LEASE
AGREEMENT
THIS LEASE AGREEMENT , made this _____ day of July, 2004, by
and between THE MILLER REALTY GROUP, LLP, a Limited Liability
Partnership with a place of business at 599 Avenue D, Williston,
County of Chittenden, State of Vermont (hereinafter called
"Landlord"), and THE VERMONT TEDDY BEAR CO., INC., a New York
Corporation with a place of business in Shelburne, County of
Chittenden and State of Vermont (hereinafter called "Tenant").
W I T N E S S E T
H:
SECTION 1. Demise, Description of Premises.
Landlord has acquired certain development rights pursuant to the
Declaration of Shelburne South Commercial Park Condominium, dated
July 17, 2000, and recorded in Volume 241, Pages 37-60 of the
Shelburne Town Land Records (the "Declaration"), that will allow
Landlord to develop, and add to the Condominium as Unit #2A, a
building bearing a footprint of 120,800 square feet and related
improvements (together the "Facility"), depicted on plans entitled
"The Miller Realty Group, LLP VERMONT TEDDY BEAR Assembly
& Shipping Facility South Park Road, Shelburne, VT OVERALL
SITE PLAN", Sheet No. 1, prepared by Lamoureux & Dickinson
Consulting Engineers, Inc., dated April 5, 2004 (Exhibit A hereof)
(hereinafter, the "Premises"). Landlord does hereby agree to
construct the Facility and rent and lease the Premises unto Tenant
upon completion thereof as hereinafter provided. Tenant does hereby
agree to hire and rent the Premises from Landlord, upon the terms
and conditions set forth in this Agreement. The Facility shall be
constructed by the Landlord in accordance with the plans and
specifications attached to this Lease Agreement as Exhibit B.
SECTION 2. Initial Term of Lease .
Said Premises are hereby leased to Tenant, subject to all of the
terms and conditions contained herein, for an initial term of ten
(10) years commencing on the date that Landlord provides to Tenant
(i) a certificate that the Facility is substantially complete and
suitable for occupancy by Tenant and (ii) a Certificate of
Occupancy from the Town of Shelburne (the "Commencement Date")
unless said term be sooner terminated as hereinafter provided (the
"Initial Term"). Landlord shall deliver the Facility substantially
complete and suitable for occupancy by Tenant and with a
Certificate of Occupancy no later than October 1, 2004.
SECTION 3. Base Rent; Adjustments .
(a)
Tenant agrees to pay the Landlord, without demand or set off, rent
as follows:
(1) Seven Hundred Sixty Seven Thousand Five Hundred Sixty Eight
Dollars and 96/100 ($767,568.96) per year, payable in equal monthly
installments of Sixty Three Thousand Nine Hundred Sixty Four
Dollars and 08/100 ($63,964.08) on the first day of each month, in
advance, commencing on October 1, 2004, and thereafter each month
through the Lease Term. In the event that Landlord shall fail to
delivery the facility substantially complete by October 1, 2004 as
described in Section 2 hereof, monthly rent shall abate on a per
diem basis until the Landlord has complied with Section 2
hereof.
(b) The Base Rent set forth in Section 3(a)(1) above shall be
increased as of October 1, 2005, and annually on every October 1
thereafter during the term hereof by an amount equal to the
percentage increase in the CPI-U as defined herein over the Base
Rent for the preceding twelve-month period, but in no event shall
such increase exceed five percent (5%) of the Base Rent for the
preceding twelve-month period. For these purposes the CPI-U is
defined to be the "Consumer Price Index - All Urban Consumers -
Northeast Region - Population Size Class C (50,000 - 500,000), All
Items (1982 - 1984 equals 100 hereinafter called the 'Index')",
published by the Bureau of Labor Statistics, United States
Department of Labor. In the event that the Department of Labor
ceases to publish the CPI-U Index during the Initial Term or any
renewal thereof, the Landlord shall select an alternative index and
shall so notify Tenant. Said alternative index shall use comparable
statistics on the purchasing power of the consumer dollar,
including the same or comparable region and population.
