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INDUSTRIAL LEASE AGREEMENT DATED APRIL 27, 2007

Industrial Lease Agreement

INDUSTRIAL LEASE AGREEMENT DATED APRIL 27, 2007 | Document Parties: 8650 Commerce Drive, LLC | INDUSTRIAL DEVELOPMENTS INTERNATIONAL, INC You are currently viewing:
This Industrial Lease Agreement involves

8650 Commerce Drive, LLC | INDUSTRIAL DEVELOPMENTS INTERNATIONAL, INC

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Title: INDUSTRIAL LEASE AGREEMENT DATED APRIL 27, 2007
Date: 8/29/2007
Industry: Computer Peripherals     Sector: Technology

INDUSTRIAL LEASE AGREEMENT DATED APRIL 27, 2007, Parties: 8650 commerce drive  llc , industrial developments international  inc
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EXHIBIT 10.26

CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

INDUSTRIAL LEASE AGREEMENT

THIS LEASE AGREEMENT (the “Lease”) is made as of the “Lease Date” (as defined in Section 37 herein) by and between INDUSTRIAL DEVELOPMENTS INTERNATIONAL, INC., a Delaware corporation (“Landlord”), and 8650 Commerce Drive, LLC, a Mississippi limited liability company (“Tenant”) (the words “Landlord” and “Tenant” to include their respective legal representatives, successors and permitted assigns where the context requires or permits).

W I T N E S S E T H:

1. Basic Lease Provisions . The following constitute the basic provisions of this Lease:

 

(a)    Demised Premises Address:    8650 Commerce Drive, Suite 100
      Southaven, Mississippi 38671
(b)    Demised Premises Square Footage: approximately 592,956 sq. ft.
(c)    Building Square Footage: approximately 740,844 sq. ft.
(d)    Annual Base Rent:

 

   Lease Year 1:     
  

(Lease Year 1 consists of 12 months plus any Fractional Month)

 

    
   
   (months 1 – [*] )    ($ [*] )
   
   Months [*] – 12)   

$ [*] (plus the prorated amount for any Fractional Month per Section 1(i) hereof, if applicable)

 

  

Based on a rental rate of $ [*] per square foot per annum, [*] .

 

  
   
   Lease Years 2-5:    $ [*]
  

Based on a rental rate of $ [*] per square foot per annum.

 

    
   
   Lease Years 6-10:    $ [*]
  

Based on a rental rate of $ [*] per square foot per annum.

 

    

 

(e)    Monthly Base Rent Installments:

 

  

Lease Year 1 (months 1- [*] ):

 

  

$ [*]

 

   
  

Lease Year 1 (months [*] -12):

 

  

$ [*] (plus the prorated amount for any Fractional Month per Section 1(i) hereof, if applicable)

 

   
  

Lease Years 2-5 (months 13 – 60):

 

  

$ [*]

 

   
  

Lease Years 6-10 (months 61 – 120):

 

  

$ [*]

 

 

(f)    Lease Commencement Date: The date on which Substantial Completion (as defined in Section 17(f) hereof) of the Demised Premises has occurred, which is contemplated to be October 1, 2007 (and Tenant shall not be required to accept a Lease Commencement Date prior to October 1, 2007).
(g)    Base Rent Commencement Date: The ninety-third (93rd) day after the Lease Commencement Date.
(h)    Expiration Date: The last day of the one-hundred twentieth (120th) full calendar month following Lease Commencement Date.
(i)    Primary Term: Ten (10) Lease Years from the Lease Commencement Date plus, in the event the Base Rent Commencement Date does not occur on the first (1st) day of a calendar month, a number of days equal to the period from and including the Base Rent Commencement Date to and including the last day of the calendar month in which the Base Rent Commencement Date occurs (if applicable, the “Fractional Month”).

 

 


[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 


(j)    Tenant’s Operating Expense Percentage: 80.04%.
(k)    Security Deposit: $ [*] .
(l)    Permitted Use: (a) Distribution, warehousing, assembly, systems integration and storage of automatic identification products and telephony and computer telephony integration products, security and conferencing products, software, and any other durable goods, training purposes, and administrative uses reasonably incidental thereto (collectively, the “Primary Use”), and (b) subject to the limitations hereinafter specified, for distribution, warehousing and storage of other products to the extent permissible under applicable Governmental Requirements (as hereinafter defined), the Rules and Regulations (as hereinafter defined) and the protective covenants and other title matters affecting the Building listed on Exhibit A-3 hereto (the “Permitted Exceptions”); provided however, that Tenant’s use of the Demised Premises (i) shall never include the distribution, warehousing and storage of products or any use of the Demised Premises prohibited by any provision contained in this Lease (including, without limitation, Section 16 hereof), (ii) shall never extend to or allow the use, distribution, warehousing or storage of radioactive materials at the Demised Premises, or any use wherein a Hazardous Substance (as hereinabove defined) constitutes the principal or primary product of the business to be conducted at the Demised Premises, and (iii) for distribution, warehousing and storage of any products other than those contemplated by the Primary Use, must not result in a material risk of environmental contamination at the Demised Premises. Tenant shall give written notice to Landlord in the event Tenant changes the use from the Primary Use.
(m)    Address for notice:
   Landlord:    Industrial Developments International, Inc.
      c/o IDI, Inc.
      3424 Peachtree Road, N.E., Suite 1500
      Atlanta, Georgia 30326
      Attn: Manager - Lease Administration
   Tenant:    8650 Commerce Drive, LLC
      6 Logue Court
      Greenville, SC 29615
      Attn: General Counsel
(n)    Address for rental payments:
      Industrial Developments International, Inc.
     

