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INDUSTRIAL BUILDING LEASE between US INDUSTRIAL REIT II A Texas real estate investment trust as Landlord and DS DISTRIBUTION, INC. A Delaware corporation as Tenant June 20, 2007

Lease Agreement

INDUSTRIAL BUILDING LEASE between US INDUSTRIAL REIT II A Texas real estate investment trust as Landlord and DS DISTRIBUTION, INC. A Delaware corporation as Tenant June 20, 2007 | Document Parties: DRUGSTORE COM INC | DS DISTRIBUTION, INC You are currently viewing:
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DRUGSTORE COM INC | DS DISTRIBUTION, INC

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Title: INDUSTRIAL BUILDING LEASE between US INDUSTRIAL REIT II A Texas real estate investment trust as Landlord and DS DISTRIBUTION, INC. A Delaware corporation as Tenant June 20, 2007
Date: 3/13/2009
Industry: Retail (Drugs)     Law Firm: Pepper Hamilton     Sector: Services

INDUSTRIAL BUILDING LEASE between US INDUSTRIAL REIT II A Texas real estate investment trust as Landlord and DS DISTRIBUTION, INC. A Delaware corporation as Tenant June 20, 2007, Parties: drugstore com inc , ds distribution  inc
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Exhibit 10.17

INDUSTRIAL BUILDING LEASE

between

US INDUSTRIAL REIT II

A Texas real estate investment trust

as Landlord

and

DS DISTRIBUTION, INC.

A Delaware corporation

as Tenant

June 20, 2007


ARTICLE I

  

BASIC LEASE PROVISIONS

  

1

1.1

  

Premises

  

1

1.2

  

Building

  

1

1.3

  

Land

  

1

1.4

  

Property

  

1

1.5

  

Project

  

1

1.6

  

Rentable Square Feet (Foot) or Rentable Area

  

1

1.7

  

Term

  

1

1.8

  

Commencement Date

  

1

1.9

  

Expiration Date

  

1

1.10

  

Lease Year

  

1

1.11

  

Calendar Year

  

1

1.12

  

Basic Rent

  

1

1.13

  

Security Deposit

  

1

1.14

  

Interest Rate

  

1

1.15

  

Tenant’s Proportionate Share

  

1

1.16

  

Broker(s)

  

1

1.17

  

Guarantor(s)

  

1

1.18

  

Landlord’s Notice Address

  

1

1.19

  

Tenant’s Notice Address

  

2

1.20

  

Agents

  

2

1.21

  

Common Area

  

2

ARTICLE II.

  

PREMISES AND TERM

  

2

2.1

  

Premises

  

2

2.2

  

Commencement Date

  

2

2.3

  

Early Possession

  

2

ARTICLE III

  

BASE RENT AND GENERAL RENTAL PAYMENT PROVISIONS

  

2

3.1

  

Types of Rental Payments

  

2

3.2

  

Covenants Concerning Rental Payments

  

2

3.3

  

Net Lease

  

2

3.4

  

Security Deposit

  

2

ARTICLE IV

  

ADDITIONAL RENT

  

3

4.1

  

Additional Rent

  

3

4.2

  

Definitions

  

3

4.3

  

Expense Adjustment

  

3

4.4

  

Tenant’s Right to Audit

  

3

4.5

  

Sales or Excise Taxes

  

4

ARTICLE V

  

USE

  

4

5.1

  

Use of Premises

  

4

5.2

  

Operation of Tenant’s Business

  

4

5.3

  

Use of Common Areas

  

4

ARTICLE VI

  

CONDITION AND DELIVERY OF PREMISES

  

4

ARTICLE VII

  

SUBORDINATION; NOTICE TO SUPERIOR LESSORS AND MORTGAGEES

  

4

ARTICLE VIII

  

QUIET ENJOYMENT

  

4

ARTICLE IX

  

ASSIGNMENT, SUBLETTING AND MORTGAGING

  

5

9.1

  

Landlord’s Consent

  

5

9.2

  

Landlord’s Option to Recapture Premises

  

5

9.3

  

Distribution of Net Profits

  

5

9.4

  

Transfers to Related Entities

  

5

ARTICLE X

  

COMPLIANCE WITH LAWS

  

6

10.1

  

General Compliance

  

6

10.2

  

ADA Compliance

  

6

10.3

  

ISRA Compliance

  

6

ARTICLE XI

  

INSURANCE

  

7

11.1

  

Certain Insurance Risks

  

7

11.2

  

Tenant’s Insurance

  

7

11.3

  

Forms of the Policies

  

7

11.4

  

Waiver of Subrogation

  

8

11.5

  

Adequacy of Coverage

  

8

ARTICLE XII

  

ALTERATIONS

  

8

12.1

  

Procedural Requirements

  

8

12.2

  

Performance of Alterations

  

8

12.3

  

Lien Prohibition

  

8

ARTICLE XIII

  

LANDLORD’S AND TENANT’S PROPERTY

  

8

13.1

  

Landlord’s Property

  

8

13.2

  

Tenant’s Property

  

9

13.3

  

Removal of Tenant’s Property

  

9

ARTICLE XIV

  

REPAIRS AND MAINTENANCE

  

9

14.1

  

Tenant Repairs and Maintenance

  

9

14.2

  

Landlord Repairs

  

9

14.3

  

Tenant Equipment

  

9

ARTICLE XV

  

UTILITIES

  

9

15.1

  

Purchasing Utilities

  

9

15.2

  

Use of Electrical Energy by Tenant

  

9

ARTICLE XVI

  

INVOLUNTARY CESSATION OF SERVICES

  

9

ARTICLE XVII

  

LANDLORD’S RIGHTS

  

10

ARTICLE XVIII

  

NON-LIABILITY AND INDEMNIFICATION

  

10


18.1

  

Indemnification

  

10

18.2

  

Waiver and Release

  

10

18.3

  

Survival

  

10

ARTICLE XIX

  

DAMAGE OR DESTRUCTION

  

10

19.1

  

Damage to the Premises

  

10

19.2

  

Condemnation

  

10

ARTICLE XX

  

SURRENDER AND HOLDOVER

  

11

ARTICLE XXI

  

DEFAULT OF TENANT

  

11

21.1

  

Events of Default

  

11

21.2

  

Landlord’s Remedies

  

