LEASE AGREEMENT
between
STONEBRIDGE INDUSTRIAL REALTY TRUST, LP a Maryland limited partnership
as Landlord
and
MERIDIAN CONSUMER BRANDS LLC a Delaware limited liability company
as Tenant
for
Building 4, Cranbury Commerce Center 200 Prospect Plains Road Cranbury, New Jersey 08512
Dated: July 18, 2022
Prepared by:
Whitfield, Barr & Calloway LLP 1700 Market Street, Suite 3200 Philadelphia, PA 19103
Attention: Thomas R. Calloway, Partner
Jennifer Pace, Associate
ARTICLE 1 — BASIC LEASE INFORMATION AND DEFINED TERMS
Section 1.1 — Basic Lease Information Summary
The following is a summary of certain basic terms and conditions of this Lease Agreement (this "Lease"). Each item below shall be deemed to incorporate all of the terms set forth in this Lease pertaining to such item. In the event of any conflict between the provisions of this Section 1.1 and any other provision of this Lease, the more detailed provision shall control.
Section 1.2 — Defined Terms
As used in this Lease, the following capitalized terms shall have the meanings set forth below. Any capitalized terms not defined in this Section 1.2 shall have the meanings ascribed to them elsewhere in this Lease.
"Additional Rent" means all sums payable by Tenant to Landlord under this Lease other than Base Rent, including, without limitation, Tenant's Proportionate Share of NNN Expenses, late charges, Default Rate interest, and any other amounts due from Tenant to Landlord hereunder.
"Alterations" means any alterations, additions, improvements, installations, or modifications to the Premises made by or on behalf of Tenant after the Commencement Date, excluding Tenant's Work performed in accordance with Article 8 and Exhibit D.
"Base Rent" means the annual base rent payable by Tenant as set forth in Section 4.1 and Section 4.2, as the same may be adjusted from time to time in accordance with the terms of this Lease.
"Building" means the building known as Building 4 at the Cranbury Commerce Center, located at 200 Prospect Plains Road, Cranbury, New Jersey 08512, containing approximately 297,500 rentable square feet.
"Commencement Date" has the meaning set forth in Section 3.2.
"Common Areas" means all areas within the Property that are not within the Premises but are made available by Landlord for the general use and convenience of tenants and occupants of the Cranbury Commerce Center, including driveways, access roads, shared internal access drives, truck courts, sidewalks, parking areas, stormwater detention basins, landscaped areas, utility corridors, and other common facilities.
"Default Rate" means the lesser of (a) one and one-half percent (1.5%) per month (eighteen percent (18%) per annum) and (b) the maximum rate permitted by applicable law.
"Environmental Laws" means all applicable federal, state, and local laws, statutes, ordinances, rules, regulations, orders, decrees, judgments, permits, licenses, and governmental requirements relating to the protection of human health, safety, or the environment, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. §§ 9601 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §§ 6901 et seq.), the Clean Air Act (42 U.S.C. §§ 7401 et seq.), the Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601 et seq.), the New Jersey Industrial Site Recovery Act (N.J.S.A. 13:1K-6 et seq.), the New Jersey Spill Compensation and Control Act (N.J.S.A. 58:10-23.11 et seq.), and the New Jersey Brownfield and Contaminated Site Remediation Act (N.J.S.A. 58:10B-1 et seq.), each as amended from time to time, and all rules and regulations promulgated thereunder.
"Event of Default" has the meaning set forth in Section 14.1.
"Expiration Date" has the meaning set forth in Section 1.1, as the same may be adjusted pursuant to Section 3.3.
"Force Majeure" means any delay or failure in performance caused by acts of God, fire, flood, earthquake, epidemic, pandemic, quarantine, war, terrorism, insurrection, riot, civil commotion, strikes, lockouts, labor disputes, governmental restrictions, governmental regulations, governmental controls, delay in issuance of permits, supply chain disruptions, inability to obtain labor or materials, freight embargoes, unusually severe weather, or any other cause beyond the reasonable control of the party obligated to perform, excluding financial inability to perform.
"Guarantor" means Meridian Holdings Inc., a Delaware corporation.
"Guaranty" means the limited guaranty executed by Guarantor in favor of Landlord in the form attached hereto as Exhibit F, as the same may be amended, modified, or supplemented from time to time.
"Hazardous Materials" means any substance, material, or waste that is regulated, classified, or otherwise characterized under any Environmental Law as hazardous, toxic, a pollutant, a contaminant, radioactive, or words of similar meaning or effect, including, without limitation, petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, lead-based paint, radon, tetrachloroethylene, trichloroethylene, volatile organic compounds, and any substance defined as a "hazardous substance" under CERCLA or as a "hazardous waste" under RCRA.
"Landlord Parties" means Landlord and its general partner, members, managers, officers, directors, employees, agents, contractors, successors, and assigns, and any mortgagee or ground lessor of the Property.
"Landlord's Work" means the construction, renovation, and improvement work to be performed by Landlord at Landlord's sole cost and expense in accordance with the Work Letter attached hereto as Exhibit C.
"Lease Year" means (a) with respect to Lease Year 1, the period commencing on the Commencement Date and ending on the last day of the twelfth (12th) full calendar month following the Commencement Date (including any partial month at the beginning of the Term), and (b) with respect to each subsequent Lease Year, each successive twelve (12) month period during the Term.
"Letter of Credit" has the meaning set forth in Section 6.1.
"NNN Expenses" means, collectively, Operating Expenses, Taxes, and insurance costs, as more particularly defined in Sections 4.5, 4.6, and 10.2, respectively.
"Operating Expenses" has the meaning set forth in Section 4.5.
"Permitted Use" has the meaning set forth in Section 5.1.
