Exhibit 10.2
LEASE AGREEMENT
THIS LEASE AGREEMENT is made effective as of the 1st day of January, 2008,
between Whittymore, LLC (hereinafter referred to as “Landlord”) and Cereplast,
Inc., a Nevada corporation (hereinafter referred to as “Tenant”).
WITNESSETH:
WHEREAS, Landlord wishes to lease to Tenant, and the Tenant wishes to lease from
Landlord, that real estate described in Exhibit A, which is attached hereto,
made a part hereof, and incorporated herein.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants,
conditions, and agreements herein contained, Landlord agrees to lease and demise
the Leased Premises (as defined herein), and the Tenant agrees to lease said
Leased Premises from the Landlord, upon the following terms and conditions:
Article I. Basic Lease Provisions
Section 1.1. Basic Lease Provisions.

         
(a)
  Commencement Date:   January 1, 2008 (the “Commencement Date”).
 
       
 (b)
  Landlord:   Whittymore, LLC
 
      c/o Dillard Whittymore III
 
      PO Box 101
 
      Brownstown, IN 47220
 
       
 (c)
  Tenant:   Cereplast, Inc.
 
      3421-3433 West El Segundo Boulevard
 
      Hawthorne, CA 90250
 
       
 
      and
 
       
 
      2213 Killion Avenue
 
      Seymour, IN 47274

(d) Lease Term: Subject to extension pursuant Section 9.8, the initial term
(“Initial Term”) of this lease shall be for ten (10) years. The Initial Term
commences as of the Commencement Date, and terminates on December 31, 2018,
subject to extension.
(e) Option to Renew: The Tenant shall have one (10) ten-year renewal option and
one five (5) year renewal option to extend the term of this lease. The first
option shall extend from January 1, 2019 through December 31, 2028; and the
second option shall extend from January 1, 2029 through December 31, 2033. In
order to exercise the option to renew, the Tenant shall provide Landlord with
notice 180 days prior to the expiration of the previous lease term.
(f) Right of Early Termination: Tenant shall have the right to terminate the
lease prior to the expiration of any term by paying an early termination fee
equivalent to one year’s rent to the Landlord.

 

 

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Upon notice of termination, Tenant shall surrender possession of the premises in
thirty (30) days or as otherwise allowed by Landlord in writing.
(g) Basic Rent. The Basic Rent shall be computed at a rate of $2.86 per square
foot per year for the initial Lease Term of this lease. Annual rental shall be
$300,000.00 per year. Rent shall be paid in the amount of Twenty-Five Thousand
and 00/100 Dollars ($25,000.00) per month.
Said rent is due in equal monthly installments on the first day of each month
beginning on the Commencement Date. If the Commencement Date is not the first
day of a calendar month, rent shall be prorated based on the number of days in
such month. Said payments shall continue from month to month (prorated on a
daily basis, if necessary due to the termination of this Lease on a day other
than the last day of any month), unless canceled by either party as provided
herein.
(h) Leased Premises: The real estate located in Seymour, Jackson County,
Indiana, the legal description of which is described in Exhibit A annexed
hereto; and the building and improvements thereon, which are described in
architectural renderings in Exhibit B, annexed hereto.
Landlord discloses and Tenant understands that Landlord has granted an emergency
access easement to Golden Endeavors, LLC over and along a gravel lane running
from North to South along the West side of demised real estate. Landlord
represents and warranties that this easement is for emergency use only and not
for commercial ingress and egress. Landlord will provide a copy of the access
agreement and legal description to Tenant.
(i) Purpose of Lease: The purpose of this Lease is for the use of the Leased
Premises for a commercial warehouse, manufacturing, storage, and shipping
facility with related office uses.
Section 1.2. Significance of Basic Lease Provisions. Each reference to any Basic
Lease Provision shall be deemed to incorporate all of the items provided under
that Basic Lease Provision.
Section 1.3. Option to Purchase. Tenant shall have the option to purchase the
demised real estate and improvements thereon at any time during the Initial Term
of this lease. In the event that Tenant exercises this option to purchase, the
purchase price shall be $3,900,000.00.
(a) Period of Option and Exercise. This Option may be exercised by Tenant giving
notice of exercise to Landlord during the Initial Term. If Tenant exercised this
Option, its obligation to complete and close the purchase of the Leased Premises
is subject to Landlord being able to convey marketable title to the Leased
Premises to Tenant subject only to:
(1) taxes and assessments which Tenant has agreed to pay;
(2) covenants, conditions, restrictions, agreements and easements, if any, of
record, to which Tenant has no obligation; and
(3) public streets, rights of ways and highways.
(b) Title Insurance. Within ten (10) days of notification by Tenant to Landlord
that it is exercising this Option, Landlord, at its sole cost and expense, shall
furnish Tenant with a commitment for an Owner’s Policy of title insurance, in an
amount equal to the Purchase Price from a title Company acceptable to Purchaser
(“the title Company”) insuring Tenant as owner and insuring marketable title in
the name of Landlord, without exception as to mechanic’s or similar liens, and
free and clear of any and all secured debts, liens, judgments, encumbrances,
leases, parties in possession, licenses, covenants, restrictions, easements,
encroachments, and any other matters of any nature effecting title, except as
otherwise permitted herein.

