LEASE AGREEMENT
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Prepared by:
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Between
STONEBRIDGE INDUSTRIAL REALTY TRUST, LP (Landlord)
and
MERIDIAN CONSUMER BRANDS LLC (Tenant)
Premises: Building 4, Cranbury Commerce Center 200 Prospect Plains Road, Cranbury, New Jersey 08512
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made and entered into as of the date set forth on the signature pages hereof (the "Effective Date"), by and between STONEBRIDGE INDUSTRIAL REALTY TRUST, LP, a Maryland limited partnership, acting through its general partner, Stonebridge Industrial GP LLC, a Maryland limited liability company ("Landlord"), and MERIDIAN CONSUMER BRANDS LLC, a Delaware limited liability company ("Tenant").
RECITALS
WHEREAS, Landlord is the owner of that certain real property and improvements known as Building 4, Cranbury Commerce Center, located at 200 Prospect Plains Road, Cranbury, New Jersey 08512, more particularly described herein; and
WHEREAS, Tenant desires to lease from Landlord, and Landlord desires to lease to Tenant, the Premises (as hereinafter defined) upon the terms and conditions set forth in this Lease; and
WHEREAS, Landlord and Tenant have negotiated this Lease following the execution of that certain non-binding Letter of Intent dated June 22, 2022 (LOI Reference No. LOI-2022-CCC-B4), which Letter of Intent is superseded in its entirety by this Lease; and
WHEREAS, as a material inducement to Landlord to enter into this Lease, Meridian Holdings Inc., a Delaware corporation ("Guarantor"), shall execute and deliver to Landlord a Limited Guaranty in the form attached hereto as Exhibit G.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:
ARTICLE 1 — BASIC LEASE PROVISIONS AND DEFINITIONS
Section 1.1 — Basic Lease Provisions Summary
The following is a summary of certain basic provisions of this Lease. Each item below is more fully described in the applicable Article or Section referenced herein. In the event of any conflict between the provisions of this Section 1.1 and the more detailed provisions of any other Article or Section of this Lease, such other Article or Section shall control.
Section 1.2 — Definitions
As used in this Lease, the following terms shall have the meanings set forth below. Capitalized terms used but not defined in this Section 1.2 shall have the meanings ascribed to them elsewhere in this Lease.
"Affiliate" means any entity that, directly or indirectly, controls, is controlled by, or is under common control with the entity in question, where "control" means the ownership of more than fifty percent (50%) of the voting securities or membership interests of such entity, or the power to direct the management and policies of such entity. For purposes of this Lease, "Affiliate" includes entities under common control (directly or indirectly) through a common parent entity, including Meridian Holdings Inc.
"Base Rent" means the annual base rent payable by Tenant during each Lease Year as set forth in Section 3.1 and the Rent Schedule attached hereto as Exhibit C.
"Building Systems" means all mechanical, electrical, plumbing, HVAC, fire protection, life safety, elevator, and other building systems serving the Building and the Premises.
"Clear Height" means the clear, unobstructed vertical distance from the finished warehouse floor to the lowest point of the structural roof framing or any installed obstruction (including lighting, sprinkler piping, and ductwork), measured at as of the date of this Lease.
"Commencement Date" has the meaning set forth in Section 2.2.
"Common Areas" means all areas within the Property and the Park that are designated for the common use and benefit of tenants, occupants, and their invitees, including parking areas, truck courts, driveways, sidewalks, landscaped areas, retention basins, stormwater management facilities, and utility corridors, as the same may exist from time to time.
"Default Rate" means a per annum rate of interest equal to the lesser of (a) the prime rate of interest published from time to time in The Wall Street Journal (or a comparable publication selected by Landlord) plus , and (b) the maximum rate of interest permitted by applicable law.
"Environmental Laws" means all federal, state, and local laws, statutes, regulations, ordinances, orders, and rules pertaining to the protection of the environment or human health from environmental hazards, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601 et seq., the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. §§ 6901 et seq., the New Jersey Industrial Site Recovery Act (ISRA), 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 all regulations promulgated thereunder, each as amended from time to time.
"Expiration Date" has the meaning set forth in Section 1.1, as may be adjusted pursuant to Section 2.3.
"Force Majeure" means any event beyond the reasonable control of the affected party, including fire, earthquake, flood, hurricane, tornado, explosion, act of God, war, terrorism, riot, civil unrest, pandemic, epidemic, governmental order or restriction, labor strike, labor dispute, material shortage, supply chain disruption, and transportation delay; provided, however, that Force Majeure shall not include the financial inability of any party to perform its obligations.
"Guaranty" means the Limited Guaranty executed by Guarantor in the form of Exhibit G attached hereto.
"Hazardous Materials" means any substance, material, or waste that is regulated by any governmental authority, including petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls (PCBs), mold, radioactive materials, and any substance defined as a "hazardous substance," "hazardous waste," "toxic substance," "pollutant," or "contaminant" under any Environmental Law.
