EXHIBIT 10.46
STANDARD INDUSTRIAL LEASE
AGREEMENT
THIS LEASE
(“ Lease ”), made this 1st day of December,
2003, by and between ROBERT PATTILLO PROPERTIES, INC. , a
Georgia corporation, hereinafter referred to as
“Landlord”; and POTTERY BARN, INC. , a
California corporation, hereinafter referred to as
“Tenant”;
Definitions
The
“Cell One Premises” means the approximate 416,000
square foot portion of the building on the Property (defined below)
and the corresponding parking area, all as shown on
Exhibit A-1.
The
“Cell Two Premises” means the approximate 364,000
square foot portion of the building on the Property and the
corresponding parking area, all as shown on
Exhibit A-1.
The
“Cell Three Premises” means the approximate 332,800
square foot portion of the building on the Property and the
corresponding parking area, all as shown on
Exhibit A-1.
“Cell”
means each of the Cell One Premises, the Cell Two Premises and the
Cell Three Premises.
“Landlord’s
Cell One Work” has the meaning given it in Exhibit B and
as described in the Cell One Plans (defined below) and everything
reasonably inferable therefrom.
“Landlord’s
Cell Two Work” has the meaning given it in Exhibit B and
as described in the Cell Two Plans (defined below) and everything
reasonably inferable therefrom.
“Landlord’s
Cell Three Work” has the meaning given it in Exhibit B
and shall be consistent with the “Baseline Elements for Cell
Three” as defined in Paragraph 4 below and as described
in the Cell Three Plans (defined below) and everything reasonably
inferable therefrom.
“Cell One
Commencement Date” shall be the date on which
Landlord’s Cell One Work is Substantially Complete. For
purposes of this paragraph the office portion of the Cell One
Premises shall be deemed Substantially Complete if the Bathrooms,
the Breakroom and the Phone Room are Substantially Complete. The
remainder of the office area shall be Substantially Complete within
fifty (50) days after the approval or deemed approval of the Cell
One Plans (as hereinafter defined)(the “Cell One Office
Substantial Completion Date”), as same may be adjusted as
provided herein.
“Cell Two
Commencement Date” shall be the date Landlord’s Cell
Two Work is Substantially Complete.
“Cell Three
Commencement Date” shall be the date Landlord’s Cell
Three Work is Substantially Complete.
“Commencement
Date” means each of the Cell One Commencement Date, the Cell
Two Commencement Date and the Cell Three Commencement
Date.
“Target
Date” means, as applicable, each of the Cell One Target Date,
the Cell Two Target Date and the Cell Three Target Date.
“Premises”
means, collectively, (i) the Cell One Premises, the Cell Two
Premises, and, if the Expansion Option (defined below) has been
exercised by Tenant, the Cell Three Premises, but as to each Cell
only to the extent its Commencement Date has occurred plus
(ii) the portion underneath the respective Cell of the real
property described on Exhibit A (the
“Property”).
“Cell One
Rent” means $2.47 per square foot per year from the Cell One
Commencement Date through the fourth anniversary of the Cell One
Commencement Date, and $2.56 per square foot per year from the
first day after the fourth anniversary date of the Cell One
Commencement Date until the end of the Initial Term.
“Cell Two
Rent” means $2.47 per square foot per year from the Cell Two
Commencement Date through the fourth anniversary of the Cell One
Commencement Date, and
$2.56 per square foot per year
from the first day after the fourth anniversary date of the Cell
One Commencement Date until the end of the Initial Term.
“Cell Three
Rent” means $2.56 per square foot per year.
“Rent”
means, collectively, the Cell One Rent, the Cell Two Rent, and the
Cell Three Rent, but as to each Cell, only to the extent its
Commencement Date has occurred.
“Building”
means the portion of the Cell One Premises that is an industrial
building, that portion of the Cell Two Premises that is an
industrial building and, if constructed, that portion of the Cell
Three Premises that is an industrial building, as constructed or to
be constructed as contemplated herein.
“Date of
this Lease” shall be the date upon which both Landlord and
Tenant (and any guarantor of Tenant’s obligations hereunder)
have fully executed and delivered a copy of this Lease to the other
party.
“Business
Day” means any day except a Saturday, Sunday, or other day on
which commercial banks in Atlanta, Georgia are authorized or
required by applicable law to close.
“Term”
means collectively, the Initial Term (as hereinafter defined) and,
if applicable, any Renewal Term (as hereinafter defined) exercised
by Tenant in accordance with the further provisions of this
Lease.
“Substantial
Completion or Substantially Complete” means, as to each Cell,
the date on which Landlord’s Work for that Cell has been
completed to the extent that: (x) Landlord has obtained and
delivered a copy to Tenant of (i) a temporary certificate of
occupancy for the Cell issued by the appropriate governing
authority authorizing the occupancy and use of that Cell;
(ii) a certificate of substantial completion for the
Landlord’s Work issued by Landlord’s architect in the
form commonly used and promulgated by the American Institute of
Architects; and (y) all aspects of Landlord’s Work are
complete except for minor “punch-list” items as set
forth in a written document determined by a walk through of the
Cell by Landlord and Tenant to be held within twenty-four
(24) hours of notice from Landlord to Tenant of the need for
same. Upon determination of the Commencement Date for a particular
Cell, the parties agree to execute a written statement setting
forth the Commencement Date for such Cell.
“Landlord’s
Work” means, as applicable, each of the Cell One
Landlord’s Work, the Cell Two Landlord’s Work, and the
Cell Three Landlord’s Work.
W I T N E S S E T H:
Premises
1. For and in
consideration of the rents, covenants, agreements, and stipulations
hereinafter set forth, to be paid, kept and performed by Tenant,
Landlord hereby leases and rents to Tenant, and Tenant hereby
leases and takes upon the terms and conditions hereinafter set
forth, the Premises. This Lease is subject to all encumbrances,
easements, covenants and restrictions of record as of the Date of
this Lease which have been disclosed to Tenant in writing prior to
the Date of this Lease and to such other customary easements and
other matters as may be hereafter placed against the Premises
pursuant to the normal development of the Premises, provided that
such other easements and matters do not materially and adversely
affect Tenant’s use or occupancy of the Premises, and to any
subsequent mortgage granted by Landlord (“Permitted
Exceptions”).
