Exhibit 10.20
Lease
Agreement
THIS LEASE AGREEMENT (this “Lease”)
is made and entered into on this 17th day of December, 2004, by and
between Red Rock Partners, LLC, a Kentucky limited liability
company whose address is 2718 Uhls Road, Franklin Kentucky 42134,
hereinafter referred to as “LESSOR”, and CWI, INC., a
Kentucky corporation, hereinafter referred as “LESSEE”
whose address is 650 Three Springs Road, Bowling Green, KY
42104.
Witnesseth:
WHERAS, the LESSOR is the owner of certain real property
(hereinafter sometimes referred to as the “Real
Property”) located at the intersection Page Drive and Highway
100, Franklin, Simpson County, Kentucky, more particularly
described in Exhibit “A” which is attached
hereto and made a part hereof by reference, and all improvements
located on the Real Property, including, without limitation, the
building (the “Building”) outlined on the site plan
attached hereto as Exhibit “A-1” (the Real
Property, the Building and all other improvements now or hereafter
existing on the Real Property are sometimes referred to herein,
collectively, as the “Property”);
WHERAS, the LESSOR proposes to complete
renovations to the Property by making certain improvements to the
Property and the Building so that it will be suitable by LESSEE for
the uses contemplated by this Lease all in accordance with the
specifications set forth in Exhibit “B” attached hereto
and made a part hereof by reference (hereinafter the
“LESSOR’S Work”); and
WHERAS, the LESSOR desires to lease a portion of
the Property during the Preliminary Term (as defined below) and the
entire Property during the New Term (as defined below) and LESSEE
desires to lease a portion of the Property during the Preliminary
Term and the entire Property during the New Term pursuant to the
terms and conditions of this Lease.
NOW, THEREFORE, in consideration of the rents to
be paid by the LESSEE to the LESSOR as hereinafter provided, and
the covenants and agreements hereinafter set forth, to be kept and
performed by both parties hereto, the LESSOR does hereby let,
demise and lease the Premises (as defined below) unto the LESSEE
for the Term and LESSOR hereby grants to LESSEE, its customers,
guests, invitees, employees, agents and licensees all easements,
rights and privileges appurtenant thereto, under the following
terms and conditions:
1.
PREMISES. During the Preliminary Term the
“Premises” (herein so called) shall consist of that
portion of the Real Property identified on the Site Plan as the
“Initial Premises” and that portion of the Building
consisting of approximately 175,000 square feet and identified on
the floor plan (the “Floor Plan”) attached hereto as
Exhibit “A-2” as the Initial
Premises”. Effective as of the date (the “New
Term Commencement Date”) which is the later to occur of (a)
February 1, 2008 or (b) the date upon which LESSOR delivers the
Additional Premises to LESSEE in the condition required herein and
continuing through the remainder of the Term, the Premises shall
also consist of that portion of the Real Property identified on the
Site Plan as the “Additional Premises” and that portion
of the Building identified on the Floor Plan as the
“Additional Premises”. The portion of the
Property identified on the Site Plan and the Floor Plan as the
Initial Premises and the Additional Premises shall, collectively,
constitute the entire Property. LESSOR represents and
warrants that the Building consists of approximately 250,000 square
feet and the Real Property consists of approximately 33
acres.
2.
LEASE TERM.
The primary term (the
“Primary Term”) of this Lease (a) shall commence on the
date (the “Commencement Date”) which is the later to
occur of (i) February 15, 2005 or (ii) the date upon which LESSOR
substantially completes LESSOR’S Work and delivers the
Premises to
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LESSEE in substantially the
condition required herein and (b) shall end at midnight on the last
day of the twentieth (20th) Lease Year (as defined below) following
the Commencement Date. The Primary Term shall consist of a
preliminary term (the “Preliminary Term”) commencing on
the Commencement Date and ending at midnight on the last day of the
third (3 rd ) Lease Year and a new term (the “New
Term”) commencing on the New Term Commencement Date and
ending upon the expiration of the Primary Term.