"Landlord's Work" means the construction, improvements, and installations to be performed by Landlord as described in Exhibit B attached hereto.
"Laws" means all applicable federal, state, and local laws, statutes, ordinances, codes, rules, regulations, orders, and requirements of governmental authorities, including Environmental Laws, the Americans with Disabilities Act, the Occupational Safety and Health Act, and all applicable building codes.
"Lease Year" means each consecutive twelve (12) month period during the Term, with the first Lease Year commencing on the Commencement Date and each subsequent Lease Year commencing on the anniversary of the Commencement Date. If the Commencement Date does not fall on the first day of a calendar month, the first Lease Year shall include the partial month in which the Commencement Date occurs plus the following twelve (12) full calendar months.
"Lender" means the holder of any mortgage, deed of trust, or other security instrument encumbering the Property, and any ground lessor under a ground lease affecting the Property.
"Operating Expenses" has the meaning set forth in Section 4.2.
"Park Common Area" means all Common Areas serving the Park as a whole and not exclusively serving any single building within the Park, including shared access drives, shared landscaping, shared stormwater management facilities, and shared perimeter areas.
"Permitted Use" has the meaning set forth in Section 6.1.
"Premises" has the meaning set forth in Section 1.1.
"Property" has the meaning set forth in Section 1.1.
"Rent" means collectively, Base Rent, Tenant's Share of Operating Expenses, and all other amounts payable by Tenant to Landlord under this Lease.
"Rent Commencement Date" means the first day of the calendar month immediately following the expiration of the Free Rent Period (i.e., the first day of month five (5) following the Commencement Date).
"Security Deposit" means the irrevocable standby letter of credit (or cash deposit, as applicable) described in Article 5.
"Substantial Completion" has the meaning set forth in Section 7.3.
"Tenant Improvement Allowance" or "TI Allowance" means the improvement allowance of $ described in Article 8 and Exhibit D.
"Tenant Improvements" means all improvements to the Premises constructed or installed by or on behalf of Tenant, including improvements funded in whole or in part by the TI Allowance.
"Tenant's Proportionate Share" means, with respect to the Building, one hundred percent (100%), and with respect to Park Common Area Expenses, the percentage obtained by dividing the Building's gross leasable area ( square feet) by the total gross leasable area of all buildings within the Park, as calculated in accordance with Section 4.3.
"Transfer" has the meaning set forth in Section 16.1.
In addition to the foregoing definitions, the following specifications relate to Building 4, Cranbury Commerce Center: Year Built: 2001; Stonebridge completed a full roof replacement and HVAC system upgrade in 2020; Clear Height: feet; dock-high doors; drive-in doors; trailer parking spaces designated for Building 4.
ARTICLE 2 — TERM
Section 2.1 — Initial Term
The term of this Lease (the "Term") shall consist of ten (10) Lease Years, commencing on the Commencement Date and expiring on the Expiration Date, unless sooner terminated or extended as provided in this Lease. The Term, together with any renewal term exercised pursuant to Article 26, is sometimes referred to herein as the "Term."
Section 2.2 — Commencement Date Determination
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 B) or (b) January 1, 2023 (the "Target Commencement Date").
If Landlord's Work is not Substantially Complete by the Target Commencement Date, Tenant shall not be obligated to pay Rent until Substantial Completion is achieved, but the Expiration Date shall not be extended beyond the date that is ten (10) years after the actual Commencement Date.
Notwithstanding the foregoing, if the delay in achieving Substantial Completion of Landlord's Work extends beyond days past the Target Commencement Date, and such delay is not caused by Tenant Delay (as defined below) or Force Majeure, then Tenant shall receive one (1) additional day of free rent (during which Base Rent shall be abated) for each day of delay beyond such day period. The additional free rent days provided under this Section 2.2 shall be added to the end of the Free Rent Period described in Section 3.2, and in no event shall the aggregate number of additional free rent days under this Section 2.2 exceed days. For clarity, the additional free rent provided hereunder is cumulative with (and in addition to) the four (4) month Free Rent Period set forth in Section 3.2.
As used herein, "Tenant Delay" means any delay in the completion of Landlord's Work that is caused by (i) any change order requested by Tenant to the scope of Landlord's Work, (ii) Tenant's failure to timely respond to Landlord's requests for information, approvals, or decisions within the timeframes set forth in Exhibit B, (iii) any interference by Tenant or Tenant's agents, contractors, or employees with the performance of Landlord's Work, or (iv) any other act or omission of Tenant that directly causes a delay in the completion of Landlord's Work.