"Premises" has the meaning set forth in Section 1.1, as more particularly described in Exhibit A and depicted on Exhibit A-1.
"Property" has the meaning set forth in Section 1.1 and as depicted on the Site Plan attached hereto as Exhibit A-2.
"Rent" means, collectively, Base Rent and Additional Rent.
"Renewal Term" has the meaning set forth in Section 3.4.
"Security Deposit" means the Letter of Credit delivered by Tenant to Landlord pursuant to Article 6, or any cash proceeds thereof held by Landlord.
"Substantial Completion" or "Substantially Complete" means, with respect to Landlord's Work, the completion of Landlord's Work in substantial accordance with the plans and specifications set forth in Exhibit C, as certified by Landlord's architect, subject only to minor punch-list items that do not materially interfere with Tenant's use and occupancy of the Premises.
"Taxes" has the meaning set forth in Section 4.6.
"Tenant Improvement Allowance" or "TI Allowance" has the meaning set forth in Section 8.1.
"Tenant Parties" means Tenant and its members, managers, officers, directors, employees, agents, contractors, subcontractors, licensees, invitees, customers, vendors, successors, and assigns.
"Tenant's Proportionate Share" means one hundred percent (100%), as set forth in Section 1.1, reflecting the fact that Tenant is the sole tenant of the Building.
"Tenant's Work" has the meaning set forth in Section 8.2.
"Term" means the initial term of this Lease commencing on the Commencement Date and expiring on the Expiration Date, as the same may be extended pursuant to Section 3.4.
ARTICLE 2 — PREMISES
Section 2.1 — Demise
Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises described in Section 1.1 and as more particularly described in the legal description attached hereto as Exhibit A and depicted on the floor plan attached hereto as Exhibit A-1, for the Term and upon the terms and conditions set forth in this Lease. The Premises consist of the entirety of Building 4 at the Cranbury Commerce Center, a multi-building industrial park located at 200 Prospect Plains Road, Cranbury, New Jersey 08512. The Building was originally constructed in 2001, and Landlord completed a roof replacement and HVAC upgrade in 2020. The Building features a clear height of approximately thirty-six (36) feet, forty-eight (48) dock-high loading doors, four (4) drive-in doors, and eighty-five (85) trailer parking spaces. Car parking spaces are provided as depicted on the Site Plan attached hereto as Exhibit A-2.
Section 2.2 — Common Areas and Appurtenances
In addition to the Premises, Tenant shall have the non-exclusive right, in common with Landlord, other tenants, and occupants of the Cranbury Commerce Center, to use the Common Areas located within the Property and the Cranbury Commerce Center, including without limitation all driveways, access roads, shared internal access drives within the Cranbury Commerce Center (a sixty-two (62) acre, four-building industrial park), truck courts, utility infrastructure and corridors, stormwater management facilities, sidewalks, and other areas designated by Landlord from time to time for the common use and benefit of the tenants and occupants of the Cranbury Commerce Center. Such use shall be subject to the Rules and Regulations attached hereto as Exhibit G, as the same may be amended by Landlord from time to time in accordance with Section 19.15 thereof.
Landlord hereby reserves the right, at any time and from time to time during the Term, to (a) make changes to the Common Areas, including changes in the location, size, shape, configuration, and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, and landscaped areas; (b) close temporarily any of the Common Areas for maintenance, repair, construction, or improvement purposes; (c) designate other land outside the boundaries of the Property for inclusion in the Common Areas; (d) construct, modify, or remove buildings or other improvements within the Cranbury Commerce Center; and (e) do and perform such other acts in and to the Common Areas as Landlord shall determine to be advisable, in its sole judgment, for the benefit of the Cranbury Commerce Center; provided, however, that no such changes shall materially impair Tenant's access to or use of the Premises or the loading and truck court areas serving the Premises.
Section 2.3 — Measurement and square Footage
The square footage of the Premises is approximately 297,500 rentable square feet, consisting of approximately 285,000 square feet of warehouse/distribution space and approximately 12,500 square feet of finished office/mezzanine space, as measured in accordance with the Building Owners and Managers Association (BOMA) standards for industrial buildings (ANSI/BOMA Z65.2-2012). Landlord's measurement of the Premises is conclusive and binding upon both parties absent manifest error. Tenant acknowledges and agrees that the stated square footage is approximate and that Tenant shall have no right to remeasure or dispute the square footage of the Premises after the execution of this Lease. Rent and all other charges based upon the square footage of the Premises shall be calculated using the approximate square footage of 297,500 rentable square feet, regardless of any subsequent measurement or determination that the actual square footage of the Premises may be greater or lesser than such figure.
Section 2.4 — Condition of Premises; As-Is Provisions
Except as expressly set forth in Exhibit C with respect to Landlord's Work, Tenant accepts the Premises in its "as-is, where-is" condition as of the Commencement Date, without any representation or warranty by Landlord of any kind, whether express or implied. Landlord makes no representations or warranties regarding the condition, fitness, suitability, or habitability of the Premises for Tenant's intended use or for any other purpose. Without limiting the generality of the foregoing, Landlord makes no representation or warranty concerning (a) the structural integrity of the Building, (b) the condition or adequacy of any mechanical, electrical, plumbing, or HVAC systems, (c) compliance with any applicable law, ordinance, code, rule, regulation, or requirement, (d) the presence or absence of any Hazardous Materials at, on, under, or about the Premises or the Property, or (e) the suitability of the Premises for Tenant's intended use or operations.
Tenant represents and warrants that Tenant has inspected the Premises and is familiar with the physical condition thereof and that Tenant is satisfied with the condition of the Premises, subject only to Landlord's obligation to complete Landlord's Work in accordance with Exhibit C. Tenant's taking possession of the Premises shall be conclusive evidence that Tenant has accepted the Premises in their then-existing condition, subject only to the completion of Landlord's punch-list items in accordance with Section 7.3.