Term
2. (a) To
have and to hold for a term to commence on the Cell One
Commencement Date as to the Cell One Premises, and on the Cell Two
Commencement Date as to the Cell Two Premises, and to end at
midnight on the last day of the seventy-second (72nd) full calendar
month after the Cell Two Commencement Date (the “Initial
Term”), subject to the following sentence, and Paragraphs 4
and 5. If the Expansion Option (as hereinafter defined) is
exercised, the term for the Cell Three Premises will commence on
the Cell Three Commencement Date, and the Initial Term for the
entire Premises (the Cell One Premises, the Cell Two Premises and
the Cell Three Premises) will end on the later of either
(i) midnight of the last day of the seventy second
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(72 nd ) full calendar
month after the Cell Two Commencement Date or (ii) midnight on the
last day of the sixtieth (60 th ) full calendar month
after the Cell Three Commencement Date.
(b) Notwithstanding
the foregoing in this Paragraph 2, following the Date of this
Lease, and prior to any of the applicable Commencement Dates,
Tenant may enter and occupy any portion of a Cell at reasonable
times and provided that: (i) doing so will not materially
interfere with Landlord’s Work; and (ii) Tenant’s
personnel report to the job site supervisor immediately upon
entering the Premises. Any construction or installation work
performed by Tenant at the Premises prior to a Commencement Date
for a particular Cell must be done so as to minimize interference
with Landlord’s general contractor. Tenant agrees to
indemnify and hold harmless Landlord against all claims (except for
such claims as may arise from Landlord’s negligence or
willful misconduct) for injuries to persons or damages to property
by reason of Tenant’s entering a Cell prior to Substantial
Completion of that Cell.
Initial Construction
Matters
3. (a) Landlord
shall fully complete (including all punch-list items) the
Landlord’s Cell One Work and the Landlord’s Cell Two
Work in accordance with the terms of EXHIBIT B attached hereto and
the respective Cell One Plans and the Cell Two Plans and those
things reasonably inferable therefrom. Except if caused by
Tenant’s negligence or breach of this Lease, Landlord agrees
that the Landlord’s Work shall be completed in a good and
workmanlike manner and in accordance with all applicable laws,
codes and ordinances. Landlord, at no cost to Tenant, shall
(i) repair any material defect in materials and workmanship of
the Landlord’s Cell One Work for a period of one
(1) year following the Cell One Commencement Date,
(ii) shall repair any material defect in materials and
workmanship of the Landlord’s Cell Two Work for a period of
one (1) year following the Cell Two Commencement Date, and
(iii) if applicable, shall repair any material defect in
materials and workmanship of the Landlord’s Cell Three Work
for a period of one (1) year following the Cell Three Commencement
Date. Further, such obligation of Landlord in the immediately
preceding sentence shall extend to two (2) years from the
applicable Commencement Date as to the parking areas for the
particular Cell. During the Term, Landlord shall repair any latent
defects in the Premises (excluding any work regarding items or work
performed by Tenant) which were not reasonably discoverable by a
prudent inspection of the Premises by a qualified contractor at the
time of the Commencement Date of a particular Cell. Landlord and
Tenant will cooperate with one another in the enforcement of any
warranties, including any manufacturer’s or
contractor’s guaranties, issued in connection with the
Landlord’s Cell One Work, the Landlord’s Cell Two Work
and the Landlord’s Cell Three Work.
(b) Before
beginning construction of any portion of the Landlord’s Cell
One Work, the Landlord’s Cell Two Work or the
Landlord’s Cell Three Work, Landlord and Tenant shall agree
upon the complete plans and specifications for Landlord’s
Cell One Work (“Cell One Plans”) and for
Landlord’s Cell Two Work (“Cell Two Plans”) or
for the Landlord’s Cell Three Work (“Cell Three
Plans”), as the case may be, all of which plans and
specifications shall be consistent in all material respects with
the applicable provisions of Exhibit B attached hereto.
Landlord shall, within ten (10) days after the Date of this
Lease (such date, the “Plan Submittal Date”), submit to
Tenant a draft of the Cell One Plans (“Cell One Preliminary
Plans”), which plans shall be marked “For Permit”
and be in form and content sufficient for submission for review and
approval by the appropriate governing building authority. The Cell
One Plans, the Cell Two Plans and the Cell Three Plans shall be
prepared solely at Landlord’s expense. Tenant shall notify
Landlord of its approval or disapproval of the Cell One Preliminary
Plans within four (4) days after Tenant’s receipt of the
Cell One Preliminary Plans (the “First Tenant Response
Date”). In the event Tenant disapproves any aspect of the
Cell One Preliminary Plans, Tenant shall provide Landlord on or
before the First Tenant Response Date specific comments which, if
incorporated into the Cell One Preliminary Plans would cause Tenant
to approve the Plans. Thereafter, Landlord shall cause to be
incorporated into the Cell One Preliminary Plans all
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of Tenant’s comments, and,
within two (2) Business Days after receipt from Tenant of such
comments (the “First Revised Plan Date”), shall
resubmit the revised Cell One Preliminary Plans to Tenant for its
approval, which revised plans shall bear the date of such revision
and must incorporate all of Tenant’s comments. Tenant shall
again be required to respond within four (4) days after
Tenant’s receipt of the revised Cell One Preliminary Plans
(the “Second Tenant Response Date”) and Landlord shall
correct and resubmit the Cell One Preliminary Plans with a revision
date shown on such plans again within two (2) Business Days
after the Second Tenant Response Date (the “Second Revised
Plan Date”). After the Second Revised Plan Date, with each
successive resubmission of the corrected Cell One Preliminary Plans
by Landlord, Tenant shall then only have two (2) days to make
any further comments or disapprovals (which date deadlines shall be
additional Tenant Response Dates). If Tenant has not responded
within two days after the Plan Submittal Date or the First Revised
Plan Date for a Cell, then Landlord shall contact Tenant via
telephone by calling Dean Miller at (901) 546-7426 to inform
the Tenant that Landlord has not received a response from Tenant to
such plans or revised plans, as the case may be. In the event
Tenant does not respond to any proposed plans or revised plans
within the required time frame, then each day thereafter shall be a
Tenant Delay (defined below) without any further notice requirement
from Landlord. The procedure described for plan approval shall
continue until such time as the Cell One Plans have been approved
by Tenant. In addition, Landlord shall, on or before the Plan
Submittal Date, submit to Tenant a draft of the Cell Two Plans
(“Cell Two Preliminary Plans”) in the same level of
detail and preparation as described above for the Cell One
Preliminary Plans. The same back and forth submittal and response
mechanism, with the same time period requirements, set forth above
for the Cell One Preliminary Plans shall ensue until the Landlord
and Tenant agree upon the Cell Two Plans. Landlord and Tenant
acknowledge that the work described on Exhibit “B” does
not constitute final construction drawings or a complete
description of the work to be performed by Landlord, but rather,
that Landlord will prepare the Cell One Plans and the Cell Two
Plans based generally upon such work described on Exhibit B
and that such plans will be revised as part of the plan process
described above to provide additional details and refinement as to
the scope of Landlord’s Work. To this end, Landlord agrees to
prepare the Cell One Plans and the Cell Two Plans to include a
scope of work including all of the items shown on Exhibit “B
and otherwise generally comparable to the scope of work customarily
performed by developers of comparable industrial facilities in the
greater Memphis marketplace, but in no event shall Landlord’s
scope of work include additional items relating to Tenant’s
specific use or desire other than as shown on Exhibit B or as
otherwise may be handled in a Change Proposal.