(c) Interest shall accrue at the rate of fifteen percent (15%) per
annum on any Rent, real estate taxes, association fees, or other
charges payable to Landlord not paid within twenty (20) days from
the date due.
SECTION 4. Rent Net to Landlord .
It is the intention of the parties that the rent paid by Tenant to
Landlord shall be absolutely net to Landlord and the terms and
provisions of this Lease shall be interpreted and construed to that
effect. All costs associated with taxes, utilities, operation and
maintenance of the premises shall be separately assessed, metered
or apportioned to the Tenant as follows:
(a)
Taxes : Tenant shall pay all real and personal property
taxes and other municipal charges levied against the Premises.
(b)
Insurance : Tenant shall pay the cost of all insurance to be
furnished by Tenant pursuant to Section 7 hereof;
(c)
Utilities : Tenant shall pay all costs of utility services
including without limitation charges for electricity, gas,
telephone.
(d) Association Fees : Tenant shall pay the cost of any fee
assessed by an Association to which the Premises are a part.
(e) Maintenance and Repairs : Tenant shall provide for
maintenance and repairs, at its own cost and expense, pursuant to
Section 9(b) hereof.
If any governmental authority imposes, assesses or levies a gross
receipts tax on rent or any other tax upon Landlord as a substitute
in whole or in part for real estate tax or assessment, the
substitute tax shall be deemed to be a real property tax and shall
be deemed to have been levied upon the Premises. Real estate taxes
shall not, however, include income taxes except for that portion of
the income tax which is the substitute for the real estate taxes
which were formerly collected to support local public elementary
and secondary education.
Tenant or its designee shall have the right to contest and review
all such taxes by legal proceedings, or in such other manner as it
may deem suitable (which, if instituted, Tenant or its designee
shall conduct promptly at its own cost and expenses, and free of
any expense to Landlord and, if necessary, in the name of and with
the cooperation of Landlord and Landlord shall execute all
documents necessary to accomplish the foregoing).
SECTION 5. Use of the Property.
Tenant shall use the Premises for office/manufacturing/warehousing
and for lawful purposes related thereto.
If the Tenant changes
it initial use of the Premises in a manner that necessitates
application for zoning or planning approval or compliance with
other municipal or state regulations, or installation of additional
or new fixtures, systems or improvements at any time during the
term of this Lease or any renewals thereof, Tenant will prosecute
and bear the cost of such applications, installation and/or changes
necessary to obtain compliance and approval and Landlord will
cooperate and join in such proceedings as owner thereof.
The Premises shall not be used for any illegal purpose, nor in
violation of any valid regulation of any governmental body, nor in
any manner to create nuisance or trespass, nor in any manner to
invalidate the insurance.
SECTION 6. Representations and Warranties .
Each signatory to this Lease warrants and represents that he or she
has been duly authorized to execute this Lease on behalf of the
party, that all required notices, votes and actions were taken by
the party to enter into this Lease, and that this Lease is a valid
and binding obligation of the party.
SECTION 7. Insurance .
The Tenant covenants to provide on or before the commencement of
the initial term of this Lease Agreement and to keep enforced
during the initial term or any renewal term:
(a)
Pay for and maintain a policy or policies of general liability
insurance issued by companies licensed in Vermont, indemnifying
Landlord, Tenant, mortgagee or mortgage guarantor as their
interests may appear, against all claims or demands for personal
injuries to or death of any person, and damage to or destruction or
loss of property, which may or may be claimed to have occurred on
the Premises or in the vicinity of same, such policies to be in
such amounts as Landlord may from time to time reasonably request
based on coverage maintained on comparable properties in Vermont,
but in any event, in an amount not less than $2,000,000.00 for
injury to or death of any one or more persons in any single
accident, and not less than $500,000.00 for damage to or
destruction of property. Tenant shall deliver a certificate
evidencing that such insurance coverage is in full force and effect
upon demand by Landlord. Said policy or policies shall provide that
there will be no termination without at least thirty (30) days'
advance written notice to Landlord of the intent to terminate.