c/o IDI Services Group, LLC

P. O. Box 281464

Atlanta, Georgia 30384-1464

(o)    Broker(s):    Commercial Advisors, LLC
      3175 Lenox Park Blvd., Suite 100
      Memphis, Tennessee 38115
      Attn: Mr. Wyatt Aiken
(p)    Guarantor:    ScanSource, Inc.
      6 Logue Court
      Greenville, SC 29615
      Attn: General Counsel

2. Demised Premises . For and in consideration of the rent hereinafter reserved and the mutual covenants hereinafter contained, Landlord does hereby lease and demise unto Tenant, and Tenant does hereby hire, lease and accept, from Landlord all upon the terms and conditions hereinafter set forth the following premises, referred to as the “Demised Premises”, as outlined on Exhibit A-1 attached hereto and incorporated herein: approximately 592,956 square feet of space, having an address as set forth in Section 1(a), located within Building F (the “Building”), which contains a total of approximately 740,844 square feet and is located on certain land containing approximately 34.89 acres (more particularly described on Exhibit A-2 attached hereto, the “Land”) within Stateline Business Park (the “Project”), located in DeSoto County, Mississippi. The parties acknowledge that the number of square feet recited above has been conclusively determined and is not subject to contest by either party, subject to the provisions of Section 13 of Exhibit C to this Lease.

 


[*] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

 

 

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3. Term . To have and to hold the Demised Premises for a preliminary term (the “Preliminary Term”) commencing on the Lease Date and ending on the day immediately preceding the Lease Commencement Date as set forth in Section 1(f), and a primary term (the “Primary Term”) commencing on the Lease Commencement Date and terminating on the Expiration Date as set forth in Section 1(h), as the Lease Commencement Date and the Expiration Date may be revised pursuant to Section 17 (the Preliminary Term, the Primary Term, and any and all extensions thereof, herein referred to as the “Term”). The term “Lease Year”, as used in this Lease, shall mean the 12-month period commencing on the Lease Commencement Date, and each 12-month period thereafter during the Term; provided, however, that if the Base Rent Commencement Date is a day other than the first day of a calendar month, the first Lease Year shall include the resulting Fractional Month and shall extend through the end of the twelfth (12th) full calendar month following the Lease Commencement Date.

4. Base Rent . Tenant shall pay to Landlord at the address set forth in Section 1(n), as base rent for the Demised Premises, commencing on the Base Rent Commencement Date and continuing throughout the Term in lawful money of the United States, the annual amount set forth in Section 1(d) payable in equal monthly installments as set forth in Section 1(e) (the “Base Rent”), payable in advance, without demand and without abatement, reduction, set-off or deduction, on the first day of each calendar month during the Term. If the Base Rent Commencement Date shall fall on a day other than the first day of a calendar month, the Base Rent shall be apportioned pro rata on a per diem basis for the resulting Fractional Month (which pro rata payment shall be due and payable on the Base Rent Commencement Date). No payment by Tenant or receipt by Landlord of rent hereunder shall be deemed to be other than on account of the amount due, and no endorsement or statement on any check or any letter accompanying any check or payment of rent shall be deemed an accord and satisfaction, and Landlord may accept such check as payment without prejudice to Landlord’s right to recover the balance of such installment or payment of rent or pursue any other remedies available to Landlord.

5. Security Deposit . On the date which is six (6) months prior to the expiration of the Term (after giving effect to any extensions of the Term that have been exercised at the time), Tenant shall pay to Landlord within ten (10) days after Landlord’s request the sum set forth in Section 1(k) (the “Security Deposit”) as security for the full and faithful performance by Tenant of each and every term, covenant and condition of this Lease (including, without limitation, those which have accrued prior to such date). The Security Deposit may be commingled with Landlord’s other funds or held by Landlord in a separate interest bearing account, with interest paid to Landlord, as Landlord may elect. In the event that Tenant is in default under this Lease, Landlord may retain the Security Deposit for the payment of any sum due Landlord or which Landlord may expend or be required to expend by reason of Tenant’s default or failure to perform; provided , however , that any such retention by Landlord shall not be or be deemed to be an election of remedies by Landlord or viewed as liquidated damages, it being expressly understood and agreed that Landlord shall have the right to pursue any and all other remedies available to it under the terms of this Lease or otherwise. In the event all or any portion of the Security Deposit is so retained by Landlord, Tenant shall, within five (5) days of demand therefor from Landlord, replenish the Security Deposit to the full amount set forth in Section 1(k). In the event that Tenant shall comply with all of the terms, covenants and conditions of this Lease, the Security Deposit shall be returned to Tenant within thirty (30) days after the later of (a) the Expiration Date or (b) the date that Tenant delivers possession of the Demised Premises to Landlord. In the event of a sale of the Building, Landlord shall transfer the Security Deposit to the purchaser, and upon acceptance by such purchaser, Landlord shall be released from all liability for the return of the Security Deposit. Tenant shall not assign or encumber the money deposited as security, and neither Landlord nor its successors or assigns shall be bound by any such assignment or encumbrance.