ARTICLE 3 — TERM
Section 3.1 — Initial Term
The initial term of this Lease (the "Term") shall be ten (10) Lease Years, commencing on the Commencement Date and expiring at 11:59 p.m. on the Expiration Date, unless earlier terminated or extended in accordance with the terms hereof. If the Commencement Date falls on a day other than the first (1st) day of a calendar month, the first Lease Year shall be extended to include the partial month in which the Commencement Date occurs and the next twelve (12) full calendar months thereafter.
Section 3.2 — Commencement Date
The Commencement Date shall be the later of (a) the date of Substantial Completion of Landlord's Work (as defined in Section 7.3 and Exhibit C) or (b) January 1, 2023 (the "Target Commencement Date"). Landlord shall use commercially reasonable efforts to achieve Substantial Completion of Landlord's Work on or before the Target Commencement Date; provided, however, that Landlord shall have no liability to Tenant and Tenant shall have no right to terminate this Lease, claim any abatement of Rent, or assert any other right or remedy by reason of any failure by Landlord to achieve Substantial Completion by the Target Commencement Date or by any other date. In the event that Landlord fails to achieve Substantial Completion by the Target Commencement Date, Tenant's sole and exclusive remedy shall be the deferral of the Commencement Date (and the corresponding deferral of the obligation to pay Base Rent) until the date of Substantial Completion.
Section 3.3 — Confirmation of Commencement Date
Within thirty (30) days after the Commencement Date, Landlord and Tenant shall execute a Commencement Date Memorandum in the form attached hereto as Exhibit B, which shall confirm: (a) the Commencement Date, (b) the Rent Commencement Date (i.e., the date upon which Tenant's obligation to pay Base Rent commences following the expiration of the Free Rent Period), (c) the Expiration Date, and (d) the Base Rent schedule applicable during each Lease Year. If the Commencement Date falls on a day other than the first (1st) day of a calendar month, the Expiration Date shall be the last day of the calendar month in which the tenth (10th) anniversary of the Commencement Date occurs. Tenant's failure to execute and deliver the Commencement Date Memorandum within such thirty (30) day period shall constitute Tenant's acceptance and confirmation of the Commencement Date, Rent Commencement Date, Expiration Date, and all other matters set forth in Landlord's proposed Commencement Date Memorandum.
Section 3.4 — Renewal Options
(a) Grant of Options. Subject to the terms and conditions set forth in this Section 3.4 and Section 3.5, Landlord hereby grants to Tenant two (2) successive options to extend the Term for a period of five (5) years each (each such five-year period, a "Renewal Term"). The first Renewal Term shall commence on the day immediately following the Expiration Date of the initial Term and shall expire on the fifth (5th) anniversary thereof. The second Renewal Term shall commence on the day immediately following the expiration of the first Renewal Term and shall expire on the fifth (5th) anniversary thereof.
(b) Exercise. Each renewal option must be exercised by Tenant's delivery of irrevocable written notice to Landlord not less than twelve (12) months prior to the expiration of the then-current Term (whether the initial Term or the first Renewal Term, as applicable). Time is of the essence with respect to the delivery of such notice. Tenant's failure to timely deliver such notice shall constitute a waiver of the applicable renewal option and all subsequent renewal options.
(c) Conditions to Exercise. Tenant's right to exercise each renewal option is expressly conditioned upon the following: (i) no Event of Default by Tenant shall exist at the time of Tenant's delivery of the renewal notice; (ii) no Event of Default by Tenant shall exist at the commencement of the applicable Renewal Term; and (iii) Tenant may not exercise the second renewal option unless the first renewal option was validly exercised and the first Renewal Term has commenced.
(d) Terms During Renewal Term. During each Renewal Term, all of the terms and conditions of this Lease shall apply, except that (i) the Base Rent during each Renewal Term shall be ninety-five percent (95%) of the then-prevailing fair market rent for comparable industrial space in the Cranbury, New Jersey submarket, as determined pursuant to Section 3.5, and (ii) Tenant shall have no further renewal options after the expiration of the second Renewal Term. The Tenant Improvement Allowance shall not be available during any Renewal Term, and Landlord shall have no obligation to perform any additional Landlord's Work or grant any further rent abatement or concessions in connection with any Renewal Term, unless otherwise agreed by the parties in writing.
Section 3.5 — Fair Market Rent Determination
(a) Landlord's Determination. Within thirty (30) days after Landlord's receipt of Tenant's renewal notice delivered pursuant to Section 3.4, Landlord shall deliver to Tenant written notice setting forth Landlord's determination of the fair market rent for the applicable Renewal Term (the "Landlord's FMR Notice").
(b) Negotiation Period. If Tenant disagrees with Landlord's determination of fair market rent, the parties shall negotiate in good faith for a period of sixty (60) days following Tenant's receipt of the Landlord's FMR Notice to reach agreement on the fair market rent for the applicable Renewal Term.
(c) Appraisal Process. If the parties are unable to agree upon the fair market rent within such sixty (60) day negotiation period, the fair market rent shall be determined by a panel of three (3) MAI-certified real estate appraisers, each of whom shall have at least ten (10) years of experience in the appraisal and valuation of industrial properties in the central New Jersey submarket. Within fifteen (15) days after the expiration of the negotiation period, each party shall select one (1) appraiser and notify the other party of such selection. Within fifteen (15) days after both party-appointed appraisers have been selected, the two (2) party-appointed appraisers shall select a third (3rd) appraiser. If the two party-appointed appraisers fail to agree upon a third appraiser within such fifteen (15) day period, either party may request the American Arbitration Association to appoint the third appraiser. Each appraiser shall independently determine the fair market rent within forty-five (45) days after the appointment of the third appraiser. The fair market rent shall be the average of the two (2) closest appraisals. If no two appraisals are closer to each other than to the third, the fair market rent shall be the average of all three (3) appraisals.
