UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

or

o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to

COMMISSION FILE NUMBER 1-13792

Systemax Inc.
(Exact name of registrant as specified in its charter)

Delaware
 
11-3262067
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)

11 Harbor Park Drive
Port Washington, New York 11050
(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (516) 608-7000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes   x    No   o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes   x     No   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o
 
Accelerated filer x
Non-accelerated filer o
 
Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)   Yes o    No x

The number of shares outstanding of the registrant’s Common Stock as of May 1, 2012 was 36,470,889.




 


 
TABLE OF CONTENTS

 
   
Part I
Financial Information
 
Item 1.
  4
Item 2.
12
Item 3.
19
Item 4.
19
     
Part II
Other Information
 
Item 1.
20
Item 6.
21
     
 
22






 
2
 


Available Information

We maintain an internet web site at www.systemax.com.  We file reports with the Securities and Exchange Commission (“SEC”) and make available free of charge on or through this website our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, including all amendments to those reports.  These are available as soon as is reasonably practicable after they are filed with the SEC.  All reports mentioned above are also available from the SEC’s website (www.sec.gov).  The information on our website is not part of this or any other report we file with, or furnish to, the SEC.

Our Board of Directors has adopted the following corporate governance documents with respect to the Company (the “Corporate Governance Documents”):

·
Corporate Ethics Policy for officers, directors and employees
·
Charter for the Audit Committee of the Board of Directors
·
Charter for the Compensation Committee of the Board of Directors
·
Charter for the Nominating/Corporate Governance Committee of the Board of Directors
·
Corporate Governance Guidelines and Principles

In accordance with the corporate governance rules of the New York Stock Exchange, each of the Corporate Governance Documents is available on our Company web site, www.systemax.com .





 
3
 


PART I - FINANCIAL INFORMATION
Item 1.   Financial Statements

Systemax Inc.
Condensed Consolidated Balance Sheets
(In thousands)

   
March 31,
 
December 31,
 
   
2012
 
2011
 
   
(Unaudited)
     
ASSETS:
         
Current assets:
         
Cash
 
$
110,987
 
$
97,254
 
Accounts receivable, net
 
281,536
 
268,980
 
Inventories
 
387,222
 
372,244
 
Prepaid expenses and other current assets
 
20,711
 
18,198
 
Deferred income taxes
 
20,526
 
20,480
 
Total current assets
 
820,982
 
777,156
 
           
Property, plant and equipment, net
 
69,259
 
70,699
 
Deferred income taxes
 
14,069
 
13,948
 
Goodwill and intangibles
 
47,460
 
47,838
 
Other assets
 
4,989
 
4,909
 
Total assets
 
$
956,759
 
$
914,550
 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY:
         
Current liabilities:
         
Accounts payable
 
$
365,797
 
$
336,550
 
Accrued expenses and other current liabilities
 
72,574
 
72,410
 
Deferred income tax liabilities
 
10,960
 
10,940
 
Current portion of long-term debt
 
2,588
 
2,552
 
Total current liabilities
 
451,919
 
422,452
 
           
Long-term debt
 
6,561
 
7,133
 
Deferred income tax liabilities
 
16,256
 
16,233
 
Other liabilities
 
15,285
 
14,440
 
Total liabilities
 
490,021
 
460,258
 
           
Commitments and contingencies
 
-
 
- 
 
           
Shareholders’ equity:
         
Preferred stock
 
-
 
- 
 
Common stock
 
389
 
389
 
Additional paid-in capital
 
180,966
 
180,538
 
Treasury stock
 
(29,634
) 
(30,520
) 
Retained earnings
 
315,017
 
307,934
 
Accumulated other comprehensive loss
 
-
 
(4,049
) 
Total shareholders’ equity
 
466,738
 
454,292
 
           
Total liabilities and shareholders’ equity
 
$
956,759
 
$
914,550
 

See Notes to Condensed Consolidated Financial Statements.




 
4
 


Systemax Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)

   
Three Months Ended
 
   
March 31,
 
   
2012
 
2011
 
Net sales
 
$
913,578
 
$
929,867
 
Cost of sales
 
782,924
 
799,369
 
Gross profit
 
130,654
 
130,498
 
Selling, general & administrative expenses
 
118,225
 
111,369
 
Special charges
 
1,865
 
504
 
Operating income
 
10,564
 
18,625
 
Foreign currency exchange gain
 
(215
) 
(1,383
) 
Interest and other income, net
 
(182
) 
(126
) 
Interest expense
 
449
 
530
 
Income before income taxes
 
10,512
 
19,604
 
Provision for income taxes
 
3,429
 
6,038
 
Net income
 
$
7,083
 
$
13,566
 
           
Net income per common share:
         
Basic
 
$
.19
 
$
.37
 
Diluted
 
$
.19
 
$
.36
 
           
Weighted average common and common equivalent shares:
         
Basic
 
36,836
 
37,157
 
Diluted
 
37,051
 
37,708
 
           

 
  See Notes to Condensed Consolidated Financial Statements.





 
5
 

Systemax Inc.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands)

   
Three Months Ended
 
   
March 31,
 
   
2012
 
2011
 
Net income
 
$
7,083
 
$
13,566
 
Other comprehensive income:
         
  Foreign currency translation gain
 
4,049
 
4,955
 
Net income
 
$
11,132
 
$
18,521
 
           

See Notes to Condensed Consolidated Financial Statements.



 
6
 


Systemax Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)

   
Three Months Ended
 
   
March 31,
 
   
2012
 
2011
 
Cash flows from operating activities:
         
Net income
 
$
7,083
 
$
13,566
 
Adjustments to reconcile net income to net cash provided by operating activities:
         
Depreciation and amortization
 
4,453
 
4,245
 
(Benefit) provision for deferred income taxes
 
(309
)
105
 
Provision for returns and doubtful accounts
 
784
 
627
 
Compensation expense related to equity compensation plans
 
907
 
533
 
Excess tax benefit from exercises of stock options
 
(420
)
(173
) 
Loss on dispositions and abandonment
 
28
 
27
 
Changes in operating assets and liabilities:
         
Accounts receivable
 
(7,928
)
2,094
 
Inventories
 
(12,892
)
(522
) 
Prepaid expenses and other current assets
 
(2,435
)
3,725
 
Accounts payable, accrued expenses and other current liabilities
 
25,505
 
(14,498
) 
Net cash provided by operating activities
 
14,776
 
9,729
 
           
Cash flows from investing activities:
         
Purchases of property, plant and equipment
 
(1,970
)
(3,715
) 
Proceeds from disposals of property, plant and equipment
 
18
 
10
 
Net cash used in investing activities
 
(1,952)
 
(3,705)
 
           
Cash flows from financing activities:
         
Borrowings on credit facility and short term debt
 
-
 
25,466
 
Repayments of borrowings on credit facility and short term debt
 
-
 
(10,861
) 
Repayments of capital lease obligations
 
(631
)
(654
) 
Proceeds from issuance of common stock
 
217
 
175
 
Excess tax benefit from exercises of stock options
 
420
 
173
 
Net cash provided by financing activities
 
6
 
14,299
 
           
Effects of exchange rates on cash
 
903
 
(116
) 
           
Net increase in cash
 
13,733
 
20,207
 
Cash – beginning of period
 
97,254
 
92,077
 
Cash – end of period
 
$
110,987
 
$
112,284
 
Supplemental disclosures of non-cash investing and financing activities:
         
Acquisitions of equipment through capital leases
 
$
95
 
$
4
 

See Notes to Condensed Consolidated Financial Statements.




 
7
 


Systemax Inc.
Condensed Consolidated Statement of Shareholders’ Equity (Unaudited)
(In thousands)

                           
   
Common Stock
             
Accumulated
 
   
Number of
     
Additional
 
Treasury
     
Other
 
   
Shares
     
Paid-in
 
Stock,
 
Retained
 
Comprehensive
 
   
Outstanding
 
Amount
 
Capital
 
At Cost
 
Earnings
 
Loss
 
                           
Balances, January 1, 2012
 
36,399
 
$
389
 
$
180,538
 
$
(30,520
) 
$
307,934
 
$
(4,049
) 
                           
Stock-based compensation expense
         
907
             
Exercise of stock options
 
72
     
(669
)
886
         
Surrender of fully vested options
         
(228
)
           
Income tax benefit on stock-based compensation
         
418
             
Change in cumulative translation adjustment
                     
4,049
 
Net income
                 
7,083
     
                           
Balances, March 31, 2012
 
36,471
 
$
389
 
$
180,966
 
$
(29,634
) 
$
315,017
 
$
-
 

See Notes to Condensed Consolidated Financial Statements.




