may be, with an agreed amount endorsement and full replacement cost coverage, exclusive of footings and foundations. Tenant shall pay to Landlord immediately on demand all premiums for the insurance maintained by Landlord pursuant to this Section 9.7.

9.8. Landlord Not Responsible for Acts of Others. Landlord shall not be responsible or liable to Tenant or Tenant’s Agents, or to those claiming by, through or under Tenant, for any loss or damage which may be occasioned by or through the acts or omissions of persons occupying space adjoining the Premises, or otherwise, or for any loss or damage resulting to Tenant, or those claiming by, through or under Tenant, or its or their property, or from fire or the breaking, bursting, stoppage or leaking of electrical cable and wires, or water, gas, or sewer pipes except when such loss or damage is caused by the negligence or willful misconduct of Landlord. Except as otherwise expressly stated herein, to the maximum extent permitted by law, Tenant agrees to use and occupy the Premises, as Tenant is herein given the right to use, at Tenant’s own risk.

9.9. Increase in Insurance Premiums. Tenant will not do or suffer to be done, or keep or suffer to be kept, anything in, upon or about the Premises which will violate or contravene Landlord’s hazard or liability insurance or which will prevent Landlord from procuring such insurance in companies or by means acceptable to Landlord. If anything done, omitted to be done or suffered by Tenant to be kept in, upon or about the Premises shall cause the rate or cost of fire or other insurance on the Premises or on other property of Landlord or others within the Building to be increased beyond the minimum rate or cost from time to time applicable to the Premises, or to any such property for the use or uses made thereof, then Tenant shall either cease such activity upon Landlord’s request or Tenant shall pay, as Additional Rent, the amount of any such increase upon Landlord’s demand.

 

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If any of the Landlord’s insurance shall be canceled or cancellation shall be threatened or the coverage thereunder reduced or threatened to be reduced in any way because of the use of the Premises or any part thereof by Tenant or any assignee or subtenant of Tenant or by anyone Tenant permits on the Premises and, if Tenant fails to remedy the condition giving rise to such cancellation, threatened cancellation, reduction of coverage, or threatened reduction of coverage within ten (10) days after notice thereof (provided, however, in no event shall Tenant fail to remedy any such condition prior to such date as will result in a cancellation or reduction of coverage), Landlord may, at its option, enter upon the Premises and attempt to remedy such condition, and Tenant shall promptly pay the cost thereof plus the Default Rate to Landlord as Additional Rent. Landlord shall not be liable for any damage or injury caused to any property of Tenant or of others located on the Premises resulting from such entry. If Landlord is unable or elects not to remedy such condition, then Landlord shall have all of the remedies provided for in this Lease in the event of a default by Tenant. Notwithstanding the foregoing provisions of this Section, if Tenant fails to remedy as aforesaid, Tenant shall be in default of its obligations hereunder without any cure period except as specified in this Section and Landlord shall have no obligation to remedy such default.

10. DAMAGE AND DESTRUCTION.

10.1. Landlord’s Obligation to Repair and Reconstruct.  If the Premises shall be damaged by fire, the elements, accident or other casualty (any of such causes being referred to herein as a “Casualty”), but the Premises shall not be thereby rendered wholly or partially untenantable, Landlord shall promptly cause such damage to be repaired. If, as the result of Casualty, the Premises shall be rendered wholly or partially untenantable, then, subject to the provisions of subsection 10.2 and provided such Casualty has not resulted from the gross negligence or willful misconduct of Tenant or Tenant’s Agents, Landlord shall cause such damage to be repaired and all Rent reserved hereunder (other than any Additional Rent due Landlord either by reason of Tenant’s failure to perform any of its obligations hereunder or by reason of Landlord’s having provided to Tenant additional services hereunder) shall be abated proportionately as to the portion of the Premises rendered untenantable or unusable for Tenant’s business during the period of such untenantability. All such repairs shall be made at the expense of Landlord, subject to Tenant’s responsibilities set forth in this Lease. Landlord shall not be liable for interruption to Tenant’s business or for damage to or replacement or repair of Tenant’s Personal Property and Alterations.

