Exhibit 10(a)1
LEASE AGREEMENT
LEASE AGREEMENT entered into as of the first day of January, 2004, by and
between ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, who is the same person as ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, and his wife ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, who is the same person as ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, both of legal age, married to each other, ▇▇▇▇▇▇ and investor
respectfully, and residents of Dorado, Puerto Rico (hereinafter referred to
collectively as the "Lessors"); and ▇▇▇▇▇ NURSERY FARMS, INC., a corporation
organized and existing under the laws of the Commonwealth of Puerto Rico
(hereinafter referred to as the "Lessee"), acting and represented herein by its
Senior Vice President and Chief Financial Officer, ▇▇▇▇ ▇. ▇▇▇▇▇▇, who has been
duly authorized to appear herein by Resolution of the Board of Directors of the
Lessee.
WHEREAS, the Lessors are the owners in fee simple ("pleno dominio") of a
parcel of land (hereinafter referred to as the ("Property") described in the
Spanish language as follows:
"RUSTICA: Finca sita en el Barrio Cerro Gordo de ▇▇▇▇ ▇▇▇▇, compuesta de ochenta
y seis punto ciento once (86.111) cuerdas que radica en el Barrio Sabana Llana,
sitio Cerro Gordo. En lindes por el Norte con carretera Insular seiscientos
noventa (690), denominada Cerro Gordo y parcela dedicada a uso publico: por el
Sur, Este y Oeste, con terrenos ▇▇ ▇▇▇▇▇▇ Hermanos, Inc."
The Property is the remanant of the following parcel of land of which it
was segregated by means of Deed number Twenty (20) of September eight (8),
nineteen hundred and ninety seven (1997), executed in San ▇▇▇▇, Puerto Rico
before Notary ▇▇▇▇ ▇. Ferraiouli ▇▇▇▇▇▇▇▇, presented for recordation at Entry
Number 19 of the Dairy Book 223 on October fiftee (15), ninety hundred and
ninety seven (1997), described in the Spanish language as follows:
"Finca sita en el Barrio Cerro Gordo de ▇▇▇▇ ▇▇▇▇, compuesta de 112.37
cuerdas, segun documento presentado radica en el Barrio Sabana, sitio Cerro
Gordo y que mensurada por los Agrimensores ▇▇▇▇▇▇ ▇. ▇▇▇▇ y ▇▇▇▇ ▇▇▇▇▇▇▇
Grandier en veintiocho de octubre de mil novecientos cuarenta y tres, ▇▇ ▇▇▇▇▇▇
de dicha finca resulto de ciento doce punto treinta y siete cuerdas,
equivalentes a cuarenta y cuatro (44) hectareas, dieciseis areas y treinta y
cinco areas; en lindes por sus cuatro puntos cardinales con terrenos ▇▇ ▇▇▇▇▇▇
Hermanos, Inc., estando cruzada de Norte a Sur por la carretera Insular seis
noventa (690) denominada Cerro Gordo."
Inscrita al folio 97 del volumen 50 de ▇▇▇▇ ▇▇▇▇, Registro de la Propiedad,
Seccion III de Bayamon, Finca numero 256.
WHEREAS, the Lessors and the Lessee have agreed to the lease the Property;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties hereto agree as follows:
1. Lease: The Lessors hereby lease to the Lessee, and the Lessee hereby
lets from the Lessors the Property.
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2. Term and Early Termination: The Demised Premises are leased for a five
(5) year term (hereinafter referred to as the "Term"), commencing retroactively
as of January 1st, 2003 and ending on December 31, 2007. The Lessee may
terminate this Lease before the expiration of the Term or any extension thereof,
by giving the Lessors written notice to such effect at least eighteen (18)
months before the proposed early termination.
3. Rent: The Lessee shall pay to the Lessors during the Term monthly rental
payments, in advance, in the amount of TWENTY FOUR THOUSAND DOLLARS ($24,000.00)
each.
4. Option to Renew:
(a) The Lessors hereby grant to the Lessee an option to renew this Lease
for an additional five (5) year period under the same terms and conditions
hereof except that the monthly rent during the five (5) years renewal period
shall be the greater of: (i) TWENTY FOUR THOUSAND DOLLARS ($24,000.00) per
month; or (ii) the monthly rent provided for in paragraph 3 above, subject to
adjustment on January 1st, 2008, on the basis of the increase in the Wholesale
Price Index ("WPI") published by the United States Department of Labor, Bureau
of Labor Statistics, from the WPI which was in effect on January 1, 2003 to the
WPI which is in effect on January 1, 2008.
(b) This option to renew may be exercised by the Lessee by written notice
given to the Lessors at least ninety (90) days before the expiration of the
Term. Unless otherwise provided, the word "Term" shall be construed to include
any renewal period.