 
8
 


Systemax Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)

 
1.
Basis of Presentation

The accompanying condensed consolidated financial statements of the Company and its wholly-owned subsidiaries are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America are not required in these interim financial statements and have been condensed or omitted.  All significant intercompany accounts and transactions have been eliminated in consolidation.  Certain prior year amounts have been reclassified to conform to current year presentation.

In the opinion of management, the accompanying condensed consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the financial position of the Company as of March 31, 2012 and the results of operations for the three month periods ended March 31, 2012 and 2011, statements of comprehensive income for the three month periods ended March 31, 2012 and 2011, cash flows for the three month periods ended March 31, 2012 and 2011 and changes in shareholders’ equity for the three month period ended March 31, 2012.  The December 31, 2011 condensed consolidated balance sheet has been derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of December 31, 2011 and for the year then ended included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.  The results for the three month periods ended March 31, 2012 are not necessarily indicative of the results for the entire year.

Systemax manages its business and reports using a 52-53 week fiscal year that ends at midnight on the Saturday closest to December 31.  For clarity of presentation herein, fiscal years and quarters are referred to as if they ended on the traditional calendar month.  The actual fiscal first quarter ended on March 31, 2012.  The first quarters of both 2012 and 2011 included 13 weeks.

 
2.
Net Income per Common Share

Net income per common share - basic was calculated based upon the weighted average number of common shares outstanding during the respective periods presented using the two class method of computing earnings per share.  The two class method was used as the Company has outstanding restricted stock with rights to dividend participation for unvested shares.  Net income per common share - diluted was calculated based upon the weighted average number of common shares outstanding and included the equivalent shares for dilutive options and restricted stock awards outstanding during the respective periods, including unvested options.   The dilutive effect of outstanding options and restricted stock issued by the Company is reflected in net income per share - diluted using the treasury stock method.  Under the treasury stock method, options will only have a dilutive effect when the average market price of common stock during the period exceeds the exercise price of the options. The weighted average number of stock options outstanding included in the computation of diluted earnings per share was 0.2 million and 0.5 million shares for the three months ended March 31, 2012 and 2011, respectively.  The weighted average number of restricted stock awards included in the computation of diluted earnings per share was 0.1 million and 0.2 million shares for the three months ended March 31, 2012 and 2011, respectively.  The weighted average number of stock options outstanding excluded from the computation of diluted earnings per share was 0.7 million and 0.7 million shares for the three months ended March 31, 2012 and 2011, respectively, due to their antidilutive effect.

 
3.
Credit Facilities and Long Term Debt

The Company maintains a $125.0 million (which may be increased to $200.0 million, subject to certain conditions) secured revolving credit agreement with a group of financial institutions which provides for borrowings in the United States.  The credit facility has a five year term and expires in October 2015.  Availability is subject to a borrowing base formula that takes into account eligible receivables and eligible inventory.  Borrowings are secured by substantially all of the Company’s assets, including accounts receivable, inventory and certain other assets, subject to limited exceptions.  The credit agreement contains certain operating, financial and other covenants, including limits on annual levels of capital expenditures, availability tests related to payments of dividends and stock repurchases and fixed charge coverage tests related to acquisitions.  The borrowings under the agreement are subject to borrowing base limitations of up to 85% of eligible accounts receivable and up to 40% of qualified inventories.  The interest rate under this facility is computed at applicable market rates based on LIBOR or the Prime Rate, plus an applicable margin.  The revolving credit agreement requires that a minimum level of availability be maintained.  If such availability is not maintained, the Company will be required to maintain a fixed charge coverage ratio (as defined).  The applicable margin varies based on borrowing base availability.  As of March 31, 2012, eligible collateral under the agreement was $119.5 million, total availability was $110.4 million, total outstanding letters of credit were $9.1 million and there were no outstanding advances.  The Company was in compliance with all of the covenants under this facility as of March 31, 2012.

 
9
 
The Company’s Inmac-WStore subsidiary maintains a secured revolving credit agreement with a financial institution in France which is secured by Inmac-WStore accounts receivable balances.  Available amounts for borrowing under this facility include all accounts receivable balances not over 60 days past due reduced by the greater of €4.0 million or 10% of the eligible accounts receivable.  As of March 31, 2012, there was availability under this credit facility of approximately €19.2 million ($25.6 million) and there were no outstanding borrowings.  Under this agreement the Company is subject to certain non-financial covenants with which it was in compliance at March 31, 2012.  This credit facility will be terminated on June 9, 2012.

The Company (through a subsidiary) has an outstanding Bond financing with the Development Authority of Jefferson, Georgia (the “Authority”).  The Bonds were issued by the Authority and purchased by GE Government Finance Inc., and mature on October 1, 2018.   The proceeds from Bond were used to finance capital equipment purchased for the Company’s distribution facility located in Jefferson, Georgia. The purchase and installation of the equipment for the facility was completed by December 31, 2011.  Pursuant to the transaction, the Company transferred to the Authority, for consideration consisting of the Bonds proceeds, ownership of the equipment and the Authority leased the equipment to the Company’s subsidiary pursuant to a capital equipment lease expiring October 1, 2018. Under the capital equipment lease the Company has the right to acquire ownership of the equipment at any time for a purchase price sufficient to pay off all principal and interest on the Bonds, plus $1.00. As of March 31, 2012 there was approximately $7.2 million outstanding against this lease facility.

 
4.
Special charges

In the first quarter of 2012, the Company’s Industrial Products segment incurred approximately $0.3 million of facility exit costs for severance and personnel costs and other exit costs related to the planned closing and relocation of one of our smaller distribution centers to a new, significantly larger distribution and call center.   These costs were recorded in cost of sales within the Industrial Products segment.  The Company anticipates incurring minimal additional costs related to this facility closing and relocation.

The following table details the associated liabilities related to this plan (in thousands):

   
Severance and
Personnel
Costs
 
Other Exit Costs
 
Total
 
Balance January 1, 2012
 
$
-
 
$
-
 
$
-
 
Charged to expense
   
254
   
17
   
271
 
Paid or otherwise settled
   
-
   
-
   
-
 
Balance March 31, 2012
 
$
254
 
$
17
 
$
271
 
 

In the first quarter of 2012, the Company’s North America Technology Products segment incurred $1.1 million of costs associated with senior staffing changes for which no future services will be rendered and also incurred $0.5 million of additional legal and professional fees related to the ongoing follow up of the previously disclosed completed investigation and settlement with a former officer and director and in pursuing related matters.  
 
 
5.
Segment Information

Systemax is primarily a direct marketer of brand name and private label products.  Our operations are organized into two reportable business segments – Technology Products and Industrial Products.

Our Technology Products segment sells computers, computer supplies and consumer electronics which are marketed in North America, Puerto Rico and Europe.  Most of these products are manufactured by other companies; however, we do offer a selection of products that are manufactured for us to our own design and marketed on a private label basis.

Our Industrial Products segment sells a wide array of industrial products and supplies which are marketed in North America. Most of these products are manufactured by other companies.  Some products are manufactured for us to our own design and marketed on a private label basis.

The Company’s chief operating decision-maker is the Company’s Chief Executive Officer.  The Company evaluates segment performance based on operating income, before net interest, foreign exchange gains and losses, special charges, internal management fees and income taxes.  Corporate costs not identified with the disclosed segments are grouped as “Corporate and other expenses”.

 
10
 
The chief operating decision-maker reviews assets and makes significant capital expenditure decisions for the Company on a consolidated basis only.  The accounting policies of the segments are the same as those of the Company.

The Company’s Industrial Products and Technology Products segments sell dissimilar products.  Industrial products are generally higher in price, lower in volume and higher in product margin.  Technology products are generally higher in volume, lower in price and lower in product margin.  This results in higher operating margin for the Industrial Products segment.  Each segment incurs specifically identifiable selling, general and administrative expenses, with the selling, general and administrative expenses for the Industrial Products segment being higher as a percentage of sales than those of the Technology Products segment as a result of the Industrial Products segment having a longer selling cycle than the Technology Products segment.