12

21.3

  

Mitigation of Damages

  

12

21.4

  

No Waiver

  

12

21.5

  

Late Payment

  

12

21.6

  

Waiver of Redemption

  

12

21.7

  

Landlord’s Lien

  

13

ARTICLE XXII

  

BROKER

  

13

ARTICLE XXIII

  

ESTOPPEL CERTIFICATES

  

13

ARTICLE XXVI

  

ENVIRONMENTAL

  

13

24.1

  

Hazardous Material

  

13

24.2

  

Definition

  

13

24.3

  

Tenant’s Liability

  

13

24.4

  

Landlord’s Liability

  

13

ARTICLE XXV

  

SIGNAGE

  

14

ARTICLE XXVI

  

MISCELLANEOUS

  

14

26.1

  

Merger

  

14

26.2

  

Notices

  

14

26.3

  

Non-Waiver

  

14

26.4

  

Parties Bound

  

14

26.5

  

Recordation of Lease

  

14

26.6

  

Survival of Obligations

  

14

26.7

  

Prorations

  

14

26.8

  

Governing Law; Construction

  

14

26.9

  

Time

  

15

26.10

  

Authority of Tenant

  

15

26.11

  

Security

  

15

26.12

  

Financial Reports

  

15

26.13

  

Rules and Regulations

  

15

26.14

  

Force Majeure

  

15

26.15

  

Waiver of Jury Trial

  

15

26.16

  

Attorneys’ Fees

  

15

26.18

  

Landlord’s Fees

  

15

26.19

  

Light, Air or View Rights

  

15

26.20

  

Counterparts

  

15

26.21

  

Nondisclosure of Lease Terms

  

16

26.22

  

Joint and Several Obligations

  

16

26.23

  

Notice of Lease Term Dates

  

16

26.24

  

Anti-Terrorism

  

16

CORPORATE GUARANTY - FORM

  

 

EXHIBIT A-1

  

DESCRIPTION OF PREMISES

EXHIBIT A-2

  

LEGAL DESCRIPTION OF LAND

EXHIBIT B-1

  

LANDLORD FORM OF WORK AGREEMENT

EXHIBIT B-2

  

TENANT FORM OF WORK AGREEMENT

EXHIBIT C

  

SECRETARY’S CERTIFICATE

EXHIBIT D

  

RULES AND REGULATIONS

EXHIBIT E

  

NOTICE OF LEASE TERM DATES

EXHIBIT F

  

GUARANTY


INDUSTRIAL BUILDING LEASE

THIS LEASE (the “Lease”), dated the 20th day of June, 2007 (“Date of Lease”) is entered into by and between DS DISTRIBUTION, INC., a Delaware corporation (“Tenant”) and US Industrial REIT II, a Texas real estate investment trust (“Landlord”).

I BASIC LEASE PROVISIONS

1.1 Premises . Approximately 85,080 Rentable Square Feet of space known as Suite 300 as outlined on Exhibit A-1 attached hereto and made a part hereof and located at the Building.

1.2 Building . The building containing approximately 385,884 Rentable Square Feet and located at 1130 Commerce Boulevard, Logan Township, New Jersey.

1.3 Land . The piece or parcel of land which comprises the Building, as more particularly described on Exhibit A-2 attached hereto and made a part hereof, and all rights, easements and appurtenances thereunto belonging or pertaining.

1.4 Property . The Building and the Land.

1.5 Project . The development known as LogistiCenter at Logan, consisting of the real property and all improvements built thereon, containing approximately 385,884 Rentable Square Feet.

1.6 Rentable Square Feet (Foot) or Rentable Area . The rentable area within the Premises, Building or Project deemed to be the amounts set forth in this Article I . Landlord and Tenant stipulate and agree that the Rentable Square Feet of the Premises, Building and Project are correct and shall not be remeasured.

1.7 Term . Forty-three (43) months, beginning on the Commencement Date and expiring on the Expiration Date, subject to adjustment as specified in Article II .

1.8 Commencement Date . August 1, 2007, subject to adjustment as specified in Article II (sometimes referred to herein as the “CD”).

1.9 Expiration Date . February 28, 2011.

1.10 Lease Year . Each consecutive 12 month period elapsing after: (i) the Commencement Date if the Commencement Date occurs on the first day of a month; or (ii) the first day of the month following the Commencement Date if the Commencement Date does not occur on the first day of a month. Notwithstanding the foregoing, the first Lease Year shall include the additional days, if any, between the Commencement Date and the first day of the month following the Commencement Date, in the event the Commencement Date does not occur on the first day of a month.

1.11 Calendar Year . For the purpose of this Lease, Calendar Year shall be a period of 12 months commencing on each January 1 during the Term, except that the first Calendar Year shall be that period from and including the Commencement Date through December 31 of that same year, and the last Calendar Year shall be that period from and including the last January 1 of the Term through the earlier of the Expiration Date or date of Lease termination.

1.12 Basic Rent . The amount set forth in the following schedule, subject to adjustment as specified in Article IV .

 

Month(s)

  

Approximate
Annual Rent (RSF)

 

 

Monthly
Basic Rent

 

 

Annual
Basic Rent

 

CD-7/31/08

  

$

4.25

*

 

$

30,132.50

*

 

$

361,590.00

**

8/1/08-7/31/09

  

$

4.36

 

 

$

30,912.40

 

 

$

370,948.80

 

8/1/09-7/31/10

  

$

4.47

 

 

$

31,692.30

 

 

$

380,307.60

 

8/1/10-2/28/11

  

$

4.58

 

 

$

32,472.20

 

 

$

389,666.40

**

 

*

Provided that no Event of Default (as defined in Section 21 of the Lease) occurs under the Lease, the Basic Rent shall be abated for the first ninety (90) days following the Commencement Date (“Abatement Period”). All of the terms and conditions of the Lease shall remain in full force and effect during the foregoing Abatement Period, including the obligation to pay Additional Rent, if any. If any Event of Default occurs under the Lease, the Basic Rent abatement provided for herein shall immediately terminate

 

**

Annualized amount

1.13 Security Deposit . $      N/A             

1.14 Interest Rate . The per annum interest rate listed as the base rate on corporate loans at large U.S. money center commercial banks as published from time to time under “Money Rates” in the Wall Street Journal plus 3%, but in no event greater than the maximum rate permitted by law. In the event the Wall Street Journal ceases to publish such rates, Landlord shall choose, at Landlord’s reasonable discretion, a similarly published rate.