6. Operating Expenses and Additional Rent .

(a) Tenant agrees to pay as Additional Rent (as defined in Section 6(b) below) its proportionate share of Operating Expenses (as hereinafter defined). “Operating Expenses” shall be defined as all reasonable expenses for operation, repair, replacement and maintenance as necessary to keep the Building and the common areas, driveways, and parking areas associated therewith (collectively, the “Building Common Area”) fully operational and in good order, condition and repair, including but not limited to, utilities for the Building Common Area, expenses associated with the driveways and parking areas (including sealing and restriping, and trash, snow and ice removal) , roof, security systems, fire detection and prevention systems, lighting facilities, landscaped areas, walkways, painting and caulking, directional signage, curbs, drainage strips, sewer lines, all charges assessed against or attributed to the Building pursuant to any applicable easements, covenants, restrictions, agreements, declaration of protective covenants or development standards, property management fees, all real property taxes and special assessments imposed upon the Building, the Building Common Area and the land on which the Building and the Building Common Area are constructed, all costs of insurance paid by Landlord with respect to the Building and the Building Common Area (including, without limitation, commercially reasonable deductibles), and costs of improvements to the Building and the Building Common Area required by any law, ordinance or regulation applicable to the Building and the Building Common Area generally (and not because of the particular use of the Building or the Building Common Area by a particular tenant), which cost shall be amortized on a straight line basis over the useful life of such improvement, as reasonably determined by Landlord in accordance with generally accepted accounting

 

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principles. Operating Expenses shall not include expenses for the costs of any maintenance and repair required to be performed by Landlord at its own expense under Section (10)(b). Further, Operating Expenses shall not include (i) the costs for capital improvements unless such costs are incurred for the purpose of causing a material decrease in the Operating Expenses of the Building or the Building Common Area or are incurred with respect to improvements made to comply with laws, ordinances or regulations as described above (ii) leasing and brokerage commissions and fees and marketing expenses; (iii) costs of building out or otherwise improving any space to be occupied by a tenant; (iv) legal or court costs (or other professional or advisory costs) associated with leasing any space or addressing disputes with any present, former or potential tenant or purchaser of the property on which the Building is located (the “Property”); (v) fines or penalties imposed on Landlord, the Property or the Building; (vi) costs of special services rendered to particular tenants of the Building rather than to all tenant thereof; (vii) capital expenditures and depreciation of the Building or any other improvements to the Property (except to the extent expressly permitted in this Section 6); (viii) interest and amortization of loans; (ix) ground rent; (x) compensation paid to officers or executives of Landlord higher than the level of Building manager; (xi) franchise, transfer, gains, inheritance, estate and income taxes imposed upon Landlord; (xii) costs and expenses otherwise includable in Operating Expenses, to the extent that Landlord is specifically and separately reimbursed from other sources for such costs and expenses through insurance or condemnation proceeds, direct payment by a tenant of the Building or otherwise; (xiii) that portion of the salaries of Landlord’s employees which does not relate to services performed in and for the Building; (xiv) any damages paid or incurred as a result of any tortious conduct by Landlord or any of its agents or employees, or any breach of any lease of space by Landlord or any of its agents or employees, and any attorneys’ fees actually incurred, disbursements, or other costs paid or incurred in the defense and settlement of claims therefor; (xv) costs relating to liability for a complete or partial withdrawal from any “multi-employer” plans within the meaning of Section 4001(a)(3) of the Employee Retirement Income Security Act of 1974, as amended by the Multi-Employer Retirement Income Security Act of 1980; and (xvi) the cost of repairs or construction necessitated by violations of applicable Governmental Requirements in effect as of the Lease Commencement Date, including without limitation, Environmental Laws (as hereinafter defined), including fines, penalties, and interest thereon. The proportionate share of Operating Expenses to be paid by Tenant shall be a percentage of the Operating Expenses based upon the proportion that the square footage of the Demised Premises bears to the total square footage of the Building (such figure referred to as “Tenant’s Operating Expense Percentage” and set forth in Section 1(j)); provided that, as to management fees, Tenant shall pay Landlord the management fees directly attributable to the Rent (as hereinafter defined) payable hereunder with respect to the Demised Premises, and not Tenant’s Operating Expense Percentage of the management fees payable on the entire Building. Notwithstanding the foregoing, Landlord shall, in Landlord’s reasonable discretion, have the right to adjust Tenant’s proportionate share of individual components of Operating Expenses if Tenant’s Operating Expense Percentage thereof would not equitably allocate to Tenant its share of such component of Operating Expenses in light of Tenant’s particular use of, manner of use of and/or level of tenant improvements in the Demised Premises. Prior to or promptly after the beginning of each calendar year during the Term, Landlord shall estimate the total amount of Operating Expenses to be paid by Tenant during each such calendar year and Tenant shall pay to Landlord one-twelfth (1/12) of such sum on the first day of each calendar month during each such calendar year, or part thereof, during the Term. Within a reasonable time after the end of each calendar year, Landlord shall submit to Tenant a statement of the actual amount of Operating Expenses for such calendar year (Landlord hereby agreeing to submit such statement within one hundred twenty (120) days of the expiration of the calendar year with respect to which such statement applies), and the actual amount owed by Tenant, and within thirty (30) days after receipt of such statement, Tenant shall pay any deficiency between the actual amount owed and the estimates paid during such calendar year, or in the event of overpayment, Landlord shall credit the amount of such overpayment toward the next installment of Operating Expenses owed by Tenant or remit such overpayment to Tenant if the Term has expired or has been terminated and no Event of Default exists hereunder (or, if an Event of Default exists, apply such amount to Tenant’s outstanding obligations hereunder), along with such statement. The obligations in the immediately preceding sentence shall survive the expiration or any earlier termination of this Lease. If the Lease Commencement Date shall fall on other than the first day of the calendar year, and/or if the Expiration Date shall fall on other than the last day of the calendar year, Tenant’s proportionate share of the Operating Expenses for such calendar year shall be apportioned prorata.