Financial information relating to the Company’s operations by reportable segment was as follows (in thousands):

   
Three Months Ended
 
   
March 31,
 
   
2012
 
2011
 
Net sales:
         
Technology Products
 
$
821,889
 
$
858,263
 
Industrial Products
 
90,378
 
70,835
 
Corporate and other
 
1,311
 
769
 
Consolidated
 
$
913,578
 
$
929,867
 
           
Operating income (loss):
         
Technology Products
 
$
8,799
 
$
17,740
 
Industrial Products
 
8,248
 
6,857
 
Corporate and other expenses
 
(6,483
)
(5,972
)
Consolidated
 
$
10,564
 
$
18,625
 

Financial information relating to the Company’s operations by geographic area was as follows (in thousands):

   
Three Months Ended
 
   
March 31,
 
   
2012
 
2011
 
Net sales:
         
United States
 
$
562,182
 
$
584,081
 
United Kingdom
 
132,416
 
117,999
 
Other Europe
 
166,097
 
167,545
 
Other North America
 
52,883
 
60,242
 
Consolidated
 
$
913,578
 
$
929,867
 

 Revenues are attributed to countries based on the location of the selling subsidiary.


Financial information relating to the Company’s entity-wide product category sales was as follows (in millions):

   
Three Months Ended
 
   
March 31,
 
   
2012
%
 
2011
%
 
Product Category:
             
Computers
 
$
262.2
  29%
 
$
218.7
  24%
 
Computer accessories & software
 
259.6
  28%
 
270.6
  29%
 
Consumer electronics
 
167.0
  18%
 
205.6
  22%
 
Computer components
 
108.5
  12%
 
142.5
  15%
 
Industrial products
 
90.4
  10%
 
70.8
  8%
 
Other
 
25.9
 3%
 
21.7
  2%
 
    Consolidated
 
$
913.6
  100.0%
 
$
929.9
  100.0%
 

 

 
11
 
 


 
  
 
6 .
Legal Proceedings

 
The Company and its subsidiaries are involved in various lawsuits, claims, investigations and  proceedings including commercial, employment, consumer, personal injury and health and safety law matters, which are being handled and defended in the ordinary course of business.  In addition, the Company is subject to various assertions, claims, proceedings and requests for indemnification concerning intellectual property, including patent infringement suits involving technologies that are incorporated in a broad spectrum of products the Company sells.  The Company is also audited by (or has initiated voluntary disclosure agreements with) numerous governmental agencies in various countries, including U.S. Federal and state authorities, concerning potential income tax, sales tax and unclaimed property liabilities.  These matters are in various stages of investigation, negotiation and/or litigation, and are being vigorously defended.

Although the Company does not expect, based on currently available information, that the outcome in any of these matters, individually or collectively, will have a material adverse effect on its financial condition or results of operations, the ultimate outcome is inherently unpredictable. Therefore, judgments could be rendered or settlements entered, that could adversely affect the Company’s operating results or cash flows in a particular period.  The Company routinely assesses all of its litigation and threatened litigation as to the probability of ultimately incurring a liability, and records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable and estimable.
 

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This report contains forward looking statements within the meaning of that term in the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).  Additional written or oral forward looking statements may be made by the Company from time to time, in filings with the Securities and Exchange Commission or otherwise.  Statements contained in this report that are not historical facts are forward looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward looking statements may include, but are not limited to, projections of revenue, income or loss and capital expenditures, statements regarding future operations, financing needs, compliance with financial covenants in loan agreements, plans for acquisition or sale of assets or businesses and consolidation of operations of newly acquired businesses, and plans relating to products or services of the Company, assessments of materiality, predictions of future events and the effects of pending and possible litigation, as well as assumptions relating to the foregoing. In addition, when used in this discussion, the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans” and variations thereof and similar expressions are intended to identify forward looking statements.

Forward-looking statements in this report are based on the Company’s beliefs and expectations as of the date of this report and are subject to risks and uncertainties which may have a significant impact on the Company’s business, operating results or financial condition.  Investors are cautioned that these forward-looking statements are inherently uncertain.  Should one or more of the risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein.  Statements in this report, particularly in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Notes to Condensed Consolidated Financial Statements, describe certain factors, among others, that could contribute to or cause such differences.

Readers are cautioned not to place undue reliance on any forward looking statements contained in this report, which speak only as of the date of this report.  We undertake no obligation to publicly release the result of any revisions to these forward looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events.

Overview

Systemax is primarily a direct marketer of brand name and private label products.  Our operations are organized in two reportable business segments – Technology Products and Industrial Products.

Our Technology Products segment sells computers, computer supplies and consumer electronics which are marketed in North America, Puerto Rico and Europe.  Most of these products are manufactured by other companies.  Some products are manufactured for us to our own design and marketed on a private label basis.  For the three months ended March 31, 2012, Technology products accounted for 90% of our net sales.

Our Industrial Products segment sells a wide array of industrial products and supplies which are marketed in North America.  Most of these products are manufactured by other companies.  Some products are manufactured for us to our own design and marketed on a private label basis. Industrial products accounted for 10% of our net sales for the three months ended March 31, 2012.  In both of our Technology Products and Industrial Products segments, we offer our customers a broad selection of products, prompt order fulfillment and extensive customer service.
 
Our Industrial Products and Technology Products segments sell dissimilar products.  Industrial products are generally higher in price, lower in volume and higher in product margin.  Technology products are generally higher in volume, lower in price and lower in product margin.  This results in higher operating margin for the Industrial Products segment.  Each segment incurs specifically identifiable selling, general and administrative expenses, with the selling, general and administrative expenses for the Industrial Products segment being higher as a percentage of sales than those of the Technology Products segment as a result of the Industrial Products segment having a longer selling cycle for its business customers than the Technology Products segment. Additionally, the Industrial Products segment’s vendors generally do not provide funding to offset its marketing expenses.
 
 
12
 
The market for computer products and consumer electronics is subject to intense price competition and is characterized by narrow gross profit margins.  The North American industrial products market is highly fragmented and we compete against multiple distribution channels.  Distribution is working capital intensive, requiring us to incur significant costs associated with the warehousing of many products, including the costs of maintaining inventory, leasing warehouse space, inventory management systems, and employing personnel to perform the associated tasks.  We supplement our on-hand product availability by maintaining relationships with major distributors and manufacturers, utilizing a combination of stock and drop-shipment fulfillment.

The primary component of our operating expenses historically has been employee related costs, which includes items such as wages, commissions, bonuses, employee benefits and stock option expenses.  We continually assess our operations to ensure that they are efficient, aligned with market conditions and responsive to customer needs.

The discussion of our results of operations and financial condition that follows will provide information that will assist in understanding our financial statements, the factors that we believe may affect our future results and financial condition as well as information about how certain accounting principles and estimates affect the consolidated financial statements.  This discussion should be read in conjunction with the condensed consolidated financial statements included herein and in conjunction with the audited financial statements as of December 31, 2011 and the other information provided in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

In the discussion of our results of operations we refer to business to business sales, consumer channel sales and period to period constant currency comparisons.  Business to business sales are sales made direct to other businesses through managed business relationships, outbound call centers and extranets.  Sales in the Industrial Products segment and Corporate and other are considered to be business to business sales.  Consumer channel sales are sales from retail stores, consumer websites, inbound call centers and television shopping channels.  Constant currency refers to the adjustment of the results of our foreign operations to exclude the effects of period to period fluctuations in currency exchange rates.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and revenues and expenses during the period.  Significant accounting policies employed by the Company, including the use of estimates, were presented in the Notes to Consolidated Financial Statements of the Company’s 2011 Annual Report on Form 10-K.

Critical accounting policies are those that are most important to the presentation of our financial condition and results of operations, require management’s most difficult, subjective and complex judgments, and involve uncertainties.  The accounting policies that have been identified as critical to our business operations and understanding the results of operations pertain to revenue recognition; accounts receivable and allowance for doubtful accounts; inventories; goodwill and intangible assets; long-lived assets; accruals; income taxes; and reorganization and other costs.  The application of each of these critical accounting policies and estimates was discussed in Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.  There have been no significant changes in the application of critical accounting policies or estimates during 2012.  Management believes that full consideration has been given to all relevant circumstances that we may be subject to, and the condensed consolidated financial statements of the Company accurately reflect management’s best estimate of the consolidated results of operations, financial position and cash flows of the Company for the periods presented.  Because of the uncertainty in these estimates, actual results could differ from estimates used in applying the critical accounting policies.  We are not aware of any reasonably likely events or circumstances which would result in different amounts being reported that would materially affect the Company’s financial condition or results of operations.


 
13
 
 


Recent Accounting Pronouncements

Public companies in the United States are subject to the accounting and reporting requirements of various authorities, including the Financial Accounting Standards Board (“FASB”) and the Securities and Exchange Commission (“SEC”).  These authorities issue numerous pronouncements, most of which are not applicable to the Company’s current or reasonably foreseeable operating structure.  Below are the new authoritative pronouncements that management believes are relevant to the Company’s current operations.