 

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(c) Exceptions to Title. Tenant shall advise Landlord after receipt of the title
Insurance Commitment of Tenant’s objection to title, if any, specifying each
objection in writing. If written objections are received by Landlord, Landlord
shall have thirty (30) days within which to remove the objections, and if
necessary, the Closing Date shall be extended accordingly. If the objections
cannot be cleared within this period of time, Tenant may waive the objections,
in writing, and close this transaction or may elect not to close.
(d) Closing Location. If Tenant exercises this Option, then the transaction
shall be closed at the offices of the Title Company within ten (10) days of
Tenant notifying Landlord that all conditions precedent have been satisfied and
that it is satisfied as to the title to the Real Estate.
(e) Deed. At closing, Landlord shall execute and deliver to Tenant a Warranty
Deed in a form acceptable to Tenant. A proposed form of the Deed shall be
furnished to Tenant with the Commitment. Tenant shall advise Landlord after
receipt of the proposed form Deed of any objections thereto. If Landlord does
not agree to cure these objections, then Tenant may waive the objections and
close this transaction or may cancel this Option.
(f) Insured Closing. The closing shall be conducted as an insured closing. The
Title Company shall mark-up the Commitment to delete the Requirements Section
and shall date the marked-up Commitment as of the date of closing. The Title
Company shall mark-up the Commitment to show Tenant as the insured.
(g) Closing Costs.
(1) at closing, Landlord shall be charged with the following:
(i) the fees for preparation of the Deed;
(ii) the cost of title report, title search and of a title insurance policy in
the amount of the purchase price;
(iii) one-half (1/2) of the Sales Disclosure fee.
(2) At closing, Tenant shall be charged with the following:
(i) the cost of recording the Deed;
(ii) the closing fee;
(iii) one-half (1/2) of the Sales Disclosure fee.
Section 1.4 Right of First Refusal. During any renewal term of this Lease,
Tenant shall have the right of first refusal to purchase the Leased Premises.
Upon the receipt of a bona fide offer from a third party, Landlord shall provide
Tenant with thirty (30) days notice within which to exercise its right of first
refusal to purchase the Leased Premises for the price and on the terms of the
intended sale.

 

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Section 1.5. Conditions Precedent. Tenant’s obligations under the Lease are
subject to the satisfaction of the following conditions prior to January 1,
2008, unless satisfaction of these conditions are waived in writing by Tenant:
(a) Tenant having received an updated Phase I environmental site assessment
showing the environmental condition of the Leased Premises to be acceptable to
Tenant. The environmental site assessment shall be performed by an environmental
engineering firm acceptable to Tenant at the sole cost and expense of Landlord.
(b) Tenant having received a commitment for a leasehold policy of title
insurance in the amount of Three Million Dollars ($3,000,000.00) from a title
insurance company acceptable to Tenant insuring Tenant’s leasehold interest and
which shows title to the Leased Premises in a condition acceptable to Tenant.
Seller shall bear the cost and expense of the commitment
(c) Tenant having received a survey conforming to a minimum standard for Indiana
Land Title Survey certified by a land surveyor or engineer registered in the
State of Indiana and certified to Tenant showing the location of all
improvements and easements located on or about the Leased Premises and the
location of all encroachments on adjacent real estate or from adjacent real
estate onto the Leased Premises. Landlord shall bear the cost of the survey.
(d) Tenant having received a letter from the company that installed a fire
suppression system that the system is in good working order and complies with
all applicable codes as of the date of the letter, which letter shall be dated
no earlier than November 29, 2007.
(e) Tenant having received a survey depicting the emergency access easement
described in Section 1.1(h) an the agreement creating the easement which show
that the emergency access easement is not situated so as to interfere with
Tenant’s rail expansion plans.
Article II. The Demise
Section 2.1. Demise. Landlord hereby leases and demises the Leased Premises to
Tenant to have and to hold the Leased Premises for the Lease Term to be used by
Tenant for only the purposes stated in Section 1.1(g) above, and for such other
lawful purposes as to which Landlord has given its prior written consent, which
consent shall not be unreasonably withheld or delayed.
Section 2.2. Use and Compliance with Laws. Tenant shall keep the Leased Premises
in a clean and orderly condition and shall operate in a safe and careful manner
and shall not maintain, permit, or suffer any nuisance or waste to occur or
exist on the Leased Premises. Tenant shall comply with all federal, state, and
local laws, rules, regulations, and ordinances applicable to its business and
the use and operation of the Leased Premises.
Article III. Rent, Taxes, and Other Charges
Section 3.1. Basic Rent. The Basic Rent, should any be due, shall be paid to
Landlord at the address set forth in Section 1.1(b) or to such other payee or at
such other address as Landlord may hereafter designate in writing to Tenant.
Section 3.2. Impositions. Landlord covenants and agrees to pay all real estate
taxes and assessments, including assessments for public improvements, utilities
or benefits, which may be laid, levied, assessed, or imposed, upon or become due
and payable and a lien upon the Leased Premises or any part thereof during the
Lease Term (“Impositions”). Tenant shall forward or cause to be forwarded to
Landlord a copy of all statements for real estate and other taxes as received.
In the alternative, Tenant may pay such taxes and Landlord shall reimburse
Tenant for such payments within twenty (20) days after receipt of written notice
to do so, accompanied by a copy of the tax bill.

 

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Section 3.3. Contest of Impositions. Landlord shall have the right to contest
the amount or validity of any Imposition by appropriate legal proceedings, but
this shall not be deemed or construed in any way as relieving Landlord of its
covenant to pay any such Imposition. Tenant shall join in any such proceeding to
the extent necessary to permit Landlord to properly prosecute the same;
provided, however, that Tenant shall not be subjected to any liability for
payment of any costs or expenses in connection with any such proceeding brought
by Landlord, and Landlord hereby covenants to indemnify and hold Tenant harmless
from any such costs or expenses.
Section 3.4. Utility Charges. Tenant shall pay for all sewer charges,
electricity, gas, heat, cable, internet, television, telephone, and water used
by it upon the Leased Premises. It is specifically understood and intended that
the Basic Rent does not include utilities. Landlord warrants to Tenant that the
Leased Premises are now connected to sewer, electric, water, gas, and telephone
utilities and the Tenant will not be required to install infrastructure to
obtain service from the utility providers; however, Tenant will be responsible
for installation of its own telephone system, if the wiring, control panels,
etc. are not compatible with the system now on site. The facility is not wired
for cable or satellite television access and such connection charges will be the
responsibility of the Tenant.
Section 3.5. Public Liability and Property Damage Insurance. Tenant shall carry
public liability and property damage insurance against claims for bodily injury
or death, in limits of not less than One Million Dollars ($1,000,000.00) for any
one occurrence upon request. Tenant shall furnish Landlord with a certificate
evidencing such coverage.
Section 3.6. Property Insurance and Re-Construction. Landlord shall maintain
insurance on the full, fair, insurable value of the Leased Premises so as to
insure the improvements located on the real estate described in Exhibit A to
their full replacement cost without depreciation against fire and other
casualties normally covered by an “all risk” endorsement and in an amount
sufficient to prevent Landlord from becoming a co-insurer within the terms of
the applicable policies. In the event of any injury or damage to the
improvements, Landlord shall promptly undertake the restoration thereof to the
condition that existed prior to injury or damage and rent shall abate in
proportion to Tenant’s inability to efficiently use the Leased Premises prior to
completion of such restoration work by Landlord. In the event the injury or
damage in not capable of being, or is not actually, restored by Landlord within
ninety (90) days’ of the occurrence thereof, Tenant may, upon written notice to
Landlord, terminate this Lease.
Article IV. Quiet Enjoyment
Section 4.1. Quiet Enjoyment. Landlord, for itself, and its successors and
assigns, covenants that Tenant, its successors and assigns, shall have
continuous, peaceful, uninterrupted, and exclusive possession and quiet
enjoyment of the entire premises during the term of this Lease.
Article V. Improvements
Section 5.1. Inspection. Landlord may, during the Lease Term at reasonable times
and during usual business hours, enter to view the Leased Premises and may show
the Leased Premises to others and may at any time within thirty (30) days next
preceding the expiration of the Lease Term, affix to any suitable part of the
Leased Premises a notice for letting the Premises, and keep the same affixed
without hindrance or molestation. Landlord shall provide Tenant with 24 hours
prior verbal notice before inspection of the Leased Premises.

