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Term of Lease - Completion of Improvements

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This Indenture of Lease is made the 14th day of August, 1995, between FREEWAY 130, L.L.C., with offices at P.0 Box 585, 510 Heron Drive, Bridgeport, NJ 08014 ("Landlord") and A.C. MOORE, INC., with offices at 17 Roland Avenue, Mt. Laurel, NJ 08057 ("Tenant").


ARTICLE 1
DEMISED PREMISES - USE OF DEMISED PREMISSES
TERM OF LEASE - COMPLETION OF IMPROVEMENTS


1.01 The Landlord hereby demises and leases to Tenant, and Tenant hereby hires and takes from Landlord subject to the terms of the Lease, for the term specified in Section 1.03, the premises known as 5 University Court, as more fully described in Exhibit A hereto, together with the improvements to be constructed thereon by Landlord pursuant to Section 1.04 (together, the "Demised Premises").


1.02 Tenant shall use and occupy the Demised Premises for any lawful purpose, specifically, for warehousing, distribution, corporate offices, and the necessary truck and car parking associated with those uses.


1.03 The term of this Lease shall be six (6) years, unless sooner terminated pursuant to other provisions of this Lease. The date of Commencement of the term of this Lease shall be and Tenant's obligation to pay rent shall commence on the earlier of (a) the date Landlord notifies Tenant that the Demised Premises is ready for occupancy following substantial completion of the work to be performed by Landlord pursuant to Section 1.04 hereof, and Tenant's Certificate of Occupancy is issued, or (b) the date Tenant occupies the Demised Premises or any part thereof, or (c) April 30, 1996 ("Commencement Date").


1.04 Before the term of this Lease begins, Landlord shall construct and prepare a building and other improvements (the "Work") upon the Demised Premises in accordance with the plans and specifications set forth in Exhibit B hereto and such other working drawings and specifications as may be reasonably necessary which shall be prepared by landlord in substantial conformity, with the plans and specifications set forth in Exhibit B, but if such working drawings and specifications are not so in conformity, they shall be subject to the approval of Tenant, not to be unreasonably withheld, such approval to be considered to have been given unless Tenant, within six (6) business days after the submission of such working drawings and specifications to it, notifies Landlord in writing of Tenant's disapproval and the reasons therefor. All other work to be done or performed in or about the Demised Premises shall be by Tenant at Tenant's sole cost and expense and in accordance with the provisions or Article 5 hereof.


1.05 The Demised Premises shall conclusively be deemed ready for Tenant's occupancy as soon as the Work has been substantially completed and a Tenant Certificate of Occupancy is issued. The Demised Premises shall not be deemed to be unready for Tenant's occupancy or incomplete (a) if only minor or unsubstantial details of construction, decoration or mechanical adjustments remain to be done in the Demised Premises or any part thereof provided that none of such items are necessary to make the building reasonably tenantable for Tenant's use, or (b) if a temporary or permanent certificate of occupancy has been issued for the building, or (c) if delay in the availability of the Demised Premises for Tenant's occupancy is caused in whole or in part by


Tenant.


1.06 Landlord shall give Tenant at least four (4) weeks's prior notice of the date when the building is expected to be ready for occupancy. Upon substantial completion of the Work, Landlord and "punchlist" listing incomplete items or items that need to be corrected. As soon as conditions practicably permit, Landlord shall finish the items of Work and adjustment not finished when the building is ready for occupancy.


1.07 Subject to the provisions of Section 1.06, the entry by Tenant into the Demised Premises and the taking of possession thereof shall be deemed an acknowledgment by Tenant that the Demised Premises are in good and tenantable and satisfactory condition at the beginning of the ter m of this Lease and that up to the time of such occupancy Landlord has no duty to make repairs or alterations to the Demised Premises at any time prior to or during the term of this Lease except as specifically set forth in the Lease. Notwithstanding anything in this Lease to the contrary, Landlord agrees to correct or repair any patent or latent defects in the construction of the Work occurring within one (1) year of the Commencement Date provided written notice thereof is given to Landlord by Tenant within said one (1) year period,


ARTICLE 2
RENT


2.01 Tenant covenants and agrees to pay to Landlord, at Landlord's address or at such other place as Landlord may from time to time designate, during each year during the term hereof, a basic annual rental in the amount of FIVE HUNDRED AND SEVENTEEN THOUSAND ONE HUNDRED AND SEVENTY-FOUR ($517,174) DOLLARS, adjusted in accordance with Section 2.02 hereof (the "Basic Rent"). The Basic Rent shall be in addition to all other payments to be made by Tenant pursuant to this Lease and shall be paid, in advance, without notice or demand, and without deduction or set-off, in monthly installments of one-twelfth (1/12th) of such Basic Rent on the first (lst) day of each calendar month during the term of this Lease, and a prorata portion of such monthly Basic Rent shall be paid at the beginning and end of the term if the Commencement Date is or the Lease terminates on other than the first day of a calendar month.