1.15 Tenant’s Proportionate Share . Tenant’s Proportionate Share of the Building is 22.04 % (determined by dividing the Rentable Square Feet of the Premises by the Rentable Square Feet of the Building and multiplying the resulting quotient by one hundred and rounding to the second decimal place).

 

1.16

  

Broker(s).

 

Landlord’s

  

Tenant’s

  

 

David Ricci

  

William A. R. Goodwin

  

 

The Flynn Company

  

CB Richard Ellis

  

 

1621 Wood Street

  

1800 JFK Blvd., 10 th Floor

  

 

Philadelphia, PA 19103

  

Philadelphia, PA 19103

1.17

  

Guarantor(s).

 

Drugstore.com, Inc., a Delaware corporation

  

1.18

  

Landlord’s Notice

 

9830 Colonnade Boulevard, Suite 600

  

  

Address.

 

San Antonio, Texas 78230-2239

  

  

 

Attention: VP Real Estate Counsel

  

  

 

Attention: VP Portfolio Management

  

 

1


  

With copies at

the same time to.

 

US INDUSTRIAL REIT II

  

  

 

 

  

  

 

 

  

  

 

 

  

  

 

 

  

  

 

 

  

  

 

 

  

1.19

  

Tenant’s

 

411 108 th Avenue NE, Suite 1400

  

  

Notice Address.

 

Bellevue, WA 98004

  

  

 

Attention: Nathan Garnett, Associate General Counsel

  

1.20 Agents. Officers, partners, directors, employees, agents, licensees, contractors, customers and invitees; to the extent customers and invitees are under the principal’s control or direction.

1.21 Common Area. All areas from time to time designated by Landlord for the general and nonexclusive common use or benefit of Tenant, other tenants of the Property, and Landlord, including, without limitation, roadways, entrances and exits, loading areas, landscaped areas, open areas, park areas, service drives, walkways, common trash areas, vending or mail areas, common pipes, conduits, wires and appurtenant equipment within the Building, maintenance and utility rooms and closets, exterior lighting, exterior utility lines, and parking facilities.

II. PREMISES AND TERM

2.1 Premises . Landlord hereby leases the Premises to Tenant, and Tenant hereby leases the Premises from Landlord, upon and subject to the terms, covenants, provisions and conditions of this Lease.

2.2 Commencement Date . The Term shall commence on the Commencement Date and expire at midnight on the Expiration Date. Notwithstanding the foregoing, if Landlord is obligated to construct any improvements within the Premises then such construction shall be governed by the terms of the Work Agreement attached hereto as Exhibit B-1 and the date set forth as the Commencement Date in Section 1.8 shall instead be defined as the “Target Commencement Date” by which date Landlord will use reasonable efforts to Substantially Complete (as defined in Exhibit B-1 ) the Landlord Work (as defined in Exhibit B-1 ), and the actual Commencement Date shall be the date of Substantial Completion. In such event, the term length shall be adjusted so that the Expiratioin Date remains February 28, 2011. Presently, the anticipated Commencement Date is August 1, 2007 (the “Anticipated Commencement Date”). In the event the Landlord has been unable to Substantially Complete the Premises within ninety (90) days after the Anticipated Commencement Date through no delays on the part of Tenant, but subject to force majeure, Tenant shall have the right to terminate this Lease upon notice to Landlord, whereupon neither party shall have any further obligation to the other hereunder.

2.3 Early Possession. If Tenant takes possession of the Premises before the Commencement Date for the purposes of commencing business operations therein , such possession shall be subject to the terms and conditions of this Lease and Tenant shall pay Rent (as defined in Article III ) to Landlord for each day of possession before the Commencement Date. However, except for the cost of services requested by Tenant, Tenant shall not be required to pay Rent for any days of possession before the Commencement Date during which Tenant is in possession of the Premises for the sole purpose of: (i) performing improvements in accordance with the terms of the Work Agreement attached hereto as Exhibit B-2 ; or (ii) installing furniture, equipment or other personal property with the prior written approval of Landlord.

III BASIC RENT AND SECURITY DEPOSIT

3.1 Types of Rental Payments . “Rent” shall be and consist of (a) Basic Rent payable in monthly installments as set forth in Section 1.12 , in advance, on the first day of each and every calendar month during the Term of this Lease; and (b) Additional Rent as defined in Section 4.1. Rent shall be paid electronically via automatic debit, ACH credit or wire transfer to such account as Landlord designates in writing to Tenant. Landlord may, in its sole discretion, designate an address for payment in lawful U.S. Dollars. The installment of the Basic Rent and Additional Rent payable for the first full calendar month of the Term shall be due and payable at the time of execution and delivery of this Lease. Notwithstanding anything contained herein to the contrary, the first month’s Basic Rent shall be applied to the fourth (4 th ) month of the Term in order to recognize the rent abatement as set forth in the Basic Lease Provisions.

3.2 Covenants Concerning Rental Payments . Tenant shall pay the Basic Rent and the Additional Rent promptly when due, without notice or demand therefor, and without any abatement, deduction or setoff for any reason whatsoever, except as may be expressly provided in this Lease. No payment by Tenant, or receipt or acceptance by Landlord, of a lesser amount than the correct Basic Rent and/or Additional Rent shall be deemed to be other than a payment on account, nor shall any endorsement or statement on any check or letter accompanying any payment be deemed an accord or satisfaction, and Landlord may accept such payment without prejudice to its right to recover the balance due or to pursue any other remedy in this Lease or at law. In addition, any such late Rent payment shall bear interest from the date such Rent became due and payable to the date of payment thereof by Tenant at the Interest Rate. Such interest shall be due and payable within five (5) days after written demand from Landlord.

3.3 Net Lease . It is intended that the Rent provided for in this Lease shall be an absolutely net return to Landlord for the Term of this Lease and any renewals or extensions thereof, free of any and all expenses or charges with respect to the Premises except for those obligations of Landlord expressly set forth herein.

