SUBJECT TO CONTRACT

DATE 18 AUGUST 2017

DRAFT HEADS OF TERMS

ADDRESS – FORMER PLOUGH INN, 36 MARGATE ROAD, BROOMFIELD, HERNE BAY, CT6 7BN

  1. LESSOR

Plough Enterprises Limited

84 High Street

Broadstairs

Kent

CT10 1JJ

Company No 10531059

  1. LESSOR’S SOLICITORS

Please confirm

3. LESSEE

Southern Co-operative Ltd

1000 Lakeside

Western Road

Portsmouth

PO6 3FE

Company No: IP01591R

AGENT

Ashwell Rogers

21 Ganton Street

London

W1F 9BN

David England

4. LESSEE’S SOLICITORS

Blake Morgan

New Kings Court

Tollgate

Chandlers Ford

Eastleigh

SO53 3LG

FAO: Ian Howlett

T: 02380 80908090

F: 02380 80908092

DX: 155850 Eastleigh 7

E:

5. DEMISE

Proposed ground floor area including dedicated car park and service area ( as per plan 477/01 rev a) to the above property, ‘The Plough, 36 Margate Road, Broomfield, Herne Bay, CT6 7BN

The unit to extend to no less than 371.61m2 GIA,(4,000 sqft), a minimum of 18 (inclone disabled space ) customer parking spaces, servicing arrangements and location of plant and bin area still to be agreed and finalised but to accommodate HGV delivery vehicles no smaller than 12m in length. The Lessee will be granted rights to install and gain access to:

i) an ATM

ii) Plant and Machinery

iii) Satellite dish and other communication equipment needed, all to be in a

location to be agreed and approved by the Lessor, such approval not to be

unreasonably withheld.

Exact demise and layout to be finalised but providing a minimum 2500 sqft sales and adequate Back of House provision with delivery solution for a 12m rigid HGV.

6. CAR PARKING

To be agreed and finalised but to have a minimum of 18 customer car parking spaces including 1 disabled space.

7. HGV SERVICING

To be agreed and finalised but to accommodate a minimum sized rigid 12m HGV.

8. TENURE

A new lease to be drawn on a full repairing and insuring basis, for a term of 15 years

from practical completion.

The Premises are to be offered up with full Vacant Possession.

9. RENT

The initial rent payable will be £70,000 per annum exclusive of business rates and

service charge if appropriate, plus VAT. This is subject to the GIA being confirmed as 4,000 sqft GIA at practical completion in accordance with the measurement provisions under the Agreement for Lease (AfL).

10. RENT FREE PERIOD

The rent free period will be 7 months from completion of the lease or the date of hand-over for the commencement of the Lessee’s fit out works, whichever being the earliest and in accordance with the Practical Completion provisions within the AfL.

11. RENT REVIEWS

The rent is to be reviewed on the 5th and 10th, anniversary of the term.

The review is to be by reference to the Retail Price Index capped at 1% (compounded Annually) and collared at 3%

12. REPAIRING OBLIGATIONS

The lease to be drawn on an effective full repairing and insuring subject to a service charge on a pro rata basis to cover common parts only applicable to the subject premises.

The Lessee will not contribute to areas from which it does not benefit and which do not relate directly to the demise.

  1. SERVICE CHARGE

The Lessee will have an obligation to pay a fair proportion (which will be based upon GIA floor area apportionment) of all sums incurred by the Lessor in relation to maintaining, repairing and renewing the roof, foundations, walls and structural parts of the building and estate, including gutters and service media that do not exclusively serve the property of which the demise forms part of together with the management thereof;

  1. The management fee will also include the service charge certification at the year end and will not be carried out by a qualified accountant;
  2. The Lessor will provide a draft service charge for the Lessee’s approval.
  3. The service charge will be payable with the rent quarterly in advance on the usual quarter days from completion of legal documents or occupation, whichever sooner.

13. LESSOR’S WORKS and SPECIFICATION

The premises are to be constructed and handed over in a shell and core condition including the shop front in accordance with a specification to be agreed and annexed to the AfL.

A copy of the Southern Co-op’s (TSC) standard specification dated November 2016 version 9 is attached.

In summary the premises to be wind & water tight, screed floor, windows, doors & bare walls with all services to capped and metered to an agreed point to include BT DPD, gas, water, drainage and electricity (3 phase 200 amp 90 KVA). All ceiling heights to be no lower than 2.8m floor to finished suspended ceiling. The Lessor to have secured all necessary statutory Consents to enable the Lessee to lawfully commence fit out and trade from the premises.

  1. Sub-lets

Lessor to ensure appropriate utilities are provided to the agreed sublets etc

  1. Residential units

Lessor to ensure that appropriate sound and fire insulation is installed.

14. WARRANTIES

All appropriate warranties from the professional team and contractors to be agreed

and provided for inclusion within the AfL.

15. ENERGY PERFORMANCE CERTIFICATE

Lessor to provide an EPC for the shell work of the convenience store only. This is to achieve a minimum rating of C any works required to achieve this level will be at the Lessor’s expense.