In June 2011, the FASB issued amended guidance related to comprehensive income.  The amended guidance requires the presentation of items of net income, items of other comprehensive income and total comprehensive income in one continuous statement or in two separate but consecutive statements.  Presentation of other comprehensive income as part of the statement of stockholders’ equity is no longer allowed under the amended guidance.  The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The Company adopted this guidance in January 2012.


 
14
 
 


Results of Operations

Three Months Ended March 31, 2012 compared to the Three Months Ended March 31, 2011

Key Performance Indicators (in millions):

 
Three Months Ended
   
 
March 31, 2012
%
 
   
2012
 
2011
 
Change
 
Net sales by segment :
             
Technology Products
 $
821.9
$ 
858.3
 
(4.2)
%
Industrial Products
 
90.4
 
70.8
 
27.7
%
Corporate and other
 
1.3
 
.8
 
62.5
%
Consolidated net sales
  $
913.6
$ 
929.9
 
(1.8)
%
Net sales by geography:
             
North America
 $
615.1
$ 
644.3
 
(4.5)
%
Europe
 
298.5
 
285.6
 
4.5
%
Consolidated net sales
  $
913.6
$ 
929.9
 
(1.8)
%
Net sales by channel:
             
Business to business
 $
512.7
$ 
480.5
 
6.7
%
Consumer
 
400.9
 
449.4
 
(10.8)
%
    Consolidated net sales
  $
913.6
$ 
929.9
 
(1.8)
%
Consolidated gross margin
 
14.3
%
14.0
%
0.3
%
Consolidated SG&A costs*
  $
120.1
$ 
111.9
 
7.3
%
Consolidated SG&A costs* as a % of net sales
 
13.1
%
12.0
%
1.1
%
Operating income (loss) by segment :*
             
Technology Products
 $
8.8
$ 
17.7
 
(50.3)
%
Industrial Products
 
8.3
 
6.9
 
20.3
%
Corporate and other
 
(6.5)
 
(6.0)
 
8.3
%
Consolidated operating income
  $
10.6
$ 
18.6
 
(43.0)
%
Operating margin by segment:*
             
Technology Products
 
1.1
%
2.1
%
(1.0)
%
Industrial Products
 
9.2
%
9.7
%
(0.5)
%
Consolidated operating margin
 
 
1.2
%
 
2.0
%
(0.8)
%
Effective income tax rate
 
32.6
%
30.8
%
1.8
%
Net income
  $
7.1
$ 
13.6
 
(47.8)
%
Net margin
 
0.8
%
1.5
%
(0.7)
%

*includes special charges. See Note 4 of Notes to Condensed Consolidated Financial Statements.

 
NET SALES
 
SEGMENTS
 
The Technology Products net sales decrease is primarily attributable to weakness in the consumer channels, principally due to television shopping sales, as well as decreased internet and retail sales in North America.  These declines were partially offset by growth in the business to business channels.  Strong computer sales were offset by weak sales of computer accessories and software, consumer electronics, and computer components in North America.  On a constant currency basis, Technology Products net sales would have decreased 3.2%.
 
The Industrial Products net sales increase is attributable to the addition of products offered and newer product categories on the Company’s website and the addition of sales personnel.

 
15
 


GEOGRAPHIES
 
The North American sales decrease was primarily the result of the challenging consumer business within the Technology Products segment, only partially offset by strong sales within the business to business operations.   On a constant currency basis, North American sales would have decreased 4.4%.  Movement in foreign exchange rates negatively impacted sales by approximately $0.9 million.

European sales benefited from an increase in business to business activity driven by public sector sales but were negatively impacted by movement in foreign exchange rates of approximately $7.7 million.  On a constant currency basis, European sales would have increased 7.2%.
 
CHANNELS

The increase in consolidated business to business channel sales was driven by the Industrial Products segment’s additional product offered, newer product categories and the addition of sales personnel.  On a constant currency basis, worldwide business to business channel sales grew 8.2%.

The decline in consolidated consumer-channel sales resulted from softness in television shopping, internet and retail stores, primarily in North America.   On a constant currency basis, worldwide consumer channel sales decreased 10.4%.

GROSS MARGIN

The increase in consolidated gross margin was due to changes in the segment and channel mix, with Industrial Products sales, which are typically higher margin than Technology Products, contributing a larger percentage of gross profit dollars in 2012. Modest improvements in our freight margin in Technology Products contributed to the improved margin from our ongoing freight and logistics initiatives.  Gross margin is dependent on variables such as product mix, price protection and other sales incentives offered by the Company’s vendors, competition, pricing strategy, co-operative advertising funds required to be classified as a reduction to cost of sales, freight discounting and other variables, any or all of which may result in fluctuations in gross margin.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

The increase in selling, general and administrative expenses was primarily the result of increases in sales and other personnel headcount, reduced vendor co-operative advertising funding and increased facility and other operating costs.  Significant expense increases include approximately $2.3 million of increased internet advertising costs, $1.2 million of increased salary and related expenses, $0.9 million of reduced vendor co-operative advertising funding offset by reduced catalog and other advertising expenses, and $0.5 million of increased rent and related expenses.

SPECIAL CHARGES

The Company recorded legal and professional fees of approximately $0.5 million related to a previously disclosed completed investigation and settlement with a former officer and director and $1.1 million for senior staffing changes within the North America Technology Products segment.  The Company also recorded $0.3 million of reorganization costs in the first quarter of 2012 related to facility exit costs (See Note 4 of Notes to Condensed Consolidated Financial Statements).  In the first quarter of 2011 the Company recorded $0.5 million in charges related to the previously mentioned investigation.
 
OPERATING MARGIN

The decline in Technology Products operating margin was primarily due to the challenging consumer business, offset by continued strength in the business to business operations, decline in vendor co-operative funding within the North America technology business, and lower sales and associated gross profit to cover fixed selling, general and administrative expenses.

The decrease in Industrial Products operating margin was due to incremental gross profits being invested in advertising expenses, and sales and other personnel costs as it continues to expand into newer product categories.

The increase in Corporate and other expenses primarily resulted from increased personnel costs in our overhead departments and increased tax and accounting fees offset by savings in other expenses.

Consolidated operating margin was impacted by special charges of $1.9 million recorded during 2012.

 
16
 


INTEREST EXPENSE

The interest expense decrease is attributable to decreasing balances owed on the Recovery Zone Bond facility and outstanding capital lease obligations.  Interest expense for 2011 is primarily attributable to interest on the Recovery Zone bond facility used to finance the second Technology Products distribution center.

INCOME TAXES

The increase in the effective tax rate is the result of higher projected taxable income in jurisdictions with higher tax rates in 2012 as compared to 2011.

 
Financial Condition, Liquidity and Capital Resources

Our primary liquidity needs are to support working capital requirements in our business, including working capital for the planned closing and relocation of one of our smaller distribution centers to a new, significantly larger distribution and call center for our Industrial Products segment,  new retail stores, funding capital expenditures, including those related to our retail stores and information technology systems, repaying outstanding debt, funding special dividends declared by our Board of Directors and funding acquisitions.  We rely principally upon operating cash flow to meet these needs.  We believe that cash flow available from these sources and our availability under credit facilities will be sufficient to fund our working capital and other cash requirements for at least the next twelve months. We believe our current capital structure and cash resources are adequate for our internal growth initiatives.  To the extent our growth initiatives expand, including major acquisitions or to significantly increase the pace at which we open retail stores, we would seek to raise additional capital.  We believe that, if needed, we can access public or private funding alternatives to raise additional capital.


Selected liquidity data (in thousands):
   
March 31,
2012
 
December 31,
2011
 
$ Change
 
Cash
 
$
110,987
 
$
97,254
 
$
13,733
 
Accounts receivable, net
 
$
281,536
 
$
268,980
 
$
12,556
 
Inventories
 
$
387,222
 
$
372,244
 
$
14,978
 
Prepaid expenses and other current assets
 
$
20,711
 
$
18,198
 
$
2,513
 
Accounts payable
 
$
365,797
 
$
336,550
 
$
29,247
 
Accrued expenses and other current liabilities
 
$
72,574
 
$
72,410
 
$
164
 
Current portion of long term debt
 
$
2,588
 
$
2,552
 
$
36
 
Working capital
 
$
369,063
 
$
354,704
 
$
14,359
 
 
Our working capital increased primarily as the result of increased cash, accounts receivable and inventory balances, partially offset by increased accounts payable balances.