3.4 Security Deposit. Contemporaneously with the execution of this Lease, Tenant shall pay to Landlord a security deposit of in the amount set forth in Section 1.13, in immediately available funds, which shall be held by Landlord without liability for interest and as security for the performance by Tenant of its obligations under this Lease. The Security Deposit is not advance payment of Basic Rent or Additional Rent or a measure or limit of Landlord’s damages upon an Event of Default (as such term is defined in Section 21.1 of this Lease). Landlord shall be entitled to commingle the Security Deposit with Landlord’s other funds. Landlord may, from time to time and without prejudice to any other remedy, use all or part of the Security Deposit to perform any obligation which Tenant was obligated, but failed, to perform hereunder. Tenant waives the provisions of any law, now or hereafter enforced, which provide that Landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage caused by Tenant or to clean the Premises, it being agreed that Landlord may, in addition, claim those sums reasonably necessary to compensate Landlord for any other loss or damage caused by the acts or omissions of Tenant or anyone acting by, through or under Tenant . Following any such application of the Security Deposit , Tenant shall pay to Landlord within ten (10) days after demand the amount so applied in order to restore the Security Deposit to its original amount. Within thirty (30) days after the Term ends, provided Tenant has performed all of its obligations hereunder, Landlord shall return to Tenant the balance of the Security Deposit not applied to satisfy Tenant’s obligations. If Landlord transfers its interest in the Premises, then Landlord may assign the Security Deposit to the transferee and Landlord thereafter shall have no further liability for the return of the Security Deposit.

 

2


IV. ADDITIONAL RENT

4.1 Additional Rent . In addition to paying the monthly Basic Rent, Tenant shall pay as “Additional Rent” the amounts determined pursuant to this Article IV and all other amounts payable by Tenant under this Lease. Without limitation on the other obligations of Tenant which shall survive the expiration or earlier termination of this Lease, the obligations of Tenant to pay the Rent incurred during the Term of this Lease shall survive the expiration or earlier termination of this Lease. For any partial Calendar Year, Tenant shall be obligated to pay only a pro rata share of the Additional Rent, equal to Additional Rent for such entire Calendar Year divided by 360, such quotient multiplied by the number of days of the Term falling within such Calendar Year.

4.2 Definitions . As used herein, the following terms shall have the following meanings:

(a) “ Basic Costs ” shall mean all expenses, costs and disbursements which Landlord shall pay or become obligated to pay because of, or in connection with, the normal commercial operation, maintenance and repair of the Building, including but not limited to (i) wages, salaries and fees of all personnel directly engaged in operating, maintaining or securing the Building, including taxes, insurance and benefits relating thereto; (ii) a management fee payable to Landlord or the company or companies managing the Building, not to exceed what is customary and reasonable in the Logan Township, New Jersey area; (iii) all supplies, tools, equipment and materials used directly in the operation and maintenance of the Building, including any lease payments therefor; (iv) cost of reasonable repairs and general maintenance, including but not limited to the parking lot, roof repairs and landscaping (excluding repairs and general maintenance paid by proceeds of insurance or by Tenant or other parties, and alterations attributable solely to specific tenants of the Building); (v) reasonable legal expenses and accounting expenses incurred with respect to the Building; (vi) Taxes; (vii) cost of all maintenance and service agreements for the Building, and any equipment related thereto, including window cleaning and snow removal; (viii) premiums and deductibles paid for insurance relating to the Building, including, without limitation, fire and extended coverage, boiler, earthquake, windstorm, rental loss, and commercial general liability insurance; and (ix) capital improvements, except that Basic Costs for capital improvements shall be limited to (A) the cost during the Term of this Lease of any capital improvement which is reasonably intended to reduce any component cost included within Basic Costs as reasonably amortized by Landlord with interest on the unamortized amount at the Interest Rate , and (B) the cost of any capital improvements which are necessary to keep the Building or any part thereof in compliance with all governmental rules and regulations applicable thereto, provided the Project’s use remains an office and industrial complex, from time to time as reasonably amortized by Landlord with interest on the unamortized amount at the Interest Rate. Any capital improvement costs which are included in the term “Basic Costs” shall only be included to the extent any such costs are attributable, on a straight-line amortization (based on the life of the improvement for federal tax purposes), to the remaining portion of the Term of this Lease and any renewal or extension thereof.

(b ) Exclusions from Basic Costs . The following items are specifically excluded from the definition of Basic Costs: (i) interest (except as otherwise allowed herein); (ii) depreciation; (iii) penalties and fines; (iv) marketing expenses and commissions; (v) costs of services or labor provided solely and directly to specific tenants at the Building, including, but not limited to tenant improvement costs; (vi) organizational expenses associated with the creation and operation of the entity which constitutes Landlord; (vii) general or special assessments levied against the owner of the Building for public improvements which are not currently due; (viii) capital improvements except as set forth in subparagraph (a) above; and (ix) leasing commissions.

(c) “ Taxes ” shall be defined as (i) all real property taxes and assessments levied by any public authority against the Property; (ii) all personal property taxes levied by any public authority on personal property of Landlord used in the management, operation, maintenance and repair of the Building, (iii) all taxes, assessments and reassessments of every kind and nature whatsoever levied or assessed in lieu of or in substitution for existing or additional real or personal property taxes and assessments on the Building, or (iv) amounts necessary to be expended because of governmental orders, whether general or special, ordinary or extraordinary, unforeseen as well as foreseen, of any kind and nature for public improvements, services, benefits or any other purposes which are assessed, levied, confirmed, imposed or become a lien upon the Premises or Building or become payable during the Term. Further, for the purposes of this Article IV , Taxes shall include the reasonable expenses (including, without limitation, attorneys’ fees) incurred by Landlord in challenging or obtaining or attempting to obtain a reduction of such Taxes, regardless of the outcome of such challenge, and any costs incurred by Landlord for compliance, review and appeal of tax liabilities. Notwithstanding the foregoing, Landlord shall have no obligation to challenge Taxes. If as a result of any such challenge, a tax refund is made to Landlord, then provided no monetary Event of Default exists under this Lease, the amount of such refund less the expenses of the challenge shall be deducted from Taxes due in the Calendar Year such refund is received. In the case of any Taxes which may be evidenced by improvement or other bonds or which may be paid in annual or other periodic installments, Landlord shall elect to cause such bonds to be issued or cause such assessment to be paid in installments over the maximum period permitted by law. Nothing contained in this Lease shall require Tenant to pay any franchise, gift, estate, inheritance or succession transfer tax of Landlord, or any income, profits or revenue tax or charge, upon the net income of Landlord from all sources

