Lease Agreement

LEASE AGREEMENT


THIS LEASE AGREEMENT is made as of the 2nd day of May, 1993, by and between INTERSTATE DEVELOPMENT COMPANY, a North Carolina corporation with its principal offices in Statesville, North Carolina, hereinafter called "Landlord", and JR TOBACCO OF AMERICA, INC., a New Jersey corporation with its principal offices in Selma, North Carolina, hereinafter called "Tenant";


W I T N E S S E T H:


The parties hereto agree for themselves, their successors and assigns, as follows:


1. Basic Lease Provisions. The following terms, whenever used in this Lease with the first letter of each word capitalized, shall have only the meanings set forth in this Paragraph, unless those meanings are expressly modified, limited or expanded elsewhere in this Lease:


(a) Demised Premises: Space outlined in red on Exhibit A, containing a total floor area of approximately fifty-three thousand eight hundred sixteen (53,816) square feet, as may be adjusted pursuant to Paragraph 2.


(b) Shopping Center: That land owned by Landlord on which the Demised Premises are located, which is outlined in green on Exhibit A and described on Exhibit B.


(c) Lease Term: Eleven (11) full Lease Years, plus the period from delivery of possession of the Demised Premises until the Rent Commencement Date, together with one (1) option to extend the Lease Term for a period of ten (10) years.


(d) Lease Year: The first Lease Year shall be the period commencing on the Rent Commencement Date and terminating on the first December 31 that is at least twelve (12) full calendar months thereafter. Each subsequent Lease Year shall be a calendar year.


(e) Guaranteed Minimum Rent:


i. Eight Thousand Nine Hundred Sixty-Nine and 35/100 Dollars
($8,969.35) per month, during each of the first (1st) through
thirteenth (13th) months of the first (1st) Lease Year.


ii. Seventeen Thousand Nine Hundred Thirty-Eight and 70/100 Dollars
($17,938.70) per month, during each month of the remainder of the
first (1st) Lease Year.


iii. Two Hundred Fifteen Thousand Two Hundred Sixty-Four and NO/100
Dollars ($215,264.00) per annum, payable in equal monthly
installments of Seventeen Thousand Nine Hundred Thirty-Eight and
70/100 Dollars ($17,938.70), during each of the second (2nd)
through the eleventh (11th) Lease Years.


iv. Two Hundred Forty-Two Thousand One Hundred Seventy-Two and NO/100
Dollars ($242,172.00) per annum, payable in equal monthly
installments of Twenty Thousand One Hundred Eighty-One and NO/100
Dollars ($20,181.00), during each of the twelfth (12th) through
the twenty-first (21st) Lease Years (the Renewal Period).


(f) Use Permitted: For the operation of a discount variety store and for any other lawful purpose or purposes; provided, however, that Tenant shall not use the Demised Premises for any prohibited use as set forth in Exhibit D attached hereto.


(g) Trade Name: J.R. TOBACCO.


(h) Real Estate Taxes: Tenant's shares as set forth in Paragraph 4. The initial estimated cost per square foot of Floor Area of the Demised Premises for the first Lease Year is Thirty-Four Cents ($0.34).


(i) Insurance: During the initial Term of this Lease and the Renewal Period, Tenant's share shall be Fifteen Cents ($.15) per square foot of Floor Area of the Demised Premises.


(j) Common Area Maintenance and Security: During the initial Term of this Lease (the 1st through 11th Lease Years), Tenant's share shall be Fifty Cents ($.50) per square foot of Floor Area of the Demised Premises, and during the Renewal Period (the 12th through 21st Lease Years), Tenant's share shall be Sixty Cents ($.60) per square foot of Floor Area of the Demised Premises.


(k) Landlord's Mailing Address: Post Office Box 366, Statesville, North Carolina 28677-0366.


(l) Tenant's Mailing Address: Post Office Box 656, Selma, North Carolina 27576- 0656.


(m) Place to Pay Rent: Post Office Box 366, Statesville, North Carolina 28677-0366.


(n) Floor Area: The number of square feet of floor space within the Demised Premises or other areas of the Shopping Center, as the case may be. All Floor Areas shall be calculated by using dimension from the centerlines of interior or party walls, and from the exterior faces of exterior walls.