 

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Section 5.2. Alterations and Improvements. Tenant shall obtain the Landlord’s
approval of all plans and contracts for the construction of any alterations and
improvements prior to the commencement of construction, which approval shall not
be unreasonably withheld, conditioned or delayed. Tenant shall deliver to
Landlord written notice describing the proposed alteration or improvement and
provide Landlord with copies of all plans and specifications therefor. Landlord
shall have thirty (30) days from the date of delivery of the notice and plans
and specifications to make objection thereto. If no objection is received by
Tenant to Landlord within thirty (30) days of delivery of the notice and of
plans and specifications, Landlord shall be deemed to have consented to the
proposed alterations or improvements. Tenant shall insure that all contractors,
sub-contractors, laborers and suppliers performing work or supplying materials
for the alterations or improvements are paid in full. Tenant shall obtain lien
waivers in a form acceptable to Landlord from such contractors, sub-contractors,
suppliers, and material men performing work or supplying or leasing materials
for the alterations or improvements. All alterations and improvements
constructed on the Leased Premises by Tenant shall be constructed in a good and
workmanlike manner; and in compliance with all applicable laws, ordinances,
rules, regulations, or orders of any State or other public authority and, when
made, shall be deemed the property of Landlord.
Section 5.3. Surrender Upon Termination. At the expiration of the Lease Term,
Tenant shall surrender the Leased Premises to Landlord in good condition and
repair, ordinary wear and tear excepted. Upon such expiration, Tenant shall be
permitted to remove its trade fixtures, as well as any personal property,
machines, and equipment placed on the Leased Premises by Tenant. Tenant shall
surrender the premises broom clean. If Tenant has not removed such property
within thirty (30) days after the expiration of the Lease Term, the property not
so removed shall be deemed abandoned and shall become the property of the
Landlord.
Section 5.4. Mechanics’ Liens. Tenant shall not suffer or permit any mechanics’
liens to be filed against the fee of the Leased Premises nor against Tenant’s
leasehold interest in the Leased Premises by reason of work, labor, services, or
materials supplied or claimed to have been supplied to Tenant, its contractors,
sub-lessees, licensees, or assigns, either prior or subsequent to the
commencement of the term hereof. If any such mechanics’ lien shall at any time
be filed, Tenant shall, within thirty (30) days after the filing thereof,
initiate such action as it deems appropriate, as provided by applicable Indiana
law, to (a) post bond, or other surety, while appealing or contesting such lien
claim; or (b) give notice to the lien holder to file suit to foreclose the lien;
or (c) bring whatever other action against the lien holder Tenant deems
appropriate to cause the lien to be discharged of record.
Section 5.5. Maintenance. The Landlord agrees that it shall keep the structure,
including the roof, gutters, exterior walls, windows/ window frames, footings,
foundations, and slab in good repair, at Landlord’s sole cost and expense. The
Landlord shall not be required to make any repairs which may be occasioned by
the act or negligence of the Tenant, except to the extent such repair is covered
by Landlord’s insurance.
The non-structural exterior of the building and the grounds shall also be kept
in a clean and safe condition at the sole expense of Tenant. By way of example,
the parties intend this provision to apply to outside storage, debris, snow
removal, loading dock facilities, lawn mowing, parking lot maintenance, etc.
Landlord represents and warrants to Tenant, its successors and assigns, that the
plumbing, heating, sprinkler and other mechanical appurtenances on or to the
Leased Premises are in good working order and comply with all applicable
building laws, rules, regulations and codes as of January 1, 2008.

 