4.3 Expense Adjustment . Commencing on the Commencement Date and continuing throughout the remainder of the Term, Tenant shall pay to Landlord as Additional Rent, on the first day of each calendar month, an amount equal to one-twelfth (1/12) of Tenant’s Proportionate Share of the total amount of the Basic Costs incurred with respect to each Calendar Year in the Term of this Lease (the total amount paid by the Tenant in each Calendar Year being referred to herein as the “Expense Adjustment Amount”). The Expense Adjustment Amount for each Calendar Year shall be estimated from time to time by Landlord and communicated by written notice to Tenant not more frequently than quarterly. Landlord shall cause to be kept books and records showing Basic Costs in accordance with an appropriate system of accounts and account practices consistently maintained. Within one hundred and twenty (120) days following the close of each Calendar Year, Landlord shall cause the amount of the Expense Adjustment Amount which should have been paid by Tenant for such Calendar Year (the “Final Expense Amount”) to be computed on the basis of the actual Basic Costs for each Calendar Year, and Landlord shall deliver to Tenant a statement of such Final Expense Amount. If the Final Expense Amount exceeds the Expense Adjustment Amount, Tenant shall pay such deficiency within thirty (30) days after receipt of such statement. If the Expense Adjustment Amount exceeds the Final Expense Amount, then at Landlord’s option such excess shall be either credited against payments of Additional Rent next due or refunded by Landlord, provided no Tenant Event of Default exists hereunder. Delay in computation of the Final Expense Amount or any Expense Adjustment Amount shall not be deemed a default hereunder or a waiver of Landlord’s right to collect the Final Expense Amount or Expense Adjustment Amount, as the case may be.

4.4 Tenant’s Right to Audit. Tenant shall have a right, at Tenant’s sole cost and expense, to audit Landlord’s Final Expense Amount upon the following terms and conditions. Tenant shall notify Landlord in writing that it is exercising its right to audit within 90 days following delivery of the Final Expense Amount, indicating in such notice with reasonable specificity those cost components of the Final Expense Amount to be subject to audit. The audit shall take place at Landlord’s regional offices or, at Landlord’s option, the Building, at a time mutually convenient to Landlord and Tenant (but not later than 60 days after receipt of Tenant’s notice to audit). Except as Landlord may consent in writing, the audit shall be completed within 10 days after commencement. No copying of Landlord’s books or records will be allowed. The audit may be accomplished by either Tenant’s own employees with accounting experience reasonably sufficient to conduct such review, or a nationally or regionally recognized public accounting firm mutually acceptable to Landlord and Tenant that is engaged on either a fixed price or hourly basis. Under no circumstances shall Landlord be required to consent to an accounting firm that is also a tenant

 

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of Landlord (or any Landlord affiliate) in the Building or any building in the city or metropolitan area in which the Building is located. The records reviewed by Tenant shall be treated as confidential and prior to commencing the audit, Tenant and any other person which may perform such audit for Tenant, shall execute a Confidentiality Agreement in a form reasonably acceptable to Landlord. A copy of the results of the audit shall be delivered to Landlord within 30 days after the completion of the audit. If Landlord and Tenant determine that the Final Expense Amount for the Calendar Year is less than reported, Landlord shall give Tenant a credit in the amount of the overpayment toward Tenant’s next monthly payment of Basic Costs, or, in the event the Lease has expired or terminated and no monetary Event of Default exists, Landlord shall pay Tenant the total amount of such overpayment within 30 days. If Landlord and Tenant determine that the Final Expense Amount for the Calendar Year is more than reported, Tenant shall pay Landlord the amount of any underpayment within 30 days. Failure by Tenant to timely request an audit, or to timely deliver to Landlord the results of the audit, or to follow any of the procedures set forth in this Section 4.4 is deemed a waiver of the applicable audit right and any right to contest the Final Expense Amount for the applicable Calendar Year and is deemed acceptance of the Final Expense Amount for the applicable Calendar Year. Any audit review by Tenant shall not postpone or alter the liability and obligation of Tenant to pay any Rent due under the terms of the Lease. Tenant shall not be entitled to conduct such an audit if any monetary Event of Default exists under this Lease. No subtenant shall have any right to conduct an audit except for a permitted assignee or sublessee under Article IX of the Lease occupying the entire Premises and no assignee or sublessee shall conduct an audit for any period during which such assignee or sublessee was not in possession of the Premises or for any period in which Tenant has conducted an audit.

4.5 Sales or Excise Taxes . Tenant shall pay to Landlord, as Additional Rent, concurrently with payment of Basic Rent all taxes, including, but not limited to any and all sales, rent or excise taxes (but specifically excluding income taxes calculated upon the net income of Landlord) on Basic Rent, Additional Rent or other amounts otherwise benefiting Landlord, as levied or assessed by any governmental or political body or subdivision thereof against Landlord on account of such Basic Rent, Additional Rent or other amounts otherwise benefiting Landlord, or any portion thereof.

V. USE

5.1 Use of Premises . In accordance with the terms, covenants and conditions set forth in this Lease, and applicable governmental regulations, restrictions and permitting (without the necessity of obtaining any zoning changes, conditional use permits or other special use permits), solely for warehouse and general business office purposes and uses incidental thereto, but for no other purpose.