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(o) Gross Leasable Area: Landlord warrants that, as of the date of this Lease, the Gross Leasable Area of the Shopping Center is 154,867 square feet. The Gross Leasable Area of the Shopping Center shall be defined as and shall mean all leasable areas within the Shopping Center intended for the exclusive use and occupancy by tenants of the Shopping Center. In the event the Gross Leasable Area of the Shopping Center and/or the Floor Area of the Demised Premises changes during the Lease Term, Tenant's pro rata share of any costs and expenses shall be adjusted accordingly; provided, however, that in the event that the Gross Leasable Area of the Shopping Center is reduced, Tenant's pro rata share of Common Area Maintenance and Security expenses shall not be increased above the amount set forth in Paragraph 1(j).


(p) Rent Commencement Date: The earlier to occur of: (i) the date Tenant opens for business in the Demised Premises; (ii) one hundred-eighty (180) days after Tenant has received its temporary or permanent Certificate of Occupancy for the Demises Premises; or (iii) September 1, 1993.


(q) Exhibits: The following exhibits are attached to this Lease and are hereby incorporated in and made a part of this Lease:


i. Exhibit A - Site Plan Identifying Demised Premises and the
Shopping Center


ii. Exhibit B - Legal Description of the Shopping Center Land


iii. Exhibit C - Memorandum of Lease


iv. Exhibit D - Prohibited Uses


v. Exhibit E - Punch List


vi. Exhibit F - Subordination, Nondisturbance and Attornment
Agreement


vii. Exhibit G - Site Plan of Shopping Center and Pylon Sign


viii. Exhibit H - Permitted Encumbrances


ix. Exhibit I - Approved Signage


Each reference in this Lease to any of the Basic Lease Provisions contained in this Paragraph 1 shall be construed to incorporate all of the terms provided by such Basic Lease Provisions. In the events of any conflict between the Basic Lease Provisions and the balance of this Lease, including any exhibits, riders, addenda or amendments, then the balance of this Lease shall control.


2. Premises. Landlord hereby leases to Tenant, and Tenant hereby accepts and rents from Landlord at the rental, and upon the terms and conditions hereinafter set forth, the interior of


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the Demised Premises as described in Paragraph 1(a), together with the nonexclusive right to use the Common Areas (as defined in Paragraph 9) and the nonexclusive right to enjoy the beneficial use of easements or rights-of-way, if any, that benefit the Shopping Center. Within sixty (60) days after Tenant takes possession of the Demised Premises, Tenant may, at Tenant option and expense, have its architect recalculate the Floor Area of the Demised Premises. Tenant shall submit such recalculation to Landlord for Landlord's approval, which shall not be unreasonably withheld or delayed, and the Guaranteed Minimum Rent and all additional charges based on the Floor Area of the Demised Premises shall be proportionately adjusted to reflect the actual Floor Area of the Demised Premises. The Floor Area of the Demised Premises shall be determined by measuring from the exterior surface of exterior walls (and extensions thereof, in the case of openings) and from the center line of demising walls, all of which form the perimeter of the Demised Premises. Nothing contained in this Lease shall be construed as a grant, rental or conveyance of: (i) any rights in the roof or exterior of the building of which the Demised Premises constitute a part; (ii) the air space (occupied or not) above a horizontal plane coterminous with the bottom edge of the structural steel framework supporting the roof of the Demised Premises; (iii) the Common Areas (except as expressly provided in this Lease); (iv) the air space (occupied or not) below a horizontal plane coterminous with the finished floor level of the Demised Premises; or (v) the land upon which the Demised Premises are located.


3. Term. The Lease Term shall begin on the date of delivery of the Demised Premises, as provided in Paragraph 5, and shall end at midnight on December 31, 2003, the date of expiration of the tenth (10th) Lease Year after the Rent Commencement Date.


At the end of the Lease Term provided Tenant is not in default beyond the expiration of any applicable cure period, Tenant shall have the option to renew and extend the Lease Term for one (1) period of ten (10) years ("Renewal Period"), upon the same terms and conditions set forth in this Lease, including Guaranteed Minimum Rent as set forth in Paragraph 1(e). Tenant shall exercise each renewal option by written notice to Landlord given on or before twelve (12) months before the expiration of the original Lease Term. All references to the "Lease Term" or the "Term of this Lease" shall, unless the context clearly indicates a different meaning, be deemed to include any properly exercised Renewal Period.


4. Rent. Tenant shall pay to Landlord for the use and occupancy of the Demised Premises the following amounts:


(a) Guaranteed Minimum Rent. Commencing on the Rent Commencement Date, Tenant shall pay to Landlord Guaranteed Minimum Rent at the rate per annum specified in Paragraph 1(e), payable in equal monthly installments as specified in Paragraph 1(e), in advance on or before the first day of each and every calendar month, without demand, setoff or deduction, except as otherwise provided herein. If the Rent Commencement Date falls on a day other than the first day of the month, then the rent for the first fractional month shall be computed on a daily basis (based on a 30-day month) and paid on the Rent Commencement Date.