10.2. Option to Terminate Lease.  If (a) the Premises are rendered wholly untenantable, or (b) if the Premises are damaged as a result of any cause which is not covered by Landlord’s insurance, or are damaged to the extent of thirty percent (30%) or more of the gross area of the Building on the Premises, or if, for reasons beyond Landlord’s control or by virtue of the terms of any financing of the Premises, sufficient insurance proceeds (over and above any deductible or self-insured amount maintained by Landlord) are not available for the reconstruction or restoration of the Premises, or (c) if, in Landlord’s reasonable opinion, the Premises are damaged by Casualty to such an extent that the damage cannot be repaired or restored within one hundred eighty (180) days from the date of such occurrence, which determination shall be made by Landlord within forty-five (45) days from the date

 

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of the Casualty, then, in any of such events, Landlord, or in the case of (c) above, Tenant, may elect to terminate this Lease by giving notice of such election to the other party within forty-five (45) days after the occurrence of such event. If such notice is given, the rights and obligations of the parties shall cease as of the date set forth in such notice, Tenant shall immediately vacate the Premises and the Basic Rent and Additional Rent (other than any Additional Rent due Landlord either by reason of Tenant’s failure to perform any of its obligations hereunder or by reason of Landlord’s having provided to Tenant with additional services hereunder) shall be adjusted as of the date of such termination.

10.3. Damage Caused by Tenant.  In no event shall Rent abate or shall any termination by Tenant occur if damage to or destruction of the Premises is the result of either (i) a default by Tenant or (ii) the gross negligence or willful act of Tenant or Tenant’s Agents.

10.4. Damage During Last Two (2) Years of Term.  If the Building or the Premises or any portion thereof is destroyed by fire or other causes at any time during the last two (2) years of the Term or any extension thereof, then Landlord or Tenant shall have the right, at each’s respective option, to terminate this Lease by giving written notice to the other party within forty-five (45) days after the date of such destruction.

10.5. No Landlord Liability.  Unless caused by gross negligence or willful misconduct of Landlord or Landlord’s Agents, Landlord shall have no liability to Tenant for inconvenience, loss of business, or annoyance arising from any repair of any portion of the Premises. If Landlord is required by this Lease or by any lender or lessor of Landlord to repair Alterations not insured by Landlord or if Landlord undertakes to repair Alterations not insured by Landlord, Tenant shall pay to Landlord that amount of Tenant’s insurance proceeds, if any, which insures such damage as a contribution towards such repair.

10.6. Insurance Proceeds.  If Landlord or Tenant does not elect to terminate this Lease pursuant to subsection 10.2, Landlord shall, subject to the terms of any Mortgage, disburse and apply any insurance proceeds received by Landlord to the restoration and rebuilding of the Building in accordance with subsection 10.1 hereof. All insurance proceeds payable with respect to the Premises shall belong to and shall be payable to Landlord, and Tenant shall not have any interest in such proceeds. Tenant agrees to look to its own policies or property damage insurance in the event of damage to Alterations or Tenant’s Personal Property.

11. CONDEMNATION.

11.1. Termination. If the entire Premises shall be acquired or condemned by any governmental authority under its power of eminent domain for any public or quasi-public use or purpose, this Lease shall terminate as of the date of vesting or acquisition of title in the condemning authority and the rents hereunder shall be abated on that date. If less than all of the Premises as shall render the Premises untenantable should be so acquired or condemned, Landlord and Tenant shall each have the option to terminate this Lease by notice given to the other within thirty (30) days of such taking. In the event that such a notice of termination is given, this Lease shall terminate as of the date of vesting or acquisition of title in the condemning authority and the rents hereunder shall be abated on that date.

 

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If (a) neither Landlord nor Tenant shall exercise their respective options to terminate this Lease, as hereinabove set forth, or (b) some lesser portion of the Premises which does not adversely affect Tenant’s use of the Premises or its ability to conduct its business or does not give rise to a right to terminate pursuant to subsection 11.1, is taken by the condemning authority, this Lease shall continue in force and effect, but from and after the date of the vesting of title in the condemning authority, the Basic Rent payable hereunder during the unexpired portion of the Term shall be reduced in proportion to the reduction in the total area of the Premises, and any additional rent payable pursuant to the terms hereof shall be adjusted to reflect the diminution of the Premises, as the case may be.