The increase in cash provided by operations during 2012 resulted from changes in our working capital accounts, which provided $2.3 million in cash compared to $9.2 million used in 2011, primarily the result of higher balances in accounts payable, accrued expenses and other current liabilities, partially offset by higher balances in accounts receivable and inventories as compared to the prior year.  Cash generated from net income adjusted by other non-cash items provided $12.5 million during 2012 compared to $18.9 million provided by these items during 2011, primarily as a result of higher net income in 2011.  Our inventory turnover was 8.6 times on an annual basis compared to 8.0 times for the same period in 2011.  Future inventory and accounts receivable balances will continue to fluctuate with the number of retail stores, changes in sales volume and the mix of our net sales between business and consumer customers.

Cash used in investing activities during 2012 totaled $2.0 million and were for plastic molds, expenditures in a new retail store in Puerto Rico, upgrades and enhancements to our information and communications systems hardware and software, and expenditures related to the new distribution and call center.  Net cash used in investing activities in 2011 totaled $3.7 million and were for upgrades and enhancements to our information and communications systems hardware and software, expenditures in retail stores in North America and expenditures in our second distribution facility which opened in the third quarter of 2010.

Net cash provided by financing activities during 2012 was de minimus.  We repaid approximately $0.6 million of capital lease obligations and net proceeds and excess tax benefits from stock option exercises provided $0.6 million.   In 2011, we borrowed $25.5 million and repaid approximately $10.9 million from revolving credit and short term debt facilities.  In addition, we repaid $0.7 million in capital lease obligations.  Proceeds and excess tax benefits from stock option exercises provided approximately $0.3 million of cash.

The Company maintains a $125.0 million (which may be increased to $200.0 million, subject to certain conditions) secured revolving credit agreement with a group of financial institutions which provides for borrowings in the United States and United Kingdom.  The credit facility has a five year term and expires in October 2015.  Availability is subject to a borrowing base formula that takes into account eligible receivables and eligible inventory.  Borrowings are secured by substantially all of the Company’s assets, including accounts receivable, inventory and certain other assets, subject to limited exceptions, including the exclusion of certain foreign assets from the collateral.  The credit agreement contains certain operating, financial and other covenants, including limits on annual levels of capital expenditures, availability tests related to payments of dividends and stock repurchases and fixed charge coverage tests related to acquisitions.  The revolving credit agreement requires that a minimum level of availability be maintained.  If such availability is not maintained, the Company will be required to maintain a fixed charge coverage ratio (as defined).  The borrowings under the agreement are subject to borrowing base limitations of up to 85% of eligible accounts receivable and up to 40% of qualified inventories.  The interest rate under this facility is computed at applicable market rates based on LIBOR or the Prime Rate, plus an applicable margin.  The applicable margin varies based on borrowing base availability. As of March 31, 2012, eligible collateral under this agreement was $119.5 million, total availability was $110.4 million, total outstanding letters of credit were $9.1 million and there were no outstanding advances.  The Company was in compliance with all of the covenants under this facility as of March 31, 2012.

 
17
 
The Company’s WStore subsidiary maintains a revolving credit agreement with a financial institution in France which is secured by WStore accounts receivable balances.  Available amounts for borrowing under this facility includes all accounts receivable balances not over 60 days past due reduced by the greater of €4.0 million or 10% of the eligible accounts receivable.  As of March 31, 2012, there was availability under this credit facility of approximately €19.2 million ($25.6 million) and there were no outstanding borrowings.  Under this agreement the Company is subject to certain non-financial covenants which it was in compliance with at March 31, 2012.  This credit facility will be terminated on June 9, 2012.

The Company (through a subsidiary) has an outstanding Bond financing with the Development Authority of Jefferson, Georgia (the “Authority”).  The Bonds were issued by the Authority and purchased by GE Government Finance Inc., and mature on October 1, 2018.   The proceeds from Bond were used to finance capital equipment purchased for the Company’s distribution facility located in Jefferson, Georgia. The purchase and installation of the equipment for the facility was completed by December 31, 2011.  Pursuant to the transaction, the Company transferred to the Authority, for consideration consisting of the Bonds proceeds, ownership of the equipment and the Authority leased the equipment to the Company’s subsidiary pursuant to a capital equipment lease expiring October 1, 2018. Under the capital equipment lease the Company has the right to acquire ownership of the equipment at any time for a purchase price sufficient to pay off all principal and interest on the Bonds, plus $1.00. As of March 31, 2012 there was approximately $7.2 million outstanding against this lease facility.

We also have certain obligations with various parties that include commitments to make future payments.  Our principal commitments at March 31, 2012 consisted of payments under operating leases for certain of our real property and equipment, payments under capital leases for equipment, and payments under employment and other service agreements.

Our earnings and cash flows are seasonal in nature, with the fourth quarter of the fiscal year generating somewhat higher earnings and cash flows than the other quarters.  Levels of earnings and cash flows are dependent on factors such as consolidated gross margin and selling, general and administrative costs as a percentage of sales, product mix and relative levels of domestic and foreign sales. Unusual expense items, such as special charges may impact earnings and are separately disclosed.  We expect that past performance may not be indicative of future performance due to the competitive nature of our Technology Products segment where the need to adjust prices to gain or hold market share is prevalent.

Macroeconomic conditions, such as business and consumer sentiment, may affect our revenues, cash flows or financial condition.  However, we do not believe that there is a direct correlation between any specific macroeconomic indicator and our revenues, cash flows or financial condition.  We are not currently interest rate sensitive, as we have minimal debt.

We anticipate cash needs to support our growth and expansion plans, continuing investment in upgrading and expanding our technological capabilities and information technology infrastructure and the opening of new retail stores.  We anticipate cash needs to fund working capital requirements in our business, including the planned closing and relocation of one of our smaller distribution centers to a new, significantly larger distribution and call center for our Industrial Products segment, repaying outstanding debt, and funding special dividends declared by our Board of Directors and funding acquisitions.  These expenses and capital expenditures will require significant levels of liquidity, which we believe can be adequately funded from our currently available cash and revolving credit resources.  We have recently engaged in several opportunistic acquisitions, choosing to pay the purchase price in cash, and may do so in the future as favorable situations arise.  However, a deep and prolonged period of reduced consumer spending could adversely impact our cash resources and force us to either forego future acquisition opportunities or to pay the purchase price in shares of our common stock, which could have a dilutive effect on our earnings per share.

We maintain our cash primarily in money market funds or their equivalent.  As of March 31, 2012, all of our investments had maturities of less than three months. Accordingly, we do not believe that our investments have significant exposure to interest rate risk.

Off-balance Sheet Arrangements and Contractual Obligations

The Company has not created, and is not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating the Company’s business.  The Company does not have any arrangements or relationships with entities that are not consolidated into the financial statements that are reasonably likely to materially affect the Company’s liquidity or the availability of capital resources.

 
18
 
In April 2012, the Company entered into a lease for a distribution and call center for the Industrial Products segment. The facility, located in Robbinsville, New Jersey, is approximately 500,000 square feet and is leased through August 2032. The following table details the contractual obligations related to this lease (in thousands):


   
Payments due by period
 
   
2012
   
2013
   
2014
   
2015
   
2016
   
After 2016
 
Distribution and call center operating lease :
  $ -     $ 1,219     $ 1,659     $ 1,701     $ 1,743     $ 33,762  

There were no other material changes to the Company’s contractual obligations from December 31, 2011.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks, which include changes in U.S. and international interest rates as well as changes in currency exchange rates (principally Pounds Sterling, Euros and Canadian dollars) as measured against the U.S. dollar and each other.

The translation of the financial statements of our operations outside of the United States is impacted by movements in foreign currency exchange rates.  Changes in currency exchange rates as measured against the U.S. dollar may positively or negatively affect sales, gross margins, operating expenses and retained earnings as expressed in U.S. dollars.  We have limited involvement with derivative financial instruments and do not use them for trading purposes.  We may enter into foreign currency options or forward exchange contracts aimed at limiting in part the impact of certain currency fluctuations, but as of March 31, 2012 we had no outstanding option or forward exchange contracts.

Our exposure to market risk for changes in interest rates relates primarily to our variable rate debt.  Our variable rate debt includes short-term borrowings under our credit facilities.  As of March 31, 2012, there were no outstanding balances under our variable rate credit facility.  A hypothetical change in average interest rates of one percentage point is not expected to have a material effect on our financial position, results of operations or cash flows.

Item 4.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2012. Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective.

The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.

Management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal controls over financial reporting during the quarterly period ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


 
19
 



PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

.