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Landlord makes no representations as to the period or periods that any department stores or any other tenant in the Shopping Center will be open for business, and this Lease will not be affected by any closing of such business.


(b) Real Estate Taxes. Commencing on the Rent Commencement Date, Tenant shall pay to Landlord, as additional rent for each Lease Year, a pro rata share of each of the following real estate taxes, based upon the fraction having as its numerator the Floor Area of the Demised Premises, and as its denominator the Gross Leasable Area:


i. All real estate taxes and assessments of every kind or nature
which are now or may hereafter be imposed or assessed upon the
Demised Premises or the Shopping Center; provided, however, that
such real estate taxes and assessments shall not include any
penalties or late fees or any of Landlord's franchise, income,
sales, transfer, gift, estate or inheritance tax.


ii. All taxes or excises on rent or any other tax, levy or charge
however described levied against the Landlord by the federal
government, the State of North Carolina or any political
subdivision of the State of North Carolina on account of rent or
other charges payable to Landlord under this Lease or based upon
the parking facilities and/or the number of parking spaces
provided by the Landlord in the Shopping Center to the extent
that any such taxes are levied in substitution for real estate
taxes; provided, however, that such taxes or excises shall not
include any penalties or late fees or any of Landlord's
franchise, income, sales, transfer, gift, estate or inheritance
tax.


To the extent that there is an increase in the taxes as a result of the construction of new leasable floor area within the Shopping Center, Tenant's pro rata share shall be recomputed based upon the change in the total leasable space in the Shopping Center.


Payment shall be made by Tenant within fifteen (15) days after receipt of a written statement from Landlord setting forth the amount of such expense, showing in reasonable detail the manner in which it has been computed, together with a copy of the tax or assessment bill. A copy of the tax or assessment bill submitted by Landlord to Tenant shall at all times be sufficient evidence of the amount of such taxes.


Landlord shall pay, as and when they become due, all real estate taxes and special and general assessments levied or imposed on the Shopping Center (including the Demised Premises). If Landlord fails to pay any such tax or assessment upon the Shopping Center when due, Tenant may pay any or all of such taxes. Landlord shall promptly after demand therefor, reimburse Tenant for any such payment or expense. If Landlord fails to reimburse Tenant within fifteen (15) days after such demand, Tenant may offset the amount of such payment against the Guaranteed Minimum Rent.


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Landlord shall notify Tenant of any increases in the taxes and assessments imposed or assessed upon the Demised Premises or the Shopping Center. Tenant may, at its option and at its cost and expense, protest or appeal any such increase provided that: (i) Tenant has given Landlord written notice of Tenant's intention to file such protest and appeal and Landlord has not, within fifteen (15) days after Landlord's receipt of such notice, notified Tenant that Landlord has filed a protest or appeal or intends to file such protest and appeal within the time permitted by law, and (ii) Tenant cooperates with other tenants in the Shopping Center interested or involved in pursuing such a protest or appeal. If required by law, Tenant may take any action in the name of Landlord who shall cooperate with Tenant to such an extent as Tenant may reasonably require; provided, however, that Tenant shall fully indemnify and save Landlord harmless from all loss, cost, damage and expense incurred by or to be incurred by Landlord as a result thereof. In the event Landlord desires to protest or appeal any such increase, Tenant agrees, at no cost to Tenant, to cooperate with Landlord and execute any documents which may be reasonably necessary and proper for any proceeding related to such protest or appeal.


(c) Insurance Expenses. Commencing on the Rent Commencement Date, Tenant shall pay to Landlord, as additional rent for each Lease Year, a share of the cost to Landlord of insurance obtained by Landlord pursuant to Paragraphs 12 and 13. Tenant's share of such cost for each Lease Year during the Lease Term, including the Renewal Period, shall be equal to Fifteen Cents ($.15) per square foot of Floor Area of the Demised Premises. The annual charge shall be paid to Landlord in twelve (12) equal monthly installments in advance on the first day of each calendar month.


(d) Additional Rent. In addition to all other rent required to be paid pursuant to the terms of this Paragraph 4, Tenant shall pay, as additional rent, the sums required to be paid pursuant to other provisions of this Lease, whether or not those sums are designated "additional rent." If the time for payment of any such amounts or charges is not specified in this Lease, they shall be deemed payable within ten (10) days after written demand from Landlord.