(d) Fair Market Rent Criteria. For purposes of this Section 3.5, "fair market rent" means the annual base rent per rentable square foot that a willing landlord and a willing tenant would agree upon for comparable NNN industrial lease space in the Cranbury, New Jersey submarket, taking into account all relevant factors, including the size of the premises, clear height, loading capacity, number and type of dock doors, location, age and condition of the building, parking, access, term length, credit of the tenant, and then-prevailing market conditions. The fair market rent so determined shall be discounted to ninety-five percent (95%) in accordance with Section 3.4(d).
(e) Costs. The costs and fees of the third (third-party-selected) appraiser shall be shared equally by Landlord and Tenant. Each party shall bear the costs of its own party-appointed appraiser.
(f) Interim Rent. Pending the final determination of the fair market rent for the applicable Renewal Term, Tenant shall continue to pay Base Rent at the rate in effect during the last Lease Year of the immediately preceding Term, and upon the final determination of the fair market rent, the parties shall make a retroactive adjustment within thirty (30) days.
Section 3.6 — Early Termination Option
(a) Grant of Option. Subject to the terms and conditions set forth in this Section 3.6, Tenant shall have a one-time option to terminate this Lease effective as of the last day of Lease Year 7 (the "Early Termination Date").
(b) Exercise. Tenant shall exercise such early termination option by delivering irrevocable written notice to Landlord not less than eighteen (18) months prior to the Early Termination Date. Time is of the essence with respect to the delivery of such notice. Tenant's failure to timely deliver such notice shall constitute a waiver of the early termination option.
(c) Early Termination Fee. As a condition to the effectiveness of Tenant's early termination, Tenant shall pay to Landlord, in immediately available funds, on or before the Early Termination Date, an early termination fee (the "Early Termination Fee") equal to the sum of:
(i) the unamortized balance of the Tenant Improvement Allowance ($4,462,500.00), amortized on a straight-line basis over the initial Term at an interest rate of seven percent (7%) per annum;
(ii) the unamortized balance of all brokerage commissions paid by Landlord in connection with this Lease ($540,000.00), amortized on a straight-line basis over the initial Term at an interest rate of seven percent (7%) per annum; and
(iii) six (6) months of the then-current monthly Base Rent in effect as of the Early Termination Date.
(d) Conditions. Tenant's right to exercise the early termination option is expressly conditioned upon the following: (i) no Event of Default by Tenant shall exist at the time of Tenant's delivery of the termination notice; (ii) no Event of Default by Tenant shall exist on the Early Termination Date; and (iii) Tenant shall have paid the Early Termination Fee in full on or before the Early Termination Date. If Tenant fails to satisfy any of the foregoing conditions, the early termination notice shall be null and void, and this Lease shall continue in full force and effect as if such notice had not been given.
(e) Surrender. Upon the Early Termination Date, Tenant shall surrender the Premises to Landlord in the condition required under Article 17, and all obligations of the parties hereunder shall terminate as of the Early Termination Date, except those obligations that by their nature survive termination.
ARTICLE 4 — RENT
Section 4.1 — Base Rent
Commencing on the Rent Commencement Date (i.e., the first day of the fifth (5th) month of the Term, following the expiration of the Free Rent Period set forth in Section 4.3), and continuing throughout the remainder of the Term, Tenant shall pay to Landlord annual Base Rent of One Million Two Hundred Thousand and 00/100 Dollars ($1,200,000.00) during Lease Year 1, payable in equal monthly installments of One Hundred Thousand and 00/100 Dollars ($100,000.00), in advance, on the first (1st) day of each calendar month. All Base Rent and Additional Rent shall be paid without prior notice, demand, deduction, counterclaim, abatement, or setoff of any kind. If the Commencement Date occurs on a day other than the first day of a calendar month, the monthly installment of Base Rent for such partial month shall be prorated on a per diem basis.
All Rent shall be paid by electronic wire transfer or automated clearing house (ACH) transfer to such account as Landlord may designate from time to time by written notice to Tenant. As of the date hereof, Landlord designates the following account for Rent payments:
Bank: Tarrant Savings Bank ABA/Routing Number: 031000053 Account Number: 4762-8891-0034 Account Name: Stonebridge Industrial Realty Trust, LP — Operating Account Reference: Cranbury Commerce Center — Building 4 — Meridian Consumer Brands LLC
Section 4.2 — Rent Escalations
Commencing on the first day of Lease Year 2, and on the first day of each successive Lease Year during the Term, the annual Base Rent shall increase by two and one-half percent (2.5%) over the Base Rent payable during the immediately preceding Lease Year, compounding annually. The Base Rent schedule for the initial Term is as follows:
The aggregate Base Rent over the initial ten (10) year Term (inclusive of all escalations) is approximately Thirteen Million Three Hundred Forty-Four Thousand and Fifty-Eight Dollars ($13,344,058.14). For the avoidance of doubt, the escalation percentages set forth above apply on a compounding basis, meaning that each year's increase is calculated on the Base Rent for the immediately preceding Lease Year (not on the initial Lease Year 1 Base Rent).