(c) Landlord
shall use diligent efforts to complete the Landlord’s Cell
One Work on or before the date that is forty (40) days from
and after the approval or deemed approval of the Cell One Plans
(“Cell One Target Date”), and shall use its diligent
efforts to complete the Landlord’s Cell Two Work on or before
the date that is one hundred fifteen (115) days from and after
the approval or deemed approval of the Cell Two Plans (“Cell
Two Target Date”). The Cell Two Target Date and the Cell
Three Target Date (as hereinafter defined) shall be subject to
adjustment due to Force Majeure (as hereinafter defined) and the
Commencement Dates shall be subject to adjustment due to Tenant
Delay (as hereinafter defined). “Force Majeure” means
an act of God, fire, casualty, strike, boycott, power outages (not
resulting from the acts or omissions of Landlord), floods,
washouts, explosions, earthquakes, storms, weather (including wet
ground or inclement weather which prevents construction), riot,
insurrections, war, terrorist act or catastrophe. “Tenant
Delay” means any delay in the completion of the
Landlord’s Cell One Work, the Landlord’s Cell Two Work
or the Landlord’s Cell Three Work resulting from (x) the
performance of any work or act in the Premises by Tenant, its
contractors, employees and agents, (y) Tenant’s failure to
timely respond to plan submissions or revised plan submissions as
described in subparagraph (b) above or (z) Tenant’s
failure to timely perform the walk
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through as described in the
definition of Substantially Complete. The Cell Two Target Date and
the Cell Three Target Date, as applicable, shall be extended by one
day for each day that the Cell Two Target Date and the Cell Three
Target Date, as applicable, is delayed by Force Majeure. Each
Target Date, as applicable, will be extended by the aggregate
number of days denominated as extending the Target Date in the
Change Proposals for that Cell. The Cell One Commencement Date, the
Cell Two Commencement Date and the Cell Three Commencement Date, as
applicable, shall, for each day that the Commencement Date for that
particular Cell, as applicable, has not occurred by reason of a
Tenant Delay, be deemed to have occurred on the date each would
have otherwise occurred but for the Tenant Delay. Landlord must
give telephonic notice to Tenant by calling Dean Miller at
(901) 546-7426 within twenty four (24) hours after an
event that gives rise to Force Majeure or Tenant Delay (a
“Delay Notice”). In the event that Landlord does not
timely give a Delay Notice, then the claimed delay shall not be
deemed to have occurred until twenty four (24) hours prior to
the time that such Delay Notice is actually given by Landlord. In
the event that Tenant disputes the occurrence of any event of Force
Majeure or Tenant Delay claimed by Landlord or the duration of any
such event, Tenant shall provide Landlord with written notice of
such dispute within ten (10) days after Landlord’s
delivery of the applicable Delay Notice (each such notice, a
“Dispute Notice”). In the event Tenant fails to provide
a timely Dispute Notice, Tenant shall be deemed to have waived any
objection to the occurrence of such event of Force Majeure or
Tenant Delay and the duration of such event. In the event Tenant
timely delivers a Dispute Notice, Landlord shall nonetheless
proceed with Landlord’s Work. However, as to all Dispute
Notices pertaining to a particular Cell, the dispute as to whether
the applicable event constitutes Force Majeure or Tenant Delay
and/or the duration of such event will be resolved by submitting
the matter to binding arbitration in accordance with the rules of
the American Arbitration Association within fifteen (15) days after
the Commencement Date for that particular Cell. The parties agree
that the findings of the arbitration shall be binding upon the
parties. The parties further agree that any fees or expenses
incurred in such arbitration in resolving any such dispute shall be
shared equally by Landlord and Tenant.
(d) No
substantial modifications shall be made to the Cell One Plans, the
Cell Two Plans or the Cell Three Plans, nor shall the construction
contemplated therein be materially altered or performed other than
in conformity therewith, without the prior written consent of
Landlord and Tenant. Any changes proposed by Tenant shall be
submitted to Landlord in writing and, upon receipt, Landlord shall
cause its contractor to promptly prepare and shall submit to Tenant
a detailed, written analysis (the “Proposed Change
Proposal”) setting forth: (i) the additional cost (if
any) of construction arising from the change(s) broken down
according to trade and giving unit pricing for all materials, and
per-hour or per-day pricing on labor, (ii) the deviations (if
any) from or changes in the approved plans for the affected work
necessitated by such change(s) and the additional cost of same, and
(iii) the number of days (if any) by which the applicable
Target Date will be extended to account for such change(s).
Regarding clause (ii) in the preceding sentence, the
“additional cost” may not exceed the actual cost of
labor and material with no greater than a ten percent mark-up by
any subcontractor and a ten percent mark-up by the Landlord’s
general contractor; Landlord may not mark-up the additional cost.