Notwithstanding anything to the contrary contained herein, (a) in
the event the Commencement Date has not occurred by February 15,
2005, Lessee shall receive two (2) days free rent for each day
after February 15, 2005 until the Commencement Date occurs and (b)
in the event the Commencement Date has not occurred by March 1,
2005, LESSEE shall have the right to extend the Commencement
Date to November 1, 2005, in which event the free rent in (a )
above shall be limited to a total of twenty-six (26) days. In
the event LESSEE accepts possession of the Premises prior to
February 15, 2005, the Commencement Date shall be the date upon
which the LESSEE accepts possession. For purposes of this
Lease, a “ Lease Year ” shall be defined as
those consecutive twelve (12) month periods during the Primary Term
or any Extension Term ( as defined below), with the first Lease
Year commencing on the Commencement Date and each subsequent Lease
Year commencing on the annual anniversary thereof. Upon the
establishment of the Commencement Date, LESSOR and LESSEE shall
execute a form of Commencement Agreement acknowledging and agreeing
to the Commencement Date.
3.
EXTENSIONS
. LESSEE shall have the option
of extending this Lease for two (2) additional terms (hereinafter,
collectively referred to as the “ Extension Terms
”, or individually as an “ Extension Term
”) of five (5) years each on the same terms and conditions as
provided herein. Notice of the exercise of such option shall
be delivered by LESSEE to LESSOR, in writing, not later than ninety
(90) days prior to expiration of the Primary Term or the then
expiring Extension Term, as applicable. The Primary Term and
the Extension Terms are sometimes referred to herein, collectively,
as the “Term”.
4.
CONSTRUCTION OF LESSOR’S
WORK. LESSOR shall
complete, at LESSOR’S sole cost and expense, LESSOR’S
WORK according to plans and specifications to be prepared by
LESSOR, at LESSOR’S expense, and approved by LESSEE, such
approval not to be unreasonably withheld, conditioned or delayed
(the “Plans”). The Plans shall be prepared in
accordance with the scope of work attached hereto as Exhibit
“B” . LESSOR’S Work shall be completed
in accordance with the Plans and the scope of work attached hereto
as Exhibit “B” in a good and workmanlike manner
and LESSOR shall deliver the Premises to Tenant in substantially
the condition required herein on or before the Commencement
Date. LESSOR shall utilize first quality new materials in
connection with LESSOR’S Work and complete LESSOR’S
Work in compliance with all applicable laws, ordinances, rules and
statutes. The LESSEE from time to time, shall have the right,
but not the obligation to inspect the progress of the construction
of LESSOR’S Work. LESSOR’S Work shall be deemed
substantially completed when, notwithstanding LESSEE’S
possession of the Premises, that (a) LESSOR’S Work has
been completed with the exception of Punchlist Items (as defined
below) and (b) a Certificate of Occupancy, or its equivalent,
has been unconditionally issued for LESSEE’S occupancy of the
Premises; provided, however, in the event the portion of
LESSOR’S Work consisting of asphalt paving cannot be
completed prior to the Commencement Date as the result of adverse
weather conditions, for purposes hereof, LESSOR’S Work shall
be deemed substantially completed so long as the area to be paved
has been graded and graveled for parking, with the asphalt paving
to be completed as soon as the weather permits. As used
herein, “Punchlist Items” shall mean minor items which
can be completed by LESSOR following the Commencement Date without
interference with LESSEE’S business operations or ability to
complete necessary improvements necessary for LESSEE’S
business operations, such as, without limiting the generality
thereof, finish work and painting that would not interfere with
LESSOR’S ability to operate its business in the
Premises.
LESSOR hereby consents to LESSEE
constructing all work necessary for LESSEE’S business
operations, including, without limitation, installing racking and
fixtures and wiring and cabling for computer and phone systems
(collectively, “LESSEE’S WORK”). LESSEE
shall have access to the Premises following the full execution of
this Lease and prior to the Commencement Date to
complete
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LESSEE’S Work and prepare the
Premises for the operation of LESSEE’S business.
Notwithstanding anything to the contrary, LESSEE’S access to
the Premises prior to the date upon which LESSOR completes
LESSOR’S Work for the purpose of completing LESSEE’S
Work shall not be deemed an acceptance by LESSEE of possession of
the Premises, provided LESSEE has not begun business
operations. LESSEE shall be deemed to have begun business
operations when LESSEE commences shipping and distributing products
from the Premises.
5.
IMPROVEMENT ALLOWANCE.
