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EXHIBIT 10.38
LEASE AND PURCHASE OPTION CONTRACT
OWNER/LANDLORD: Industrial Development Authority of
The Town of Chase City, Virginia
OPTIONEE/TENANT: Star Scientific, Inc.
DATE OF CONTRACT: March 10, 2000
THIS LEASE AND PURCHASE OPTION CONTRACT is made this 10th of March,
2000, by and between the INDUSTRIAL DEVELOPMENT AUTHORITY OF XXX XXXX XX XXXXX
XXXX, XXXXXXXX, a body politic and corporate (hereafter the "XXX")
Grantor/Landlord, whose address is 000 Xxxx Xxxxxx, Xxxxx Xxxx, Xxxxxxxx 00000,
and STAR SCIENTIFIC, INC. (hereafter "Star"), Grantee/Tenant, whose address is
00 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000;
WITNESSETH:
That for an in consideration of the mutual covenants of the reciprocal
benefits inuring to the parties hereunder, and in consideration of the
reciprocal duties hereby imposed upon the parties, and for other good and
valuable consideration, XXX hereby leases, the real property described in the
attachment hereto and identified as "Exhibit A" (hereafter the "Property"), and
Star hereby leases the Property from XXX, said lease being made upon the
following terms and conditions.
1. LEASE TERM: The term of the lease shall be for a period of one
hundred twenty (120) months commencing on the first day of May, 2000, and ending
at midnight on the 30th day of April, 2010, unless the lease term is shortened
by Star's exercise of its purchase option.
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2. RENT: The monthly rent due from Star to XXX during the term of this
lease shall be ELEVEN THOUSAND ONE HUNDRED TWENTY-THREE & 63/100 ($11,123.63)
DOLLARS, the first of which monthly installments shall be due on the first day
of May, 2000, with a like installment to be due and payable on the first day of
each month thereafter, to and including April 1, 2010.
3. USE OF THE PREMISES: The parties hereby acknowledge that the
premises shall be used for activities related to the processing of tobacco,
production of Lamina and other products, and fabrication of mobile units for
farm use. Star shall make no illegal use of the premises nor permit the same to
be done by any agent, employee or assign.
4. EXPENSES BORNE BY STAR: Throughout the term of this lease, and
throughout any renewal or extension hereof, Star shall pay in full all costs
arising from any of the following:
a. Insurance of all types on the premises, including hazard
and property insurance, and liability insurance on the
premises to indemnify the XXX in an amount of at least
$1,000,000.00. XXX shall be shown as a named insured on the
policy and furnished with evidence of insurance upon request.
Insurance on the premises shall be maintained in an amount not
less than ONE MILLION FOUR HUNDRED THOUSAND & NO/100
($1,400,000.00) DOLLARS, or the maximum insurable amount. Star
shall endeavor to obtain cancellation notification provisions
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requiring the insurer to afford a minimum of sixty (60) days
notice of any proposed cancellation.
b. All taxes assessed, levied, and imposed upon the personal
property located on the premises and any business licenses,
merchants capital or business operation taxes arising because
of business activities thereon.
c. All real estate taxes, both town and county, assessed
levied, or imposed upon the real estate which taxes shall be
paid on or before the due date. Taxes for the initial and
final year shall be prorated with Star paying a proportionate
share representing the number of months during which the lease
existed in said years.
d. Star hereby agrees that during the term of this lease or
any renewal, it shall be responsible exclusively for all
maintenance of the premises, including both the interior and
exterior of the premises, and the demised real property
surrounding the premises, and including (although not
exclusively) exterior painting, glass, roof, heating and
cooling, air conditioning, driveways, parking areas and any
maintenance or repairs necessary to be made to maintain the
premises.
5. ASSIGNMENT OR SUBLEASE PROHIBITED: Star shall not assign this lease
or sublet any portion of the premises, without the prior written consent of XXX,
which consent shall not be unreasonably withheld. Any such assignment or
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subletting without written consent shall be void at the option of XXX, and shall
constitute a cause for termination by XXX.
6. ENTRY AND INSPECTIONS: Prior to occupying the premises, Star shall
be permitted to inspect the premises and the personal property leased hereby to
determine the condition of the premises and property. Any exception taken by
Star as to the conditions found shall be noted in writing and acknowledge by the
XXX; otherwise Star shall accept the premises and property on an "as is" basis.
During this lease Star shall permit XXX or IDA's agent to enter upon
the premises at reasonable times and upon reasonable notice for the purpose of
inspection the same, and will permit XXX at any time within sixty (60) days
prior to the expiration of this lease, to place upon the premises any usual "for
lease" or "for sale" signs permitting persons desiring to lease or purchase the
premises to inspect the same.
7. INDEMNIFICATION: Star shall hold harmless XXX from and against any
and all claims for personal injury and/or property damage arising out of
resulting from, or incident to its entry upon, and/or its use or occupancy of
the leased premises.