The Company and its subsidiaries are involved in various lawsuits, claims, investigations and  proceedings including commercial, employment, consumer, personal injury and health and safety law matters, which are being handled and defended in the ordinary course of business.  In addition, the Company is subject to various assertions, claims, proceedings and requests for indemnification concerning intellectual property, including patent infringement suits involving technologies that are incorporated in a broad spectrum of products the Company sells. The Company is also audited by (or has initiated voluntary disclosure agreements with) numerous governmental agencies in various countries, including U.S. Federal and state authorities, concerning potential income tax, sales tax and unclaimed property liabilities. These matters are in various stages of investigation, negotiation and/or litigation, and are being vigorously defended.  Although the Company does not expect, based on currently available information, that the outcome in any of these matters, individually or collectively, will have a material adverse effect on its financial condition or results of operations, the ultimate outcome is inherently unpredictable.  Therefore, judgments could be rendered or settlements entered, that could adversely affect the Company’s operating results or cash flows in a particular period.  The Company routinely assesses all of its litigation and threatened litigation as to the probability of ultimately incurring a liability, and records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable and estimable.


 
20
 



 
  Item 6.    Exhibits

     
 
10.1
Lease Agreement, dated April 16, 2010, between Jefferson Project I LLC as Landlord and SYX Distribution Inc. as Tenant (Jefferson, GA facility) (filed herewith)
     
 
10.2
First Amendment, dated August 24, 2010, to the Lease Agreement, dated April 2010, between Jefferson Project I LLC as Landlord and SYX Distribution Inc. as Tenant (Jefferson, GA facility) (filed herewith)
     
 
10.3
Lease Agreement, dated February 27, 2012 between PR I Washington Township NJ, LLC as Landlord and Global Equipment Company Inc. as Tenant (Robbinsville, NJ facility) (filed herewith)
     
 
10.4
Employment Agreement, dated April 12, 2012, between Systemax Inc. and Eric Lerner* (filed herewith)
     
 
31.1
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
 
31.2
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
 
32.1
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
 
32.2
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
 
101.INS
XBRL Instance Document
     
 
101.SCH
XBRL Taxonomy Extension Schema Document
     
 
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
     
 
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
     
 
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
     
 
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
     
 *Management contract or compensatory plan or arrangement


 
21
 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 
SYSTEMAX INC.
   
   
Date: May 8, 2012
By:
/s/ Richard Leeds
     
 
Richard Leeds
 
Chairman and Chief Executive Officer
     
     
 
By:
/s/ Lawrence P. Reinhold
     
 
Lawrence P. Reinhold
 
Executive Vice President and Chief Financial Officer
   




 
22
 


                                                                                  Exhibit 10.1
INDUSTRIAL NET
LEASE AGREEMENT
 
THIS LEASE is executed this 16 th day of April, 2010, by and between JEFFERSON MILL
 
PROJECT I LLC, a Georgia limited liability company ("Landlord"), and SYX DISTRIBUTION INC. ("Tenant").
 
WITNESSETH:
 
ARTICLE 1 - LEASE OF PREMISES
Section 1.01. Basic Lease Provisions and Definitions. Certain fundamental terms of the Lease and definitions used in the Lease are set forth below for convenience of reference and are hereafter referred to as the "Basic Lease Provisions". Other provisions of the Lease shall prevail over the Basic Lease Provisions in the event of any inconsistency.
 
A.  
Leased Premises: Shown outlined and more particularly described on Exhibit "A" attached hereto and incorporated herein (the "Site Plan"). The purpose of the Site Plan attached is to show the general configuration of the Park (as defined below) and the approximate location of the Building (as defined below), exclusive parking areas, and the Leased Premises. The address of the Leased Premises is 235 Hog Mountain Road, Jefferson, Georgia.
 
B.  
Building: "Building" shall mean the building structure located or to be constructed on the Leased
 
 
Premises as shown on the Site Plan.
 
C.  
Park: "Park" shall mean that certain industrial park known as Jefferson Mill Industrial Park, which includes, without limitation, the Building and the Leased Premises, and is shown on the Site Plan attached hereto as Exhibit "A-1" and is, by this reference, incorporated herein.
 
D.  
Rentable Area: 459,134 square feet. Landlord used commercially reasonable standards, consistently applied, in determining the Rentable Area. Landlord's determination of Rentable Area shall conclusively be deemed correct for all purposes hereunder.
 
E.  
Tenant's Proportionate Share: 100%
 
F.  
Base Rent: "Base Rent" shall consist of the base building rent, established in Lease Year 1 as $3.35 per square foot of Rentable Area for base building rent and increased annually (at 1.5% per annum, for the first 10 Lease Years, and 2.0% per annum, for the next 10 Lease Years), with specific amounts of Base Rent due from Tenant, as follows:
 
Lease Year
Per Square Foot
Annual Rent
Monthly Installment
Months 1-8
$0
$0
$0
Months 9-12
$3.35
 
$128,174.91
2
$3.40
$1,561,055.60
$130,087.97
3
$3.45
$1,584,587.94
$132,049.00
4
$3.50
$1,608,356.76
$134,029.73
5
$3.56
$1,642,482.11
$136,040.18
6
$3.61
$1,656,969.34
$138,078.28

 
 
 

7
            $3.66
                   $1,681,823.88
          $140,151.99
8
            $3.72
                   $1,707,051.24
          $142,254.27
9
            $3.77
                   $1,732,657.01
          $144,388.09
10
            $3.85
                   $1,767,310.15
          $147,275.85
11
            $3.93
                   $1,802,656.35
          $150,221.37
12
            $4.00
                   $1,838,709.48
          $153,225.79
13
            $4.08
                   $1,874,483.67
          $156,206.98
14
            $4.17
                   $1,912,993.34
          $159,416.12
15
            $4.25
                   $1,951,253.21
          $162,604.44
16
            $4.33
                   $1,990,278.27
          $165,856.53
17
            $4.42
                   $2,030,083.84
          $169,173.66
18
            $4.51
                   $2,070,685.51
          $172,557.13
19
            $4.60
                   $2,112,099.22
          $176,008.27
20
            $4.69
                   $2,154,341.21 
          $179,528.44

 
 
G.  
Additional Rent: "Additional Rent" shall mean all items set forth in Section 3.02 below together with any other items due and payable hereunder, whether or not designated as "Additional Rent" herein.
 
H.  
Rent: "Rent" may be used sometimes herein to refer to Base Rent and Additional Rent, collectively.
 
Tenant's Annual Estimated Share of Taxes: $165,288.00 (360 per square foot of Rentable Area of the Leased Premises, per annum.)
 
Tenant's Annual Estimated Share of Insurance: None (See Article 9)
 

K.            Lease Term: Twenty (20) years
Commencement Date: "Commencement Date" shall be on day that Landlord delivers Premises to Tenant with Landlord's Work (as defined in Section 2.02 below) (as Section 2.02 below).
Security Deposit: $ -0-
N.            Rent Deposit: $128,174.91
0.            Guarantor(s): Systemax Inc.
the Leased defined in

 
 
P.  
Guaranty: The form of Guaranty of Lease attached hereto as Exhibit "G", and by this reference incorporated herein, which Tenant shall cause to be duly executed by Guarantor and delivered with this Lease.
 
Q.  
Broker(s): Cushman & Wakefield of Georgia, Inc. and Weeks-Robinson Properties, Inc.
 
 
R. Permitted Use: General office, warehousing, distributing, storage, retail sales, and any other use permitted by local zoning regulations and building codes, and no other purpose whatsoever, except as agreed upon in writing by Landlord.

 
 
 


 
S.  
Default Rate: "Default Rate" shall mean the lesser of (i) the maximum amount of interest permitted by law, or (ii) the greater of (x) the prime rate as reported in the Wall Street Journal plus six percent (6%) per annum, or (y) twelve percent (12%) per annum.
 
T.  
Address for notices:
 
 
Landlord:
c/o Cousins Properties Incorporated
 
 
191 Peachtree Street
Suite 3600
Atlanta, GA 30303-1740
Attention: Corporate Secretary
 
With a copy to:
 
Weeks-Robinson Properties Inc. 3350 Riverwood Parkway
Suite 700
Atlanta, GA 30339
Attn: Forrest Robinson
 
Tenant: SYX Distribution Inc.
7795 West Flagler Street Miami, Fla.
Attn: Gil Fiorentino
 
With a copy to:
 
Systemax Inc.
11 Harbor Park Drive
Port Washington, NY 11050 Attention: General Counsel
 
Systemax Inc.
11 Harbor Park Drive
Port Washington, NY 11050 Attention: Chief Financial Officer
 
Farrell Fritz, P.C.
1320 RXR. Plaza
Uniondale, NY 11556-1320 Attn: Peter L. Curry, Esq.
 