LESSOR shall pay to LESSEE an
“Improvement Allowance” (herein so called) in an amount
equal to the amount by which Five Hundred Twenty-Five Thousand and
No/100 Dollars ($525,000) exceeds the actual costs incurred by
LESSOR in completing LESSOR’S Work; provided, however, for
purposes hereof the cost incurred by LESSOR in completing
LESSOR’S WORK shall in no event be deemed to exceed the
Budget Amount (as defined below) and no individual component of
LESSOR’S Work shall be deemed to exceed the Budget Amount
therefor. The Improvement Allowance, less a reserve for
the anticipated cost for completing the Punchlist Items, shall be
paid by LESSOR to LESSEE within fifteen (15) days following
LESSEE’S delivery to LESSOR of the final list of Punchlist
Items. Within fifteen (15) days following completion of the
Punchlist Items, LESSOR shall pay to LESSEE the unused portion, if
any, of the reserve for Punchlist Items. As used herein, the
“Budget Amount” shall mean the amount set forth on
Exhibit “B” as the amount budgeted for the
completion of LESSOR’S WORK and the amount budgeted for each
individual component of LESSOR’S Work; provided, however, in
the event LESSEE requests any changes to the scope of
LESSOR’S Work set forth on Exhibit “B” ,
LESSOR and LESSEE shall mutually agree to a revised budgeted amount
(the “New Budget Amount”) based upon the additions or
deletions, as applicable, requested by LESSEE to the scope of
LESSOR’S Work. LESSEE shall reimburse LESSOR for the
amount of the New Budget Amount which exceeds Five Hundred
Twenty-Five Thousand and No/100 Dollars ($525,000). Following
the completion of LESSOR’S WORK, LESSOR shall provide to
LESSEE copies of all invoices for LESSOR’S Work evidencing
the total cost of LESSOR’S Work. In addition to the
Improvement Allowance, LESSOR acknowledges that LESSEE is
negotiating with certain governmental and quasi-governmental
authorities for certain incentives (the “Incentives”)
for relocating LESSEE’S distribution business to the City of
Franklin, Simpson County, Kentucky. A portion of the
Incentives may be paid in the form of a reimbursement for certain
of the costs incurred by LESSOR in completing certain portions of
LESSOR’S Work. LESSOR acknowledges and agrees that all
such Incentives shall belong to LESSEE and in the event any of the
Incentives are paid to LESSOR, such Incentives shall immediately be
paid by LESSOR to LESSEE. The Incentives shall be in addition
to the Improvement Allowance payable by LESSOR to LESSEE hereunder
and in no event shall the Incentives reduce the amount of the
Improvement Allowance payable by LESSOR to LESSEE. If LESSOR
fails to pay the Improvement Allowance or any portion of the
Incentives paid to LESSOR as set forth above, then the unpaid
portion thereof shall accrue interest at the Default Rate (as
defined below) until paid and, in addition to all other remedies
available to LESSEE hereunder as the result of a default by LESSOR,
at LESSEE’s option, LESSEE may offset the unpaid portion
thereof, and all interest accrued thereon, against the rent payable
hereunder. As used herein, the “Default Rate”
shall mean the rate of interest equal to the lesser of (i) the
maximum rate permitted by law or (ii) fifteen percent (15%)
per anum.
6.
LEASE PRICE.
Commencing on the Rent
Commencement Date (as defined below) and continuing during the
Primary Term of this Lease, the LESSEE shall pay to the LESSOR rent
for the use and occupancy of the Premises in accordance with the
attached Exhibit “C” (hereafter the “Base Rent).