(b) Any amounts required to be paid by Tenant hereunder (in addition to Base Rent) and any charges or expenses incurred by Landlord on behalf of Tenant under the terms of this Lease shall be considered “Additional Rent” payable in the same manner and upon the same terms and conditions as the Base Rent reserved hereunder except as set forth herein to the contrary (all such Base Rent and Additional Rent sometimes being referred to collectively herein as “Rent”). Any failure on the part of Tenant to pay such Additional Rent when and as the same shall become due shall entitle Landlord to the remedies available to it for non-payment of Base Rent. Tenant’s obligations for payment of Additional Rent shall begin to accrue on the Lease Commencement Date regardless of the Base Rent Commencement Date.

(c) If applicable in the jurisdiction where the Demised Premises are located, Tenant shall pay and be liable for all rental, sales, use and inventory taxes or other similar taxes, if any, on the amounts payable by Tenant hereunder levied or imposed by any city, state, county or other governmental body having authority, such payments to be in addition to all other payments required to be paid to Landlord by Tenant under the terms of this Lease. Such payment shall be made by Tenant directly to such governmental body if billed to Tenant, or if billed to Landlord, such payment shall be paid concurrently with the payment of the Base Rent, Additional Rent, or such other charge upon which the tax is based, all as set forth herein.

 

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(d) In addition to the provisions of this Section 6, Special Stipulations 5 and 6 on Exhibit C hereto shall be applicable to the determination of Operating Expenses hereunder.

7. Use of Demised Premises .

(a) The Demised Premises shall be used for the Permitted Use set forth in Section 1(l) and for no other purpose.

(b) Tenant will permit no liens to attach or exist against the Demised Premises, and shall not commit any waste.

(c) The Demised Premises shall not be used for any illegal purposes, and Tenant shall not allow, suffer, or permit any vibration, noise, odor, light or other effect to occur within or around the Demised Premises that could constitute a nuisance or trespass for Landlord or any occupant of the Building or an adjoining building, its customers, agents, or invitees. Upon notice by Landlord to Tenant that any of the aforesaid prohibited uses are occurring, Tenant agrees to promptly remove or control the same.

(d) Tenant shall not in any way violate any law, ordinance or restrictive covenant affecting the Demised Premises, and shall not in any manner use the Demised Premises so as to cause cancellation of, prevent the use of, or increase the rate of, the fire and extended coverage insurance policy required hereunder. Landlord makes no (and does hereby expressly disclaim any) covenant, representation or warranty as to the Permitted Use being allowed by or being in compliance with any applicable laws, rules, ordinances or restrictive covenants now or hereafter affecting the Demised Premises, and any zoning letters, copies of zoning ordinances or other information from any governmental agency or other third party provided to Tenant by Landlord or any of Landlord’s agents or employees shall be for informational purposes only, Tenant hereby expressly acknowledging and agreeing that Tenant shall conduct and rely solely on its own due diligence and investigation with respect to the compliance of the Permitted Use with all such applicable laws, rules, ordinances and restrictive covenants and not on any such information provided by Landlord or any of its agents or employees. Notwithstanding the foregoing, Industrial Developments International, Inc. (“IDI”), the initial “Landlord” hereunder, hereby represents that, to IDI’s actual knowledge (i) which for purposes of this clause (i) is based solely on that letter from the Office of Planning and Development of the City of Southaven, Mississippi to Mr. Robert Fischer of IDI dated July 21, 2006, a copy of which is attached hereto as Exhibit H , the land on which the Building lies is currently zoned “Planned Business Park (PBP)” under the City of Southaven, Mississippi zoning ordinance; and (ii) there are no protective or restrictive covenants that encumber the Property other than as may be included in the Permitted Exceptions.