Section 4.3 — Free Rent
Notwithstanding Section 4.1, Tenant shall not be obligated to pay Base Rent for the first four (4) full calendar months following the Commencement Date (i.e., months 1 through 4 of the Term) (the "Free Rent Period"). If the Commencement Date falls on a day other than the first day of a calendar month, the Free Rent Period shall commence on the Commencement Date and shall expire on the last day of the fourth (4th) full calendar month following the Commencement Date (and the partial month in which the Commencement Date occurs shall not count toward the four (4) months of free rent). The Free Rent Period applies solely to Base Rent. During the Free Rent Period, Tenant shall remain obligated to pay all Additional Rent, including, without limitation, NNN Expenses, insurance premiums, and all other charges and amounts due under this Lease.
Notwithstanding the foregoing, in the event of an Event of Default by Tenant at any time during the Term, all Base Rent that was abated during the Free Rent Period shall immediately become due and payable to Landlord as Additional Rent, without notice or demand, and Landlord shall be entitled to collect the same through all available remedies, including, without limitation, by drawing on the Letter of Credit.
Section 4.4 — Additional Rent / NNN Expenses
In addition to Base Rent, Tenant shall pay, as Additional Rent, Tenant's Proportionate Share (100%) of all Operating Expenses, Taxes, and insurance costs (collectively, "NNN Expenses") incurred by Landlord with respect to the Property during each calendar year (or partial calendar year) during the Term. Estimated NNN Expenses for the 2022 calendar year are Two Dollars and Eighty-Five Cents ($2.85) per rentable square foot per annum, or approximately Eight Hundred Forty-Seven Thousand Eight Hundred Seventy-Five and 00/100 Dollars ($847,875.00) per annum for the entirety of the Premises (297,500 rentable square feet).
On or before December 1 of each calendar year during the Term, Landlord shall deliver to Tenant a written estimate of the NNN Expenses for the ensuing calendar year (the "Estimated NNN Expenses"). Tenant shall pay one-twelfth (1/12) of the Estimated NNN Expenses in monthly installments, in advance, on the first (1st) day of each calendar month, concurrently with the payment of Base Rent. If Landlord does not deliver the estimate for any calendar year prior to January 1 of such year, Tenant shall continue to pay monthly installments based on the prior year's estimate until Landlord delivers the new estimate, at which point Tenant shall pay any shortfall or receive a credit for any overpayment.
Within one hundred twenty (120) days after the end of each calendar year (or as soon thereafter as reasonably practicable), Landlord shall deliver to Tenant a statement (the "Annual Reconciliation Statement") setting forth the actual NNN Expenses incurred during the preceding calendar year. If the actual NNN Expenses exceed the total Estimated NNN Expenses paid by Tenant during such year, Tenant shall pay the deficiency to Landlord within thirty (30) days after receipt of the Annual Reconciliation Statement. If the total Estimated NNN Expenses paid by Tenant during such year exceed the actual NNN Expenses, Landlord shall credit the overpayment against the next monthly installments of NNN Expenses due from Tenant (or, if at the end of the Term, refund such overpayment to Tenant within sixty (60) days).
Landlord's determination of NNN Expenses as set forth in the Annual Reconciliation Statement shall be final and binding upon Tenant absent manifest error.
Section 4.5 — Operating Expenses Defined
"Operating Expenses" means all costs and expenses of every kind and nature incurred by Landlord in operating, maintaining, repairing, managing, and administering the Property and the Common Areas, including, without limitation:
(a) costs of maintaining, repairing, resurfacing, restriping, and cleaning the Common Areas, including driveways, access roads, shared internal access drives, parking areas, truck courts, loading areas, sidewalks, landscaping, irrigation systems, and exterior lighting;
(b) snow and ice removal from the Common Areas, including driveways, parking areas, and sidewalks;
(c) landscaping, tree trimming, and grounds maintenance;
(d) maintenance, repair, and replacement of exterior lighting fixtures, poles, and electrical systems serving the Common Areas;
(e) maintenance and repair of stormwater detention basins, drainage systems, and all utility infrastructure serving the Property;
(f) management fees payable to Landlord's managing agent, which shall not exceed five percent (5%) of gross revenues from the Property;
(g) costs of capital expenditures and capital improvements, amortized over the useful life of the applicable capital item at an interest rate of eight percent (8%) per annum, including, without limitation, capital expenditures required by any law, ordinance, or governmental regulation first enacted or imposed after the date of this Lease, and capital expenditures reasonably expected by Landlord to reduce Operating Expenses;
(h) reasonable reserves for anticipated future capital expenditures, repairs, and replacements, as determined by Landlord in its reasonable discretion;
(i) costs of any shared services, security services, or pest control services provided by Landlord to the Property;
(j) costs of maintaining, repairing, and servicing any shared utility systems (water, sewer, gas, electric) serving the Property;
(k) wages, salaries, and benefits of any personnel directly engaged in the operation and maintenance of the Property;
(l) accounting, legal, and consulting fees incurred in connection with the operation and management of the Property;
(m) costs of complying with any governmental requirements applicable to the Property (to the extent not the direct responsibility of Tenant under Article 5); and
(n) any other costs reasonably incurred by Landlord in the operation and maintenance of the Property.
Operating Expenses shall not include (i) the costs of Landlord's Work, (ii) costs reimbursed by insurance proceeds, condemnation awards, or other third parties, (iii) depreciation on the Building, (iv) debt service on any mortgage, (v) income taxes of Landlord, and (vi) costs incurred in leasing, marketing, or negotiating leases for other space at the Cranbury Commerce Center.
Section 4.6 — Taxes
"Taxes" means all real property taxes, ad valorem taxes, general and special assessments, governmental levies, charges, and impositions of every kind and nature, whether general, special, ordinary, or extraordinary, that are levied, assessed, or imposed upon or with respect to the Property (including the land, improvements, and fixtures thereon), including any tax levied in whole or in part in lieu of or in substitution for any such real property taxes. Taxes shall include, without limitation, any assessments for public improvements or benefits, whether or not commenced or completed prior to the date hereof, and any reasonable fees and expenses (including attorneys' fees and appraiser fees) incurred by Landlord in connection with any proceeding to contest or reduce Taxes, whether or not successful.