The Base Rent shall be based upon a rate equal to $2.75 per square
foot contained in the Building portion of the Premises, subject to
increases as set forth herein; provided, however, for purposes
hereof the Building portion of the Premises shall be deemed not to
exceed 175,000 square feet during the Preliminary Term or 250,000
square feet during the New Term. As used herein, the Rent
Commencement Date shall be the date which is the earlier to occur
of (a) the Commencement Date or (b) the date upon which LESSEE
accepts possession of the Premises. The rent shall be paid to
LESSOR at the address set forth herein, in advance, on a monthly
basis. In addition to the monthly Base Rent payment, commencing on
the Rent Commencement Date, the LESSEE shall be
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responsible for maintaining the
Premises, as set forth herein, paying premiums for insurance
required to be maintained by LESSEE hereunder, paying real estate
taxes assessed against the Premises, as set forth herein, and shall
pay all sales and uses taxes levied or assessed against all Rent
payments due under this lease (if any) simultaneously with each
payment required hereunder.. Commencing with the eleventh (11
th ) Lease Year, the Base Rent shall increase by an
amount equal to the Base Rent for the tenth (10 th )
Lease Year multiplied by the percentage increase in the CPI (as
defined below) over the preceding five year period, with such five
year period commencing with the month which is three months prior
to the end of the fifth (5 th ) Lease Year and ending
with the month which is three months prior to the end of the tenth
(10 th ) Lease Year; provided, however any such increase
shall not exceed ten percent (10%). Commencing with the
sixteenth (16 th ) Lease Year, the Base Rent shall
increase by an amount equal to the Base Rent for the fifteenth (15
th ) Lease Year multiplied by the percentage increase in
the CPI over the preceding five year period, with such five year
period commencing with the month which is three months prior to the
end of the tenth (10 th ) Lease Year and ending with the
month which is three months prior to the end of the fifteenth (15
th ) Lease Year; provided, however any such increase
shall not exceed ten percent (10%). In the event LESSEE
exercises a right to extend the Term for an Extension Term, the
Base Rent for the applicable Extension Term shall be equal to the
Base Rent for the last year of the immediately preceding Primary
Term or Extension Term, as applicable, multiplied by the
percentage increase in the CPI over the preceding five year period,
with such five year period commencing with the month which is
sixty-three months prior to commencement of the applicable
Extension Term and ending with the month which is three months
prior to the commencement of the applicable Extension Term;
provided, however, any such increase shall not exceed ten percent
(10%) . As used herein, the “CPI” shall mean the
“All Urban Consumer Price Index — United States City
average” (1987 = 100) published by the United States
Department of Labor (the “Department”). In the
event the Department ceases publishing the CPI, LESSOR and LESSEE
shall mutually agree upon a comparable index.
7.
CONDITIONS OF
PREMISES. LESSEE
shall have a period of thirty (30) days from the completion of
LESSOR’S Work to provide LESSOR with a list of any Punchlist
Items. LESSOR shall be obligated within a reasonable amount
of time not to exceed thirty (30) days to cure the Punchlist
Items. If LESSOR fails to prosecute such repairs diligently
and continuously until completion, then LESSEE, after providing
five (5) days written notice to Lessor of its intent to do so, may
prosecute such repairs itself and apply the cost of same against
the next rent obligations due hereunder. This thirty (30) day
time period set forth above shall not apply to latent
defects. LESSOR warrants that, upon completion of
LESSOR’S Work and the delivery of the Premises to LESSEE, the
Premises will meet with all laws, codes, regulations and ordinances
in effect at the time the Premises is delivered by LESSOR to
LESSEE. LESSOR represents and warrants that the Building and
LESSOR’s Work have been constructed and completed in a first
class manner with good workmanship and guarantees the construction
thereof and materials used therein against defects for a period of
twelve (12) months following the Commencement Date, provided that
such time limit shall not apply to latent defects. After
expiration of said twelve (12) month warranty period, LESSOR shall
assign to LESSEE any and all warranties and guaranties of third
parties held by LESSOR with respect to any items LESSEE is
obligated to repair or maintain hereunder, except in the event same
are un-assignable, in which event LESSOR shall enforce same for the
benefit of LESSEE.
8.
ADDITIONAL PREMISES.
On or before February 1,
2008, LESSOR shall deliver to LESSEE the Additional Premises in the
condition LESSOR is obligated to deliver the Premises to LESSEE
hereunder, with any demising walls, partitions or fencing
separating the Initial Premises from the Additional Premises
removed. All representations and warranties contained herein
with respect to the Premises shall be deemed restated and
reaffirmed with respect to the Additional Premises as of the New
Term Commencement Date. Notwithstanding anything to the
contrary contained herein, in no event shall LESSEE have any
obligation to pay rent or any other amounts with respect to the
Additional Premises prior to the earlier of: (i) the date LESSEE
accepts possession of the Additional
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Premises; or (ii) the date the
Additional Premises is delivered to LESSEE in the condition
required herein.
9.