Within two (2) Business Days following receipt of a Proposed
Change Proposal by Tenant, Tenant shall notify Landlord in writing
of its decision to accept, reject or negotiate the Change Proposal.
If following good faith negotiation between Landlord and Tenant
(which will not conclude until an in-person meeting has occurred
between Dean Miller for Tenant, and James Topple for Landlord),
they are unable to agree on a Proposed Change Proposal, Tenant
shall be deemed to have rejected the Proposed Change Proposal.
Tenant, may cause the work covered by any rejected Proposed Change
Proposal to be performed with its own forces or by a third party,
and Landlord and Tenant agree to take all reasonable measures to
allow such work to be completed with minimal interference to both
such work and Landlord’s Work.
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In the event Tenant accepts the
Proposed Change Proposal (as accepted, a “Change
Proposal”) in the manner set forth above, Tenant shall,
within five days after the Commencement Date of the applicable
Cell, pay to Landlord any additional funds provided for in the
Change Proposal, and Landlord shall promptly commence construction
in accordance with the Change Proposal. In the event Tenant rejects
the Proposed Change Proposal, or is deemed to have rejected,
Landlord shall proceed with construction as originally approved in
accordance with the Plans, unless Tenant elects to undertake the
work as described above.
(e) Regarding
each of the Cell One Premises or the Cell Two Premises, Tenant will
accrue one day free rent for each day the Landlord is late in
meeting a Plan Submittal Date, a Revised Plan Date, the Cell One
Target Date or the Cell Two Target Date, as such dates may have
been adjusted in accordance with the terms of paragraph 3(c) above
due to Force Majeure. Failure by Landlord to have the remainder of
the office area (i.e the areas not consisting of the Breakroom,
Bathrooms and Phone Room) Substantially Complete on the Cell One
Office Substantial Completion Date shall give Tenant a credit of
$1,000.00 against the next rent due for each late day, subject to
Force Majeure and Tenant Delay. Notwithstanding the first sentence
of this subparagraph (e), Landlord shall have the opportunity to
make up delays in meeting a Plan Submittal Date or a Revised Plan
Date. In this regard, Tenant shall accrue free rent only to the
extent that the Cell One Commencement Date or the Cell Two
Commencement Date, as the case may be, (as adjusted in accordance
with the terms of paragraph 3(c) above due to Tenant Delays) occurs
after the date that would otherwise have been the Cell One Target
Date or the Cell Two Target Date but for Landlord’s failure
to meet a Plan Submittal Date or Revised Plan Date. Further, if the
Plan Submittal Date is less than 10 days from the Date of this
Lease, Tenant shall accrue free rent only to the extent that the
Cell One Commencement Date or the Cell Two Commencement Date, as
applicable, occurs after the date that would otherwise have been
the Cell One Target Date or the Cell Two Target Date had the Plan
Submittal Date been 10 days after the Date of this
Lease.
For
example, if the Date of Lease is November 1, the Plan
Submittal Date is November 15 (14 days after lease
execution or 4 days late), and Landlord and Tenant approve the
plans the next day (November 16); then the Cell One Target
Date would be December 26 (40 days after plan approval).
If the Cell One Lease Commencement Date occurs on December 24,
then Tenant would receive two (2) days of free rent, since the
Cell One Lease Commencement Date occurred two (2) days after
the date that would otherwise have been the Cell One Target Date
(December 22) if not for Landlord’s delay in meeting the
Plan Submittal Date.
By
further example, if, in the above example, the Plan Submittal Date
is November 6 (5 days after lease execution or 5 days
early) and Landlord and Tenant approve the plans the next day
(November 7); then the Cell One Target Date would be
December 17. If the Cell One Commencement Date occurs on
December 20, no free rent would accrue, since the Cell One Lease
Commencement Date occurred within 40 days of the date that
would otherwise have been the Cell One Target Date
(December 22) if not for Landlord’s acceleration of the
Plan Submittal Date.
(f) Notwithstanding
the fact that the Commencement Date for a Cell may have occurred,
Landlord shall diligently pursue completion and fully complete the
Landlord’s Work pertaining to the affected Cell in order to
obtain a full certificate of occupancy from the appropriate
governing authority. Tenant will cooperate with Landlord to obtain
a full certificate of occupancy. If Landlord fails to complete all
punch-list items within twenty (20) days following each
Cell’s Commencement Date, Tenant may do so at
Landlord’s expense and deduct the cost thereof from the next
Rental payment due (but only until Tenant has fully recovered the
amount which it has paid on Landlord’s behalf pursuant to
this subparagraph) in an amount not exceeding twenty-five percent
(25%) of each installment of monthly Rent. It is
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anticipated that a full
certificate of occupancy for the Cell One Premises will be obtained
contemporaneously with Landlord’s obtaining the full
certificate of occupancy for the Cell Two Premises.