5.2 Operation of Tenant’s Business . If any governmental license or permit, other than a Certificate of Occupancy (if any is issued or required), shall be required for the proper and lawful conduct of Tenant’s business in the Premises or any part thereof, Tenant shall first provide Landlord with prior written notice and obtain Landlord’s consent thereto. Thereafter, at its expense, Tenant shall procure such license prior to the first day of the Term, and thereafter maintain and renew such license or permit. Tenant shall, at all times, comply with the terms and conditions of each such license or permit. Tenant shall not, at any time, use or occupy, or suffer or permit anyone to use or occupy, the Premises, or do or permit anything to be done in the Premises, in any manner which may (a) violate any Certificate of Occupancy for the Premises or for the Building; (b) cause, or be liable to cause injury to the Building or any equipment, facilities or systems therein; (c) constitute a violation of the laws and requirements of any public authority or the requirements of insurance bodies; (d) impair or tend to impair the character, reputation or appearance of the Project or the Building; (e) impair or tend to impair the proper and economic maintenance, operation, and repair of the Property and the Building and/or its equipment, facilities or systems; and (f) annoy or inconvenience other tenants or users of the Building and the Project, if any. Tenant shall take all substantial or non substantial actions necessary to comply with all applicable statutes, ordinances, rules, regulations, orders and requirements regulating the use by Tenant of the Premises, including without limitation, the Occupational Safety and Health Act, and regulating Hazardous Materials (as such term is herein defined in Section 10.32 ). If the nature of Tenant’s use or occupancy of the Premises causes any increase in Landlord’s insurance premiums over and above those chargeable for the least hazardous type of occupancy legally permitted in the Premises, the Landlord will promptly give written notice of such increase to Tenant (which such notice shall include supporting documents evidencing such premium increase) and if Tenant fails to limit its use so as to negate such premium increase, Tenant will thereafter pay the resulting increase within ten (10) days after receipt of a statement from Landlord setting forth the amount thereof.

5.3 Use of Common Areas . Tenant and its employees and visitors shall have the non-exclusive right to use any Common Areas of the Property as constituted from time to time, subject to such reasonable rules and regulations governing the use as Landlord from time to time may prescribe.

VI. CONDITION AND DELIVERY OF PREMISES

Tenant hereby covenants and agrees that Tenant is familiar with the condition of the Property and the Premises and that Tenant is accepting the Premises on an “AS-IS,” “WHERE-IS” basis, and that Landlord is making absolutely no repairs, replacements or improvements of any kind or nature to the Premises or the Property in connection with, or in consideration of, this Lease, except for Landlord Work”, as set forth on Exhibit B-1. Landlord agrees to enforce, upon Tenant’s request, all manufacturer’s or contractor’s warranties given in connection with Landlord Work.

VII. SUBORDINATION; NOTICE TO SUPERIOR LESSORS AND MORTGAGEES; ATTORNMENT

This Lease is subject and subordinate to all ground or underlying leases and to any mortgage, deed of trust, security interest, or title retention interest affecting the Land, Building, Property or Project (the “Mortgage”) and to all renewals, modifications, consolidations, replacements and extensions thereof. This subordination shall be self-operative; however, in confirmation thereof, Tenant shall, within 10 days of receipt thereof, execute any instrument that Landlord or any holder of any note or obligation secured by a Mortgage (the “Mortgagee”) may request confirming such subordination. Notwithstanding the foregoing, before any foreclosure sale under a Mortgage, the Mortgagee shall have the right to subordinate the Mortgage to this Lease, and, in the event of a foreclosure, this Lease may continue in full force and effect and Tenant shall attorn to and recognize as its landlord the purchaser of Landlord’s interest under this Lease. Tenant shall, upon the request of a Mortgagee or purchaser at foreclosure, execute, acknowledge and deliver any instrument that has for its purpose and effect the subordination of the lien of any Mortgage to this Lease or Tenant’s attornment to such Purchaser. Landlord shall use commercially reasonable efforts to obtain a Subordination Nondisturbance Agreement on behalf of Tenant

VIII. QUIET ENJOYMENT

So long as Tenant pays all of the Rent and performs all of its other obligations hereunder, Tenant shall peaceably and quietly have, hold and enjoy the Premises without hindrance, ejection or molestation by Landlord, or any other person lawfully claiming through or under Landlord, subject, nevertheless, to the provisions of this Lease and to those of a Mortgage and to all laws, ordinances, orders, rules and regulations of any governmental authority. Landlord shall not be responsible for the acts or omissions of any other persons or third party that may interfere with Tenant’s use and enjoyment of the Premises.

 

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IX. ASSIGNMENT, SUBLETTING AND MORTGAGING

9.1 Landlord’s Consent.

(a) Tenant shall not assign, transfer, mortgage or otherwise encumber this Lease or sublet or rent (or permit a third party to occupy or use) the Premises, or any part thereof, nor shall any assignment or transfer of this Lease or the right of occupancy hereunder be effected by operation of law or otherwise, without the prior written consent of Landlord, such consent not to be unreasonably withheld. A transfer at any one time or from time to time of a majority interest in Tenant (whether stock, partnership interest or other form of ownership or control) shall be deemed to be an assignment of this Lease, unless at the time of such transfer Tenant is an entity whose outstanding stock is listed on a recognized security exchange. Within 30 days following Landlord’s receipt of Tenant’s request for Landlord’s consent to a proposed assignment, sublease, or other encumbrance, together with all information required to be delivered by Tenant pursuant to the provisions of this Section 9.1 , Landlord shall: (i) consent to such proposed transaction; (ii) refuse such consent; or (iii) elect to terminate this Lease in the event of an assignment, or in the case of a sublease, terminate this Lease as to the portion of the Premises proposed to be sublet in accordance with the provisions of Section 9.2 . Any assignment, sublease or other encumbrance without Landlord’s written consent shall be voidable by Landlord and, at Landlord’s election, constitute an Event of Default hereunder. Without limiting other instances in which Landlord may reasonably withhold consent to an assignment or sublease, Landlord and Tenant acknowledge that Landlord may withhold consent (a) if an Event of Default exists under this Lease or if an Event of Default would exist but for the pendency of any cure periods provided under Section 21.1 ; or (b) if the proposed assignee or sublessee is: a governmental entity; a person or entity with whom Landlord has negotiated for space in the Project during the prior 6 months; a present tenant in the Project; a person or entity whose tenancy in the Project would violate any exclusivity arrangement which Landlord has with any other tenant; a person or entity of a character or reputation or engaged in a business which is not consistent with the quality of the Project; or not a party of reasonable financial worth and/or financial stability in light of the responsibilities involved under this Lease on the date consent is requested. If Tenant requests Landlord’s consent to a specific assignment or subletting, Tenant will submit in writing to Landlord: (1) the name and address of the proposed assignee or subtenant; (2) a counterpart of the proposed agreement of assignment or sublease; (3) reasonably satisfactory information as to the nature and character of the business of the proposed assignee or subtenant, and as to the nature of its proposed use of the space; (4) banking, financial or other credit information reasonably sufficient to enable Landlord to determine the financial responsibility and character of the proposed assignee or subtenant; (5) executed estoppel certificates from Tenant containing such information as provided in Article XXIV ; and (6) any other information reasonably requested by Landlord.