Section 2.3 — Commencement Date Memorandum
Within thirty (30) days after the Commencement Date, Landlord and Tenant shall execute a Commencement Date Memorandum in the form of Exhibit E attached hereto, confirming (a) the Commencement Date, (b) the Rent Commencement Date, (c) the Expiration Date, and (d) such other information as may be relevant. Tenant's failure to execute the Commencement Date Memorandum within such thirty (30) day period shall not affect the validity of the Commencement Date as determined pursuant to Section 2.2, nor shall it relieve Tenant of any obligations under this Lease. In the event of any dispute regarding the Commencement Date, the determination of Landlord's architect shall be binding, subject to Tenant's right to contest such determination by written notice to Landlord within fifteen (15) business days of receipt of Landlord's architect's certification.
Section 2.4 — Early Access
Tenant shall have the right to access the Premises during the thirty (30) day period immediately preceding the Commencement Date (the "Early Access Period") for the sole purposes of installing racking, automation equipment, conveyor systems, furniture, fixtures, telecommunications infrastructure, and other equipment, and performing such other preparatory activities as are reasonably necessary for Tenant's intended operations in the Premises. Tenant's early access shall be subject to the following conditions:
(a) Tenant shall coordinate all early access activities with Landlord and Landlord's contractors so as not to interfere with or delay the completion of Landlord's Work;
(b) Tenant shall comply with all insurance requirements set forth in Article 13, and Tenant's insurance shall be in full force and effect during the Early Access Period;
(c) Tenant shall comply with all applicable Laws and safety requirements during the Early Access Period;
(d) Tenant shall indemnify and hold Landlord harmless from any claims, damages, or liabilities arising from Tenant's early access activities, in accordance with Section 14.1;
(e) No Rent shall be payable during the Early Access Period; and
(f) Tenant's early access shall not constitute acceptance of the Premises or a waiver of any right of Tenant with respect to the condition of the Premises or Landlord's Work.
ARTICLE 3 — RENT
Section 3.1 — Base Rent
Commencing on the Rent Commencement Date (subject to the Free Rent Period set forth in Section 3.2), Tenant shall pay to Landlord annual Base Rent in the amounts set forth below, payable in equal monthly installments in advance on the first (1st) day of each calendar month during the Term, without notice, demand, offset, or deduction (except as expressly set forth in Section 8.2 and Section 17.3 of this Lease):
The Base Rent escalates at the rate of two and one-half percent (2.5%) per annum, compounding annually, as set forth in the Rent Schedule attached hereto as Exhibit C. The aggregate Base Rent over the Initial Term (inclusive of escalations) is approximately , as further detailed in Exhibit C.
If the Commencement Date falls on a day other than the first day of a calendar month, Base Rent for the partial month shall be prorated on a per-diem basis based on the actual number of days in such month.
All Rent shall be paid by Tenant to Landlord by electronic funds transfer (ACH or wire transfer) to an account designated by Landlord in writing, or by such other method as Landlord may from time to time reasonably designate. Landlord's current payment instructions are as follows, and Landlord shall provide updated instructions upon any change:
Bank: First Chesapeake Trust Company ABA Routing No.: 052100249 Account Name: Stonebridge Industrial Realty Trust, LP — Operating Account Account No.: [To be provided at Lease execution] Reference: Cranbury Commerce Center — Building 4 — Meridian
Section 3.2 — Free Rent
Notwithstanding anything in Section 3.1 to the contrary, Tenant shall not be obligated to pay Base Rent during the first four (4) months of the Term following the Commencement Date (the "Free Rent Period"). 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. If the Commencement Date does not fall on the first day of a calendar month, the partial month in which the Commencement Date occurs shall not be counted toward the four (4) month Free Rent Period, and Base Rent for such partial month shall also be abated.
During the Free Rent Period, Tenant shall remain obligated to pay Tenant's Share of Operating Expenses and all other Rent obligations under this Lease, other than Base Rent. The Free Rent Period is in addition to any additional free rent days that may accrue pursuant to Section 2.2.
Section 3.3 — Late Charge and Interest
If any installment of Rent is not received by Landlord within five (5) business days after the date such payment is due, Tenant shall pay a late charge equal to four percent (4%) of the overdue amount. The late charge is intended to compensate Landlord for the additional administrative cost and expense of handling delinquent payments and is not intended as a penalty.
In addition, if any installment of Rent is not received by Landlord within ten (10) business days after the date such payment is due, such overdue amount shall bear interest at the Default Rate from the original due date until paid in full. The imposition of interest under this Section 3.3 shall not constitute a waiver of Landlord's right to declare an Event of Default or to exercise any other remedy under this Lease.
Notwithstanding the foregoing, Landlord shall not impose a late charge or interest on any Rent payment if such payment is the first delinquent payment in any twelve (12) month period and Tenant cures such delinquency within three (3) business days after written notice from Landlord.