11.2. Rights to Award. Tenant shall have no claim against Landlord arising out of the taking or condemnation, or arising out of the cancellation of this Lease, or for any portion of the amount that may be awarded as damages as a result of any taking or condemnation or for the value of any unexpired portion of the Term, and Tenant hereby assigns to Landlord all its rights, title and interest in and to any such award; provided, however, that, Tenant may assert any claim it may have against the condemning authority for compensation for Tenant’s Personal Property lost thereby as authorized pursuant to Virginia Code Section 25-46.21:1, as amended, provided such claim does not diminish the award or compensation payable to or recoverable by landlord in connection with such taking or condemnation. Landlord shall have no obligation to contest any taking or condemnation.

12. BANKRUPTCY OF TENANT OR LANDLORD.

12.1. Notwithstanding any of the other provisions of this Lease, in the event Tenant shall voluntarily or involuntarily come under the jurisdiction of the Federal Bankruptcy Code and thereafter Tenant or its trustee in bankruptcy, under the authority of and pursuant to applicable provisions thereof, shall determine to assign this Lease, Tenant agrees that (a) Tenant or its trustee will provide to Landlord sufficient information enabling it to independently determine whether Landlord will incur actual and substantial detriment by reason of such assignment and (b) “adequate assurance of future performance” under this Lease, as that term is generally defined under the Federal Bankruptcy Code, will be provided to Landlord by Tenant and its assignee as a condition of said assignment.

12.2. Notwithstanding any of the other provisions of this Lease, in the event Landlord shall voluntarily or involuntarily come under the jurisdiction of the Federal Bankruptcy Code and whether or not Landlord or its trustee in bankruptcy, under the authority of and pursuant to the applicable provisions of the Federal Bankruptcy Code, shall determine to assign or assume this Lease, Landlord agrees that Tenant shall have the right, in its sole and absolute discretion, to terminate this Lease by providing the Landlord written notice thereof. If such notice is given, the rights and obligations of the parties shall cease as of the date set forth in the notice, and Basic Rent and any additional rent, if any, shall be adjusted as of the date of such termination.

 

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13. DEFAULT PROVISIONS AND REMEDIES.

13.1. Events of Default. Each of the following shall be deemed a default (sometimes herein referred to as a “default” or an “Event of Default”) by Tenant under this Lease:

(a) failure of Tenant to pay Basic Rent, or any other sum required to be paid under the terms of this Lease, including late charges, on the date when due hereunder, which failure continues for five (5) business days after the date when due hereunder, provided, however, two times in a twelve month period, such failure shall not be an Event of Default unless such failure continues for a period of five (5) business days after Tenant has receive written notice of such failure;

(b) if Tenant fails to pay Rent on time more than five (5) times in any period of twelve (12) months, notwithstanding that such payments have been made within the applicable cure period;

(c) if Tenant permits to be done anything which creates a lien upon the Premises and fails to discharge, or bond such lien or post such security with Landlord as is required by Section 8;

(d) if Tenant violates the provisions of Section 19 by attempting to make an unpermitted assignment or sublease;

(e) if Tenant fails to maintain in force all policies of insurance required by this Lease and any such failure shall continue for more than ten (10) business days after Landlord gives Tenant notice of such failure;

(f) if any petition is filed by or against Tenant under any present or future section or chapter of the Bankruptcy Code, or under any similar law or statute of the United States or any state thereof (which, in the case of an involuntary proceeding, is not permanently discharged, dismissed, stayed, or vacated, as the case may be, within sixty (60) days of commencement), or if any order for relief shall be entered against Tenant in any such proceedings;

(g) if Tenant becomes insolvent or makes a transfer in fraud of creditors or makes an assignment for the benefit of creditors;

(h) if a receiver, custodian, or trustee is appointed for the Premises or for all or substantially all of the assets of Tenant, which appointment is not vacated within sixty (60) days following the date of such appointment;

(i) the cessation of Tenant’s business in the Premises for a period of thirty (30) days; and/or

(j) failure by Tenant to perform or observe any other term, covenant, agreement or condition of this Lease, on the part of Tenant to be performed, for a period of thirty (30) days after written notice thereof from the Landlord, unless such performance shall reasonably require a longer period, in which case Tenant shall not be deemed in default if Tenant commences