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Article VI. Condemnation
Section 6.1. Apportionment. If at any time during the Lease Term the whole or
any part of the Leased Premises shall be taken for any public or quasi-public
use, under any statute, or by right of eminent domain, then, in such event, the
award, obtained by settlement or trial, shall be paid to Landlord and Tenant in
proportionate shares depending upon the assessment of damages and their
apportionment between the Landlord’s real estate and the Tenant’s improvements
Section 6.2. Reduction in Rent. Amounts received by Landlord upon such a taking
shall reduce the Basic Rent in proportion to the area taken. Such reduction
shall take effect as of the date upon which condemnation proceeds are paid to
Landlord.
Section 6.3. Temporary Taking. If all or any portion of the Leased Premises is
taken by the exercise of the right of eminent domain for governmental occupancy
for a limited period, this Lease shall not terminate and Tenant shall continue
to perform its obligations hereunder as though such taking had not occurred
except to the extent that it may be prevented from so doing pursuant to the
terms of the order of the authority which made the taking, but rent and other
charges shall abate to the extent and in proportion to Tenant’s loss of use of
the Leased Premises during such temporary taking.
Section 6.4. Control of Proceeding. In the event of any such proceedings, Tenant
shall be made a party to such proceedings. Landlord shall give Tenant written
notice within five (5) days of the receipt by Landlord of any official notice
(written or otherwise) of any contemplated condemnation or taking by eminent
domain of any such land. Landlord and Tenant may negotiate jointly or separately
with respect to any such contemplated condemnation as each deems to be in its
best interest.
Section 6.5 Termination by Tenant. If the whole of the Leased Premises shall be
taken or condemned, or if such a portion of the Leased Premises shall be so
taken that as a result thereof the balance cannot be used for the same purpose
and with substantially the same utility to Tenant as immediately prior to such
taking (for purposes of this paragraph, the parties agree that at Tenant’s
election, a taking or partial taking of any portion of Tenant’s parking or truck
turnaround area shall be deemed to prohibit Tenant’s use of the Leased Premises
for the same purpose and with substantially the same utility to Tenant as
immediately prior to such taking), Tenant may terminate this Lease by giving
written notice thereof of to Landlord and the Lease term shall terminate upon
delivery of possession to the condemning authority.
Article VII. Default
Section 7.1. Default by Tenant. The occurrence of any of the following shall
constitute an event of default by Tenant:
(a) In the event that the monthly installment of basic rent is more than five
(5) days late, Tenant shall incur a ten (10%) percent penalty of the basic
monthly installment, but the Tenant shall not be deemed in default unless it
exceeds a fifteen (15) day grace period after the due date of the rent.
(b) Failure by Tenant to perform or comply with any of the conditions or
covenants contained in this Lease, other than those referred to in the foregoing
subsection (a), for a period of thirty (30) days after written notice of such
failure is delivered to Tenant, except for any default not susceptible of being
cured within such thirty (30) day period, in which event the time permitted
Tenant to cure such default shall be extended for as long as shall be necessary
to cure such default, provided Tenant commences promptly and proceeds diligently
to cure such default, and provided further that such period of time shall not be
so extended as to jeopardize the interest of Landlord in this Lease or so as to
subject Landlord or Tenant to any civil or criminal liabilities.

 

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(c) Filing by Tenant in any court pursuant to any statute, either of the United
States or any state, of a petition in bankruptcy or insolvency, or for
reorganization, or for an arrangement, or for the appointment of a receiver or
trustee of all or a portion of Tenant’s property, or an assignment by Tenant for
the benefit of creditors.
(d) Filing against Tenant in any court, pursuant to any statute, either of the
United States or of any state, of a petition in bankruptcy or insolvency, or for
reorganization, or for appointment of a receiver or trustee of all or a portion
of Tenant’s property, if within sixty (60) days after the commencement of any
such proceeding against Tenant, such petition shall not have been dismissed or
stayed.
(e) The taking by any party of the Tenant’s interest in the Leased Premises, or
any part thereof, upon foreclosure, levy, execution, attachment, or other
process of law or equity.
(f) Any warranty, representation, or statement made or furnished to the Landlord
by or on behalf of the Tenant which proves to have been false in any material
respect when made or furnished.
Section 7.2. Notice of Termination. Upon the occurrence of an event of default,
Landlord, within one hundred eighty (180) days of the occurrence, may give
written notice to Tenant specifying such event of default and stating that this
Lease shall expire on the date specified in such notice and upon the date
specified in such notice, this Lease and all rights of Tenant hereunder shall
terminate if the default is not cured with the time provided by this lease.
Section 7.3. Surrender Upon Default. Tenant shall peacefully surrender the
Leased Premises to Landlord within one hundred eighty days of the occurrence of
an event of default by Tenant. Tenant shall be obligated to pay rent so long as
it is possession of the leased premises. Landlord, upon or at any time after
such expiration, may without further notice re-enter the Leased Premises and
repossess it by force, summary proceedings, ejectment, or otherwise, and may
dispossess Tenant and remove Tenant and all other persons and property from the
Leased Premises and may have, hold, and enjoy the Leased Premises and the right
to receive all rental income therefrom.
Section 7.4. Tenant’s Liability.
(a) In the event of surrender upon default Tenant shall be obligated to pay rent
so long as it in possession of the leased premises
(b) The prevailing party in any action to enforce the terms of this Lease
Agreement shall be liable to the other party for the prevailing party’s
reasonable attorneys’ fees and expenses necessary to enforce any term,
condition, or covenant of this Lease.
Section 7.5. Advances and Interest. Upon the occurrence of any Event of Default,
Landlord may, if such default has not been cured, cure that default at the
expense of Tenant. If Landlord in curing such default is compelled to pay or
elects to pay any sum of money or do any acts which will require the payment of
any sum of money, the sum so paid or incurred shall be reimbursed by Tenant upon
demand by Landlord. All sums as to which Tenant is in default of payment,
including rental payments, shall bear interest at the rate of ten percent (10%)
per annum until paid.

 