Expansion
Option
4. Subject to
the further provisions of this Paragraph 4, Tenant has a
one-time option (the “Expansion Option”) to require
Landlord to undertake and complete Landlord’s Cell Three
Work, and to lease the Cell Three Premises from Landlord under the
terms of this Paragraph 4, and on all the other terms and
conditions contained in this Lease. Provided that Tenant is not in
default beyond any applicable notice or cure period as of the time
Tenant gives notice to Landlord or at any time during the
construction of the Cell Three Premises, Tenant may exercise the
Expansion Option, by giving written notice to Landlord
(“Tenant’s Expansion Notice”) on or before the
first anniversary of the Cell Two Commencement Date
(“Expansion Deadline Date”). Following receipt of
Tenant’s Expansion Notice, Landlord and Tenant will follow
the same approval procedures for the plan approval and construction
of the Cell Three Premises as described in Paragraph 3
regarding the Cell One Premises and the Cell Two Premises, except
that the “Cell Three Target Date” shall be the date
that is one hundred thirty (130) days from and after the
approval or deemed approval of the Cell Three Plans. The
Landlord’s Cell Three Work and the Cell Three Plans (which
shall be prepared by Landlord at its expense) shall be consistent
with the following elements (collectively, the “Baseline
Elements for Cell Three”): (i) the Cell Three Premises
shall be built using the same general warehouse specifications as
the Cell One Premises and the Cell Two Premises, (ii) the Cell
Three Premises shall have the same bay sizes and the same general
warehouse improvement finishes as the Cell One Premises and the
Cell Two Premises including, without limitation, metal halide
lighting, sixty battery charging stations, six air changes per hour
and dock packages similar to the Premises on all doors to be
utilized by Tenant in the Cell Three Premises in the same
proportion of doors to be used by Tenant in the Cell Two Premises
as described on Exhibit B, (iii) an additional guardhouse
will be located at the northerly end of the Cell Three Premises,
(iv) the existing auto parking area at the south end of the
Cell One Premises will be modified to conform to the general
configuration shown on EXHIBIT A-1, and (v) there shall be no
more than 2000 square feet of office and no additional load bearing
roof requirements. Landlord and Tenant acknowledge that the work
described in the Baseline Elements for Cell Three do not constitute
final construction drawings or a complete description of the work
to be performed by Landlord, but rather, that Landlord will prepare
the Cell Three Plans based generally upon such work described in
the Baseline Elements for Cell Three and that such plans will be
revised as part of the plan approval process described above to
provide additional details and refinement as to the scope of work
to be performed by Landlord. To this end, Landlord agrees to
prepare the Cell Three Plans so as to include a scope of work
including all of the items shown in the Baseline Elements for Cell
Three and otherwise generally comparable to the scope of work
contained in Landlord’s Cell One Work and Landlord’s
Cell Two Work, and customarily performed by developers of
comparable industrial facilities in the greater Memphis
marketplace, but in no event shall Landlord’s scope of work
include additional items relating to Tenant’s specific use or
desire other than as shown on Exhibit B or as otherwise may be
undertaken in a Change Proposal. Regarding the Cell Three Premises,
Tenant will accrue one day free rent for each day the Landlord is
late in meeting the Cell Three Target Date, Plan Submittal Date
(which, in the case of the Cell Three Premises, shall be ten
(10) days after Landlord’s timely receipt of
Tenant’s Expansion Notice) or a Revised Plan Date, as such
dates may be adjusted due to Force Majeure and subject further to
the “make-up” provisions of Paragraph 3(e) above. The
Cell Three Commencement Date shall be subject to advancement due to
Tenant Delays in accordance with the terms of paragraph 3(c) above.
In the event Tenant fails to provide the Tenant’s Expansion
Notice on or before the Expansion Deadline Date, then this
Expansion Option shall terminate and Tenant shall have no further
right or option to expand the Premises or to require the Landlord
to construct the Landlord’s Cell Three Work. The Expansion
Option shall terminate in the event that (y) the named Tenant
enters
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into an Assignment (as defined in
Paragraph 17) of the Lease which, under Paragraph 17, requires
Landlord’s consent, or (z) in the event Tenant subleases
more than twenty five (25%) percent of the combined area in the
Cell One Premises and the Cell Two Premises to any entity which,
under Paragraph 17, requires Landlord’s consent.
Renewal Option
5. Landlord
grants Tenant two consecutive options (each a “Renewal
Option”) to extend the term of this Lease. Each Renewal
Option shall extend the term for two years (each a “Renewal
Term”). Tenant may exercise a Renewal Option by delivering
written notice (a “Renewal Notice”) of its exercise not
later than six months prior to the expiration of the Initial Term
or the Renewal Term, as the case may be. Provided that Tenant is
not in default beyond any applicable notice and cure period as of
the time Tenant gives the applicable Renewal Notice to Landlord or
at the time the then applicable term of this Lease would otherwise
expire, Tenant may exercise its first Renewal Option as to
(i) the Cell One Premises only; (ii) the Cell One
Premises and the Cell Two Premises only; or (iii) the Cell One
Premises, the Cell Two Premises, and the Cell Three Premises (but
as to the Cell Three Premises, only if Tenant has exercised the
Expansion Option). Tenant may exercise its second Renewal Option
for all or any of the Cells for which it exercised under its first
Renewal Option, but only in the combinations of Cells permitted in
clauses (i), (ii), or (iii) of the immediately preceding
sentence. If Tenant has not timely exercised its first Renewal
Option as to any Cell, Tenant’s second Renewal Option will
lapse as to such Cell and be of no further force or effect. With
respect to any Cell for which Tenant has exercised a Renewal Term,
all of the terms and conditions of this Lease shall remain in full
force and effect during the Renewal Terms except that Landlord
shall not be required to perform any improvements, modifications or
installations to the Premises except as specifically noted below
and the following terms shall govern:
(a) If
Tenant exercises a Renewal Option for only the Cell One Premises,
the Cell One Rent will be — $2.87 per square foot per year
for the first Renewal Term, and $2.98 per square foot per year for
the second Renewal Term, if applicable.
(b) If
Tenant exercises a Renewal Option for only the Cell One Premises
and Cell Two Premises, and did not exercise the Expansion Option,
the Cell One Rent and the Cell Two Rent will each be — $2.76
per square foot per year for the first Renewal Term, and, as to the
second Renewal Term, if exercised for the Cell One Premises and the
Cell Two Premises, $2.88 per square foot per year for the second
Renewal Term, if applicable.
(c) If
Tenant exercises a Renewal Option for only the Cell One Premises
and Cell Two Premises, and did exercise the Expansion Option, the
Cell One Rent and the Cell Two Rent will each be — $2.82 per
square foot per year for the first Renewal Term, and, as to the
second Renewal Term, if exercised for the Cell One Premises and the
Cell Two Premises, $2.93 per square foot per year for the second
Renewal Term, if applicable.
(d) If
Tenant exercises a Renewal Option for the Cell One Premises, Cell
Two Premises, and the Cell Three Premises, the Cell One Rent, the
Cell Two Rent and the Cell Three Rent will each be — $2.76
per square foot per year for the first Renewal Term, and, as to the
second Renewal Term, if exercised for the Cell One Premises, the
Cell Two Premises and the Cell Three Premises, $2.88 per square
foot per year for the second Renewal Term, if
applicable.