(e) In the event insurance premiums pertaining to the Demised Premises, the Building, or the Building Common Area, whether paid by Landlord or Tenant, are increased over the least hazardous rate available for ordinary office, warehouse, assembly, integration and distribution purposes due to the nature of the use of the Demised Premises by Tenant, Tenant shall pay such additional amount as Additional Rent.

8. Insurance .

(a) Tenant covenants and agrees that from and after the Lease Commencement Date or any earlier date upon which Tenant enters or occupies the Demised Premises or any portion thereof, Tenant will carry and maintain, at its sole cost and expense, the following types of insurance, in the amounts specified and in the form hereinafter provided for:

(i) Commercial General Liability insurance (including Contractual Liability coverage) covering the Demised Premises and Tenant’s use thereof against claims for bodily injury or death, property damage and product liability occurring upon, in or about the Demised Premises, such insurance to be written on an occurrence basis (not a claims made basis), to be in combined single limits amounts not less than $3,000,000.00 per occurrence and to have general aggregate limits of not less than $5,000,000.00.

(ii) Insurance covering (A) all of the items included in the leasehold improvements constructed in the Demised Premises by or at the expense of Landlord (collectively, the “Improvements”), including but not limited to demising walls and the heating, ventilating and air conditioning system and (B) Tenant’s trade fixtures, merchandise and personal property from time to time in, on or upon the Demised Premises, in an amount not less than one hundred percent (100%) of their full replacement value from time to time during the Term (with such replacement value reasonably determined by Landlord by notice to Tenant from time to time during the term), providing protection against perils included within the standard form of “Special Form” fire and casualty insurance policy, together with insurance against sprinkler damage, vandalism, malicious mischief, flood and earthquake, regardless of the flood or earthquake zone. If during the lease term, Tenant is unable to procure earthquake coverage on its merchandise through Tenant’s risk management portfolio, Landlord agrees to allow Tenant to carry earthquake coverage on such merchandise of not less than sixty percent (60%) of the full replacement value

 

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thereof. Any policy proceeds from such insurance relating to the Improvements shall be used solely for the repair, construction and restoration or replacement of the Improvements damaged or destroyed unless this Lease shall cease and terminate under the provisions of Section 20.

(b) All policies of the insurance provided for in Section 8(a) shall be issued in form reasonably acceptable to Landlord by insurance companies with a rating of not less than “A,” and financial size of not less than Class VII, in the most current available “Best’s Insurance Reports”, and licensed to do business in the state in which the Building is located. Each and every such policy:

(i) shall name Landlord, Lender (as defined in Section 24), and any other party reasonably designated by Landlord, as an additional insured. In addition, the coverage described in Section 8(a)(ii)(A) relating to the Improvements shall also name Landlord as “loss payee”;

(ii) shall be delivered to Landlord through a certificate of insurance evidencing the required lines of coverage, insurance limits and coverage endorsements set forth in this Lease, and otherwise in a form acceptable to Landlord, prior to the Lease Commencement Date and thereafter within ten (10) days prior to the expiration of each such policy, and, as often as any such policy shall expire or terminate. Renewal or additional policies shall be procured and maintained by Tenant in like manner and to like extent;

(iii) shall contain a provision that the insurer will give to Landlord and such other parties in interest at least thirty (30) days notice in writing in advance of any cancellation, termination or lapse (provided that no such notice shall be required by virtue of the expiration of such policy in accordance with the terms of the certificate delivered to Landlord as provided herein), or the effective date of any reduction in the amounts of insurance (provided that such policy need only provide ten (10) days notice in writing in advance of any cancellation as a result of failure to pay the premium therefor); and

(iv) shall be written as a primary policy which does not contribute to and is not in excess of coverage which Landlord may carry.

(c) In the event that Tenant shall fail to carry and maintain the insurance coverages set forth in this Section 8, Landlord may upon thirty (30) days notice to Tenant (unless such coverages will lapse in which event no such notice shall be necessary) procure such policies of insurance and Tenant shall promptly reimburse Landlord therefor.

(d) Landlord and Tenant hereby waive any rights each may have against the other on account of any loss or damage occasioned to Landlord or Tenant, as the case may be, their respective property, the Demised Premises, its contents or to the other portions of the Building, arising from any risk covered by the Special Form fire and extended coverage insurance required to be carried hereunder. The parties hereto shall cause their respective insurance companies insuring the property of either Landlord or Tenant against any such loss, to waive any right of subrogation that such insurers may have against Landlord or Tenant, as the case may be.