 

Address for rental and other payments:
Exhibits attached hereto:
Exhibit "A": Exhibit "A-1": Exhibit "B":
Leased Premises Park Site Plan Scope of Work

 
 
 

Exhibit "B-1": Exhibit "B-1A" Exhibit "B-2": Exhibit "C": Exhibit "D": Exhibit "E": Exhibit "F":
 
Exhibit "G": Exhibit "II": Exhibit "I":

Work Not Funded by Allowance Clearing Limits
Approved Plans
Commencement Date Certificate Cousins Parcel
Intentionally Omitted
Subordination, Non-Disturbance and Attornment Agreement
Form of Guaranty of Lease
Schedule of Critical Dates
Parcel Restriction Agreement

 
Section 1.02. Leased Premises. Landlord hereby leases to Tenant and Tenant leases from Landlord, under the terms and conditions herein, the Leased Premises, together with the nonexclusive right to use all common areas, if any, located from time to time in the Park. This Lease creates a usufruct not subject to levy and sale and no estate in or with respect to the Leased Premises or any portion thereof is granted or conveyed hereby.
 
Section 1.03. Covenants, Conditions and Restrictions. Landlord shall cause the Leased Premises to be withdrawn from the coverage of those certain Covenants, Conditions and Restrictions recorded in Deed Book 50W, Page 775, Jackson County, Georgia real estate records ("CCR's") within three (3) business days after the execution of this Lease Agreement.
 
ARTICLE 2 - TERM AND POSSESSION
 
Section 2.01. Term. The Lease Tenn shall be for the period of time and shall commence on the Commencement Date described in the Basic Lease Provisions. Upon receipt of request from Landlord, Tenant shall execute the Commencement Date Certificate attached hereto as Exhibit "C", acknowledging, among other matters, (i) the Commencement Date of this Lease, (ii) the Expiration Date of this Lease, and (iii) that Tenant has accepted the Leased Premises as of the Commencement Date.
 
Section 2.02. Construction of Leased Premises. (a) Landlord agrees to obtain all necessary permits and approvals for construction, and to construct the Leased Premises in accordance with the scope of work, and Tenant's Request For Proposals, General Specifications, Outline Specifications and Typical Drawings attached in Exhibit "B" (the "Scope of Work") and plans and construction contract approved by Tenant. Once approved by the parties, such plans shall be referred to herein as the "Approved Plans." The Approved Plans shall be attached or referenced in Exhibit "B-2" attached hereto and incorporated herein. The work set forth on the Scope of Work and Approved Plans may sometimes be referred to herein as "Landlord's Work." Landlord shall deliver the Leased Premises to Tenant upon Substantial Completion of Landlord's Work. Landlord shall use its commercially reasonable efforts to deliver all areas of the warehouse other than the mezzanine and premises beneath the mezzanine by May, 7, 2010, the mezzanine area by June 8, 2010, the office and retail space by July 22, 2010 (each such date being herein referred to as an "Interim Construction Date"), and the remainder of the Leased Premises to Tenant on or before August 1, 2010 (the final delivery of all of the Leased Premises being referred to as the "Delivery Date"). Subject to any delay caused by, through or under Tenant and any delays caused by or arising out of the matters or items described under Section 8.01 and 16.03 of this Lease (collectively, a "Delay"), and predicated on adherence by Tenant to the schedule set forth on Exhibit "H", attached hereto and by this reference incorporated herein, if Landlord does not deliver the portions of the Leased Premises described above by the applicable Interim Construction Date, and Landlord does not cure such

 

 
 
 


 
failure within ten (10) days after the applicable Interim Construction Date specified for the portion of the Leased Premises set forth above, or if Landlord does not deliver possession of the Leased Premises to Tenant on or before August 1, 2010, Tenant shall receive (2) days of free Base Rent for each day after the applicable Interim Construction Date or Delivery Date (as any such date is extended by any days of Delay), until the applicable portion of the Leased Premises (or all of the Leased Premises, as applicable) are so delivered by Landlord. For example, if Landlord does not deliver the mezzanine area to Tenant until June 15, 2010, then there shall be no additional free Base Rent granted, but if Landlord does not deliver the mezzanine area to Tenant until June 20, 2010, then Tenant shall be entitled to an additional twenty-four (24) days of free Base Rent.
 
(b)   Subject to any Delay, and predicated on adherence by Tenant to the schedule set forth on Exhibit "H'', if Landlord does not deliver possession of the Leased Premises to Tenant Substantially Completed on or before September 1, 2010 (as such date is extended by any days of Delay), Tenant may elect to cancel and terminate this Lease by giving written notice to Landlord within ten (10) days thereafter, unless Landlord, within said ten (10) day period, so delivers such Leased Premises to Tenant. If Tenant gives such notice and Landlord does not deliver the Leased Premises within ten (10) days thereafter, this Lease shall be canceled and terminated, and neither Landlord nor Tenant shall have any further obligations to the other, excepting only those obligations which have accrued prior to or which expressly survive termination of this Lease. If Tenant does not timely give such notice, Tenant's right to cancel and terminate this Lease shall expire and the Lease Term shall commence upon the delivery of possession of the Leased Premises to Tenant. Landlord and Tenant agree, at the time the Leased Premises are delivered to Tenant, to execute the Commencement Date Certificate referenced in Section 2.01 above setting forth the date the Leased Premises are actually delivered to Tenant. In the event of any dispute concerning work performed or required to be performed in the Premises by Landlord, the matter in dispute shall be submitted to Landlord's architect for determination and his certificate with respect thereto shall be conclusively binding on Landlord and Tenant.
 
(c)   Landlord has determined that the construction of interior areas of the Building as set forth in the Scope of Work shown on Exhibit "B" and Approved Plans shall be $5,069,000.00 (the "Cost of Interior Construction"). The Cost of Interior Construction is to be utilized for the "hard" costs of construction, and shall not include the overhead or any profit for Landlord, overtime costs and expenses of the contractor, site conditions, or the design costs and engineering fees and permit fees. If Tenant makes or requests: (i) changes in the Scope of the Work; (ii) consent to any Approved Plans which reflect differences from the Scope of the Work; or (iii) changes in the work being done under such Approved Plans after approval of the Approval Plans, any of which increase the Cost of Interior Construction or which would delay Substantial Completion, then any such requests or matters shall be subject to Landlord's prior consent, such consent of Landlord not to be unreasonably withheld, conditioned or delayed and, in any event, all increased Costs of interior Construction associated with such changes shall be paid for by Tenant, prior to such changes being incorporated or effectuated. The cost of certain of the work Landlord is performing, as shown on Exhibit "B-1",   by this reference incorporated herein, is not being funded from the Cost of Interior Construction, and is being done at Landlord's cost and expense prior to the Commencement Date. If the foregoing is completed for a cost which is less than the Cost of Interior Construction, any remaining sums shall be applied to reduce the next-ensuing installments of Base Rent.
 
(d) Tenant shall have the right of early occupancy of warehouse, mezzanine, office and retail areas of the Leased Premises, subject to (a) full execution of this Lease, (b) Landlord's receipt of the initial monthly installment of Base Rent, (c) Landlord's and Tenant's receipt of any necessary governmental permits, approvals, or consents, and (d) all of the terms and conditions of this Lease, with the exception of the payment of Rent. Such early occupancy shall be for the sole purpose of preparing the

 
 
 


 
Leased Premises for Tenant's use, including the installation of equipment and racking, and storage of Tenant's products. During such period, Tenant shall assume all risk of loss to Tenant's equipment, products, and other personal property. Tenant's occupancy during this period shall not interfere with construction of Landlord's Work by Landlord's contractor, and Tenant shall coordinate its preparation activities with Landlord's contractor to minimize any such interference.
 
(e)   At the time Tenant takes possession of each of the areas of the Leased Premises for the operation of Tenant's business, the parties shall draw up a list of minor finishing operations which do not materially interfere with Tenant's operations ("Punch List Items"). All Punch List Items shall be completed within thirty (30) days of "Substantial Completion", or as soon thereafter as reasonably practical.
 
(f)   For the purposes of this Lease, Substantial Completion shall mean the completion of all elements of the Leased Premises, in substantial compliance with the Scope of Work and Approved Plans, as evidenced by an architect's certificate of substantial completion, and the issuance of a certificate of occupancy, temporary or otherwise, permitting the lawful entry into and occupancy of the Leased Premises.
 