(e) Interest and Late Charges. If Tenant fails to pay, when due and payable, any rent or any additional rent, or amounts or charges of any kind or character provided in this Lease, such unpaid amounts shall bear interest at Citicorp's prime rate per annum from the date that is ten (10) days after the date due until the date of payment; provided, however, if two (2) times in any calendar year Tenant fails to pay when due and payable any rent or additional rent or amounts or charges of any kind or character provided in this Lease, any subsequent amounts that Tenant fails to pay when due and payable during such calendar year shall bear interest from the date due until the date of payment. In addition to such interest, if Tenant fails to pay any installment of Guaranteed Minimum Rent by the fifth (5th) day for the month in which such installment is due, a late charge equal to two percent (2%) of the monthly installment of Guaranteed Minimum Rent shall be assessed. In no event may any late charge and/or interest provided in this Paragraph 4(e) exceed the maximum permitted by law.


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(f) Payment of Rent. All rent and additional rent payments provided herein shall be made payable to Interstate Development Company, Post Office Box 366, Statesville, North Carolina 28677-0366, until notice to the contrary is given by Landlord.


5. Improvements and Delivery of Demised Premises.


(a) Landlord warrants that it is the owner of the Shopping Center. Landlord has previously developed the Shopping Center with commercial retail buildings and other improvements as shown on Exhibit A.


(b) Landlord shall deliver possession of the Demised Premises to Tenant upon the full execution of this Lease. Tenant expressly recognizes and agrees that it has inspected the Demised Premises, that Landlord makes no warranty whatsoever with respect to the condition thereof, that Tenant accepts the Demised Premises in "AS IS" condition, and that there is no obligatioin whatsoever on the part of Landlord to make any improvement to or other modification of the Demised Premises. Notwithstanding the terms of the preceding sentence, Landlord represents that the heating, air conditioning, electrical and plumbing systems serving the Demised Premises are in working order, and Landlord, at its expense, shall complete all of the repairs identified on the punch list attached hereto as Exhibit E on or before the date that is forty-five (45) days from the date hereof. In the event that Landlord does not complete the repairs within such forty-five (45) day period, the Rent Commencement Date shall be extended by one day for each day after the forty-five (45) day period that Landlord does not complete such repairs.


(c) Upon delivery of the Demised Premises to Tenant, Tenant shall proceed to install such stock, fixtures and equipment and to perform such other work as shall be necessary or appropriate in order to prepare the Demised Premises for the opening of business ("Tenant's Work"). Tenant's Work shall be performed by a licensed contractor in a good and workman like manner with the use of good grades of materials, in accordance with applicable laws and building codes and in a manner so as not to structurally impair the Demised Premises or the Shopping Center. Tenant shall be liable for any damage caused to the Demised Premises or the Shopping Center arising as a result of or during Tenant's Work. Notwithstanding the foregoing, Tenant shall not make any structural or exterior changes to the Demised Premises without Landlord's prior written approval, which approval shall not be unreasonably withheld. Landlord hereby agrees that Tenant shall have the right to install an additional truck loading dock in the Demised Premises in accordance with plans that have been approved in advance by Landlord, which approval shall not be unreasonably withheld.


(d) By occupying the Demised Premises after the delivery of possession, to install fixtures, facilities or equipment, or to perform finishing work, or for any other purpose, Tenant shall be deemed to have accepted the same and to have acknowledged that the Demised Premises are in the condition required by this Lease, except as otherwise provided on Exhibit E.


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6. Use of the Premises.


(a) The Demised Premises shall, during the Lease Term, be used and occupied only for the Use Permitted, and operated under the Trade Name, specifically set forth in Paragraphs 1(f) and 1(g), and for no other purpose and under no other name, without the written consent of Landlord, which consent shall not be unreasonably withheld. Tenant shall install and maintain in the Demised Premises store fixtures of high quality and shall, during the first Lease Year, operate its business in the whole of the Demised Premises in a high-grade reputable manner throughout the Lease Term, keeping the Demised Premises in a clean and sanitary condition, and in general employing its best business judgment, efforts and abilities to operate said business in an efficient and businesslike manner, to the end that the maximum volume of sales which can be reasonably produced in the Demised Premises shall be realized under Tenant's Trade Name.