(e) Landlord agrees to keep in force during the Term, at Landlord’s sole cost and expense (subject to reimbursement therefor by Tenant’s payment of its share of Operating Expenses) (i) a fire and other casualty policy protecting against losses suffered to any portion of the Building by fire and such other risks and hazards as are insurable under present and future terms of “all-risk” insurance policies (or its equivalent), such policy to be issued by an insurance company with a rating of not less than “A”, and financial size of not less than Class VII, in the most current “Best’s Insurance Reports”, and authorized to do business in the State of Mississippi (a “Satisfactory Insurance Company”) in an amount not less than ninety-five percent (95%) of the replacement value of the Building (exclusive of footing and foundations), and shall be on such other terms and conditions as insurance policies then generally being carried by other owners of similar buildings in the greater Memphis, Tennessee area carrying such insurance, and (ii) a Commercial General Liability Insurance policy written by a Satisfactory Insurance Company insuring Landlord against bodily injury (including death) and property damage occasioned by an occurrence in or about the Building for which Landlord would be responsible pursuant to the terms hereof. The limits of liability for such liability policy shall be not less than that required of Tenant hereinabove. Landlord agrees to carry an “All Risk” property deductible of not greater than two hundred fifty thousand dollars ($250,000) and an Earthquake deductible of not greater than five percent (5%) of the total insurable value of the building, subject to a minimum deductible of two hundred fifty thousand dollars ($250,000). These deductibles shall be subject to the operating expenses identified in Section 6 of the lease. Notwithstanding the above, Tenant shall only be subject to actual deductibles paid by the Landlord at the time of loss.

9. Utilities . During the Term, Tenant shall promptly pay as billed to Tenant all rents and charges for water and sewer services and all costs and charges for gas, steam, electricity, fuel, light, power, telephone, heat and any other utility or service used or consumed in or servicing the Demised Premises and all other costs and expenses involved in the care, management and use thereof as charged by the applicable utility companies. All such utilities shall be separately metered and billed to Tenant, and Tenant shall establish an account with the utility provider with respect to each such separately metered utility. Tenant’s obligation for payment of all utilities shall commence on the earlier of the Lease Commencement Date or the date of Tenant’s actual occupancy of all or any portion of the Demised Premises, including any period of occupancy prior to the Lease Commencement Date, regardless of whether or not Tenant conducts

 

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business operations during such period of occupancy. If Tenant fails to pay any utility bills or charges, Landlord may, at its option and upon reasonable notice to Tenant, pay the same and in such event, the amount of such payment, together with interest thereon at the Interest Rate as defined in Section 32 from the date of such payment by Landlord, will be added to Tenant’s next payment due as Additional Rent.

10. Maintenance and Repairs .

(a) Tenant shall, at its own cost and expense, maintain in good condition and repair and replace as necessary the interior of the Demised Premises, including but not limited to the heating, air conditioning and ventilation systems, glass, windows and doors, sprinkler, all plumbing and sewage systems (excluding any pipes or lines located beneath the floor slab which are used in common with other tenants of the Building), fixtures, interior walls, floors (including floor slabs), dock areas, dock ramps, ceilings, storefronts, plate glass, skylights, all electrical facilities and equipment including, without limitation, lighting fixtures, lamps, fans and any exhaust equipment and systems, electrical motors, and all other appliances and equipment (including, without limitation, dock levelers, dock shelters, dock seals and dock lighting) of every kind and nature located in, upon or about the Demised Premises, except as to such maintenance, repair and replacement as is the obligation of Landlord pursuant to Section 10(b). During the Term, Tenant shall either (i) maintain qualified staff reasonably acceptable to Landlord to perform maintenance of the heating, ventilation and air conditioning systems, as reasonably evidenced to Landlord from time to time upon Landlord’s request, or (ii) maintain in full force and effect a service contract for the maintenance of the heating, ventilation and air conditioning systems with an entity reasonably acceptable to Landlord; provided, however, that during the one year period following the Lease Commencement Date, such service contract shall be maintained with the contractor that installed the heating, ventilation and air conditioning systems and shall provide for at least two preventive maintenance service calls during such one year period. If Tenant is required to or elects to maintain the service contracts in accordance with part (ii) of the foregoing sentence, Tenant shall deliver to Landlord (x) a copy of said service contract prior to the Lease Commencement Date, and (y) thereafter, a copy of a renewal or substitute service contract within thirty (30) days prior to the expiration of the existing service contract. Tenant’s obligation shall exclude any maintenance, repair and replacement required because of the act, gross negligence or willful misconduct of Landlord, its employees, contractors or agents, which shall be the responsibility of Landlord.