2.02 Renewals.


(a) Tenant shall have the right and option to extend the term of this Lease for ONE (1) successive renewal terms (each of which is a separate, independent option) of SIX (6) years (each of which shall be called a "Renewal Term"), provided and on condition that:


(i) Tenant gives Landlord at least six (6) months written notice of its exercise of the option prior to the expiration of the then current term of the Lease, and


(ii) all prior options, if any, have been exercised, and


(iii) any extension of this Lease pursuant to the provisions of this Section 2.02(a) shall be upon the same terms and condition as are then in effect except that there shall be options to extend only as provided in this Section 2.02(a) and except as specifically otherwise


provided in this Lease, and


(iv) if Tenant fails to exercise any option to extend as provided in this Lease, this Lease shall terminate at the end of the then current term.


(b) The Basic Rent for the Demised Premises during any Renewal Term shall be computed by multiplying the then existing Basic Rent times a fraction, the numerator of which shall be the "Index" (as defined below) for the month immediately prior to the applicable Renewal Term, and the denominator shall be the Index for the month in which the Commencement Date occurs, but in no event less than the Basic Rent in effect for the period immediately prior to the applicable Renewal Term.


(c) The term "Index" shall mean the United States Bureau of Labor Statistics, Consumer Price Index for Urban Wage Earners and Clerical Workers, All Items, Philadelphia, PA - NJ (1982 - 100). If the Index shall be no longer published and a successor index with stated adjustments based on the Index is published such successor index shall be used; otherwise, Landlord shall select successor index.


2.03 It is the purpose and intent of Landlord and Tenant that, except as otherwise provided in this Section 2.03, the Basic Rent shall be net to Landlord, so that this Lease shall yield, net to Landlord, the Basic Rent specified in Section 2.01, and that all taxes, costs, expenses, obligations and charges of every kind and nature relating to the Demised Premises (excepting the payments by Landlord of interest and principal pursuant to any note and mortgage to which Landlord is a party secured by the Demised Premises, or any part thereof, or any real property of which the Demised Premises is a part and the one year warrantee as cited in Article 1.07), that may arise or become due during the term of this Lease shall be paid by Tenant, and Tenant agrees to indemnify, defend and save harmless Landlord from and against such costs, expenses, obligations and charges.


2.04 All taxes, charges, costs, expenses and obligations that Tenant assumes or agrees to pay under any provisions of this Lease, together with all interest and penalties that may accrue thereon in the event of Tenant's failure to pay the same as provided in this Lease, all other damages, costs and expenses that Landlord may suffer or incur, and any and all other sums that may become due, by reason of any default of Tenant or failure on Tenant's part to comply with the agreements, terms, covenants and conditions of this Lease on Tenant's part to be performed, and each or any of them, shall be deemed to be additional rent and, in the event of non-payment, Landlord shall have all the rights and remedies provided in this Lease and provided by law in the case of non-payment of rent.


ARTICLE 3
TAXES AND OTHER CHARGES AND EXPENSES - UTILITIES


3.01 (a) Tenant shall bear, pay and discharge, or cause to be paid and discharged, at least fifteen (15) days before the last day upon which payment may be made without penalty or interest, all real estate taxes, use and occupancy taxes, special assessments, water rents, rates and charges, sewer rents, license fees, permit fees and other authorization fees, charges for public utilities and other governmental impositions and charges of every kind and nature whatsoever, extraordinary as well as ordinary, seen or unforeseen,


and each and every installment thereof ("Impositions") that shall or may during the term hereof become due and payable, or become liens upon, or arise in connection with the use, occupancy or possession of, or be due or payable out of the proceeds of, or for or with respect to, or with respect to the rents from (i) the Demises Premises and any part thereof, the appurtenances thereto and the sidewalks, streets and vaults adjacent thereto, and any estate, right or interest therein and (ii) any occupancy, use or possession of the Demised Premises or any part thereof, and such franchises, licenses or permits that may be appurtenant to the use of the Demised Premises or any part thereof.


(b) All Impositions that are charged, laid, assessed, or imposed for each fiscal or billing period in which the term of this Lease commences and terminates shall be apportioned pro-rata between Landlord and Tenant in accordance with the respective portions of each such fiscal or billing period during the term of this Lease.


