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
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ARTICLE I
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BASIC LEASE
PROVISIONS
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1
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1.1
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Premises
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1
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1.2
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Building
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1
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1.3
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Land
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1
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1.4
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Property
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1
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1.5
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Project
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1
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1.6
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Rentable Square
Feet (Foot) or Rentable Area
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1
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1.7
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Term
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1
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1.8
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Commencement
Date
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1
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1.9
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Expiration
Date
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1
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1.10
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Lease
Year
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1
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1.11
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Calendar
Year
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1
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1.12
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Basic
Rent
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1
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1.13
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Security
Deposit
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1
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1.14
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Interest
Rate
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1
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1.15
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Tenant’s
Proportionate Share
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1
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1.16
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Broker(s)
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1
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1.17
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Guarantor(s)
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1
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1.18
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Landlord’s Notice Address
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1
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1.19
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Tenant’s
Notice Address
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2
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1.20
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Agents
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2
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1.21
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Common
Area
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2
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ARTICLE II.
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PREMISES AND
TERM
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2
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2.1
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Premises
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2
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2.2
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Commencement
Date
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2
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2.3
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Early
Possession
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2
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ARTICLE III
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BASE RENT
AND GENERAL RENTAL PAYMENT PROVISIONS
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2
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3.1
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Types of Rental
Payments
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2
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3.2
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Covenants
Concerning Rental Payments
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2
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3.3
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Net
Lease
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2
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3.4
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Security
Deposit
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2
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ARTICLE IV
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ADDITIONAL
RENT
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3
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4.1
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Additional
Rent
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3
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4.2
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Definitions
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3
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4.3
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Expense
Adjustment
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3
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4.4
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Tenant’s
Right to Audit
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3
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4.5
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Sales or Excise
Taxes
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4
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ARTICLE V
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USE
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4
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5.1
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Use of
Premises
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4
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5.2
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Operation of
Tenant’s Business
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4
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5.3
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Use of Common
Areas
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4
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ARTICLE VI
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CONDITION
AND DELIVERY OF PREMISES
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4
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ARTICLE VII
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SUBORDINATION; NOTICE TO SUPERIOR LESSORS AND
MORTGAGEES
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4
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ARTICLE VIII
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QUIET
ENJOYMENT
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4
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ARTICLE IX
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ASSIGNMENT,
SUBLETTING AND MORTGAGING
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5
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9.1
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Landlord’s Consent
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5
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9.2
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Landlord’s Option to Recapture
Premises
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5
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9.3
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Distribution of
Net Profits
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5
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9.4
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Transfers to
Related Entities
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5
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ARTICLE X
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COMPLIANCE
WITH LAWS
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6
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10.1
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General
Compliance
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6
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10.2
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ADA
Compliance
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6
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10.3
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ISRA
Compliance
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6
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ARTICLE XI
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INSURANCE
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7
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11.1
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Certain
Insurance Risks
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7
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11.2
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Tenant’s
Insurance
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7
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11.3
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Forms of the
Policies
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7
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11.4
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Waiver of
Subrogation
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8
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11.5
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Adequacy of
Coverage
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8
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ARTICLE XII
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ALTERATIONS
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8
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12.1
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Procedural
Requirements
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8
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12.2
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Performance of
Alterations
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8
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12.3
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Lien
Prohibition
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8
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ARTICLE XIII
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LANDLORD’S AND TENANT’S
PROPERTY
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8
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13.1
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Landlord’s Property
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8
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13.2
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Tenant’s
Property
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9
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13.3
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Removal of
Tenant’s Property
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9
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ARTICLE XIV
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REPAIRS AND
MAINTENANCE
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9
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14.1
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Tenant Repairs
and Maintenance
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9
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14.2
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Landlord
Repairs
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9
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14.3
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Tenant
Equipment
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9
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ARTICLE XV
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UTILITIES
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9
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15.1
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Purchasing
Utilities
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9
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15.2
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Use of
Electrical Energy by Tenant
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9
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ARTICLE XVI
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INVOLUNTARY
CESSATION OF SERVICES
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9
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ARTICLE XVII
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LANDLORD’S RIGHTS
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10
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ARTICLE XVIII
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NON-LIABILITY AND INDEMNIFICATION
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10
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18.1
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Indemnification