ARTICLE 4 — OPERATING EXPENSES AND TAXES (NNN)
Section 4.1 — Triple Net Lease
This Lease is intended to be an absolutely net lease to Landlord. Except as otherwise expressly provided in this Lease, Tenant shall be responsible for and shall pay, in addition to Base Rent, Tenant's Share of all Operating Expenses attributable to the Building and the Property, and Tenant's proportionate share of Park Common Area Expenses, all as more fully set forth in this Article 4. It is the intention of the parties that the Base Rent payable hereunder shall be received by Landlord free of all costs, charges, and expenses attributable to the ownership, operation, maintenance, management, repair, and replacement of the Premises, the Building, the Property, and Tenant's proportionate share of the Park Common Areas.
Section 4.2 — Operating Expenses Defined
"Operating Expenses" means all costs and expenses incurred by Landlord in connection with the ownership, operation, management, maintenance, repair, and replacement of the Building, the Property, and the Premises (to the extent not the direct obligation of Tenant under other provisions of this Lease), including without limitation the following:
(a) Real Estate Taxes. All real estate taxes, assessments (general and special), and governmental charges of every kind and nature levied or assessed against the Building, the Property, and the land upon which the same are situated, including any tax or assessment levied in lieu of or in addition to real estate taxes. If Landlord elects to contest any tax assessment, the costs of such contest (including attorneys' fees and appraisal costs) shall be included in Operating Expenses.
(b) Insurance. Premiums for property insurance (including fire, extended coverage, and all-risk or special form coverage), commercial general liability insurance, umbrella/excess liability insurance, and such other insurance as Landlord maintains on the Building and the Property or as may be required by Landlord's Lender, in each case at coverage levels consistent with those maintained by institutional owners of comparable industrial properties in Central New Jersey.
(c) Common Area Maintenance. Costs of maintaining, repairing, cleaning, and operating the Common Areas serving the Building and the Property, including landscaping, snow and ice removal, parking lot and driveway maintenance, striping and seal-coating, exterior lighting, stormwater management facility maintenance, refuse removal, and security (if any).
(d) Property Management Fee. A management fee payable to Landlord or Landlord's property management company, which fee shall not exceed three percent (3%) of gross rents received from the Premises in any calendar year.
(e) Capital Expenditures. The amortized cost of capital repairs and replacements to the Building, the Property, and the Building Systems (including the roof, structural components, parking areas, and mechanical systems), amortized over the useful life of such capital item as determined in accordance with generally accepted accounting principles ("GAAP"), together with interest on the unamortized balance at the rate of per annum. Only the annual amortization amount allocable to the applicable calendar year shall be included in Operating Expenses for such year.
(f) Utilities. Costs of water, sewer, and any other utilities provided to the Common Areas of the Property (to the extent not separately metered and billed directly to Tenant).
(g) Compliance. Costs of compliance with Laws applicable to the base building and Common Areas (as distinguished from compliance required by reason of Tenant's specific use, which costs are Tenant's responsibility under Section 6.2).
(h) Other. All other reasonable and customary costs and expenses incurred by Landlord in the ownership, operation, management, maintenance, and repair of the Building and the Property.
Notwithstanding the foregoing, Operating Expenses shall not include any of the following:
(i) Leasing commissions, brokerage fees, advertising costs, or other costs incurred in connection with the leasing, marketing, or re-leasing of space in the Building or the Park;
(ii) Costs of constructing, renovating, decorating, or improving space for any other tenant or occupant of the Park;
(iii) Landlord's income taxes, franchise taxes, inheritance taxes, estate taxes, gift taxes, or transfer taxes;
(iv) Depreciation of the Building or any component thereof (it being understood that capital expenditure amortization under subparagraph (e) above is distinct from and in lieu of depreciation);
(v) Costs to the extent reimbursed to Landlord by insurance proceeds, condemnation awards, warranty claims, or payments by any third party;
(vi) Landlord's financing costs, including mortgage interest, principal amortization, and any fees or charges associated with Landlord's debt;
(vii) Costs arising from Landlord's violation of any Law or from Landlord's negligence or willful misconduct;
(viii) Costs of repairs or replacements covered by manufacturer or contractor warranties;
(ix) Costs incurred in connection with the sale, refinancing, mortgaging, or other disposition of all or any portion of the Property;
(x) Charitable contributions;
(xi) Compensation of executive-level employees of Landlord above the level of property manager; and
(xii) Costs of remediation of Hazardous Materials existing on the Premises or Property prior to the Commencement Date.
Section 4.3 — Park Common Area Expenses
In addition to the Operating Expenses attributable to the Building and the Property, Tenant shall pay Tenant's proportionate share of all costs and expenses incurred by Landlord in connection with the operation, maintenance, repair, and replacement of the Park Common Areas (collectively, "Park Common Area Expenses"). Tenant's proportionate share of Park Common Area Expenses shall be a fraction, the numerator of which is the Building's gross leasable area ( square feet) and the denominator of which is the total gross leasable area of all buildings within Cranbury Commerce Center.