3.02 So long as it is not in default under this Lease, Tenant, without postponement of payment of any Imposition, may bring appropriate proceedings in the name of Landlord or Tenant or both for contesting the validity or amount of any Imposition, or to recover payments therefor, and agrees to indemnify, defend and save Landlord harmless from all liability, costs and expenses in connection therewith. Landlord shall cooperate with Tenant with respect to the proceedings so far as reasonably necessary. Tenant shall be entitled to amounts recovered that relate to payments that, pursuant to the terms of this Lease, have been made by Tenant.


3.03 (a) Except as in this Section 3.03 provided, Tenant shall be solely responsible for the provision of, and promptly pay all charges for gas, heating, electricity, telephone, water, sewer and all other utilities and services used or consumed in connection with the Demised Premises. Tenant agrees to indemnify, defend and save Landlord harmless against any liability or charges for such utilities and services.


(b) In no event shall Landlord be liable for an interruption or failure in the supply of any such utilities or services to the Demised Premises.


(c) In no event shall Landlord be liable for an interruption or failure in the supply of any utilities or services to the Demised Premises, and Tenant shall not be entitled to any rent or other abatement therefor. It is expressly agreed that Landlord is not and shall not be required to render any services of any kind to Tenant.


3.04 Tenant shall promptly, timely, and fully pay all expenses pertaining to the Demised Premises.


3.05 Tenant shall promptly supply to Landlord, and in any event prior to the period in which any interest and/or penalty would accrue for non-payment, written proof of payment of all Impositions and other charges and expenses required to be paid by Tenant by this Article 3.


ARTICLE 4
ASSIGNMENTS MORTGAGES AND SUBLEASES --
TRANSFER OF OWNERSHIP -- SERVICE CONTRACTS


4.01 Neither Tenant, nor Tenant's successors or assigns, shall, without Landlord's prior written consent, voluntarily or involuntarily or by operation of law, assign, transfer, mortgage, pledge or encumber this Lease or the estate created hereby, in whole or in part, or sublet the Demised Premises or any part thereof, or enter into any license agreement pertaining to the Demised Premises or any part thereof, or otherwise permit the Demised Premises or any part thereof to be used or occupied by others. Except for a public stock offering or a minority interest transfers, for the purposes of this Lease, any transfer of any ownership interest in Tenant or any entity of which Tenant is composed shall be deemed a prohibited assignment, or unless Tenant is a corporation whose stock is publicly traded. Each permitted assignee and subtenant shall assume, and be deemed to have assumed this Lease, and shall be and remain liable jointly and severally with Tenant for all payments and for the due performance on all terms, covenants and conditions to be paid and performed by Tenant.


ARTICLE 5
ALTERATIONS & TRADE FIXTURES


5.01 Except for the addition of trade fixtures and equipment that do not attach to the Demised Premises, Tenant shall not make any alteration, rebuilding, replacement, change, addition or improvement in or to the Demised Premises without the prior written consent of Landlord; and if Landlord gives written consent:


(a) such work shall be performed in a first class, workmanlike manner, at Tenant's sole cost and expense, and shall not weaken or impair the structural strength, or lessen the value, of the Demised Premises;


(b) such work shall be made according to plans and specifications therefor, prepared at Tenant's sole cost and expense, that have received Landlord's prior written approval, and such work shall comply with the Declarations in all respects;


(c) before the commencement of any such work, at Tenant's sole cost and expense, such plans and specifications shall, if required by law, statute, ordinance, rule or regulation, be filed with and approved by all governmental departments or authorities having jurisdiction, and any public utility company having an interest therein, and written evidence of such approval provided to Landlord; all such work shall be done subject to and in accordance with all requirements of law, statutes, ordinances, rules and regulations, all governmental departments or authorities having jurisdiction, public utility companies having or claiming jurisdiction, and any other body exercising similar functions; and


(d) before the commencement of any such work Tenant shall obtain, and at all times when any such work is in progress Tenant shall maintain, at Tenant's sole cost and expense, such insurance coverage as covers all insurable risks during the course of such work, and such



workmen's compensation insurance as covers all persons employed in connection with the work and with respect to whom death or bodily injury claims could be asserted against Landlord or the Demised Premises or Landlord's interest in the Demised Premises.


5.02 Tenant shall have the right to install trade fixtures required by Tenant or used by it in its business provided and to the extent not attached or affixed to the Demised Premises and, if installed by Tenant, to remove any or all such trade fixtures from time to time during and upon termination of this Lease, provided however, that Tenant is not otherwise in default under this Lease and that Tenant shall repair and restore any damage or injury to the Demised Premises caused by the installation and/or removal of any such trade fixtures.