Tenant shall be solely responsible for any increase in Taxes that is attributable to or results from any improvements, alterations, or additions made to the Premises by or on behalf of Tenant (including Tenant's Work), as well as any personal property taxes assessed against Tenant's trade fixtures, equipment, inventory, and personal property located at the Premises. Landlord shall have no obligation to contest or seek a reduction of Taxes; provided, however, that if Landlord elects to contest Taxes, any refund received by Landlord (net of the costs of obtaining such refund) shall be applied to reduce Taxes for the applicable year, and Tenant shall receive a corresponding credit or refund of its Proportionate Share of such net reduction.
Section 4.7 — Late Charges and Default Interest
(a) Late Charges. If any installment of Rent or any other sum payable by Tenant under this Lease is not received by Landlord within five (5) days after the date when due, Tenant shall pay to Landlord a late charge equal to five percent (5%) of the overdue amount. Landlord and Tenant acknowledge that the actual damages arising from late payment are difficult to ascertain, and such late charge represents a reasonable estimate of the costs and damages that Landlord will incur by reason of Tenant's late payment.
(b) Default Interest. In addition to the late charge set forth in subsection (a) above, any amount payable by Tenant under this Lease that is not paid within ten (10) days after the date when due shall bear interest at the Default Rate from the date such amount was due until the date of payment. The Default Rate shall be the lesser of (i) one and one-half percent (1.5%) per month (eighteen percent (18%) per annum) and (ii) the maximum rate of interest permitted by applicable law.
(c) No Waiver. The imposition of late charges and Default Rate interest shall not be deemed a waiver by Landlord of any other right or remedy available to Landlord under this Lease or at law or in equity.
ARTICLE 5 — USE AND COMPLIANCE
Section 5.1 — Permitted Use
The Premises shall be used and occupied by Tenant solely for the Permitted Use, namely: warehousing, distribution, light assembly, packaging, and ancillary office use in connection with the manufacture, storage, and distribution of consumer packaged goods, and for no other purpose. Tenant shall not use or permit the Premises to be used for any other purpose without Landlord's prior written consent, which consent may be withheld by Landlord in Landlord's sole and absolute discretion.
Section 5.2 — Compliance with Laws
Tenant shall, at Tenant's sole cost and expense, promptly comply with and cause the Premises to comply with all applicable federal, state, and local laws, statutes, ordinances, codes, rules, regulations, requirements, orders, judgments, and decrees now in force or hereafter enacted, adopted, or promulgated, including, without limitation, all applicable zoning laws, building codes, fire codes, health and safety regulations, the Americans with Disabilities Act of 1990, as amended (42 U.S.C. §§ 12101 et seq.), and all Environmental Laws (collectively, "Applicable Laws"). Tenant shall be responsible for obtaining and maintaining, at Tenant's sole cost and expense, all permits, licenses, certificates, and approvals (including any certificate of occupancy, temporary or permanent) necessary for Tenant's use and occupancy of the Premises in accordance with the Permitted Use. Tenant shall promptly furnish copies of all such permits and approvals to Landlord upon request.
Tenant shall comply with all requirements of any insurance carrier, board of fire underwriters, or similar body applicable to the Premises. If any Applicable Law requires alterations or improvements to the Premises by reason of Tenant's specific use or occupancy (as distinguished from requirements applicable to the Premises generally regardless of use), such alterations and improvements shall be performed by Tenant at Tenant's sole cost and expense, subject to the requirements of Section 9.3.
Section 5.3 — Hazardous Materials
(a) Restrictions on Use. Tenant shall not use, generate, manufacture, produce, store, treat, release, discharge, or dispose of any Hazardous Materials at, on, under, or about the Premises or the Property, or transport any Hazardous Materials to or from the Premises, except for such Hazardous Materials as are customarily used in connection with the Permitted Use (e.g., cleaning supplies, office products, and packaging materials) in quantities that do not require any special permit, license, or reporting obligation under any Environmental Law, and only in strict compliance with all Environmental Laws.
(b) Responsibility. Tenant shall bear all risk and responsibility for, and shall be solely liable for, any and all environmental claims, liabilities, fines, penalties, remediation costs, and expenses arising from or related to the presence, use, storage, generation, treatment, release, or disposal of Hazardous Materials at, on, under, or about the Premises during the Term, regardless of the source thereof, except for pre-existing environmental conditions that are both (i) known to Landlord as of the date of this Lease and (ii) specifically disclosed by Landlord to Tenant in writing prior to the execution of this Lease.
(c) Notice. Tenant shall promptly notify Landlord of (i) any release, spill, or discharge of Hazardous Materials at, on, under, or about the Premises, (ii) any notice or communication from any governmental authority concerning any violation or alleged violation of Environmental Laws at the Premises, and (iii) any environmental claim, demand, investigation, or proceeding relating to the Premises.
Section 5.4 — Nuisance and Prohibited Activities
Tenant shall not use or permit the use of the Premises in any manner that (a) creates or constitutes a public or private nuisance, (b) causes unreasonable noise, vibration, odor, or emission, (c) interferes with the use and enjoyment of adjacent properties or the Common Areas, (d) causes damage to the Premises or the Property, or (e) increases the cost of insurance for the Property or violates the conditions of any insurance policy maintained by Landlord. Tenant shall not store any materials, goods, inventory, equipment, or personal property outside the Building (including in the truck court or loading areas) without Landlord's prior written consent, which consent may be withheld in Landlord's sole discretion.