This is a covenant of first payment and defense, not merely of
indemnity. If a claim for personal injury and/or property damage is asserted
against XXX by any person or legal entity alleged to have arisen out of Star's
entry upon the leased premises or to have arising out of, to have resulted from
or to have occurred as an incident of its use and/or occupancy of the premises,
then, upon written notification from XXX, Star shall immediately and without
further demand enter upon the affirmative defense of any such claim and shall
pay promptly, to the complete indemnification and exoneration of XXX,
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all fees, costs and expenses (including attorney's fees) that might be, or
become, due incident to any such claim (to include negotiated settlements or
compromises or any awards or judgments as a result of arbitration or judicial
proceeding) to the end that XXX shall have no exposure and shall suffer no
damage or expense incident thereto.
8. UTILITIES: Star agrees that Star shall be responsible for all
utilities, including water, gas, electricity, heat and other services delivered
to the premises.
9. TRADE FIXTURES: Any and all improvements made to the premises during
the term hereof shall belong to XXX, except trade fixtures of Star. Star may
upon termination hereof remove all trade fixtures owned by Star, provided
however the premises shall be restored to the original condition by Star,
reasonable wear and tear excepted, and Star shall make repair to or pay for all
repairs necessary for damage to the premises occasioned by removal of the trade
fixtures.
10. CONDEMNATION: If any part of the premises shall be taken or
condemned for public use, and a part thereof remains which is susceptible of
occupation hereunder, the lease shall as to the part taken terminate as of the
date the condemnor acquires possession and thereafter Star shall be required to
pay such proportion of the rent of the remaining term as the value of the
premises remaining bears to the total value to the premises, and its permitted
use for the original purpose of this lease, at the date of condemnation.
Provided, however, XXX may at its option, terminate this lease as of the date
the condemnor acquires possession. In the event that the demised premises are
condemned in whole, or that such portion is condemned that the remainder is not
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susceptible for use hereunder, this lease shall terminate upon the date upon the
condemnor acquires possession.
In the event XXX receives notification of condemnation proceedings
against the premises, XXX shall immediately notify Star and allow Star the
election of invoking its purchase agreement contained hereinafter, and in the
event Star exercises its option XXX shall defer to Star all decisions pertaining
to settlement with the condemning authority. In the event Star fails to elect
its purchase option, the parties hereto agree that any amount received by XXX
from the condemning authority shall be deducted from the purchase price of the
property as provided hereinafter in Section 17, if and when said purchase is
elected by Star.
Star shall be permitted to be a party to the condemnation proceeding in
light of the option held by Star for the purchase of the property. No settlement
of account with the condemning authority shall be permitted by XXX without the
agreement of Star or assignment of Star's respective right to seek its own
remedy against the condemnor.
11. DESTRUCTION OF THE PREMISES: In the event of a partial destruction
of the premises during the term hereof, from any cause, XXX shall forthwith
repair the same provided that such repairs can be made within sixty (60) days
under the existing governmental laws and regulations. If such repairs cannot be
made, XXX at its option may make the same within a reasonable time, the lease
continuing in effect with the rent proportionately abated as aforesaid and in
the event XXX shall not elect to make such repairs the lease may be terminated
at the option of either party.
12. DEFAULT PROVISIONS: If default is made in the payment of rent or
failure to complete the purchase of the property following election of the
option,
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XXX shall give notification to Star at the address specified herein stating the
reasons for default and IDA's intention to seek a remedy. Should the breach or
default not be corrected, including all rents paid and/or closing held, within
thirty (30) days of the receipt of such notice XXX shall have the right to
re-enter without further demand or notice and at IDA's option, terminate the
lease and with it the option for the purchase of the property or rights of Star
under any other option. It is provided however nothing contained herein shall
prevent XXX from enforcing, by an action for specific performance of its rights
against Star.
13. MEMORANDUM OF LEASE AND OPTION: The parties agree that they shall
execute a Memorandum of Lease and Purchase Option which may be recorded by
either party in the Circuit Court of Mecklenburg County, all costs of such
recordation to be borne by Star even if XXX opts for such recordation.
14. OPTION TO PURCHASE: So long as Star is not in substantial default
of its performance of any term of this lease, Star shall have the option to
purchase the Property for the purchase price hereinafter set forth, upon the
terms and conditions specified in the provisions hereinafter stated.
15. PURCHASE PRICE: The purchase price for the property shall be the
sum of the following:
a. The balance due on a note or notes secured by a credit line
deed of trust dated March 10, 2000, securing unto Community
National Bank repayment of debt in the original principal sum
not to exceed FIVE HUNDRED THOUSAND & NO/100 ($500,000.00)
DOLLARS; PLUS,
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b. The balance due on a note or notes secured by a deed of
trust dated July 24, 1998, securing unto Lake County
Development Corporation repayment of a debt in the original
principal sum of $250,000.00; PLUS,
c. The balance due on a note or notes securing unto XXX,
repayment of a debt in the original principal sum of
$200,000.00; PLUS,
d. The sum of FIFTY THOUSAND & NO/100 ($50,000.00) DOLLARS.