5. Lessee's Acceptance of Property: The Lessee acknowledges it has occupied
the Demised Premises for a number of years and, as such, it has examined the
Demised Premises and continues to accept the same in the condition they are now,
without representation or warranty by the Lessors, express or implied, and
without recourse to the Lessors as to the nature of condition of the Demised
Premises.
6. Use, Maintenance and Repair: The Lessors and the Lessee acknowledge that
the Demised Premises consists basically of a developed nursery with offices,
green houses, warehouses, pumping stations, etc., and will be used by the Lessee
only in connection with its agribusiness. Throughout the Term the Lessee shall,
at its expense, keep and maintain in a good, clean, and safe condition the
Demised Premises by undertaking all ordinary and necessary repairs. The Lessee
shall conduct its business in the Demised Premises in a safe manner and shall
maintain the Demised premises free of any materials which may result in a public
nuisance.
7. Alterations and Improvements:
(a) The Lessee may, it its own expense, make such alterations, additions,
and changes to the Demised Premises as it may deem necessary or expedient for
its business operations within the Demised Premises, provided that the Lessee
shall not make any material change or alteration in or around the Demised
premises which, when completed, would substantially diminish the value of
Demised Premises without the written consent of the Lessors. The foregoing
notwithstanding, if the estimated cost of any proposed alteration, improvement,
addition or change to the Demised Premises shall exceed the sum of ONE HUNDRED
THOUSAND DOLLARS ($100,000.00), the Lessee shall first obtain the Lessors'
approval, but such approval shall not be unreasonably withheld by the Lessors.
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(b) During the course of any construction, alteration or addition to the
Demised premises, the Lessee shall deliver to the Lessors, at the Lessee's
expense, comprehensive general liability insurance of the character and in the
limits reasonably required by the Lessors, but in an amount not less that THREE
MILLION DOLLARS ($3,000,000).
(c) Any alteration, addition and improvement placed upon the Demised
Premises by the Lessee, as well as fixtures and articles of personal property
attached to or used in connection with such alterations, additions or
improvements, shall immediately become the property of the Lessors and at the
end or other termination of this lease, and shall be surrendered to the Lessors;
provided, however, that Lessors shall pay Lessee for the unamortized book value
of those leasehold improvements fixed to the the Demised Premises as of the date
of termination of this lease; and, provided, further, that the movable
furniture, movable personal property, and movable trade fixtures put in at the
expense of the Lessee which, pursuant to the provisions of this Lease, may be
removed by the Lessee at or before the expiration or sooner termination of this
Lease, shall not be deemed to be the property of, nor surrendered to, the
Lessors.
8. Property Taxes: The Lessee shall pay the real property taxes allocate to
the Demised Premises.
9. Insurance: Throughout the Term, the Lessee shall maintain in full force
comprehensive general public liability insurance against claims for bodily
injury, death, or property damage, occurring on, in or about the Demised
Premises and the adjoining and related parking areas, streets, sidewalks and
passageways, such insurance to provide limits of no less than THREE MILLION
DOLLARS ($3,000,000.00) per person, THREE MILLION DOLLARS ($3,000,00.00) per
occurrence, and ONE MILLION DOLLARS ($1,000,000.00) for property damage. The
policy shall name both the Lessors and Puerto Rico Production Credit Association
(or its legal successor) as the insured parties. The Lessee shall deliver to the
Lessors certificates of insurance certifying that such insurance is in full
force and effect and in the amounts set forth herein.
10. Destruction or Contamination:
(a) If, during the term, the Demised Premises are totally or partially
destroyed, rendering them totally or partially inaccessible or unusable, the
Lessee shall, within six (6) months of the date of casualty, restore the Demised
Premises to substantially the same condition as they were immediately before the
destruction, whether or not the insurance proceeds are sufficient to cover the
actual cost of restoration. Such destruction shall not terminate this Lease, and
there shall not be any reduction or abatement of any rent due hereunder.
(b) If the Demised Premises, or a substantial portion of the Demised
Premises (not less that 25%) sufficient to render the remaining portion thereof
unsuitable for the Lessee's continued use or occupancy for the Lessee's
business, are taken by condemnation or other eminent domain proceeding pursuant
to any law, general or especial, then this Lease shall terminate as of the date
possession of the Demised Premises or such substantial portion thereof is so
taken.
(c) The Lessee accepts full responsibility for any contamination of the
Demised Premises resulting from the Lessee's operations, not only during the
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term of this Lease buy also under the prior leases of the Demised Premises
superseded by the terms hereof. The Lessee also accepts full responsibility for
any contamination of water, land, air of any property of third parties, as well
as abutting parcels, resulting from the Lessee's operations in the Demised
Premises. The Lessors acknowledge that the Demised Premises prior to the
commencement of the lease term hereunder. The Lessors hereby release the Lessee
from responsibility for any claims arising from the Lessee's use of the product
"Benlate" in its operations at the Demised Premises.