Landlord represents that, as of the date of this Lease, the total gross leasable area of all buildings within Cranbury Commerce Center is approximately 1,150,000 square feet, resulting in Tenant's proportionate share of Park Common Area Expenses being approximately . In the event that any new building is completed and added to the Park (including, without limitation, Building 5, currently under development on Block 24, Lot 17.05), the total Park gross leasable area shall be recalculated, and Tenant's proportionate share of Park Common Area Expenses shall be correspondingly adjusted (decreased). Landlord agrees to recalculate Tenant's proportionate share within ninety (90) days of the issuance of a certificate of occupancy for any new building added to the Park, and such recalculated proportionate share shall be effective as of the first day of the calendar month following the issuance of such certificate of occupancy.
Section 4.4 — Estimated Payments; Reconciliation
Prior to the commencement of each calendar year during the Term (and, with respect to the first partial calendar year, prior to the Commencement Date), Landlord shall deliver to Tenant a written estimate of the Operating Expenses and Park Common Area Expenses for such calendar year (the "Estimated Operating Expenses"). The current Estimated Operating Expenses are $2.85 per rentable square foot per annum. Tenant shall pay one-twelfth (1/12) of the Estimated Operating Expenses on the first (1st) day of each calendar month, together with the monthly installment of Base Rent.
Within days after the end of each calendar year (or as soon thereafter as reasonably practicable), Landlord shall deliver to Tenant a statement (the "Reconciliation Statement") setting forth the actual Operating Expenses and Park Common Area Expenses for such calendar year, together with a calculation of Tenant's Share thereof. If Tenant's actual Share of Operating Expenses for such calendar year exceeds the aggregate Estimated Operating Expenses paid by Tenant for such year, Tenant shall pay the deficiency to Landlord within thirty (30) days after receipt of the Reconciliation Statement. If the aggregate Estimated Operating Expenses paid by Tenant for such calendar year exceed Tenant's actual Share of Operating Expenses, Landlord shall credit the overpayment against the next installment(s) of Estimated Operating Expenses due from Tenant (or, if the Lease has expired or been terminated and Tenant has no outstanding obligations, Landlord shall refund the overpayment to Tenant within sixty (60) days).
Landlord's failure to deliver a Reconciliation Statement within the day period shall not constitute a waiver of Landlord's right to collect any underpayment, provided that Landlord delivers such statement within eighteen (18) months after the end of the applicable calendar year. If Landlord fails to deliver the Reconciliation Statement within such eighteen (18) month period, Landlord shall be deemed to have waived any right to collect additional Operating Expenses for such calendar year.
Section 4.5 — Audit Rights
Tenant shall have the right, at Tenant's sole cost and expense, to audit and examine Landlord's books and records relating to Operating Expenses and Park Common Area Expenses for any calendar year, subject to the following conditions:
(a) Tenant may exercise such audit right no more than once per calendar year, and such audit must be initiated within twelve (12) months after Tenant's receipt of the Reconciliation Statement for the applicable year;
(b) Tenant shall provide Landlord with not less than thirty (30) days' prior written notice of Tenant's intention to conduct such audit;
(c) The audit shall be conducted during Landlord's normal business hours at Landlord's offices or such other location where Landlord's books and records are maintained;
(d) The audit shall be conducted by a certified public accountant engaged by Tenant on a non-contingent fee basis (i.e., the auditor's compensation shall not be based upon or determined by the results of the audit);
(e) If the audit reveals that Landlord has overcharged Tenant by more than with respect to Operating Expenses for the applicable calendar year, Landlord shall reimburse Tenant for the reasonable cost of the audit within thirty (30) days after Tenant's delivery of the audit results and supporting documentation to Landlord; and
(f) Tenant and Tenant's auditor shall maintain the confidentiality of all information obtained during the audit and shall not disclose such information to any third party (other than Tenant's attorneys and financial advisors, subject to comparable confidentiality obligations).
If the audit reveals an overcharge, Landlord shall credit the amount of such overcharge against subsequent installments of Estimated Operating Expenses (or, if the Lease has expired, refund such amount to Tenant within thirty (30) days). If the audit reveals an undercharge, Tenant shall pay the amount of such undercharge within thirty (30) days.
ARTICLE 5 — SECURITY DEPOSIT
Section 5.1 — Letter of Credit
On or prior to the Commencement Date, Tenant shall deliver to Landlord an irrevocable standby letter of credit (the "LC") in the initial amount of Three Hundred Thousand Dollars ($300,000.00), which amount is equal to three (3) months of Year 1 Base Rent. The LC shall be governed by the following terms and conditions:
(a) The LC shall be issued by a commercial bank reasonably acceptable to Landlord. Tenant has proposed Harborview National Bank, N.A., 300 Vesey Street, New York, NY 10281, and Landlord has not objected to such bank as of the date of this Lease.