Should Tenant's use and occupancy of the Premises make it prudent
in the Landlord's reasonable judgment to require special insurance
coverage, Landlord may notify Tenant of the additional insurance
requirements and Tenant shall promptly obtain such policies.
(b) Insure the Premises for loss, damage or destruction by fire
and other casualty, including fire, vandalism, malicious mischief,
flood, sprinkler leakage and all other matters covered by a
standard extended coverage endorsement for one hundred percent
(100%) of full insurable replacements costs.
(c)
To the extent permitted by such policies and without voiding the
insurance provided thereby, the Landlord and Tenant hereby waive
their rights of subrogation. This paragraph shall not, however, in
any manner limit the liability of the Tenant or the Landlord for
damage to property or persons as a result of the negligence on the
part of either party. Tenant shall furnish to Landlord upon request
the policy or policies required herein.
SECTION 8. Option to Extend .
So long as Tenant is not in default hereunder Tenant shall have the
option to extend the Initial Term for three (3) additional
five-year terms under all the same conditions as set forth herein
with the exception of the amount of the Base Rent as described in
Section 3 hereof. In the event that the Tenant intends to exercise
the option granted hereunder, the Tenant shall give the Landlord
written notice of Tenant's intent to exercise said option to extend
the term of the Lease as provided in Section 3 hereof at least one
hundred twenty (120) days but no more than one hundred eighty (180)
days prior to the expiration of the then current term. The Base
Rent for each extension term shall be that amount then due at the
expiration of a term increased by an amount equal to the percentage
increase in the CPI-U defined in 3(b) above for the preceding
twelve-month period, but in no event shall such increase exceed
five percent (5%) for the preceding twelve-month period.
SECTION 9. Repairs, Maintenance and
Alteration.
(a)
Landlord's Obligations .
Landlord covenants and agrees, during the Initial Term and any
extension, if this Lease is extended, to perform necessary repairs
and replacement to the roof, building foundation and structural
walls of buildings which comprise the Premises or in which the
Premises are located at its cost and expense, to the quality and
class at least equal to the original work properly executed.
Landlord shall not be required to make any such repairs where same
were caused or occasioned by an act or omission or negligence of
Tenant, any sub-Tenant or their employees, agents, invitees,
licensees, visitors or contractors. Except for Landlord's
negligence and/or intentional acts or those of its agents,
servants, assigns, invitees or employees in the performance of
Landlord's obligations as set forth in this Section, Landlord shall
not be liable for interruption in or cessation of any service
rendered to the Premises due to any cause beyond the Landlord's
control including, but not limited to: any accident; the making of
repairs, alterations, or improvements; labor difficulties; fuel and
electric supplies or shortages.
(b)
Tenant's Obligations .
Except for maintenance and repair to be performed by Landlord
pursuant to Section 9(a) hereof, Tenant shall, at its own cost and
expense:
(1) keep and maintain in good order, condition and repair, the
Premises, and each and every part thereof;
(2) Tenant shall make all repairs and replacements to the Premises
made necessary as a result of its negligence and shall make all
non-structural repairs and replacements to the Premises that are
reasonably required to keep and maintain the Premises in good order
and repair. Tenants shall perform or cause to be performed, regular
periodic and preventive maintenance on all heating, air
conditioning, plumbing and similar systems located within the
Premises.
(3) Tenant shall not install, operate or maintain any electrical
equipment which will overload the electrical system, or any part
thereof, beyond its reasonable capacity for safe and proper
operation as determined by the Landlord, or which does not bear
underwriter's approval; Tenant shall not perform, or permit to be
performed, any act or carry on any practice which may damage, mar
or deface the Premises.
(4) Tenant shall not store materials or equipment outside the
buildings on the Premises if such outside storage is prohibited by
applicable permits.
(5) Tenant shall place all trash in receptacles in areas designated
by Landlord and provide for removal of same.
(6) Tenant shall not use or occupy the Premises in a manner which
would unreasonably disturb other tenants or adjoining property
owners.