(b) If at any time during the Lease Term, the Demised Premises shall be closed for business for a period of sixty (60) consecutive days or more, other than as a result of fire or other casualty, eminent domain or force majeure, Landlord shall have the right to terminate this Lease upon thirty (30) days written notice to Tenant. In the event that Landlord terminates this Lease in accordance with the provisions of this paragraph, the Lease shall terminate effective as of the date specified in Landlord's notice (but not earlier than the date that is thirty (30) days after such notice) and neither party shall have any further obligations hereunder, except that both parties shall remain liable for any accrued obligations existing as of the date of termination. Tenant shall execute a recordable cancellation agreement acceptable to Landlord evidencing any early termination, and shall surrender the Demised Premises on the termination date in accordance with Paragraphs 8 and 14.


(c) Tenant shall not use or suffer or permit to be used the Demised Premises or any part thereof in violation of any law or ordinance or any regulation of any governmental authority or in any manner that will constitute a nuisance, or that will injure the reputation of the Shopping Center or any part thereof, or for any hazardous purpose, or that will violate, suspend, void or serve to increase the premium rate of or make inoperative any policy or policies of insurance of any kind whatsoever at any time carried on any property, buildings or improvements in the Shopping Center or any part thereof.


(d) During the Lease Term, Tenant agrees:


i. To keep the Demised Premises, including all vestibules, entrances
and returns located therein, all improvements thereon, and all
windows, doors and glass or plate glass fixtures, in a safe,
clean, orderly and sanitary condition at all times.


ii. To store or stock in the Demised Premises only such goods, wares,
merchandise, or other property as shall be reasonably required in
connection with Tenant's business in the Demised Premises.


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iii. To use for offices, clerical or other nonselling purposes only
such space in the Demised Premises as is from time to time
reasonably required for Tenant's business therein.


iv. To store all trash and garbage in adequate containers, maintained
in a neat and clean condition and located so as not to be visible
to the public in or outside the Shopping Center and so as not to
create or permit any health, safety or fire hazard, and not to
permit undue accumulation of garbage, trash, rubbish and other
refuse in the Demised Premises.


v. Not to burn any papers, trash or garbage of any kind in or about
the Demised Premises or the Shopping Center.


vi. Not to use or operate any equipment, fixtures or machinery which
in Landlord's reasonable opinion is harmful to it or disturbs
other tenants or customers in the Shopping Center.


vii. Not to use the plumbing facilities for any purpose other than
that for which they were constructed and not to dispose of any
damaging or injurious substance therein.


viii. Not to distribute any handbills or other advertising matter in
an unreasonable manner on or about any part of the Shopping
Center outside the Demised Premises, and in the event that Tenant
elects to distribute any such handbills or other advertising
matter, to promptly reimburse Landlord for any additional
cleaning expenses incurred by Landlord in connection therewith.


ix. Not to advertise any going out of business, removal, fire,
bankruptcy, auction or other distress sale on the Demised
Premises unless and until satisfactory proof has been supplied
that the person intending to conduct such sales has complied
meticulously with all legal requirements, including without
limitation any applicable rules and regulations of the Federal
Trade Commission.


x. Not to use any sidewalks, walkways or other common areas of the
Shopping Center for the keeping, displaying, advertising and/or
sale of any merchandise or other object; provided, however,
Tenant shall have the right to use, in a businesslike fashion,
the sidewalks immediately outside of and adjacent to the Demised
Premises for the exhibit and sale of its merchandise so long as
Tenant does not unreasonably interfere with pedestrian traffic in
the Shopping Center or unreasonably restrict pedestrian access by
sidewalk to other tenants in the Shopping Center.


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xi. Not to install on or about the Demised Premises any amplifiers or
similar devices and/or not to use in, on or about the Demised
Premises any advertising medium which may be heard or experienced
outside the Demised Premises, such as flashing lights,
searchlights, loudspeakers, phonographs, television or radio
broadcasts, and which unreasonably disturb and interfere with the
business conducted by other tenants in the Shopping Center.


xii. Not to install a television antenna outside the Demised Premises
without first notifying Landlord in writing; and, if Tenant is
permitted to connect with any master antenna provided by
Landlord, to furnish and install any and all wiring and booster
systems related to such connection and the operation within the
Demised Premises of television receivers, and to reimburse
Landlord for all connection charges incurred by Landlord.


xiii. To keep the Demised Premises clean, orderly, sanitary and free
from objectionable odors and from termites, insects, vermin and
other pests, and not to keep any live animals of any kind in,
upon or about the Demised Premises. Tenant agrees to establish at
its own cost and expense, a pest, vermin or other extermination
program for the Demised Premises. Any program of extermination
and the company or person performing the same shall be subject to
Landlord's approval, not to be unreasonably withheld.


xiv. To comply with any and all requirements of any ...