(b) Landlord shall, at its own cost and expense, maintain in good condition and repair the foundation (beneath the floor slab), structural frame, external walls (exclusive of painting and caulking of the Building, the cost of which will be included in Operating Expenses) and roof of the Building (but any patches to the roof membrane not covered by warranty will be included in Operating Expenses). Landlord shall also be responsible for any repairs to the floor slab (but not the maintenance thereof) required because of latent defects in the floor slab, defects resulting from inferior workmanship in the construction of the floor slab, or defects resulting from a failure to construct the floor slab in accordance with the applicable plans and specifications therefor or the laws and regulations applicable thereto. Landlord’s obligation shall exclude the cost of any maintenance or repair required because of the gross negligence, improper use or willful misconduct of Tenant or any of Tenant’s subsidiaries or affiliates, or any of Tenant’s or such subsidiaries’ or affiliates’ agents, contractors, employees, licensees or invitees (collectively, “Tenant’s Affiliates”), the cost of which shall be the responsibility of Tenant. Landlord shall never have any obligation to repair, maintain or replace, pursuant to this subsection 10(b) or any other provision of this Lease, any Tenant’s Change (as defined in Section 18 hereof). In addition to the foregoing, Landlord will maintain the fire pump and sprinklers and perform inspections and testing in accordance with the guidelines outlined in NFPA No. 25 “Inspection of Water Based Fire Suppression Systems.”

(c) Unless the same is caused solely by the negligent action or inaction of Landlord, its employees or agents, and is not covered by the insurance required to be carried by Tenant pursuant to the terms of this Lease, Landlord shall not be liable to Tenant or to any other person for any damage occasioned by failure in any utility system or by the bursting or leaking of any vessel or pipe in or about the Demised Premises, or for any damage occasioned by water coming into the Demised Premises or arising from the acts or neglects of occupants of adjacent property or the public.

11. Tenant’s Personal Property; Indemnity . All of Tenant’s personal property in the Demised Premises shall be and remain at Tenant’s sole risk. Landlord, its agents, employees and contractors, shall not be liable for, and Tenant hereby releases Landlord from, any and all liability for theft thereof or any damage thereto occasioned by any act of God or by any acts, omissions or negligence of any persons, except to the extent caused by the negligence or willful misconduct of Landlord, its agents, employees and contractors. Landlord, its agents, employees and contractors, shall not be liable for any injury to the person or property of Tenant or the employees, agents, contractors or invitees of Tenant in or about the Demised Premises, Tenant expressly agreeing to indemnify and save Landlord, its agents, employees and contractors, harmless, in all such cases, except to the extent caused by the negligence or willful misconduct of Landlord, its agents, employees and contractors. Tenant further agrees to indemnify and reimburse Landlord for any costs or expenses, including, without limitation, attorneys’ fees, that Landlord reasonably may actually incur in investigating, handling or litigating any such claim against Landlord by a third person, unless such claim arose from the negligence or willful misconduct of Landlord, its agents, employees or contractors. The provisions of this Section 11 shall survive the expiration or earlier termination of this Lease with respect to any damage, injury or death occurring before such expiration or termination.

 

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12. Tenant’s Fixtures . Tenant shall have the right to install in the Demised Premises trade fixtures required by Tenant or used by it in its business, and if installed by Tenant, to remove any or all such trade fixtures from time to time during and upon termination or expiration of this Lease; provided , however , that Tenant shall repair and restore any damage or injury to the Demised Premises (to the condition in which the Demised Premises existed prior to such installation) caused by the installation and/or removal of any such trade fixtures.

13. Signs . No sign, advertisement or notice shall be inscribed, painted, affixed, or displayed on the windows or exterior walls of the Demised Premises or on any public area of the Building, except in such places, numbers, sizes, colors and styles as are approved in advance in writing by Landlord, and which conform to all applicable laws, ordinances, or covenants affecting the Demised Premises. Any and all signs installed or constructed by or on behalf of Tenant pursuant hereto shall be installed, maintained and removed by Tenant at Tenant’s sole cost and expense.

14. No Landlord’s Lien . Notwithstanding any other provision hereof to the contrary, other than with respect to liens arising by virtue of any judgments obtained by Landlord against Tenant, Landlord hereby waives any and all rights (whether contractual, common law, statutory or otherwise) to any lien or right of distraint against any personal property and trade fixtures of Tenant situated in and upon the Demised Premises.