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10
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18.2
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Waiver and
Release
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10
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18.3
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Survival
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10
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ARTICLE XIX
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DAMAGE OR
DESTRUCTION
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10
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19.1
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Damage to the
Premises
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10
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19.2
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Condemnation
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10
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ARTICLE XX
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SURRENDER
AND HOLDOVER
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11
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ARTICLE XXI
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DEFAULT OF
TENANT
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11
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21.1
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Events of
Default
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11
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21.2
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Landlord’s Remedies
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12
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21.3
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Mitigation of
Damages
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12
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21.4
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No
Waiver
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12
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21.5
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Late
Payment
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12
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21.6
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Waiver of
Redemption
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12
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21.7
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Landlord’s Lien
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13
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ARTICLE XXII
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BROKER
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13
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ARTICLE XXIII
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ESTOPPEL
CERTIFICATES
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13
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ARTICLE XXVI
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ENVIRONMENTAL
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13
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24.1
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Hazardous
Material
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13
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24.2
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Definition
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13
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24.3
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Tenant’s
Liability
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13
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24.4
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Landlord’s Liability
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13
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ARTICLE XXV
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SIGNAGE
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14
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ARTICLE XXVI
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MISCELLANEOUS
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14
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26.1
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Merger
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14
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26.2
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Notices
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14
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26.3
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Non-Waiver
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14
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26.4
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Parties
Bound
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14
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26.5
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Recordation of
Lease
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14
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26.6
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Survival of
Obligations
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14
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26.7
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Prorations
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14
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26.8
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Governing Law;
Construction
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14
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26.9
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Time
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15
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26.10
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Authority of
Tenant
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15
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26.11
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Security
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15
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26.12
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Financial
Reports
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15
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26.13
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Rules and
Regulations
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15
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26.14
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Force
Majeure
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15
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26.15
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Waiver of Jury
Trial
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15
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26.16
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Attorneys’ Fees
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15
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26.18
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Landlord’s Fees
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15
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26.19
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Light, Air or
View Rights
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15
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26.20
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Counterparts
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15
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26.21
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Nondisclosure
of Lease Terms
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16
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26.22
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Joint and
Several Obligations
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16
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26.23
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Notice of Lease
Term Dates
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16
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26.24
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Anti-Terrorism
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16
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CORPORATE GUARANTY - FORM
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EXHIBIT A-1
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DESCRIPTION OF
PREMISES
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EXHIBIT A-2
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LEGAL
DESCRIPTION OF LAND
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EXHIBIT B-1
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LANDLORD FORM
OF WORK AGREEMENT
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EXHIBIT B-2
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TENANT FORM OF
WORK AGREEMENT
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EXHIBIT C
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SECRETARY’S CERTIFICATE
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EXHIBIT D
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RULES AND
REGULATIONS
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EXHIBIT E
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NOTICE OF LEASE
TERM DATES
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EXHIBIT F
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GUARANTY
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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 .
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Approximate
Annual Rent (RSF)
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Monthly
Basic Rent
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Annual
Basic Rent
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CD-7/31/08
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$
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4.25
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*
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$
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30,132.50
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*
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$
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361,590.00
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**
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8/1/08-7/31/09
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$
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4.36
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$
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30,912.40
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$
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370,948.80
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8/1/09-7/31/10
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$
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4.47
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$
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31,692.30
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$
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380,307.60
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8/1/10-2/28/11
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$
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4.58
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$
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32,472.20
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$
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389,666.40
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**
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*
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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
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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).
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1.16
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David
Ricci
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William A. R.
Goodwin
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The Flynn
Company
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CB Richard
Ellis
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1621 Wood
Street
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1800 JFK Blvd.,
10 th
Floor
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Philadelphia,
PA 19103
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Philadelphia,
PA 19103
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1.17
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Guarantor(s).
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Drugstore.com,
Inc., a Delaware corporation
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1.18
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Landlord’s Notice
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9830 Colonnade
Boulevard, Suite 600
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Address.
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San Antonio,
Texas 78230-2239
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Attention: VP
Real Estate Counsel
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Attention: VP
Portfolio Management
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1
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With copies at
the same time to.
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US INDUSTRIAL REIT II
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1.19
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Tenant’s
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411 108
th Avenue NE, Suite 1400
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Notice Address.
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Bellevue, WA
98004
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Attention:
Nathan Garnett, Associate General Counsel
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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.
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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
5
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