ARTICLE 6 — SECURITY DEPOSIT
Section 6.1 — Letter of Credit
Concurrently with the execution and delivery of this Lease, Tenant shall deliver to Landlord an irrevocable standby letter of credit (the "Letter of Credit") in the amount of Three Hundred Thousand and 00/100 Dollars ($300,000.00), issued by a commercial bank reasonably acceptable to Landlord. The issuing bank shall have a minimum credit rating of A- (or its equivalent) from a nationally recognized credit rating agency (Standard & Poor's, Moody's, or Fitch). The proposed issuing bank is Harborview National Bank, N.A., 300 Vesey Street, New York, NY 10281. The Letter of Credit shall be in the form attached hereto as Exhibit E, or such other form as may be reasonably acceptable to Landlord. The Letter of Credit shall name Landlord (or its designee or successor) as the beneficiary and shall be transferable by Landlord without the consent of Tenant or the issuing bank.
The Letter of Credit shall have an initial term of not less than one (1) year and shall contain an "evergreen" clause providing for automatic renewal for successive one (1) year periods unless the issuing bank provides written notice of its election not to renew the Letter of Credit at least sixty (60) days prior to the then-current expiration date. In the event the issuing bank provides notice of non-renewal, Tenant shall deliver a replacement Letter of Credit (from a bank meeting the requirements of this Section 6.1) to Landlord at least thirty (30) days prior to the expiration of the existing Letter of Credit. If Tenant fails to deliver such replacement Letter of Credit within such time period, Landlord shall have the right to draw the full face amount of the Letter of Credit and hold the proceeds as a cash security deposit.
Section 6.2 — Draws on Letter of Credit
Landlord may draw upon the Letter of Credit, in whole or in part, upon the occurrence of any of the following:
(a) an Event of Default by Tenant under this Lease;
(b) Tenant's failure to renew or replace the Letter of Credit at least sixty (60) days prior to its expiration;
(c) the issuing bank's credit rating falling below the minimum requirement set forth in Section 6.1; or
(d) the issuing bank being placed in receivership, liquidation, or conservatorship, or otherwise ceasing to conduct banking operations.
Any amounts drawn by Landlord from the Letter of Credit shall be held by Landlord as a cash security deposit and may be applied by Landlord, without limitation, to any unpaid Rent, any damages or losses suffered by Landlord as a result of Tenant's default, any costs of restoration or repair, or any other amounts due from Tenant to Landlord under this Lease. Landlord shall not be required to maintain any drawn proceeds in a separate account or to pay interest thereon. Within ten (10) business days after Landlord's written demand, Tenant shall replenish the Letter of Credit (or, if the Letter of Credit has been fully drawn, deliver a replacement Letter of Credit or cash) to restore the security deposit to the amount required under this Article 6.
Section 6.3 — Burn-Down
The required face amount of the Letter of Credit shall be reduced as follows, provided that (i) no Event of Default exists at the time of the requested reduction and (ii) no Event of Default has occurred and is continuing:
(a) After the expiration of Lease Year 3, the required amount shall be reduced to Two Hundred Thousand and 00/100 Dollars ($200,000.00).
(b) After the expiration of Lease Year 6, the required amount shall be reduced to One Hundred Thousand and 00/100 Dollars ($100,000.00).
Tenant may effectuate each reduction by delivering an amendment to the Letter of Credit reducing the face amount thereof, or by delivering a replacement Letter of Credit in the reduced amount, in each case meeting the requirements of Section 6.1. No reduction shall be effective until Landlord has confirmed that the conditions set forth above have been satisfied.
Section 6.4 — Return of Security Deposit
Landlord shall return the Letter of Credit (or any remaining cash security deposit, less any amounts applied by Landlord in accordance with this Article 6) to Tenant within sixty (60) days after the later of (a) the Expiration Date (or earlier termination of this Lease) or (b) the date on which Tenant has surrendered the Premises in the condition required under Article 17 and satisfied all outstanding obligations under this Lease. Landlord may apply any portion of the security deposit to any unpaid Rent, damages, restoration costs, or other amounts due from Tenant under this Lease, and Tenant shall not be entitled to credit the security deposit against Rent or any other amount due hereunder.
ARTICLE 7 — LANDLORD'S WORK AND DELIVERY
Section 7.1 — Landlord's Work
Landlord shall perform the work described in the Work Letter attached hereto as Exhibit C (the "Landlord's Work") at Landlord's sole cost and expense. The estimated cost of Landlord's Work is One Million Eight Hundred Fifty Thousand and 00/100 Dollars ($1,850,000.00), which shall not be deducted from the Tenant Improvement Allowance. The scope of Landlord's Work shall include the following:
(a) Installation of new LED lighting throughout the warehouse area (approximately 285,000 square feet);
(b) Upgrade of the ESFR (Early Suppression, Fast Response) sprinkler system to provide full coverage compliant with current NFPA 13 standards;
(c) Replacement of dock levelers at all forty-eight (48) dock-high loading doors;
(d) Office refresh in the approximately 12,500 square foot office/mezzanine area, including new carpet, paint, and ceiling tiles; and
(e) Installation of six (6) Level 2 electric vehicle (EV) charging stations in the car parking area, at locations depicted on the Site Plan (Exhibit A-2).
Landlord's Work shall be performed in a good and workmanlike manner using materials of reasonable quality, and in compliance with all Applicable Laws. All design and construction decisions regarding Landlord's Work shall be made by Landlord in its sole discretion, subject to the specifications set forth in Exhibit C.