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Section 7.6. Default by Landlord. Landlord’s failure or refusal to perform any
provision of this Lease which it is obligated to perform or the breach of any
covenant made by Landlord herein shall be a default by Landlord. In the event of
a default by Landlord, and without waiving any other remedy or claim for damages
or breach of this Lease, Tenant may:
(a) Emergency Situation. In an Emergency Situation, as hereinafter defined, if
the default is not cured after reasonable notice to (or attempts to notify)
Tenant may cure the default at Landlord’s expense, provided that such cure is
not more extensive than is reasonably necessary under the circumstances; and
(b) Non-Emergency Situation. In a Non-Emergency Situation, if the default is not
cured without thirty (30) days of written notice from Tenant to Landlord (or, if
such default is of such a nature as to not be reasonably susceptible to cure
within said thirty (30) day period, then the period for cure shall be extended
so long as Lessor commences its efforts to cure within said thirty (30) day
period and thereafter diligently pursues the same to completion), Tenant may
cure the default at Landlord’s reasonable expense.
If Tenant incurs any sum because of Landlord’s default, the reasonable sums paid
by Tenant in connection therewith shall be due from Landlord to Tenant upon
demand, shall bear interest from the date such expenses are incurred until
repaid by Landlord at the rate of twelve percent (12%) per annum, and may be
offset against Tenant’s Rent obligations hereunder. “Emergency Situation” as
used in this Section means a situation that threatens the physical wellbeing of
persons in or on the Leased Premises, or that disrupts Tenant’s use and/or
occupancy of he Leased Premises or any portion thereof so as to materially
interfere with the ordinary conduct of Tenant’s business.
Article VIII. Restrictions on Use
Section 8.1. Amendments or Revisions. It is further understood and agreed that
in the event any part, provision, or condition of this Lease Agreement be
determined illegal or unconstitutional, that the Landlord and Tenant shall make
such amendment, revision, addition or deletion of such condition or provision as
shall be required, provided, however, that no such amendment or revision shall
affect the rights or agreement of the parties hereto or legal rights and
possession in the leasehold, its term or lease rental.
Section 8.2. Non-Discrimination and Equal Opportunity Federal and State Law and
Regulations. It is understood and agreed by the Tenant, its agents, or employees
that, in the use of these premises herein demised, either for the erection of
any structure or building, or in the conduct and operation of its business
thereof, the Tenant, its agents, or employees shall comply and conform with all
Federal, State, or local law, statutes, regulations, or requirements pertaining
to non-discrimination against any person or persons by reason of race, color,
creed, sex or national origin, and further as such may relate to employment and
equal opportunity of persons under any such legal requirements of Federal, State
or local statutes or regulations.
Article IX. Miscellaneous
Section 9.1. Assignment. Tenant shall not assign, mortgage, encumber, or
transfer this Lease, its interest in this Lease, or any improvements permitted
to be constructed by it on the Leased Premises, in whole or in part, or sublet
the leased premises, or any part thereof, nor grant a license or concession in
connection therewith without Landlord’s prior written consent, which consent may
not be unreasonably withheld. This prohibition shall include any act which has
the effect of an assignment or transfer and which occurs by operation of law. It
is specifically understood and agreed, however, that no such assignment or
subletting shall excuse or relieve the Tenant of responsibility for the full and
faithful performance of this Lease by any such assignee or subtenant.

 

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Notwithstanding the foregoing, Tenant shall have the unrestricted right, without
obtaining Landlord’s consent, to assign this Lease and/or to sublet all or a
portion of the Leased Premises to (i) any parent, subsidiary or affiliated
company of Tenant, (ii) any corporation into which Tenant may merge or be
consolidated or to which Tenant may sell all or substantially all of its assets,
or to (iii) any contractor engaged by Tenant for the purpose of managing the
Leased Premises and/or Tenant’s inventory therein; provided, however, that no
such assignment or subletting shall release Tenant from any obligation or
liability under this Lease.
Section 9.2. No Brokers. Landlord and Tenant each represent and warrant to the
other that there are no brokerage fees or real estate commissions due and
payable as a result of this Lease. In the event one of the parties breaches this
warranty, the breaching party covenants to defend, and indemnify and hold
harmless, the other from and against all costs, claims, damages, expenses, and
disbursements of any kind whatsoever (including reasonable attorneys’ fees) for
any compensation, commission, or charge by, or due to, any broker or real estate
agent who alleges to have been employed by the breaching party in connection
with this Lease or the negotiation thereof.
Section 9.3 Estoppel Certificates. At any time and from time to time, each party
agrees, upon request in writing from the other, to execute, acknowledge, and
deliver to the other party a statement in writing certifying that this Lease is
unmodified in full force and effect (or if there have been modifications, that
the same is in full force and effect as modified and stating the modifications),
stating the dates to which the Basic Rent and other charges have been paid, and
making such other accurate certifications as the party or its mortgages may
reasonably require.
Section 9.4. Right to Mortgage. Landlord shall have the right to mortgage the
Leased Premises at any time and without Tenant’s consent. Accordingly, Landlord
shall have the right to subordinate this Lease to any mortgage presently
existing or hereafter placed upon the Leased Premises by so declaring in such
mortgage; and the recording of any such mortgage shall make it prior and
superior to this Lease regardless of the date of execution or recording of
either document. Tenant shall, at Landlord’s request, execute and deliver to
Landlord, without cost, any true and accurate instrument which may be deemed
necessary or desirable by Landlord to confirm the subordination of this Lease.
Any subordination of this lease to a mortgage pursuant to the terms of this
paragraph, whether by a mortgage placed upon the Leased Premises by Landlord or
by the written subordination agreement of Tenant, shall be on the express
provision that so long as Tenant shall not be in default of this Lease beyond
any applicable notice and/or cure period, the mortgagee, in the exercise of any
rights by such mortgagee due to a default of Landlord under the mortgage, shall
not disturb the Tenant in its use or enjoyment of the Leased Premises in
accordance with the terms of this Lease nor shall Tenant be joined as a party in
any such proceeding.
Section 9.5. Fees and Expenses. Each party shall pay the other party’s
reasonable expenses, legal costs, and attorneys’ fees incurred in successfully
enforcing against the other party any covenant, term, or condition of this
Lease.
Section 9.6. Specific Performance. It is expressly provided that the rights and
obligations of the parties under this Lease shall be specifically enforceable.

 