(b) The LC shall be in form and substance reasonably acceptable to Landlord, substantially in the form attached hereto as Exhibit F, and shall be governed by the International Standby Practices 1998 (ISP98) or the Uniform Customs and Practice for Documentary Credits (UCP 600), as specified therein.
(c) The LC shall name Landlord as beneficiary and shall permit Landlord to draw upon the LC upon presentation of a sight draft and a written certification by Landlord that (i) Tenant is in default under this Lease beyond any applicable notice and cure period or (ii) the LC has not been renewed or replaced at least thirty (30) days prior to its stated expiration date.
(d) The LC shall be "evergreen" (i.e., automatically renewable for successive one-year periods), with the issuing bank required to provide Landlord with not less than sixty (60) days' prior written notice of any election not to renew the LC.
(e) If the LC is not renewed or replaced at least thirty (30) days prior to its stated expiration date, Landlord shall have the right to draw the full face amount of the LC and hold the proceeds as a cash security deposit, subject to the terms and conditions of this Article 5. Interest, if any, earned on such cash deposit shall belong to Landlord.
(f) The LC shall be freely transferable by Landlord to any successor landlord under this Lease, without the consent of Tenant or the issuing bank (or, if the issuing bank requires consent, with such consent to be given promptly upon request), and any transfer fees shall be paid by Landlord.
Section 5.2 — LC Burn-Down
The required amount of the LC shall be reduced (the "Burn-Down") as follows, provided that, as of the applicable reduction date :
(a) Effective as of the first (1st) day of Lease Year 4, the required LC amount shall be reduced to Two Hundred Thousand Dollars ($200,000.00); and
(b) Effective as of the first (1st) day of Lease Year 7, the required LC amount shall be reduced to One Hundred Thousand Dollars ($100,000.00).
To effectuate each Burn-Down, Tenant may deliver to Landlord an amended or replacement LC in the reduced amount, or Landlord shall consent to a partial reduction in the amount of the existing LC upon Tenant's request and Landlord's confirmation that the applicable conditions have been satisfied. Landlord shall confirm or deny satisfaction of the Burn-Down conditions within fifteen (15) business days of Tenant's written request.
Section 5.3 — Application and Return
Landlord may draw upon the LC (or apply any cash security deposit held in lieu thereof) to cure any default by Tenant under this Lease, including any failure to pay Rent when due, any failure to perform any non-monetary obligation, or to reimburse Landlord for any damages sustained by Landlord as a result of Tenant's default. Any such application shall not constitute a waiver of Landlord's right to pursue any other remedy available under this Lease or at law or in equity.
If Landlord draws upon the LC (in whole or in part), Tenant shall, within fifteen (15) business days after Landlord's written demand, deliver to Landlord either (i) a replacement or supplemental LC restoring the LC to its then-required amount under this Article 5, or (ii) a cash deposit in the amount of the draw, to be held by Landlord as a cash security deposit.
Within days after the expiration or earlier termination of this Lease, Tenant's surrender and vacation of the Premises in accordance with Article 19, and the performance by Tenant of all of Tenant's obligations under this Lease, Landlord shall return to Tenant the LC (or any remaining cash deposit), less any amounts drawn or applied by Landlord in accordance with this Article 5.
ARTICLE 6 — USE AND COMPLIANCE WITH LAWS
Section 6.1 — Permitted Use
Tenant shall use and occupy the Premises solely for the following purposes (collectively, the "Permitted Use"): warehousing, distribution, fulfillment, light assembly, packaging, and related office and ancillary uses in connection with Tenant's consumer packaged goods business, including the storage and distribution of shelf-stable snack foods, condiments, and specialty beverages, and including e-commerce fulfillment operations. Tenant shall not use or permit the use of the Premises for any other purpose without Landlord's prior written consent.
Notwithstanding the foregoing, Tenant shall not use the Premises for the manufacturing or processing of food products requiring health department processing permits unless and until Tenant has obtained all necessary permits, licenses, and approvals from the applicable governmental authorities at Tenant's sole cost and expense, and has delivered copies of the same to Landlord.
Tenant shall not use or permit the use of the Premises in any manner that (a) violates any applicable Law, (b) creates a nuisance or unreasonable interference with other occupants of the Park, (c) increases the rate of any insurance maintained by Landlord beyond the rate that would be charged for the Permitted Use, or (d) voids or makes voidable any insurance policy maintained by Landlord.
Section 6.2 — Compliance with Laws
Tenant shall, at Tenant's sole cost and expense, comply with all applicable Laws pertaining to Tenant's use and occupancy of the Premises, including without limitation the Americans with Disabilities Act, the Occupational Safety and Health Act, and all Environmental Laws. Tenant shall obtain and maintain all permits, licenses, and approvals required for Tenant's operations at the Premises.