(e) If
Tenant exercises a Renewal Option for the Cell One Premises only,
Tenant at its cost and expense, will cause to be constructed a
demising wall between the Cell One Premises and the Cell Two
Premises, from floor to ceiling deck, with a single layer of
5/8” sheetrock on both sides, and with a single layer of
5/8” plywood on both sides to a height of eight feet above
the floor. If Tenant exercises a Renewal Option for only the Cell
One Premises
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and Cell Two Premises, and did
exercise the Expansion Option, the Landlord at its cost will seal
the pass-through in the existing demising wall between the Cell Two
Premises and the Cell Three Premises. If required, the above
described work as to a wall must be constructed by the responsible
party within thirty days following the first day of the applicable
Renewal Term.
(f) If
Tenant exercises a Renewal Option for the Cell One Premises only,
then Tenant, and its permitted subtenants, successors and assigns,
shall have the non-exclusive right to use the driveway depicted as
the (“Driveway”) on the site plan attached hereto as
EXHIBIT “E” for vehicular and pedestrian access,
ingress and egress to and from the Cell One Premises. Landlord and
Landlord’s tenants, successors and assigns shall have the
right to use the Driveway for vehicular and pedestrian access,
ingress and egress to and from the Cell Two Premises and the Cell
Three Premises and for any other purpose not inconsistent with the
use of the Driveway for vehicular and pedestrian access, ingress
and egress being made by Tenant. In such event, during all
applicable Renewal Periods, Tenant shall pay CAM Charges to
Landlord pursuant to subparagraph (g) below and shall pay, in
accordance with the terms of Paragraphs 30 and 31 of this Lease,
the prorata portion of the taxes and insurance applicable to the
Cell One Premises only (based on a per square foot basis of the
Building and a prorata portion of the acreage contained within the
Property).
(g) At
any time following the Cell One Commencement Date, during which
Tenant is leasing less than all the Cells: (i) Landlord and
Tenant shall prorate the taxes and insurance based on a per square
foot basis of the then complete Building and a prorata portion of
the acreage contained within the Property; and (ii) Landlord
and Tenant shall work together to determine a fair and equitable
allocation of the cost and responsibility for common area repair
and maintenance, including but not limited to, repair and
maintenance of the landscaped areas, the Driveway and parking areas
and other common areas on the Property.
Rental
6. Tenant
shall pay Rent to Landlord monthly and on the first day of each
month, in advance, without offset (except as provided in Paragraphs
3(f) and 10) or demand. All payments of Rent shall be sent to
Robert Pattillo Properties, Inc., P.O. Box 101923, Atlanta,
Georgia, 30392, or such other address provided to Tenant by
Landlord. Tenant shall, within three (3) days of the Date of
this Lease, pay to Landlord $42,813.33 representing one-half of the
first month’s Rent for the Cell One Premises due hereunder.
The balance of the first month’s Rent for the Cell One
Premises will be due on the Cell One Commencement Date. In the
event Tenant fails to pay Rent or any other payment called for
under this Lease within ten (10) days of the due date, Tenant
shall pay a late charge equal to three percent (3%) of the unpaid
amount; provided that Tenant shall be entitled to two
(2) 10-day grace periods during the Initial Term in which
Tenant shall not be assessed a late charge so long as the amount
due is paid on or before the tenth (10th) calendar day after
written notice from Landlord that such Rent amount is past due.
Landlord and Tenant agree that such late charge is intended to
compensate Landlord for additional administrative charges and other
damages incurred by Landlord on account of such late payment and
not as a penalty. Landlord and Tenant agree that the actual damages
to be suffered by Landlord in such event shall be difficult, if not
impossible to ascertain, and that such late charge is a reasonable
estimate of such charges and damages. Either Landlord or Tenant may
have the area of the combined Cell One Premises and Cell Two
Premises, or the combined Cell One Premises, Cell Two Premises and
Cell Three Premises measured by an architect or surveyor reasonably
qualified to make the measurement, which measurement shall be
measured from outside wall to outside wall of the applicable Cell.
If the Premises vary in size from the size recited in the
definitions of the Cell One Premises, the Cell Two Premises, or the
Cell Three Premises, the Rent shall be proportionally increased or
decreased by the increase or the decrease in size revealed in the
measurement as of the date of delivery of the measurement to the
other party. If, as a result of the negligent acts or willful
misconduct of Landlord or any contractor
- 9 -
performing work on the Premises
on behalf of Landlord, Tenant is prevented from using any material
portion of the Premises in the ordinary course of Tenant’s
business, then Tenant must notify Landlord in writing of such event
(a “Stoppage Notice”) within twenty four
(24) hours of the commencement of such event. In the event
that Tenant does not timely provide such Stoppage Notice, then the
claimed prevented use shall not be deemed to have occurred until a
time no earlier than 24 hours prior to when such Stoppage Notice is
actually provided by Tenant to Landlord (such date, the
“Prevention Start Date”). In the event that Tenant is
so prevented from using any material portion of the Premises and
such condition continues after the Prevention Start Date for a
period of more than forty eight consecutive hours on Business Days,
the Rent shall abate as to such portion of the Premises that can
not be used by Tenant from the end of such forty eight hour period
until Tenant’s full use and enjoyment of such portion of the
Premises is restored.
Utility Bills
7. Following
the Commencement Date with respect to any respective Cell, Tenant
shall place utility bills of all types serving that respective Cell
in its name. Each Cell must have its own electrical meter. Tenant
shall be responsible for all such bills, along with all charges and
assessments pertaining to utilities serving the Premises,
including, but not limited to, water and sewer, natural gas,
electricity, fire protection (including sprinkler testing charges)
and sanitary charges, but excluding installation or connection fees
and any amounts outstanding, with respect to such Cell which relate
to a period prior to the Commencement Date for such Cell. If Tenant
does not pay its utility bills prior to delinquency and if failure
to pay such charges would create a lien on the Premises or would
cause the gas, electric, water or fire protection service to all or
a portion of the Premises to be suspended or result in physical
damage to the Premises, Landlord may do so ten (10) days after
delivering written notice to Tenant. The amount paid by Landlord
shall be paid by Tenant to Landlord, as Additional Rent, within ten
days of demand therefor by Landlord and proof of payment. The term
Additional Rent shall include, without limitation, the charges due
under this paragraph along with any charges due under the terms of
this Lease other than Rent.