11. Utility Charges: All costs for providing security and/or guard services
for the Demised Premises shall be paid and shall be for the account of the
Lessee. The Lessee shall also pay and be responsible for electricity, water and
other utility charges including, but not limited to, telephone and telefax.
12. Default by Lessee:
(a) The occurrence of any of the following shall constitute a default under
this Lease:
(i) Any failure by the Lessee to pay the rent when due as herein
specified. The Lessors shall forward notice of such default in writing to
the Lessee, and the failure of the Lessee to cure such default within
thirty (30) days after the date of receipt of such notice shall, at the
option of the Lessors, authorize the Lessors to terminate this Lease.
(ii) The abandonment of the Demised Premises by the Lessee.
(iii) A failure by the Lessee to observe and perform any other
provision of this Lease, where such failure continues for thirty (30) days
after written notice by the Lessors. However, if the nature of such default
is such that it cannot reasonable be cured within such period, the Lessee
shall not be deemed to be in default if the Lessee shall within this period
commence to cure and then diligently complete such curing.
(iv) The making by the Lessee of an assignment of its interest
hereunder without prior written approval from the Lessors, or if the Lessee
shall file a petition in bankrupt or the appointment of a receiver or
assignee shall automatically terminate all rights of the Lessee under this
Lease and no rights thereto shall pass to the receiver, trustee in
bankruptcy or assignee.
(b) In any such events, the Lessors may give the Lessee written notice
specifying a day not less than five (5) days thereafter whereupon the Term shall
end, and on the day specified the Term shall expire as if that day were the day
herein fixed for the expiration of the Term, and the Lessee shall quit and
surrender the Demised Premises to the Lessors, and the rent for the balance of
the Term of this Lease shall become immediately due to compensate the Lessors
for all damages sustained by the Lessors which resulted from the Lessee's
failure to perform its obligations hereunder.
13. Sublease: The Lessee will not assign or sublease the Demised Premises
without the prior written permission of the Lessors.
14. Access: Although the Lessee shall have complete control over the
Demised Premises, the Lessors shall have the right to enter into and upon the
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Demised Premises or any part thereof during reasonable hours for inspection
purposes for showing the Demised Premises to prospective purchaser, or within
ninety (90) days before the expiration of the Term or any renewal thereof for
showing the Demised Premises to prospective tenants. The Lessors may also enter
the Demised Premises at hours previously agreed to by the parties for purposes
of keeping and maintaining and/or making any and all alterations or improvements
that may be required or that may have been agreed to by the Lessors and the
Lessee.
15. Quiet Enjoyment; Option to Purchase: The Lessors covenant that the
Lessee, on paying the rent and performing all of its obligations hereunder,
shall peacefully and quietly have, hold and enjoy the Demised Premises
throughout the Term and any renewal thereof without hindrance, ejection or
disturbance by any person(s) claiming under the Lessors. The Lessors, in
addition, expressly agree and covenant that should the Lessors decide at any
time during the Term of this Lease or any renewal thereof to sell or mortgage
the Demised Premises or the Property of which it forms part, the Lessors shall
require from the buyer or mortgage that this Lease be honored under the exact
terms and conditions hereof by such buyer or mortgages.
(a) The Lessors hereby grant to the Lessee an option to purchase
the Demised Premises at any time during the Term and any extension
thereof only in the case both Lessors pass away during the Term of
this Agreement or extension thereof. As such, Lessee shall have the
right to exercise this option with the Estate of both Lessors during
the Term of this Agreement and any extension thereof.
(b) The purchase price for the Demised Premises shall be
determined by MAI appraisal. Both the Estate of Lessors and the Lessee
shall each appoint one appraiser within fifteen (15) days of the
Lessee's exercise of the option to purchase. Each appraiser shall
notify both parties of their decision, and the purchase price shall
constitute the sum of both appraisers' decision divided by two. The
Lessee shall pay both appraisers for their services. Should either of
the parties not appoint an appraiser named by above-referenced fifteen
(15) day period, the appraiser named by the other party shall
determine the value of the Demised Premises.
(c) In addition to any rent and all other charges due hereunder,
throughout the Term and any extension thereof, and until the date, if
any, the Lessee exercises the option to purchase, the Lessee shall pay
the Estate of Lessors, in consideration for the granting of said
option, the monthly sum of ONE THOUSAND DOLARS ($1,000.00). This
option shall terminate on the first to occur of the following events:
1) The exercise of this option and the consummation of the sale
and purchase of the Demised Premises by the parties hereto.
2) Termination of the herein Lease, whether by expiration,
default, or mutual consent of the parties hereto.