Tenant shall be responsible for any modifications, alterations, or improvements to the Premises that are required to comply with Laws as a result of Tenant's specific use of the Premises (as opposed to general building code compliance or compliance obligations arising from the condition of the base building). For clarification, the allocation of compliance responsibilities between Landlord and Tenant is as follows:
(a) Tenant's Responsibility: Compliance with Laws to the extent required by reason of Tenant's specific use of the Premises, Tenant's alterations or improvements, or Tenant's particular manner of operation, including compliance with ADA requirements in the office/mezzanine areas as configured by Tenant, food safety requirements applicable to Tenant's operations, and any requirements arising from Tenant's installation of racking, automation equipment, or conveyor systems.
(b) Landlord's Responsibility: General compliance of the base building with applicable building codes, fire codes, structural requirements, and accessibility requirements, to the extent such compliance is required irrespective of Tenant's particular use. Landlord's obligation under this subparagraph (b) is limited to the structural components, roof, exterior walls, and Building Systems as they existed as of the Commencement Date (as modified by Landlord's Work).
Section 6.3 — Exclusive Use / Co-Tenancy
Landlord acknowledges Tenant's interest in protecting its business operations at the Premises from direct competition within the Park. In recognition thereof, Landlord agrees that, during the Term, Landlord shall not lease space within Cranbury Commerce Center to a tenant whose the warehousing and distribution of snack foods, condiments, or specialty beverages. This restriction is limited to leases entered into by Landlord after the Effective Date of this Lease and applies solely to the extent that Landlord is the landlord of the applicable building within the Park. Landlord makes no representation or warranty regarding the uses of other buildings in the Park that are not owned by Landlord, and this restriction shall not bind any successor owner of any building in the Park other than the Building.
ARTICLE 7 — LANDLORD'S WORK
Section 7.1 — Scope of Landlord's Work
Landlord shall perform the improvements and installations described on Exhibit B attached hereto (collectively, "Landlord's Work"), at Landlord's sole cost and expense. The estimated cost of Landlord's Work is . Landlord's Work includes the following:
(a) Installation of new LED lighting throughout all warehouse areas (approximately square feet);
(b) Upgrade of the existing sprinkler system to an Early Suppression Fast Response (ESFR) sprinkler system in compliance with current National Fire Protection Association (NFPA) standards ;
(c) Replacement of all dock levelers at all dock-high doors and all drive-in doors;
(d) Office area refresh, consisting of new carpet, paint, and ceiling tiles in the approximately 12,500 square foot office/mezzanine area; and
(e) Installation of six (6) Level 2 electric vehicle (EV) charging stations in the car parking area.
The cost of Landlord's Work shall not be deducted from, charged against, or otherwise reduce the Tenant Improvement Allowance. Landlord's Work and the Tenant Improvement Allowance are separate and independent obligations of Landlord. Landlord shall perform Landlord's Work in a good and workmanlike manner, using first-quality materials, in accordance with the plans and specifications set forth in Exhibit B and in compliance with all applicable Laws.
Section 7.2 — Delivery Condition
Landlord shall deliver the Premises to Tenant on the Commencement Date in "warm vanilla shell" condition, with Landlord's Work complete, broom-clean, free of all tenancies, occupancies, and personal property of prior occupants, and in compliance with all applicable Laws. The Premises shall be delivered with all Building Systems in good working order and the structural components of the Building in sound condition.
In addition, Landlord represents and warrants to Tenant as follows:
(a) Roof: The roof membrane of the Building was fully replaced in 2020 and is in good condition as of the date of this Lease. Landlord shall assign to Tenant, for the benefit of the Premises, the existing manufacturer's warranty on the roof membrane (currently warranted by Northpoint Corporation; warranty expiration: 2040). Such assignment shall not relieve Landlord of its maintenance and repair obligations under Section 9.2.
(b) HVAC Systems: The HVAC systems serving the Building were upgraded in 2020 and are in good working order as of the date of this Lease.
(c) Building Systems: All Building Systems, including electrical, plumbing, fire protection (including the sprinkler system as upgraded by Landlord's Work), and elevators (if any), are in good working order as of the Commencement Date.
Landlord shall provide Tenant with a month warranty on Landlord's Work, commencing on the date of Substantial Completion. During such warranty period, Landlord shall, at Landlord's sole cost and expense, promptly repair or replace any defective or non-conforming work that is part of Landlord's Work, provided Tenant delivers written notice to Landlord specifying the defect or non-conformity within such month period. This warranty is in addition to any manufacturer or contractor warranties applicable to the materials and equipment installed as part of Landlord's Work.
Section 7.3 — Substantial Completion
"Substantial Completion" means the date on which Landlord's Work has been substantially completed in accordance with the plans and specifications set forth in Exhibit B, as certified by Landlord's architect, except for minor punch-list items that do not materially interfere with Tenant's use and occupancy of the Premises. Landlord shall deliver written notice to Tenant, together with Landlord's architect's certification, promptly upon Substantial Completion.