Mortgagee’s
Rights
8. Landlord
represents that, as of the date of this Lease, there is no
mortgage, deed of trust or similar type lien against the Premises
or ground lease. For any future holder of a mortgage on the
Premises or ground lessor (“Lien Holder”), Tenant will
subordinate its interest in the Premises under the Lease and attorn
to such future Lien Holder, provided that such future Lien Holder
executes and delivers a subordination, non-disturbance and
attornment agreement to Tenant in form substantially similar in all
material respects to the form attached hereto as EXHIBIT
“F”, subject to reasonable modifications that do not
materially and adversely affect Tenant’s rights or remedies
under this Lease.
Repairs by
Tenant
9. Except for
repairs and maintenance necessitated by the acts or omissions of
Landlord, its agents, employees, contractor and invitees, or which
are covered by Landlord’s responsibilities in connection with
the terms of paragraph 3(a) above relating to defects in materials
or workmanship during certain periods, Tenant, at its sole cost,
shall keep and maintain the Premises (except portions of the
Premises to be maintained and repaired by Landlord under terms of
Paragraph 10), including without limitation, all paving, the
driveways and walkways, the floor slab surface, lawn maintenance
and landscaping, in good order and repair. Tenant also agrees to
keep in good repair, and replace if necessary (subject to the
succeeding sentence), all systems pertaining to water, fire
protection, drainage, sewer (but not if located under the floor
slab or under the paving), electrical, heating, ventilation, air
conditioning and lighting (“ Building Systems
”). Provided, however, if one or more of the Building Systems
or a portion thereof requires a repair that (i) is at a cost
in excess of 40% of the cost of replacing that Building System or
applicable portion thereof or otherwise requires replacement, and
(ii) is at a cost in excess of $10,000 in any one occurrence,
and (iii) would be a capitalized expenditure under Generally
Accepted Accounting Principles, and
- 10 -
(iv) is not the result of
Tenant’s negligence or a breach by Tenant of its obligations
under this Lease (which repair and replacement shall be
Tenant’s responsibility), then Tenant must notify Landlord in
writing of the need for such repair or replacement along with
supporting estimates for the cost of same. In such event, the
Building System or affected portion thereof shall be either
replaced or repaired by Landlord, at Landlord’s determination
(“Capital Repair\Replacement”). The cost to Tenant of a
Capital Repair\Replacement shall be initially paid by Landlord and
amortized over the useful life of the applicable Capital
Repair\Replacement in accordance with Generally Accepted Accounting
Principles plus interest at a rate equal to the “prime
rate” as announced by Wachovia Bank, in Atlanta, Georgia in
effect at the time such Capital Repair\Replacement is made, and the
annual amortized amount shall be paid by Tenant to Landlord
monthly, as Additional Rent, in equal installments, during the
remainder of the Initial Term (and any Renewal Term that is
exercised by Tenant) until the cost of such Capital
Repair\Replacement has been fully amortized; provided, however, in
the event that this Lease is terminated due to a default by Tenant,
all of the payments that would have been due from Tenant pursuant
to this paragraph 9 shall be immediately due and payable as
Additional Rent, as of the day of such termination. In the event
that any Capital Repair\Replacement is not fully amortized over the
Initial Term of the Lease and any Renewal Term, Tenant shall only
be responsible for the costs amortized during the Initial Term and
any Renewal Term with Tenant reserving the right to prepay its
obligation at any time. Tenant agrees to return the Building
Systems to Landlord in the same condition as they were on the
Commencement Date for each Cell upon the expiration or earlier
termination of this Lease as pertains to that Cell, normal wear and
tear, or damage by storm, fire, lightning, earthquake or other
casualty excepted. Tenant shall not cause the Premises to become
subject to any lien, charge or encumbrance whatsoever. Tenant shall
have no authority, express or implied, to create any lien, charge
or encumbrance upon the interest of the Landlord in the Premises.
Tenant shall, at its sole cost, maintain a regularly scheduled
preventive maintenance and service program for the repair,
maintenance and servicing of all heating and air-conditioning
systems and related equipment within the Premises and a regularly
scheduled maintenance and inspection program relating to the fire
sprinkler system. Tenant shall provide Landlord with copies of any
reports or test results provided by such maintenance program. Upon
written request by Tenant and at Tenant’s sole cost, Landlord
will arrange for any repair which is Tenant’s responsibility
pursuant to the terms of this Lease to be performed by
Landlord’s employees, agents or contractors. Tenant shall
pay, as Additional Rent, the cost of such repair within ten
(10) days of receipt of a bill in detail sufficient to
determine the scope of the work performed from Landlord.
Repairs by
Landlord
10. Except
for damage caused by the negligence or willful misconduct of
Tenant, its agents, employees, contractors and invitees, Landlord,
at its sole cost and expense, shall keep in good repair and
maintain (commensurate with other first-class warehouse and
distribution centers in the vicinity of the Premises) the roof
(including the roof membrane, gutters, and downspouts), and all
structural elements of the Premises, including but not limited to,
foundation, the floor slab (excluding the surface), and exterior
walls (exclusive of painting, glass and exterior doors), and all
underground portions of all Building Systems. Tenant shall promptly
notify Landlord of the need for any repairs which are
Landlord’s responsibility hereunder. Landlord shall be under
no duty to make any repairs hereunder unless Landlord receives
notice of the need for such repairs or of which Landlord has actual
notice. In an emergency, or if Landlord fails to begin repairs or
maintenance as to an item that is Landlord’s responsibility
as described by this Paragraph 10, within ten (10) days
following written request from Tenant (or in the case of material
roof leaks, following 24-hours written notice from Tenant), Tenant
may make the repairs and, only after providing Landlord with
written proof of payment and lien waivers, may be entitled to abate
Rent (but only until Tenant has fully recovered the amount which it
has paid on Landlord’s behalf pursuant to this Paragraph) in
an amount not exceeding twenty-five percent (25%) of
each
- 11 -
installment of monthly
Rent.