16. AGREEMENT TO LEASE

Both parties to enter into an Agreement for Lease as soon as possible on the following terms:

  1. The Lessee obtaining an Off Sales License in accordance with 25ii a.
  2. The Lessor at their own cost obtaining detailed planning permission and releasing all conditions for the attached scheme which will allow the Lessee to complete the lease and legally commence fit out works, and lawfully trade from the premises in accordance with A1 Retail Use including food and normal trading criteria.
  3. Agreeing a satisfactory and operationally appropriate servicing arrangement for all delivery vehicles.
  4. The premises to be offered with vacant possession and without any restrictions on title. All historic covenants and other such encumbrances to be removed at the Lessor’s expense.
  5. Amendments to the agreed specification (11/2016 v9) and plans to be agreed between the parties to be approved by the Lessee if reasonable, such consent not be unreasonably withheld or delayed and providing they comply with normal operational requirement and do not impact on the agreed floor area.
  6. Completion of the Lessor’s works in accordance with both the planning consent, agreed scheme and the tenant’s specification all annexed in the AfL.

17. USER

Any use within Class A1 as defined by the Town & Country Planning Act (Use

Classes) Order 1987 to include retail convenience store, ATM, Lottery, Pay-point and back up/storage.

18. ALIENATION

The Lessee will be permitted to assign whole or sublet the whole or a maximum of TWO parts of the premises at open market value, and for shorter terms that are remaining under the Head Lease, with the Lessor’s consent which is not to be unreasonably withheld or delayed.

Sub-Lease to be excluded from the Security of Tenure and Compensation provisions of the Landlord & Tenant Act 1954 Part II.

The Lessee to be able to share the unit with group companies or assign within the group without Lessor’s consent, but confirming no diminution in value.

The Lessee to have the ability to sub-let to franchisees.

19. INSURANCE

The Lessor will be required to provide Insurance of the Building to its full

Reinstatement Value, against damage by the usual commercial risks (to include

terrorism where such cover is available on reasonable terms), and other risks as are

reasonably required.

The buildings insurance premium shall be reimbursed by the Lessee in full if applicable to an entire building, but otherwise subject to a fair and reasonable floor area (GIA) apportionment.

Loss of rent is to be insured for three years.

The Lease shall provide for the reinstatement of the premises where damage is caused by risks that are not fully insured and the Lessee shall have the option to carry out the reinstatement.

The Lessee shall pay the Lessor’s costs in complying with its insurance obligation pro rata

The Lessee is to insure the plate glass if appropriate and if this affects the insurance for the Building.

Similarly, if the Lessee installs an ATM within the window area, this is to be the Lessee's responsibility if again it impacts upon the insurance of the whole.

20. ALTERATIONS

The Lessee will be permitted to carry out non-structural alterations without the need

for Lessor’s prior approval. Any structural or external alterations (except signage) will

be permitted subject to Lessor’s prior approval, not to be unreasonably withheld or

delayed.

Only if reasonably required by the Lessor, alterations shall be reinstated at the end of the term.

21. SIGNAGE

The Lessee will be permitted to erect usual trading signage, brand materials and

branding without the Lessor’s consent. The Lessee to be responsible for obtaining any statutory consents.

22. TRADING AND DELIVERY HOURS

The intended opening hours are 6.00 am to 11.00 pm every day. No restrictions are

to be placed on Trading or Delivery Hours, other than those imposed under Law. If

such restrictions are imposed, the minimum opening hours are 6.30 am to 10.00 pm

every day and minimum Delivery Hours are 6.30 am to 9.00 pm every day.

23. PLANNING

During the term of the lease, planning applications may be submitted by the Lessee,

without Lessor’s consent, but implementation of any such consent which affects the

structure or exterior of the Building will not be undertaken without prior formal

Lessor’s consent, not to be unreasonably withheld or delayed.

24. LEGAL COSTS

Each party to be responsible for their own legal costs

25. CONDITIONS

These terms are subject to the following contract and pre-contract conditions:

i) Pre-Contract

a)Agreement to specifications

b)Agreement of layout and area of premises to be demised and shared areas

c)Lessor’s approval to fit out works

d)The Lessee obtaining Board Approval

ii) Contract

a)The Lessee at its own cost obtaining an off-sales license, to be lodged within two weeks of obtaining satisfactory planning permission. The Lessee is expected to pursue the application diligently.

b)The Lessor at their own cost obtaining detailed planning in accordance with 16.2

26. LONGSTOP DATES

Target completion date of TBA

The AFL to have a long stop timescale of 24 months from exchange

27. TIMING

Exchange of conditional agreements for lease is to take place within 28 days of the full legal package.

Completion of the lease is to take place 21 days after service of a notice by the landlord of practical completion of the building works to allow for the surveys as above, or sooner if feasible and permissible.

If Practical Completion is not achieved before the first working day of December then PC will take place on or after the first working day of January the following year.

28. INITIAL PLANNING APPLICATION

The Lessor will be responsible for and meet the costs involved in applying for detailed planning consent and the tenant will fully support the planning negotiations and the application as required, including the provision of any additional information required by the LPA.

The Lessee will be responsible for the costs in obtaining planning consent for the signage and plant by way of a separate application.

If planning permission is refused or unsatisfactory conditions are attached to a conditional consent, the Lessor will appeal against such refusal/conditions if so advised by its planning counsel or consultant

NOTES

a)All parties to the transaction are recommended to take independent advice on any VAT implications in this transaction.

b)The terms referred to reflect a proposed agreement and are not intended to be legally binding, pending completion of legal formalities.

The Southern Co-operative Ltd. Registered Office: 1000 Lakeside, Western Road, Portsmouth, Hampshire, PO6 3FE.

Reg No. 1591R (Co-operative and Community Benefit Societies Act 2014) England