Section 7.2 — Delivery Condition
Landlord shall deliver the Premises to Tenant in "warm vanilla shell" condition with all Landlord's Work substantially complete. As used herein, "warm vanilla shell" condition means the following:
(a) Concrete floors, sealed and in broom-clean condition;
(b) Demising walls and exterior walls in place;
(c) HVAC system operational and in good working order;
(d) Plumbing roughed-in for restrooms, with building domestic water service connected;
(e) Electrical service to the Building, including main switchgear and panel boards, in place and operational;
(f) Fire protection and life safety systems, including the upgraded ESFR sprinkler system, installed and operational;
(g) All forty-eight (48) dock-high loading doors and four (4) drive-in doors functional, with replaced dock levelers installed and operational;
(h) New LED lighting installed and operational throughout the warehouse; and
(i) Car parking area accessible, with EV charging stations installed.
Section 7.3 — Substantial Completion
Landlord's Work shall be deemed "Substantially Complete" when Landlord's architect reasonably certifies in writing that the Landlord's Work has been completed in substantial accordance with the plans and specifications set forth in Exhibit C, subject only to minor punch-list items that do not materially interfere with Tenant's use and occupancy of the Premises. Landlord shall deliver a copy of such certification to Tenant promptly upon issuance. Landlord shall use commercially reasonable efforts to complete all punch-list items within sixty (60) days after the Commencement Date.
There is no outside date for the completion of Landlord's Work. In the event that Landlord fails to achieve Substantial Completion by the Target Commencement Date, Tenant's sole and exclusive remedy shall be the deferral of the Commencement Date in accordance with Section 3.2, and Tenant shall have no right to terminate this Lease, claim any abatement of Rent (other than as a result of the deferral of the Commencement Date), or pursue any other right or remedy against Landlord on account of such delay.
Section 7.4 — Tenant's Access Prior to Commencement
Subject to Landlord's prior written consent, which may be given, withheld, or conditioned in Landlord's sole discretion, Landlord may permit Tenant early access to the Premises prior to the Commencement Date for the sole purpose of installing Tenant's equipment, racking, racking systems, conveyor systems, automation equipment, telecommunications and data infrastructure, and other improvements and personal property, provided that such early access (a) does not interfere with Landlord's performance of Landlord's Work and (b) is coordinated with Landlord's general contractor.
Any such early access by Tenant shall be subject to all terms and conditions of this Lease, including, without limitation, the insurance requirements of Article 10, the indemnification obligations of Section 10.4, and the compliance requirements of Article 5, except that Tenant shall not be obligated to pay Base Rent or NNN Expenses during such early access period prior to the Commencement Date; provided, however, that Tenant shall be responsible for all NNN Expenses (including insurance costs) attributable to Tenant's early access activities, and Tenant shall maintain and provide evidence of all insurance required under Article 10 during such early access period.
ARTICLE 8 — TENANT IMPROVEMENT ALLOWANCE
Section 8.1 — Allowance Amount
Landlord shall provide to Tenant a tenant improvement allowance (the "Tenant Improvement Allowance" or "TI Allowance") in the amount of Fifteen Dollars ($15.00) per rentable square foot of the Premises, equal to Four Million Four Hundred Sixty-Two Thousand Five Hundred and 00/100 Dollars ($4,462,500.00), based upon 297,500 rentable square feet, to be applied toward the cost of Tenant's Work in accordance with this Article 8 and Exhibit D. The TI Allowance covers hard construction costs, architectural and engineering fees, permit fees, and project management costs directly related to Tenant's Work.
Section 8.2 — Tenant's Work
Tenant shall perform, at Tenant's sole cost and expense (subject to reimbursement from the TI Allowance), all improvements necessary or desired to prepare the Premises for Tenant's occupancy and use in accordance with the Permitted Use ("Tenant's Work"). Tenant's Work may include, without limitation, the installation of racking systems, conveyor systems, automation and robotics equipment, interior partitions, supplemental HVAC units, electrical upgrades, data and telecommunications wiring, additional office build-out, break rooms, locker rooms, and any other improvements required for Tenant's operations.
Tenant shall prepare and submit to Landlord complete plans and specifications for Tenant's Work for Landlord's review and approval prior to the commencement of any construction. Landlord's approval of Tenant's plans and specifications shall not be unreasonably withheld, conditioned, or delayed; provided, however, that Landlord may withhold its approval in its sole and absolute discretion with respect to any element of Tenant's Work that (a) affects the structural elements of the Building (foundation, structural steel, exterior walls, or roof), (b) is visible from the exterior of the Building, (c) involves penetrations of the roof membrane, or (d) could reasonably be expected to adversely affect any building system or the value of the Property. Landlord shall approve or disapprove Tenant's plans and specifications within fifteen (15) business days after receipt thereof, and any disapproval shall include a reasonably specific statement of Landlord's objections.
Tenant's Work shall be performed (i) in a good and workmanlike manner, (ii) using new materials of reasonable quality, (iii) in compliance with all Applicable Laws, (iv) by contractors and subcontractors reasonably approved by Landlord, and (v) subject to such additional conditions as Landlord may reasonably impose, including requirements regarding insurance, indemnification, coordination with Landlord's property manager, and compliance with the Rules and Regulations.
Section 8.3 — Disbursement
The TI Allowance shall be disbursed by Landlord upon the completion of Tenant's Work (or, at Landlord's election, in periodic installments upon Landlord's approval, but no more frequently than once per calendar month) upon Tenant's submission of the following documentation to Landlord:
(a) a written request for disbursement, accompanied by a detailed breakdown of costs incurred;
(b) copies of paid invoices from all contractors, subcontractors, architects, engineers, and consultants;
(c) unconditional lien waivers and releases from all contractors, subcontractors, materialmen, and suppliers (partial lien waivers for interim disbursements and final lien waivers for the final disbursement);
(d) contractor affidavits confirming that all amounts due for labor and materials have been paid in full;