(b) Notwithstanding that the prior express written permission of Landlord to any of the aforesaid transactions may have been obtained, the following shall apply:

(i) In the event of an assignment, contemporaneously with the granting of Landlord’s aforesaid consent, Tenant shall cause the assignee to expressly assume in writing and agree to perform all of the covenants, duties, and obligations of Tenant hereunder and such assignee shall be jointly and severally liable therefore along with Tenant.

(ii) All terms and provisions of the Lease shall continue to apply after any such transaction.

(iii) In any case where Landlord consents to an assignment, transfer, encumbrance or subletting, the undersigned Tenant and any guarantor shall nevertheless remain directly and primarily liable for the performance of all of the covenants, duties, and obligations of Tenant hereunder (including, without limitation, the obligation to pay all Rent and other sums herein provided to be paid), and Landlord shall be permitted to enforce the provisions of this instrument against the undersigned Tenant, any guarantor and/or any assignee without demand upon or proceeding in any way against any other person. Neither the consent by Landlord to any assignment, transfer, encumbrance or subletting nor the collection or acceptance by Landlord of rent from any assignee, subtenant or occupant shall be construed as a waiver or release of the initial Tenant or any guarantor from the terms and conditions of this Lease or relieve Tenant or any subtenant, assignee or other party from obtaining the consent in writing of Landlord to any further assignment, transfer, encumbrance or subletting.

(iv) Tenant hereby assigns to Landlord the rent and other sums due from any subtenant, assignee or other occupant of the Premises and hereby authorizes and directs each such subtenant, assignee or other occupant to pay such rent or other sums directly to Landlord; provided however, that until the occurrence of an Event of Default, Tenant shall have the license to continue collecting such rent and other sums. Notwithstanding the foregoing, in the event that the rent due and payable by a sublessee under any such permitted sublease (or a combination of the rent payable under such sublease plus any bonus or other consideration therefor or incident thereto) exceeds the hereinabove provided Rent payable under this Lease, or if with respect to a permitted assignment, permitted license, or other transfer by Tenant permitted by Landlord, the consideration payable to Tenant by the assignee, licensee, or other transferee exceeds the Rent payable under this Lease, then Tenant shall be bound and obligated to pay Landlord such excess rent and other excess consideration in accordance with Section 9.3 within 10 days following receipt thereof by Tenant from such sublessee, assignee, licensee, or other transferee, as the case may be.

(v) Tenant shall pay Landlord a fee in an amount not to exceed $1,000.00 to reimburse Landlord for all its expenses under this Article IX for each proposed transaction, including, without limitation, reasonable attorneys’ fees.

9.2 Landlord’s Option to Recapture Premises . If Tenant proposes to assign this Lease, Landlord may, at its option, upon written notice to Tenant given within 30 days after its receipt of Tenant’s notice of proposed assignment, together with all other necessary information, elect to recapture the Premises and terminate this Lease. If Tenant proposes to sublease all or part of the Premises for a greater amount of Basic Rent than that being charged hereunder, Landlord may, at its option upon written notice to Tenant given within 30 days after its receipt of Tenant’s notice of proposed subletting, together with all other necessary information, elect to recapture such portion of the Premises as Tenant proposes to sublease and upon such election by Landlord, this Lease shall terminate as to the portion of the Premises recaptured. If a portion of the Premises is recaptured, the Rent payable under this Lease shall be proportionately reduced based on the square footage of the Rentable Square Feet retained by Tenant and the square footage of the Rentable Square Feet leased by Tenant immediately prior to such recapture and termination, and Landlord and Tenant shall thereupon execute an amendment to this Lease in accordance therewith. Landlord may thereafter, without limitation, lease the recaptured portion of the Premises to the proposed assignee or subtenant without liability to Tenant. Upon any such termination, Landlord and Tenant shall have no further obligations or liabilities to each other under this Lease with respect to the recaptured portion of the Premises, except with respect to obligations or liabilities which accrue or have accrued hereunder as of the date of such termination (in the same manner as if the date of such termination were the date originally fixed for the expiration of the Term). Notwithstanding anything contained herein to the contrary, Landlord’s shall not have the option to recapture the Premises in the event Tenant proposes to sublease all or part of the Premises for an amount equal to or less than the amount of Basic Rent being charged hereunder or in the event of an assignment or sublease to a Related Entity.

9.3 Distribution of Net Profits . In the event that Tenant assigns this Lease or sublets all or any portion of the Premises during the Term to any entity, Landlord shall receive 75% of any “Net Profits” (as hereinafter defined) and Tenant shall receive 25% of any Net Profits received by Tenant from any such assignment or subletting. The term “Net Profits” as used herein shall mean such portion of the Rent payable by such assignee or subtenant in excess of the Rent payable by Tenant under this Lease (or pro rata portion thereof in the event of a subletting) for the corresponding period, after deducting from such excess Rent all of Tenant’s documented reasonable third party costs associated with such assignment or subletting, including, without limitation, broker commissions, attorney fees and any costs incurred by Tenant to prepare or alter the Premises, or portion thereof, for the assignee or sublessee.

9.4 Transfers to Related Entities . Notwithstanding anything in this Article IX to the contrary, provided no Event of Default exists under this Lease or would exist but for the pendency of any cure periods provided for under Section 21.1 , Tenant may, without Landlord’s consent, but after providing written notice to Landlord and subject to the provisions of Section 9.1(b)(i-iii) , assign this Lease or

 

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sublet all or any portion of the Premises to any Related Entity (as hereinafter defined) provided that (i) such Related Entity is not a governmental entity or agency; (ii) such Related Entity’s use of the Premises would not cause Landlord to be in violation of any exclusivity agreement within the Project; and (iii) the net worth (computed in accordance with generally accepted accounting principles exclusive of goodwill) of the Guarantor is greater than or equal to the greater of (a) the net worth of Guarantor as of the Date of Lease; or (b) the net worth of the Guarantor immediately prior to such transfer, and proof satisfactory to Landlord that such net worth standards have been met shall have been delivered to Landlord at least 10 days prior to the effective date of any such transaction. “Related Entity” shall be defined as (a) any parent company, subsidiary, affiliate or related corporate entity of Tenant that controls, is controlled by, or is under common control with Tenant, or (b) an entity (i) resulting from the merger or consolidation of Tenant with or into such other entity or (ii) purchasing all or substantially all of the assets of Tenant.