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Section 9.7. Indemnification and Release. Regardless of whether or not separate,
several, joint, or concurrent liability may be imposed upon Landlord, Tenant
shall indemnify and hold harmless Landlord from and against all reasonable
expenses, legal costs, and attorneys’ fees, damages, claims, and liability
arising from or connected with Tenant’s control or use of Leased Premises,
including without limitation, any damage or injury to person or property. This
indemnification shall not include any matter for which the Landlord is
effectively protected against by insurance; nor shall it include any liability
which is attributable to the Landlord’s conduct or negligence. If Landlord
shall, without fault, become a party to litigation commenced by or against
Tenant, then Tenant shall indemnify and hold Landlord harmless. The
indemnification provided by this Section shall include Landlord’s legal costs
and fees in connection with any such claim, action, or proceeding. Tenant does
hereby release Landlord from all liability for any accident, damage, or injury
caused to person or property on or about the Leased Premises, except that due to
negligence on the part of Landlord, and notwithstanding whether such acts or
omissions be active or passive.
Landlord shall indemnify and hold harmless Tenant from and against all
reasonable expenses, legal costs, and attorneys’ fees, damages, claims, and
liability arising from or connected with any act or omission of Landlord in or
about the Leased Premises, including without limitation, any damage or injury to
person or property. This indemnification shall not include any matter for which
the Tenant is effectively protected against by insurance; nor shall it include
any liability that is attributable to the Tenant’s conduct or negligence. If
Tenant shall, without fault, become a party to litigation commenced by or
against Landlord, then Landlord shall indemnify and hold Tenant harmless. The
indemnification provided by this Section shall include Tenant’s legal costs and
fees in connection with any such claim, action, or proceeding.
Section 9.8. Additional Improvements by Landlord.
(a) Paving Improvements. Landlord shall make the following improvements to the
leased premises on or before June 30, 2008: increase the number of parking
spaces from 18 to to a minimum of 75, to be agreed upon at the time of
construction. In addition, Landlord shall within six (6) months of notice by
Tenant pave the exit/rail access area which is currently packed gravel.
(b) Expansion Facility. Upon request of the Tenant made during the Initial Term
(years one through 10) the Landlord will obtain design and construction bids for
a building (“Expansion Facility”) substantially similar to the demised premises
to be located adjoining or adjacent thereto. The expansion facility will include
same core building infrastructure such as loading gates, sprinkler systems,
parking spaces, office area, washrooms and the like.
Upon instructions to proceed by the Tenant to the Landlord, the Landlord shall
proceed to construct the Expansion Facility at Landlord’s sole cost and expanse.
The terms of this Lease shall apply to the Expansion Facility except the
following cost structure shall apply to the rent for the Expansion Facility:
(1) In the event that the cost of construction is $3,000,000 or less, the rental
rate for the Expansion Facility shall be $3.00 per square foot per year; (2) In
the event that the cost of construction is $3,000,000 to $4,000,000, the rental
rate for the Expansion Facility shall be no more than a twelve percent (12%)
yield on the actual cost of construction. For example if the cost of
construction is $4,000,000, annual rent shall be no more than $480,000.
Tenant shall have the right to consult with Landlord and Architect, review and
approve the design of the Expansion Facility.
If Landlord cannot afford to make the expansion improvements, then Tenant shall
have the right to construct the expansion facility at its own cost and expense.

 

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In the event an Expansion Facility is constructed, whether by Landlord or Tenant
after the first three (3) years of the Initial Term, the Initial Term shall not
expire earlier than seven years from the date of completion. For example, if the
Expansion Facility is completed during the third year of this lease, the Initial
Term shall still terminate on December 31, 2018; if the Expansion Facility is
completed during the fourth year of this lease, the Initial Term shall still
terminate on December 31, 2019; if the Expansion Facility is completed during
the tenth year of this lease, the initial term shall still terminate on
December 31, 2025; Tenant shall retain its right to exercise its renewal options
referenced in 1.1 (e), with appropriate adjustments to termination dates.
Section 9.9. No Waiver. No waiver by Landlord of any default by Tenant shall be
effective unless in writing, nor operate as a waiver of any default or of the
same default on a future occasion. Landlord’s acceptance of Basic Rent shall not
be deemed a waiver of any preceding default.
Section 9.10. Applicable Law and Constitution. This Lease shall be deemed an
Indiana contract, and the laws of the State of Indiana shall govern the
validity, performance, and enforcement of this Lease. The invalidity or
unenforceability of any provision of this Lease shall not affect or impair any
other provision. The headings of the several articles and sections contained
herein are for convenience only and do not define, limit, or construe the
contents of such articles or sections.
Section 9.11. Notice. All notices hereunder shall be given in writing and shall
be deemed to have been duly given on the date delivered or refused, if delivered
personally, or, if mailed by registered or certified mail, postage prepaid, to
the respective addresses specified in paragraphs (b) and (c) of Section 1.1.
Section 9.12. Construction of Terms. Whenever the singular or plural number, or
masculine, feminine, or neuter gender is used herein, it shall equally include
the other, and the terms and provisions of this instrument shall be construed
accordingly.
Section 9.13. Agreement Binding Upon Successors. The covenants, agreements, and
obligations herein contained shall extend to, bind, and inure to the benefit not
only of the parties hereto, but to their respective successors and assigns. This
provision does not modify the provisions governing assignment found elsewhere in
this Lease.
Section 9.14. Venue. In the event of any litigation between the Landlord and the
Tenant, the Tenant hereby waives a trial by jury, and further agrees that the
venue of any such action shall be in the County of Jackson, State of Indiana.
Section 9.15. Severance Provision. Any provision thereof which may prove
unenforceable shall not affect the validity of any other provision of any other
contract.
Section 9.16. Complete Agreement. All negotiations, considerations,
representations, and understandings, between the parties are incorporated
herein, and may be modified or altered only by agreement in writing signed by
the party to be bound.
Section 9.17. Storage of Supplies Equipment and Materials. The Tenants shall not
be permitted to stack or store items outside of the structure which the subject
of this Lease Agreement. All storage of supplies, equipment and material shall
be, as much as practicable, inside the building itself.

 