MAINTENCE AND REPAIR
OBLIGATIONS.
(a) Except for the repair and
maintenance obligations of LESSOR hereunder, including, without
limitation, LESSOR’s obligations set forth below and
LESSOR’s obligation in connection with a casualty or
condemnation, the LESSEE shall have the absolute responsibility for
maintaining the Premises in good condition and repair during the
Term, which shall include all necessary repairs and replacements,
whether covered by insurance or not. Notwithstanding the
foregoing, LESSEE’S obligation with respect to the Retention
Pond (as defined below) shall be limited to normal and routine
maintenance of the Retention Pond.
(b) The LESSEE shall maintain
the Premises in a good state of repair and shall upon expiration of
the Term return the Premises to the LESSOR in as good a condition
as when received, reasonable and ordinary wear and tear and damage
due to casualty or condemnation excepted. The LESSEE shall promptly
remove debris of all kinds and keep the Premises in a clean and
sanitary condition.
(c) LESSOR covenants and agrees, at its expense without
reimbursement or contribution by LESSEE, to keep, maintain and
repair or replace, if necessary, the structural systems of the
Building, including, without limitation, the roof, roof membrane
roof covering, load-bearing walls and floor slabs and masonry walls
and foundations and (ii) make any repairs or improvements to the
drainage and retention pond constructed on the Property
(collectively, the “Retention Pond”) necessary to cause
the Retention Pond to comply with any applicable governmental
laws, rules regulations or ordinances or any drainage or retention
plans or agreements applicable to the Property.
Notwithstanding the foregoing, subject to the waiver of subrogation
provisions contained herein, LESSOR shall not be responsible for
any repairs necessary as the result of the negligence of LESSEE
hereunder. If such repairs are not completed within thirty
(30) days after LESSOR has received notice from LESSEE of such
state of disrepair or if such repairs cannot reasonably be
completed within such thirty (30) day period and LESSOR shall fail
to commence such repairs within ten (10) days after notice and
proceed diligently thereafter then LESSEE may, without waiving any
rights or remedies as the result of any default by LESSOR,
prosecute such repairs itself, and apply the cost of such repairs
against the next maturing monthly installment or installments of
Base Rent due hereunder. Notwithstanding the foregoing, in
the case of an emergency (such as, without limitation, a leaky
roof), in the event LESSOR is unable to immediately prosecute
necessary repairs, LESSEE shall have the right to immediately
prosecute any and all necessary repairs and shall deliver
contemporaneous notification to LESSOR of the emergency and related
repairs, and offset the cost of such repairs against the next
maturing monthly installment or installments of Base Rent due
hereunder; provided further that if contemporaneous notice is not
practicable, then LESSEE shall provide such notice as soon
thereafter as reasonably practicable. Notwithstanding the
obligations of LESSOR provided in this paragraph, LESSEE’s
remedy in the event of damage to its personal property shall be
limited to LESSEE’s separate insurance coverage.
10.
INSURANCE OBLIGATIONS.
During the Term of this Lease
and for any further time that the LESSEE shall hold the Premises
following the expiration of the Term, the LESSEE shall obtain at
its expense, subject to contribution from LESSOR as set forth
below, the following types and amounts of insurance:
(a) The LESSEE shall keep the
Premises, including all alterations and additions thereto, insured
against loss or damage by fire or other peril, with all standard
extended coverage that may be required by any first mortgagee, with
a reputable and solvent insurance carrier. The insurance value of
the Premises shall be in the amount of EIGHT MILLION
DOLLARS
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($8,000,000.00) initially, and shall
be reviewed and adjusted every three years thereafter by the LESSEE
and the LESSOR. LESSEE shall have unrestricted access to all
parts of the Building as well as to any systems (and contracted
vendors) that support the operations of the Building during the
Term. During the Preliminary Term and any period prior to the date
LESSOR delivers the Additional Premises to LESSEE in the condition
required herein, (a) LESSOR shall pay to LESSEE thirty percent
(30%) of the premiums paid by LESSEE for the insurance set forth
above, (b) LESSOR shall be responsible for any increases in the
premiums for the Property resulting from the nature of use for the
Additional Premises and (c) the security or fire protections
systems for the Additional Premises shall not be modified or
disconnected without the prior written consent of LESSEE.
Such amount shall