3) Failure and or refusal of the Lessee to pay in a timely manner
any sums due hereunder for this option.
(d) Upon exercise of the option to purchase, payment will be
made, and within one hundred and eighty (180) days, the Estate of
Lessors and the Lessee shall execute a public deed transferring title
to the Demised Premises in favor of the Lessee, free and clear of all
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liens and encumbrances. The Lessee shall pay all fees relating to said
execution, including but not limited to, the internal revenue stamps
and vouchers and notarial fees required for the public deed and a
certified copy thereof, and the recording of the title transfer in the
records of the Registry of Property.
(e) Upon request of the Lessee during the Term and any extension
thereof, and at the expense of the Lessee, the Lessors agree that this
option to purchase be recorded in the Registry of Property. The
Lessors agree to execute (at the expense of the Lessee) a public deed
and any other instruments, public or private, which may be required or
convenient for such option to be recorded in the Registry of Property.
17. Mortgages: As further consideration for the Lessee entering into this
Lease and for the monthly payments to the Lessors for the option to purchase
herein granted to the Lessee, the Lessors agree not to mortgage or encumber the
Property throughout the term, and any extension thereof, in excess of TEN
MILLION DOLLARS ($10,000,000.00) unless it is for interim financing for
development of land that has not yet segregated.
18. Surrender of Possession: Upon the expiration or other termination of
this Lease, the Lessee shall remove from the Demised Premises any and all
movable industrial equipment and installations belonging to the Lessee, in a
▇▇▇▇▇▇▇-like manner, and shall repair any damage which may thereby result; and
the Lessee shall surrender the Demised Premises in as good condition as the same
were received, ordinary wear and tear, and damage by casualty not caused by the
act or negligence of the Lessee excepted. Any improvements made by the Lessee to
the Demised Premises shall remain therein and become the Property of the
Lessors, without any compensation being due to the Lessee for such improvements.
19. Separability: Except as otherwise expressly agreed, each provision of
this Lease shall be construed to be a separate and independent covenant and
agreement. If any term or provision of this lease or the application thereof to
any personal circumstances shall to any extent be held invalid and
unenforceable, the reminder of this Lease or the application of such term or
provision to persons or circumstances other than as to which it is invalid or
unenforceable, shall not be affected thereby. Each term and provision of this
Lease shall be valid and shall be enforced to extent permitted by law.
20. Successors and Assigns: The terms, covenants and conditions hereof
shall be binding and inure to the benefit of the successors in interest and
assigns to the parties hereto.
21. Notices: Notices required or permitted under this Lease shall be deemed
sufficiently given or served if sent by certified mail, return receipt
requested, as follow:
In case of notice to the Lessors: Mr. and ▇▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Call Box 1370
Dorado, P.R. 00646-1370
In case of notice to Lessee: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ Nursery Farms, Inc.
Road No. 690, Km. 5.8
▇▇▇▇ ▇▇▇▇, P.R. 00692
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22. Arbitration: Any controversy, which shall arise between the Lessors and
the Lessee regarding the rights, duties or liabilities hereunder of either
party, shall be settled by arbitration. Such arbitration shall be before one (1)
disinterested arbitrator if one be agreed upon, otherwise before three (3)
disinterested arbitrators, one named by the Lessors, one by the Lessee, and one
by the two (2) thus chosen. The arbitrator or arbitrator shall settle the
controversy in accordance with the provisions of this Lease and the laws of the
Commonwealth of Puerto Rico.
23. Governing Law: This Lease shall be construed and enforced in accordance
with the laws of the Commonwealth of Puerto Rico.
24. Recordation. Upon request of the Lessee during the Term and any
extension thereof, and at the expense of the Lessee, the Lessors agree that this
Lease be recorded in the Registry of Property. The Lessors agree to execute (at
the expense of the Lessee) a public deed and any other instruments, public or
private, which may be required or convenient for such option to be recorded in
the Registry of Property. The Lessee shall pay all fees relating to said
recordation, including but not limited to, the internal revenue stamps and
vouchers and notarial fees required for the public deed and a certified copy
thereof, and the recording of the Lease in the records of the Registry of
Property. In addition, the Lessee shall advance to the Lessors the legal fees
required to effect the cancellation of the Lease in the Registry of the
Property.
25. Entire Agreement and Amendments: This Lease constitutes the entire
agreement between the Lessors and the Lessee for the lease of the Demised
Premises, and supersedes and nullifies any and all prior leases, agreements and
understandings between the parties hereto for the lease of he Demised Premises.
This Lease may not be changed, modified or discharged except by an instrument in
writing signed by both the Lessors and the Lessee.
IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the
date stated above.
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ /s/▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ NURSERY FARMS, INC.
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President & CFO
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