ARTICLE 6
REPAIRS


6.01 At all times during the term of this Lease, Tenant shall, at Tenant's own cost and expense, keep and maintain in first-class order and condition the Demised Premises, including but not limited to all lawns and planted areas, and all roadways, walkways, sidewalks, curbing and parking and loading areas thereon, and all equipment and appurtenances, and make all repairs thereto and restorations, replacements and renewals thereof, inside, and non-structural, extraordinary and ordinary, seen or unforeseen, howsoever the necessity or desirability for repairs may occur, and whether or not necessitated by (subject to the provisions of Section 1.07) latent defects or otherwise; and shall use all reasonable precaution to prevent waste, damage or injury.


6.02 Tenant shall keep the roadways, walks, parking and loading areas and sidewalks clean and free of snow and ice, and the exterior and interior of the buildings and improvements clean and neat. Without limiting the generality of the foregoing, all open storage and loading areas within the Demised Premises shall be maintained by Tenant in an orderly, neat and clean fashion, and shall be screened so as not to be visible from streets and adjoining properties.


6.03 The Demised Premises and each part thereof shall at all times be maintained by Tenant in compliance with the Declarations.


6.04 Tenant shall enter into a preventive maintenance agreement for the Heating, Air Conditioning, and Ventilating systems of the Demised Premises.


ARTICLE 7
MECHANICS' AND OTHER LIENS


7.01 Tenant shall have no power to do any act or make any contract that may create or be the foundation for any lien, mortgage or other encumbrance upon the Demised Premises, the reversion or other estate of Landlord, or upon any interest of Landlord in the Demised Premises. If Tenant causes any alterations, rebuildings, replacements, changes, additions, improvements or repairs to be made to the Demised Premises, or causes any labor to be performed or material to be furnished therein, thereon or thereto, neither Landlord nor the Demised Premises nor Landlord's interest in the Demised Premises shall under any circumstances be liable for the payment of any expense incurred or for the value of any work done or material furnished, but all such alterations,



rebuildings, replacements, changes, additions, improvements and repairs, and labor and material, shall be made, furnished and performed at Tenant's sole cost and expense, and Tenant shall be solely and wholly responsible to contractors, laborers and materialmen furnishing and performing such labor and material. Landlord is willing to sign a Landlord's waiver on personal property and trade fixtures as long as a waiver does not hinder financing and is acceptable to the mortgagee.


7.02 If, because of any act or omission (or alleged act or omission) of Tenant, any mechanics or other liens charge or order for the payment of money is filed against Landlord or the Demised Premises or Landlord's interest therein or any financing statement is filed for or affecting any equipment or any materials used in the construction or alteration of, or installed in, any such building or improvement in or on the Demised Premises, (whether or not such lien, charge or order, or financing statement is valid or enforceable as such), Tenant shall, at its own cost and expense, cause the same to be canceled and discharged (whether by bonding or payment) within ten (10) days after notice of filing thereof.


7.03 Prior to the performance of any alterations, additions or improvements to the Demised Premises, (i) Tenant will enter into a written contract with each contractor performing such work and with each supplier providing material and supplies in connection with such work which shall provide (A) that the contractor and supplier agree that neither they nor any subcontractors nor materialmen shall file any mechanic's or materialman's liens, or notices of intention therefor, against the Demised Premises, or any part thereof or any notices of refusal relating to any work upon or material supplied to or for the Demised Premises; (B) that all subcontracts and purchase orders executed in connection with any such work shall contain agreements similar to those referred to in (A) above, by the subcontractors and suppliers, (C) that Tenant is entering into the contract as tenant and not on behalf of Landlord and that all stop notices thereafter filed by any subcontractor or supplier will be filed only against Tenant and will be binding upon Tenant in connection with Tenant's obligation to make payments under the construction contract; and (ii) Tenant shall, pursuant to Title 2A N.J.S.A. 44-75, cause to be filed a copy of the written contract with each such contractor and supplier and all specifications accompanying the contract.


ARTICLE 8
REQUIREMENTS OF LAW


8.01 Tenant, shall, at its own cost and expense, promptly observe and comply with all present and future laws, ordinances, requirements, orders, directions, rules and regulations of the federal, state, county and municipal governments and of all other governmental authorities having or claiming jurisdiction over the Demised Premises or appurtenances or any part thereof, which are applicable to the Demised Premises and/or the conduct of business thereon, and of the insurance underwriting b
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