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Section 9.18. Environmental Compliance. The Tenant shall not discharge, emit,
cause, allow, or threaten to discharge, emit, cause, or allow any contaminant or
waste including any noxious odor, either alone or in combination with
contaminants from other sources, into the environment or into any publicly owned
treatment works in any form which causes or would cause pollution which violates
or would violate rules, standards, or discharge or emission requirements adopted
by any agency, federal or state. In addition, the Tenant warrants that it shall
comply with all federal and state statutes, administrative regulations, and
local ordinances with regard to environmental compliance including, but not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act, as amended (“CERCLA”), the Resource Conservation and Recovery Act, as
amended (“RCRA”), the Toxic Substance Control Act (“TSCA”), any of the
regulations thereunder, and the Indiana Environmental Code, Title 13 of the
Indiana Code. From and after the date of this Lease Agreement, the Tenant shall
indemnify and hold the Landlord harmless from and against all claims, damages,
losses, costs, expenses (including, without limitation, reasonable attorneys’
fees), actions and liabilities arising out of or as a proximate result of the
treatment, storage, disposal or the arranging therefor, or the existence on the
Real Estate, of any hazardous or toxic substance (including any constituent
thereof) due to the act or negligence of the Tenant or the discharge into the
environment by the Tenant of any hazardous or toxic substance (including any
constituent thereof), including, without limitation, claims or natural resource
damage, personal injury, property damage or response or remedial costs, whether
at common law or under any domestic or foreign law, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act (“CERCLA”), the Resource Conservation and Recovery Act (“RCRA”), the Toxic
Substance Control Act, and any state or federal statute or municipal ordinance
creating liability for the treatment, storage or disposal, or the arranging
therefore, or the existence on property, of hazardous or toxic substances.
To the knowledge of Landlord, no pollutants or contaminants or other toxic or
hazardous substances, or petroleum products, including crude oil or any fraction
thereof, including any solid, liquid, gaseous or thermal irritant or contaminant
such as smoke, vapor, soot, fumes, acids, alkalis, chemicals or waste regulated
by any local, state or federal agency, authority or governmental unit, statute,
law, ordinance or regulation (including materials to be recycled, reconditioned
or reclaimed) collectively the “Substances”) have been discharged, dispersed,
released, stored, treated, generated, disposed of or allowed to escape on or
about the building or the Leased Premises, or in or about the property of which
the building is a part. Further, Landlord represents and warrants to Tenant that
(I) no asbestos or asbestos-containing materials have been installed, used
incorporated into or disposed of on the Leased Premises; (ii) no polychlorinated
biphenyls (“PCBs”) are located on or in the building in the form of electrical
transformers, fluorescent light fixtures with ballasts, cooling oils or any
other device or form; and (iii) no investigation, administrative order, consent
order or agreement, litigation or settlement with respect to Substances is
proposed, threatened, anticipated or in existence with respect to the building,
or in or about the property of which the building is a part.
Landlord agrees to defend, indemnify and hold harmless Tenant, its directors,
officers, employees, agents, contractors, subcontractors, licensees, invitees,
successors and assigns from and against any and all claims, demands, judgments,
damages, actions, causes of action, injuries, administrative orders, consent
agreements and orders, liabilities, penalties, costs and expenses f any kind
whatsoever, including claims arising out of loss of life, injury to persons,
property or business or damages to natural resources in connection with the
activities of Landlord or parties in a contractual relationship with Landlord,
and which (I) arises out of the actual, alleged or threatened discharge,
dispersal, release, storage, treatment, generation, disposal or escape of
Substances in the building or in or about the property of which the building is
a part; (ii) actually or allegedly arises out of the use, specification or
inclusion of any product, material or process containing chemicals, the failure
to detect the existence or proportion of chemicals in the soil, air, surface
water or ground water or the performance or failure to perform the abatement of
any pollution source or the replacement or removal of any soil, water, surface
water or ground water containing chemicals; or (iii) arises out of any duty to
pay for the cleanup or removal of any Substance or material from the building or
the property upon which the same is located, under any federal, state or local
laws.

 

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Section 9.19. Subrogation. Anything to the contrary in this Lease
notwithstanding, neither party, nor its officers, directors, employees, agents
or invitees, shall be liable to the other party or to any insurance company (by
way of subrogation or otherwise) insuring the other party for any loss or damage
to any building, structure or other tangible property, when such loss is caused
by any of the perils which are or could be insured against under a standard
policy of full replacement cost insurance providing coverage at lease as broad
as the Insurance Offices Causes of Loss, “Special Form”, even though such loss
or damage might have been occasioned by the negligence of such party, its agents
or employees (this clause shall not apply, however, to any damage caused by
intentionally wrongful actions or omissions).
9.20 Dispute Resolution. In the event of a dispute between the Landlord and
Tenant regarding any provision of this lease, the parties agree to the following
dispute resolution procedure: (a) the parties will first try to resolve their
dispute by mediation pursuant to Indiana rules of court governing alternative
dispute resolution; (b) in the event mediation fails, the parties shall submit
their dispute to arbitration pursuant to the Indiana Arbitration Act as amended
from time to time. Each party shall bear their own costs of mediation or
arbitration.
IN WITNESS WHEREOF, Whittymore, LLC, Landlord, and Cereplast, Inc., Tenant, each
in the presence of the undersigned witnesses, have executed this Lease Agreement
on the dates below indicated, but effective as of the date of execution of the
last party to sign this document.

 

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LANDLORD
   
 
   
Whittymore, LLC
   
 
   
/s/ Dillard Whittymore III
         
Dillard Whittymore III, Managing Member
   

Dated: 11/29, 2007

          TENANT    
 
        Cereplast, Inc    
 
       
By:
  /s/ Frederic Scheer    
 
       
 
  Frederic Scheer, CEO    
 
       
By:
       
 
       
 
    (Printed)  

Dated: November 29, 2007
This instrument prepared by

         
Jeffrey J. Lorenzo, Esq.
  and   David W. Paugh, Esq.
Attorney at Law
      Attorney at Law
208 West Second Street
      308 West Second Street
Seymour, IN 47274
      Seymour, IN 47274
(812) 524-9000
      (812) 522-4109

 

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Exhibit A
Legal description.

 