Notwithstanding anything to the contrary contained in this
subsection (b), Tenant shall not be required to perform any repair
or maintenance covered by any warranty received by Landlord from
its contractors or suppliers unless and until Landlord shall have
assigned to Tenant its warrantee rights with respect to the
required repair or maintenance. Landlord shall cooperate with
Tenant in pursuing any warranty claims that Landlord or Tenant
might have against Landlord's contractors or suppliers.
Upon the default of Tenant in making such repairs and replacements,
the Landlord may, but shall not be required to, make such repairs
and replacements for the Tenant's account and the expenses thereof
shall be collectable against Tenant as additional rent. If the
Landlord desires to make any such repairs and replacements, the
Landlord shall obtain the prior consent of the Tenant before making
such repairs and replacements, unless an emergency exists that
makes Tenant's prior consent impracticable.
SECTION 10. Force Majeure.
During the Lease Term, Landlord or Tenant shall not be required to
perform any term, condition, or covenant in this Lease so long as
such performance is delayed or prevented by force majeure, which
shall mean acts of God, epidemics, cyclones, floods, drought, or by
reason of war, declared or undeclared revolution, civil commotion
or strife, acts of public enemies, blockade or embargo, or by
reason of any new law, proclamation, regulation, ordinance or
demand by any government authority, and any other cause not
reasonably within the control of Landlord or Tenant and which, by
the exercise of due diligence, Landlord or Tenant is unable, wholly
or in part, to prevent or overcome.
SECTION 11. Reserved Access Rights of Landlord
.
Landlord reserves the right to enter the Premises during Tenant's
regular business hours to make reasonable inspections, to make such
repairs, alterations or additions as may be required or permitted
under the provisions of this Lease; to exhibit reasonably the
Premises to prospective purchasers or to perform any act related to
the safety, protection or preservation of the Premises; and during
the three month period prior to the end of the leased term, for the
purposes of exhibiting reasonably the Premises to prospective
Tenants. Landlord shall exercise these reserved rights of access in
a manner that minimizes the disruption of Tenant's business
operations.
SECTION 12. Quiet Enjoyment.
Landlord covenants that the Tenant upon paying the rent and
complying with the provisions of this Lease, shall peaceably and
quietly have, hold and enjoy the Premises for the term of this
Lease.
SECTION 13. Alterations, Improvements, and Additions
.
No alterations, improvements or additions to the Premises shall be
made by Tenant without the prior written consent of Landlord which
shall not be unreasonably withheld or delayed. All fixtures
installed in the Premises by Tenant shall automatically become the
property of Landlord and shall not be removed upon the expiration
or termination of this Lease; provided, however, that Tenant shall
be entitled to remove the following from the Premises, which shall
not be considered fixtures and shall remain at all times the
personal property of Tenant: all personal property and all trade
fixtures, machinery, office, manufacturing and warehouse equipment,
racks and shelving.
SECTION 14. Hazardous Materials .
(a) Tenant shall not use, transport, store, dispose of or in any
manner deal with hazardous materials on the Premises or any
adjacent lands and premises of Landlord (collectively the
"Property"), except in compliance with all applicable federal,
state and local laws, ordinances, rules and regulations. The term
"hazardous materials" as used in this Lease shall include, without
limitation, gasoline, petroleum products, explosives, radioactive
materials, or any other substances or materials defined as a
hazardous or toxic substance or material by any federal, state or
local law, ordinance, rule or regulation.
(b) Except as provided in Section 14(c), Tenant unconditionally and
irrevocably indemnifies and agrees to defend and hold harmless
Landlord and its officers, employees, agents, contractors and those
claiming by, through or under Landlord, from and against all loss,
cost and expense (including attorneys' fees) of whatever nature
suffered or incurred by Landlord on account of the existence at or
on the Property, or the release or discharge at, on, from or to the
Property, during the Lease Term, of any hazardous material,
including any claims, costs, losses, liabilities and expenses
arising from the violation (or claimed violation) of any law, rule,
regulation or ordinance or t