X. COMPLIANCE WITH LAWS

10.1 General Compliance . Tenant shall give prompt notice to Landlord of any notice it receives of the violation of any law or requirement of any governmental or administrative authority with respect to the Premises or the use or occupation thereof. Tenant shall, at Tenant’s expense, comply with all laws and requirements of any governmental or administrative authorities which shall impose any violation, order or duty on Landlord or Tenant arising from (a) Tenant’s particular use of the Premises; (b) the manner or conduct of Tenant’s business or operation of its installations, equipment or other property therein; (c) any cause or condition created by or caused by Tenant; (d) breach of any of Tenant’s obligations under this Lease, whether or not such compliance requires work which is structural or non-structural, ordinary or extraordinary, foreseen or unforeseen; and Tenant shall pay all the costs, expenses, fines, penalties and damages which may be imposed upon Landlord by reason or arising out of Tenant’s failure to fully and promptly comply with and observe the provisions of this Article X . Nothing in this Article X shall make Tenant responsible for any structural repairs or improvements that are not specifically necessitated by the causes set forth in Clauses (a), (b), (c) or (d)  of the immediately preceding sentence.

10.2 ADA Compliance . Notwithstanding any other statement in this Lease, the following provisions shall govern the parties’ compliance with the Americans With Disabilities Act of 1990, as amended from time to time, Public Law 101-336; 42 U.S.C. §§12101, et seq. (the foregoing, together with any similar state statute governing access for the disabled or handicapped collectively referred to as the “ ADA ”):

(a) To the extent governmentally required as of the Commencement Date of this Lease, Landlord shall be responsible for the cost of compliance with Title III of the ADA, and such cost shall not be included as a Basic Cost of the Property, with respect to any repairs, replacements or alterations to the Common Areas of the Project. To the extent governmentally required subsequent to the Commencement Date of this Lease as a result of an amendment to Title III of the ADA or any regulation thereunder enacted subsequent to the Commencement Date of this Lease, Landlord shall be responsible for compliance with Title III of the ADA with respect to any repairs, replacements or alterations to the Common Area of the Property, and such expense shall be included as a Basic Costs of the Property. Landlord shall indemnify, defend and hold harmless Tenant and its Agents from all fines, suits, procedures, penalties, claims, liability, losses, expenses and actions of every kind, and all costs associated therewith (including, without limitation, reasonable attorneys’ and consultants’ fees) arising out of or in any way connected with Landlord’s failure to comply with Title III of the ADA as required above.

(b) To the extent governmentally required, Tenant shall be responsible for compliance, at its expense, with Titles I and III of the ADA with respect to the Premises. Tenant shall indemnify, defend and hold harmless Landlord and its Agents from all fines, suits, procedures, penalties, claims, liability, losses, expenses and actions of every kind, and all costs associated therewith (including, without limitation, reasonable attorneys’ and consultants’ fees) arising out of or in any way connected with Tenant’s failure to comply with Titles I and III of the ADA as required above.

10.3 ISRA Compliance .

(a) Tenant shall, at Tenant’s sole cost and expense, comply with the Industrial Site Recovery Act (N.J.S.A. 13:1k-6 et seq.), the regulations promulgated thereunder and any amending and successor legislation and regulations (collectively, “ISRA”). Tenant shall, at Tenant’s sole cost and expense, make all submissions to, provide all information to, and comply with all requirements of, the Industrial Site Evaluation Element or its successor (the “Element”) of the New Jersey Department of Environmental Protection or its successor (the “NJDEP”). Tenant’s obligations under Section 10.3 of this Lease shall arise if there is a closing of operations, a transfer of ownership or operations, or a change in ownership at or affecting the Premises pursuant to ISRA, whether triggered by Landlord or Tenant. Provided this Lease is not previously canceled or terminated by either party to this Lease or by operation of law, Tenant shall commence its submission to the Element in anticipation of the end of the Term no later than one year prior to the Expiration Date.

(b) For purposes of Section 10.3 of this Lease, “Environmental Documents” means, collectively, all environmental documentation concerning the Premises or its environs in the possession or under the control of Tenant, including, without limitation, all sampling plans, clean-up plans, preliminary assessment plans and reports, site investigation plans and reports, remedial investigation plans and reports, remedial action plans and reports or the equivalent, sampling results, sampling result reports, data, diagrams, charts, maps, analyses, conclusions, quality assurance/quality control documentation, correspondence to or from the Element or any other municipal, county, state or federal governmental authority, submissions to the Element or any other municipal, county, state or federal governmental authority and directives, orders, approvals and disapprovals issued by the Element or any other municipal, county, state or federal governmental authority. During the Term and thereafter promptly after receipt by Tenant or Tenant’s representatives, Tenant shall deliver to Landlord all Environmental Documents concerning or generated by or on behalf of Tenant, whether currently or hereafter existing.

(c) At no expense to Landlord, Tenant shall promptly provide all information requested by Landlord or NJDEP for preparation of a non-applicability affidavit, de minimus quantity exemption application, limited conveyance application or other submission and shall promptly sign such affidavits and submissions when requested by Landlord or NJDEP.

(d) Tenant shall notify Landlord in advance of all meetings scheduled between Tenant or Tenant’s representatives and NJDEP or any other environmental authority, and Landlord and Landlord’s representatives shall have the right, without the obligation, to attend and participate in all such meetings.

(e) Should Tenant’s operations at the Premises be outside of those industrial operations covered by ISRA, Tenant shall, at Tenant’s sole cost and expense, obtain a letter of non-applicability or de minimus quantity exemption from the Element prior to the Expiration Date and shall promptly provide Tenant’s submission and the Element’s exemption letter to Landlord. Should Tenant obtain a letter of non-applicability or a de minimus quantity exemption from the Element, then Tenant shall, at Landlord’s option, hire a consultant satisfactory to Landlord to undertake sampling at the Premises sufficient to determine whether fill materials, hazardous or toxic substances, pollutants or wastes exist or have been spilled, discharged or placed in, on, under or about the Premises during the Term. Tenant’s sampling shall also establish the integrity of all underground storage tanks at the Premises, if any. Should the sampling r


 
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