15. Governmental Regulations . Tenant shall promptly comply throughout the Term, at Tenant’s sole cost and expense, with all present and future laws, ordinances, orders, rules, regulations or requirements of all federal, state and municipal governments and appropriate departments, commissions, boards and officers thereof (collectively, “Governmental Requirements”) relating to (a) all or any part of the Demised Premises, and (b) the use or manner of use of the Demised Premises and the Building Common Area; provided, however, that Landlord shall be solely responsible for making all changes necessitated by violations by Landlord, it contractors or agents, of applicable Governmental Requirements in effect as of the Lease Commencement Date. Tenant shall also observe and comply with the requirements of all policies of public liability, fire and other policies of insurance at any time in force with respect to the Demised Premises. Notwithstanding the foregoing, (A) if as a result of one or more Governmental Requirements it is necessary, from time to time during the Term, to perform an alteration or modification of the Demised Premises, the Building, or the Building Common Area (a “Code Modification”) which is made necessary as a result of the specific use being made by Tenant of the Demised Premises (as distinguished from an alteration or modification which would be required to be made by the owner of a warehouse-office building comparable to the Building irrespective of the use thereof by any particular occupant) or a Tenant’s Change, then such Code Modification shall be the sole and exclusive responsibility of Tenant in all respects; any such Code Modification shall be promptly performed by Tenant at its expense in accordance with the applicable Governmental Requirement and with Section 18 hereof; and (B) if as a result of one or more Governmental Requirements it is necessary from time to time during the Term to perform a Code Modification which (i) would be characterized as a capital expenditure under generally accepted accounting principles and (ii) is not made necessary as a result of the specific use being made by Tenant of the Demised Premises (as distinguished from an alteration or modification which would be required to be made by the owner of any warehouse-office building comparable to the Building irrespective of the use thereof by any particular occupant) or a Tenant’s Change, then (a) Landlord shall have the obligation to perform the Code Modification at its expense, (b) the cost of such Code Modification shall be amortized on a straight-line basis over the useful life of the item in question, as reasonably determined by Landlord in accordance with generally accepted accounting principles, and (c) Tenant shall be obligated to pay (as Additional Rent, payable in the same manner and upon the same terms and conditions as the Base Rent reserved hereunder) for (i) Tenant’s proportionate share (based on Tenant’s Operating Expense Percentage) of the portion of such amortized costs attributable to the remainder of the Term, including any extensions thereof, with respect to any Code Modification respecting the Building Common Area, and (ii) the entire portion of such amortized costs attributable to the remainder of the Term, including any extensions thereof, with respect to any Code Modification respecting the Demised Premises (and Tenant shall expressly not be required to pay any portion of the cost of a Code Modification respecting any leased or leasable space in the Building other than the Demised Premises, unless specifically required to do so under such Code Modification). Tenant shall promptly send to Landlord a copy of any written notice received by Tenant requiring a Code Modification.

16. Environmental Matters .

(a) For purposes of this Lease:

(i) “Contamination” as used herein means the presence of or release of Hazardous Substances (as hereinafter defined) into any environmental media from, upon, within, below, into or on any portion of the Demised Premises, the Building, the Building Common Area or the Project so as to require remediation, cleanup or investigation under any applicable Environmental Law (as hereinafter defined).

(ii) “Environmental Laws” as used herein means all federal, state, and local laws, regulations, orders, permits, ordinances or other requirements, which exist now or as may exist hereafter, concerning protection of human health, safety and the environment, all as may be amended

 

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from time to time including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq. (“CERCLA”) and the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq. (“RCRA”).

(iii) “Hazardous Substances” as used herein means any hazardous or toxic substance, material, chemical, pollutant, contaminant or waste as those terms are defined by any applicable Environmental Laws and any solid wastes, polychlorinated biphenyls, urea formaldehyde, asbestos, radioactive materials, radon, explosives, petroleum products and oil.

(b) Landlord represents that, except as revealed to Tenant in writing by Landlord, to Landlord’s actual knowledge, Landlord has not treated, stored or disposed of any Hazardous Substances upon or within the Demised Premises, nor, to Landlord’s actual knowledge, has any predecessor owner or occupant of the Demised Premises.

(c) Tenant covenants that all its activities, and the activities of Tenant’s Affiliates (as defined in Section 10(b)), on the Demised Premises, the Building, or the Project during the Term will be conducted in compliance with Environmental Laws. Tenant warrants that, to the current actual knowledge of Shelby McCloud, Vice President of Warehouse Operations for Tenant (without any individual liability on her part), it is currently in compliance with all applicable Environmental Laws and that there are no pending or threatened notices of deficiency, notices of violation, orders, or judicial or administrative actions involving alleged violations by Tenant of any Environmental Laws. Tenant, at Tenant’s sole cost and expense, shall be responsible for obtaining all permits or licenses or approvals under Environmental Laws necessary for Tenant’s operation of its business on the Demised Premises, shall make all notifications and registrations required by any applicable Environmental Laws, and shall use and store all substances used in the operation of Tenant’s business at the Demised Premises in accordance with the Materials Safety Data Sheets therefor. Tenant, at Tenant’s sole cost and expense, shall at all times comply with the terms and conditions of all such permits, licenses, approvals, notifications and registrations and, to the extent regulating the conduct of Tenant’s activities at the Demised Premises, with any other applicable Environmental Laws. Tenant will maintain all such permits, licenses or approvals and make all such notifications and registrations required by any applicable Environmental Laws necessary for Tenant’s operation of its business on the Demised Premises.

(d) Tenant shall not cause or permit any Hazardous Substances to be brought


 
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