Within fifteen (15) business days after Tenant's receipt of Landlord's notice of Substantial Completion and Tenant's access to the Premises, Tenant shall conduct a walk-through inspection of the Premises and may submit to Landlord a written punch-list identifying items of Landlord's Work that, in Tenant's reasonable judgment, have not been completed or do not conform to the plans and specifications set forth in Exhibit B. Landlord shall diligently prosecute the completion of all punch-list items and shall complete such items within after receipt of Tenant's punch-list (or such longer period as may be reasonably necessary for items requiring long-lead materials, provided Landlord commences correction within such period and diligently prosecutes to completion). Tenant's failure to submit a punch-list within the fifteen (15) business day period shall not be deemed acceptance of Landlord's Work or a waiver of any warranty rights.
Section 7.4 — Delays
The following provisions shall govern delays in the completion of Landlord's Work:
(a) Tenant Delay. If the completion of Landlord's Work is delayed by any Tenant Delay, the Commencement Date shall not be deferred on account of such Tenant Delay, and the Commencement Date shall be deemed to have occurred on the date that Substantial Completion would have been achieved but for the Tenant Delay.
(b) Force Majeure. If the completion of Landlord's Work is delayed by Force Majeure, the Commencement Date shall be extended on a day-for-day basis for each day of Force Majeure delay; provided, however, that the aggregate extension of the Commencement Date attributable to Force Majeure shall not exceed one hundred twenty (120) days.
(c) Landlord Delay. If the completion of Landlord's Work is delayed beyond sixty (60) days past the Target Commencement Date for reasons other than Tenant Delay or Force Majeure, Tenant shall be entitled to the additional free rent remedy set forth in Section 2.2.
ARTICLE 8 — TENANT IMPROVEMENTS AND ALLOWANCE
Section 8.1 — Tenant Improvement Allowance
Landlord shall provide Tenant with a tenant improvement allowance in the amount of (the "TI Allowance"). The TI Allowance shall be used exclusively for the design, permitting, and construction of Tenant's interior improvements to the Premises (the "Tenant Improvements"), including without limitation:
(a) Warehouse racking systems;
(b) Conveyor systems and automation equipment (to the extent permanently affixed to the Premises);
(c) Office build-out within the 12,500 square foot office/mezzanine area;
(d) Additional electrical, plumbing, and HVAC modifications required for Tenant's specific use;
(e) Architectural and engineering design fees directly related to the Tenant Improvements;
(f) Permit fees and inspection costs;
(g) Construction management fees, if applicable
The TI Allowance shall not be used for Tenant's furniture, movable trade fixtures, inventory, that are not directly related to the construction or installation of permanent improvements to the Premises.
Section 8.2 — Disbursement
The TI Allowance shall be disbursed by Landlord to Tenant (or, at Landlord's election, directly to Tenant's contractors) in arrears, upon Tenant's submission of draw requests in accordance with the following procedures:
(a) Tenant shall submit each draw request in writing, accompanied by (i) invoices or payment applications from Tenant's contractors and suppliers, (ii) conditional lien waivers from all contractors, subcontractors, and materialmen for the work covered by the draw request (unconditional lien waivers shall be required for the final draw request and for all prior draws at the time of the final disbursement), and (iii) certification by Tenant's architect that the work covered by the draw request has been completed in accordance with the approved plans.
(b) Landlord shall review each draw request and shall fund each approved draw request within of Landlord's receipt of complete documentation. Landlord may disapprove any draw request (or any portion thereof) that does not comply with the requirements of this Section 8.2 or that includes costs not eligible for reimbursement from the TI Allowance, and Landlord shall specify the reasons for any disapproval in writing.
(c) Landlord may retain ten percent (10%) of the TI Allowance (the "Retainage") until (i) all Tenant Improvements have been completed in accordance with the approved plans, (ii) Tenant has delivered unconditional final lien waivers from all contractors, subcontractors, and materialmen, (iii) Tenant has delivered as-built plans or an as-built survey of the Tenant Improvements, and (iv) any required governmental inspections have been completed and a certificate of occupancy (or equivalent approval) has been issued for the Premises as improved. Upon satisfaction of all of the foregoing conditions, Landlord shall disburse the Retainage within thirty (30) calendar days.
Tenant's right to receive disbursements of the TI Allowance is expressly conditioned upon Tenant not being in default under this Lease at the time of any draw request.
Section 8.3 — Excess Costs; Unused Allowance
All costs of Tenant Improvements in excess of the TI Allowance shall be Tenant's sole responsibility, and Tenant shall pay such excess costs directly to Tenant's contractors and suppliers.
Section 8.4 — Ownership of Tenant Improvements