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DESCRIPTION OF PARCEL FROM SEYMOUR INDUSTRIAL CORPORATION TO FOURTH STREET
LEASING
A PART OF THE SOUTH HALF OF SECTION 9, TOWNSHIP 6 NORTH, RANGE 6 EAST, JACKSON
COUNTY, INDIANA, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHWEST CORNER OF SECTION 9, TOWNSHIP 6 NORTH, RANGE 6 EAST;
THENCE NORTH ALONG THE WEST LINE, 1,034.00 FEET TO THE INDIAN BOUNDARY LINE;
THENCE ALONG THE INDIAN BOUNDARY LINE, NORTH 56 DEGREES 10 MINUTES 00 SECONDS
EAST, 1,184.14 FEET TO THE CENTERLINE OF OLD VERNON TO BEDFORD ROAD, (THE ABOVE
PORTION OF THIS DESCRIPTION BEGINNING WITH THE WORDS “COMMENCING AT...” IS
QUOTED FROM DEED RECORD 235, PAGE 501, AS FOUND RECORDED IN THE OFFICE OF THE
RECORDER OF JACKSON COUNTY, INDIANA; THENCE SOUTH 67 DEGREES 06 MINUTES 01
SECONDS EAST ALONG THE APPROXIMATE CENTER LINE OF COUNTY ROAD 650 NORTH, A
DISTANCE OF 85.00 FEET TO A P.K. NAIL, FOUND IN PLACE: THENCE CONTINUING SOUTH
67 DEGREES 06 MINUTES 01 SECONDS EAST ALONG THE APPROXIMATE CENTER LINE OF
COUNTY ROAD 650 NORTH, A DISTANCE OF 342.59 FEET TO A P.K. NAIL, FOUND IN PLACE:
THENCE SOUTH 68 DEGREES 55 MINUTES 20 SECONDS EAST ALONG THE APPROXIMATE CENTER
LINE OF COUNTY ROAD 650 NORTH. A DISTANCE OF 504.40 FEET TO A P.K. NAIL, PLACED
THIS SURVEY (THE AFORMENTIONED WORDS BEGINNING WITH “COMMENCING AT...” ARE
COPIED DIRECTLY FROM DEED RECORD 246, PAGES 938-940) AT THE SOUTHWEST CORNER OF
THE PARCEL DESCRIBED IN DEED RECORD 246, PAGES 938-940; THENCE ALONG THE SOUTH
LINE OF SAID PARCEL THE FOLLOWING THREE COURSES, SOUTH 68 DEGREES 19 MINUTES 08
SECONDS EAST 440.73 FEET TO A FOUND P.K. NAIL; THENCE SOUTH 69 DEGREES 39
MINUTES 11 SECONDS EAST 214.53 FEET TO A SET P.K. NAIL; THENCE SOUTH 68 DEGREES
26 MINUTES 56 SECONDS EAST 212.78 FEET TO A SET P.K. NAIL; THENCE NORTH 00
DEGREES 22 MINUTES 09 SECONDS EAST 32.17 FEET TO A SET 5/8” CAPPED IRON PIN AT
THE POINT OF BEGINNING; THENCE CONTINUING NORTH 00 DEGREES 22 MINUTES 09 SECONDS
EAST 786.03 FEET TO A SET 5/8” CAPPED IRON PIN ON THE NORTH LINE OF THE PARCEL
DESCRIBED IN DEED RECORD 246, PAGES 938-940; THENCE ALONG THE NORTH AND EAST
LINES OF SAID PARCEL THE FOLLOWING THREE COURSES, SOUTH 81 DEGREES 42 MINUTES 42
SECONDS EAST 416.89 FEET TO A FOUND 5/8” IRON PIN; THENCE SOUTH 68 DEGREES 48
MINUTES 19 SECONDS EAST 184.58 FEET TO A FOUND 5/8” IRON PIN; THENCE SOUTH 00
DEGREES 22 MINUTES 09 SECONDS WEST 917.04 FEET TO A SET 5/8” CAPPED IRON PIN;
THENCE NORTH 61 DEGREES 23 MINUTES 04 SECONDS WEST 94.52 FEET TO A SET 5/8”
CAPPED IRON PIN; THENCE NORTH 67 DEGREES 53 MINUTES 19 SECONDS WEST 350.42 FEET
TO A SET 5/8” CAPPED IRON PIN; THENCE NORTH 68 DEGREES 26 MINUTES 56 SECONDS
WEST 237.28 FEET TO THE POINT OF BEGINNING, CONTAINING 12.450 ACRES, MORE OR
LESS, SUBJECT TO THE RIGHT-OF-WAY FOR AN ELECTRIC TRANSMISSION LINE, AND ALL
OTHER LEGALLY ESTABLISHED RIGHTS-OF-WAY AND EASEMENTS.

 

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Exhibit B
Architectural drawings provided by Landlord.

 

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(IMAGE) [c73320c7332001.gif]

 

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Addendum
Upgrades or changes by Landlord
1. Landlord will add additional paved parking to the existing 18 spaces for
50-75 spaces within 6 months of occupancy.
2. Landlord will pave exit / rail access area which is now packed gravel. (It is
not paved currently because it would need to be ripped up for rail
installation.) This will be done in coordination with Tenant and be based upon
schedule for rail spur addition.
3. Landlord will provide updated Phase 1 environmental report prior to lease
execution.
Other Improvements
Rail spur access will be granted and made available.
1. This is to be coordinated with State of Indiana economic authorities, but
assumption is CSX will approve a design and issue letter stating this. It will
cost approximately $400,000 to increase length to reach the site and add dual
spur. One-half of this will be paid for by a State grant. CSX will likely
require the remaining one-half be in paid cash and returned in rebates, but it
is expected that the City and County will pay for this and be reimbursed in
rebates from CSX so Tenant is not out cash for rail spur construction.
2. Utilities. Duke Power will make available up to 5,000 amps of power as
needed. It will require Tenant to coordinate with Duke Energy for correct
transformer sizing.
Other
The lease and right of first refusal would be subject to the site, facilities
and structures satisfactorily passing an environmental review that Tenant may
require or as documented in an updated Phase I environmental report provided by
the Landlord. Required environmental permitting for Tenant’s operations shall be
its own responsibility.
Expansion option
1. At Tenant’s request, Landlord will construct and make available a ‘mirror
image’ 105,000 square-foot building directly adjacent to the existing building
within 9 months of Tenant’s request, barring unforeseen circumstances.
2. The lease term length for the new structure will be 7 years.
3. The terms of this lease will be the same as for the existing structure
(property tax included, building insurance included, no CAM included or business
personal property tax or personal effects insurance, one year break fee, etc.)
4. Lease price. Because Landlord cannot be certain when Tenant will request the
construction of an additional building similar to the current demised premises,
it cannot predict future interest rates, costs of construction, materials,
availability of labor, etc. Landlord will agree to negotiate these items at the
time that Tenant makes its request for the construction of an additional
building.
5. Cereplast and owner may discuss and agree to an expansion building that
varies in some way from existing building. If so, then adjustments to the lease
rate may be needed and will be based on the above as a reference.
6. Expansion Building will include same core building infrastructure such as
loading gates, sprinkler systems, parking spaces, office area, washrooms and the
like.

 

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