Modifications and Alterations
to the Premises
11. Tenant
shall make no material modifications, alterations or improvements
to the Premises or cut any openings or penetrations in the roof
without the prior written consent of Landlord, which may not
unreasonably be withheld, conditioned or delayed. In the event
Landlord gives its consent to such modification or alteration,
Landlord shall also inform Tenant whether or not such modification
or alteration must be removed from the Premises at the termination
of this Lease. Landlord’s failure to respond to
Tenant’s written request for consent for ten (10) days
following the receipt of such request, means that Landlord’s
consent is deemed given and that Tenant will not be required to
remove the item for which consent was sought when the Lease
terminates. Notwithstanding the preceding sentences of this
Paragraph, Tenant, without Landlord’s consent, may install
any satellite or communications antennae and related structures on
the roof provided that Tenant will be responsible for any damage to
the roof caused thereby and for any subsequent roof leaks or any
related damage associated with leaks at or around the areas
affected by such installation and for any damage or repair
necessitated by any breach or termination of any roof warranty
caused by such installation work. Landlord and Tenant agree to take
all steps necessary to comply with any applicable roof warranty in
conjunction with such installation activities by Tenant affecting
the roof provided that Tenant pays the cost of any needed
inspections or tests. Further notwithstanding anything contained in
this Paragraph 11 to the contrary, Tenant may make material
modifications, alterations or improvements to the Premises, without
Landlord’s consent (but Tenant shall be required to inform
Landlord at least ten days prior to any such work being performed)
which do not affect the structural components of the Premises, the
structural integrity of the floor slab, the exterior of the
Premises, or materially or adversely affect any water, fire
protection, drainage, sewer, electrical, heating, ventilation, air
conditioning or lighting systems on the Premises (“Permitted
Alterations”). Following notice from Tenant that it intends
to make a Permitted Alteration (“Permitted Alteration
Notice”), Landlord shall inform Tenant of whether or not such
modification or alteration must be removed by Tenant at the
termination of this Lease. Landlord’s failure to respond in
writing to a Permitted Alteration Notice within ten (10) days
from Landlord’s receipt of such notice means that Tenant will
not be required to remove the Permitted Alteration described
therein. Any modifications or alterations made by Tenant shall be
completed in a good, workmanlike and lien free manner in accordance
with all applicable codes and regulations and Tenant shall provide
Landlord with certificates of insurance from Tenant’s
contractor showing coverage for general liability and
workmens’ compensation. Upon written request by Tenant and at
Tenant’s sole cost, Landlord will arrange for any
modification, alternation or improvement consented to by Landlord
to be performed by Landlord’s employees, agents or
contractors. Tenant shall pay, as Additional Rent, the cost of such
modification, alteration or improvement within ten days of receipt
of a bill in detail sufficient to determine the scope of the work
performed therefor from Landlord.
Return of
Premises
12. As to
each Cell, Tenant agrees to return the Premises to Landlord at the
expiration or prior termination of this Lease broom clean and in
good condition and repair, normal wear and tear, damage by storm,
fire, lightning, earthquake or other casualty excepted. Upon
Landlord’s request, Tenant agrees to remove those alterations
installed by or for Tenant and which, under Paragraph 11,
Landlord has elected to have Tenant remove at the end of the Term.
As to each Cell, Tenant shall remove its personal property
(including but not limited to its racks) from the Premises on or
before the expiration or termination of this Lease. Tenant shall
repair any damage caused by any such removal.
Destruction of or Damage to
Premises
13. If the
Premises are partially or totally damaged or destroyed by storm,
fire, lightning, earthquake or other casualty, such that the
Premises are rendered totally or partially inaccessible, or
unusable by Tenant in the ordinary course of its business, the Rent
will abate proportionately to the diminution in Tenant’s use,
and Landlord shall restore the Premises to substantially the
same
- 12 -
condition as existed before such
casualty as speedily as practicable, whereupon full rental shall
recommence. Regardless whether Landlord or Tenant has obtained the
insurance policy on the Premises in accordance with
Paragraph 30 below, each of Landlord and Tenant shall take all
steps necessary to assist the other in processing the insurance
claim. However, if the damage shall be so extensive that it cannot
reasonably be repaired and restored within nine (9) months
from date of the casualty, then Tenant may terminate this Lease by
giving written notice to Landlord within thirty (30) days
after the date of such casualty. Notwithstanding the foregoing, if
the Premises are damaged and the cost of repair is greater than
thirty-five percent of the replacement cost of the Premises, and if
the damage is of a type not covered by the insurance described in
Paragraph 30(b) herein, then Landlord may terminate this Lease by
giving written notice to Tenant within thirty (30) days after
the date of such casualty. In addition, in the event that there is
a total destruction of the Premises during the last year of the
Initial Term or the last year of the then current Renewal Term,
then, notwithstanding anything in this Lease to the contrary, this
Lease shall terminate as of the date of such casualty and Landlord
shall have no duty to restore or rebuild unless Tenant agrees, at
that time, to exercise the next available renewal term, if any. In
the event of such termination, rental shall be abated as of the
date of such casualty. If neither party elects to terminate the
Lease as provided above, and if Landlord has not commenced to
repair within ninety (90) days following the casualty, Tenant
may then terminate the Lease as of the date of the casualty by
giving written notice to Landlord. If Landlord has commenced to
repair or rebuild and has not completed such work to the point of
Substantial Completion within one (1) year from the date of
such casualty (as may be extended by Force Majeure occurring after
the date such repair or rebuilding work has been commenced by
Landlord), then Tenant shall have the continuing right to terminate
this Lease effective as of the date that is thirty days after the
Landlord’s receipt of such notice, unless Landlord completes
such work within such thirty days. In no event shall Landlord be
responsible for repairing or restoring any personal property of
Tenant or any alterations or improvements made by
Tenant.
Indemnity
14. Except to
the extent arising from or related to Landlord’s negligence,
willful misconduct, or breach of this Lease, Tenant agrees to
indemnify, defend and save harmless Landlord against all claims,
losses, liabilities, costs and expenses (including reasonable
attorney’s fees and costs of litigation) suffered by Landlord
by reason of the use or occupancy of the Premises by Tenant. Except
to the extent arising from or related to Landlord’s
negligence, willful misconduct, or breach of this Lease, Landlord
shall not be liable to Tenant’s employees, agents,
contractors or invitees for any injury to a person or damage to
property on or about the Premises, or any damage caused by the
improvements becoming out of repair, the failure or cessation of
any utility or by any leakage of gas, oil, water or steam or
electricity emanating from the Premises. Landlord indemnifies and
will defend and save harmless Tenant against all claims, losses,
liabilities, costs and expenses (including reasonable
attorney’s fee
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