Star may exercise its option to purchase at any time during the term of
this lease by paying the balance then due on each of said three notes, plus
paying to XXX an additional FIFTY THOUSAND & NO/100 ($50,000.00) DOLLARS. Upon
receipt of such payments, XXX shall deliver title to the premises to Star by
SPECIAL WARRANTY Deed. Should Star make all rental payments due hereunder, and
then elect to exercise its option to purchase, XXX shall, after receipt of the
last of said monthly rental payments, and upon receipt of the sum of FIFTY
THOUSAND & NO/100 ($50,000.00) DOLLARS, deliver title to the premises to Star by
Special Warranty Deed.
16. EXPIRATION OF STAR'S PURCHAES OPTION: If star is in compliance with
the terms and conditions hereof, it shall have the right to exercise its
purchase option at any time during the term of the lease. However, Star's
purchase option shall, if not duly exercised on or before April 30, 2010,
automatically terminate and expire on May 1, 2010.
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17. EXERCISE OF PURCHASE OPTION: Star's purchase option must be
exercised by Star in writing, by mailing via certified mail/return receipt, or
by hand-delivery to XXX, of written notice of Star's exercise of its purchase
option. To be effective, such written notice must be received by XXX on or
before April 30, 2000. Such written notice shall state the date of closing,
which date shall be a maximum of sixty (60) days from the date said written
notice is received by XXX.
18. CLOSING COSTS: If Star exercises its purchase option, XXX shall pay
the cost of preparation of a Special Warranty deed, grantor's tax assessed upon
recordation of the deed, and any attorney's fee incurred by XXX at its election.
Star shall pay all other costs incurred as an incident of closing.
19. RETURN OF PREMISES: Should Star not exercise its purchase option,
then upon termination of this lease the Property and personal property shall be
returned to XXX in the condition which existed upon commencement of this lease,
reasonable wear and tear excepted. Star shall have the right to replace personal
property.
20. REQUIREMENT FOR NOTICES: Any notice required hereunder shall be
deemed effective if mailed by the mailing party to the other party via certified
mail, return receipt requested, to the addresses provided for each party herein,
or to such other address as either party may designate in writing from time to
time. Hand-delivered notices shall also be effective, but the notifying party
shall bear the burden of proof of delivery.
21. BINDING EFFECT: This agreement shall be binding upon the parties
hereto and upon any successor or assign of either party hereto. The terms hereof
may be amended only by written document signed by the duly authorized officers
or
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agents of either party, and no modification or amendment hereof shall have
any force or effect unless in writing and duly signed.
22. SEVERABILITY: The parts and provisions of this contract are
severable. If any part or provision shall be held invalid by a court of
competent jurisdiction, the remainder of this contract shall remain in effect.
23. SUCCESSORS IN TITLE: The parties covenant and agree that all terms
and conditions hereof shall be binding upon the parties, their heirs, assigns,
devisees, executors, administrators and other successors in title.
24. WRITTEN MODIFICATION REQUIRED: This contract supersedes and
replaces any agreement or understanding, whether oral or written, heretofore
entered into between the parties, and no amendment hereto shall be binding
unless made in writing and duly executed on behalf of both parties hereto.
25. EXECUTION IN DUPLICATE ORIGINAL AND COUNTERPARTS: This Contract is
made in duplicate on the day, month and year aforesaid, and each copy hereof
bearing original signatures shall be deemed an original. In addition, this lease
may be executed in counterparts, so that the execution of one original by a
party and another original by the other party shall together constitute one
fully binding original.
26. RESCISSION OF PRIOR LEASE: Upon execution hereof on behalf of both
parties, the terms and conditions hereof shall become effective, and in addition
all terms and conditions of the Lease and Option agreement between the parties,
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dated May 29, 1998, shall automatically terminate and be superceded by the terms
and conditions hereof.
27. AUTHORITY TO SIGN: This Contract is executed on behalf of each
party pursuant to action duly taken to authorize the undersigned individuals to
execute this contract on behalf of his or her principal. Either party shall be
the right to require written evidence of such authority from the other party.
WITNESS the following signatures and seals:
INDUSTRIAL DEVELOPMENT STAR SCIENTIFIC, INC.
AUTHORITY OF THE TOWN
OF CHASE CITY, VIRGINIA
BY: BY:
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Xxxxxxx X. Xxxxxxxxx Authorized Officer
Chairman
Attest:
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Xxxxxxx Xxxxxx, Secretary
STATE OF VIRGINIA
COUNTY/CITY OF ____________to wit:
The foregoing instrument was acknowledged before me this ____day of
March, 2000, on behalf of the Industrial Development Authority Chase City,
Virginia, by Xxxxxxx X. Xxxxxxxxx, its Chairman, whose signature was attested by
Xxxxxxx Xxxxxx, its secretary.
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Notary Public
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My commission expires:_______________
STATE OF VIRGINIA
COUNTY/CITY OF ________________. to-wit:
The foregoing instrument was acknowledged before me this _____day of
March, 2000, by Xxxxx X. XxXxxxx, CFO of Star Scientific, Inc., on behalf of
said corporation.
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Notary Public
My commission expires:
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