Section 2.03. Surrender of the Leased Premises. Upon the expiration or earlier termination of this Lease, Tenant shall immediately surrender the Leased Premises to Landlord in broom-clean condition and in good condition and repair, subject to reasonable wear and tear. Prior to the expiration of the Lease Term or within ten (10) days following the earlier termination of this Lease, Tenant shall also remove its personal property and trade fixtures, promptly repair any damage caused by such removal, and restore the Leased Premises to the condition existing prior to the installation of such items. At the time that Tenant surrenders the Leased Premises to Landlord, all systems serving the Leased Premises, including, without limitation, electrical, plumbing, heating, ventilation and air conditioning, shall be in good working order, subject to reasonable wear and tear. Notwithstanding the foregoing, Landlord acknowledges and agrees that Tenant's racking will be anchored to the concrete slab of the Building and that, upon Tenant vacating the Leased Premises, these anchors will be cut flush with the slab and neither removed nor filled. If Tenant fails to perform any of the obligations set forth in this Section 2.03, Landlord may cause all of said property to be removed and restore the Leased Premises to its required condition and Tenant hereby agrees to pay all the costs and expenses incurred by Landlord in connection therewith immediately upon demand therefor. All Tenant property which is not removed within ten (10) days following the expiration or earlier termination of the Lease Tenn shall be conclusively deemed to have been abandoned by Tenant, and Landlord shall be entitled to dispose of such property at Tenant's cost without thereby incurring any liability to Tenant. The provisions of this section shall survive the expiration or other termination of this Lease.
 
Section 2.04. Holding Over. If Tenant retains possession of the Leased Premises after the expiration or earlier termination of this Lease, Tenant shall become a tenant from month to month at one hundred twenty five (125%) percent of the monthly Base Rent in effect at the end of the then applicable Lease Term for the first three (3) months of any such holdover, and then one hundred fifty percent (150%) of the monthly Base Rent in effect at the end of the then applicable Lease Term, thereafter, and otherwise upon the terms, covenants and conditions herein specified, so far as applicable. Acceptance by Landlord of rent in such event shall not result in a renewal of this Lease, and Tenant shall vacate and surrender the Leased Premises to Landlord upon Tenant being given thirty (30) days' prior written notice from Landlord to vacate whether or not said notice is given on the rent paying date. This Section 2.04 shall in no way constitute the consent by Landlord to any holding over by Tenant upon the expiration or earlier termination of this Lease, nor limit Landlord's remedies in such event.

 

 
 
 


 
Section 2.05 Option(s) to Extend Lease Term. (a) Landlord hereby grants to Tenant three (3) options (the "Options") to extend the Lease Term for additional term(s) of either ten (10) years or twenty (20) years (the "Extension(s)"), on the same terms and conditions as set forth in this Lease, but at an increased Base Rent as set forth below and without any additional Option(s) other than those granted in this Section 2.05, and except that the obligations of Landlord set forth in Section 7.02 of this Lease shall not be applicable and shall not be in force for any Extensions. Each Option shall be exercised only by written notice delivered to Landlord not less than three hundred sixty five (365) days before the expiration of the initial Lease Term or the preceding Extension of the Lease Term, respectively, which notice shall also state the duration of the subject Extension. If Tenant fails to deliver Landlord written notice of the exercise of an Option within the prescribed time period, such Option and any succeeding Options shall lapse, and there shall be no further right to extend the Lease Term. Each Option shall be exercisable by Tenant on the express conditions that at the time of the exercise, and at all times thereafter and prior to the commencement of such Extension, Tenant shall not be in default under any of the provisions of this Lease beyond the expiration of any applicable notice and/or cure periods. Following Tenant's timely and valid exercise of an Option, Landlord shall prepare and Tenant shall execute and deliver to Landlord an amendment to this Lease confirming the term of the Extension and the amount of Base Rent payable by Tenant during such Extension. Time is of the essence with respect to Tenant's exercise of the Option(s) granted in this Section 2.05.
 
(b)   The Base Rent during each of any first, second and third Extension shall be ninety five (95%) percent of the fair rental value of the Leased Premises on the date that Tenant shall exercise such option. For the purposes of such calculation, the term "fair rental value" shall mean the price that a ready and willing tenant would pay, as of the applicable expiration date, as a monthly Base Rent to a ready and willing landlord of property comparable to the Lease Premises if such property were exposed for lease on the open market for a reasonable period of time and taking into account all of the purposes for which such property may be used, and that the Landlord shall have no further obligations under Section 7.02 of this Lease. The Base Rent for each of these Extensions shall increase by seven & one-half (7.5%) percent on each of the fifth and, if applicable, tenth and fifteenth anniversaries of the Commencement Date of such Extension. In the event that Landlord and Tenant cannot agree on the fair rental value within sixty (60) days of Tenant's exercise of the subject option, the fair rental value shall be determined by an arbitration, using a broker (as provided below.)
 
(c)   (i) If Landlord and Tenant are not able to agree upon the fair rental value of the Leased Premises within the prescribed time period, then not later than ten (10) days thereafter, each party shall appoint a broker qualified under the terms of this Lease and notify the other party of such appointment, identifying the appointee. Each party hereto agrees to select as its respective appointee a licensed real estate broker, who is an individual of substantial experience with respect to industrial building ownership, management and marketing in the Jackson County, Georgia industrial market, which person shall have at least five (5) years experience in sales and leasing of industrial real property and who shall not be regularly employed or have been retained during the last two (2) years as a broker by the party selecting such person. Neither party may consult directly or indirectly with any broker regarding the fair rental value prior to appointment, or after appointment, outside the presence of the other party. The arbitration shall be conducted in Atlanta, Georgia, under the provisions of the commercial arbitration rules of the American Arbitration Association and the applicable Laws of the State of Georgia governing the arbitrator.
 
(2) Not later than ten (10) days after both brokers are appointed, each party shall separately, but simultaneously, submit in a sealed envelope to each broker their separate suggested fair rental value and shall provide a copy of such submission to the other party. After reviewing such

 
 
 


 
submissions, the two (2) selected brokers shall determine whether Landlord's or Tenant's estimate of the fair rental value is closer to the actual fair rental value for the Premises. If both brokers agree that one of said declared estimates is closer to the actual fair rental value, they shall declare that estimate to be the fair rental value, and their decision shall be final and binding upon the parties.
 
(3)   If the two selected brokers are unable to agree on the fair rental value within thirty (30) days after receipt of Landlord's and Tenant's submitted estimates, then the brokers shall inform the parties. Unless the parties shall both otherwise then direct, said brokers shall select a third broker qualified under the terms of this Article, not later than ten (10) days after the expiration of said thirty (30) day period. If no broker is selected within such ten (10) day period, either party may immediately petition a court with appropriate jurisdiction to appoint such third broker. The third broker shall have the qualifications and restrictions set forth above, and shall conduct an arbitration pursuant to the commercial arbitration rules of the American Arbitration Association. The third broker's decision shall be final and binding as to which estimate (as between Landlord's and Tenant's) of the fair rental value is closer to the actual fair rental value, and shall select such rate as the fair rental value. Such third broker shall make a decision not later than thirty (30) days after appointment.
 
(4)   Each party shall be responsible for the costs, charges and/or fees of its respective broker, and the parties shall share equally in the costs, charges and/or fees of the third arbitrator.
 
Section 2.06 Expansion Option. (a) At all times during the Lease Term, so long as no Default on the part of Tenant then exists, Tenant shall have the option to construct a maximum of an additional 150,000 square foot expansion to the Leased Premises (the "Expansion Space".) The Expansion Space shall be located at a location as reasonably required by Tenant and otherwise complying with all applicable municipal requirements. Tenant shall deliver to Landlord preliminary plans and specifications for the Expansion Space together with Tenant's notice of the exercise of the Expansion Option. In the event that the Expansion Space shall be a free-standing building, Landlord shall have no obligation to provide a bid to construct same. In the event that the Expansion Space shall be attached to the Building, Landlord shall be obligated to issue a proposal to construct same at a bid price which shall be competitive to other similar institutional quality industrial construction projects in the Jackson County, Georgia area, with such proposal to include a lease term and the costs to provide the Expansion Space as requested by Tenant. Tenant, at its option, may accept Landlord's bid or contract with a third party to construct the Expansion Space. In the event that Tenant accepts Landlord's bid, the Lease shall be amended to reflect all relevant and appropriate terms and conditions prior to any work on the Expansion Space being performed or commenced, and the Lease Term for all of the Leased Premises shall be extended so that it expires ten (10) years after the date Base Rent is first due for the Expansion Space (which shall have the same ten (10) year Lease Term). The Base Rent for the Expansion Space shall reflect current market conditions, and the Lease amendment shall reflect such other relevant terms and conditions as are specified in Landlord's proposal and agreed upon by Landlord and Tenant. This extension associated with Expansion Space shall not be one of the Extensions provided to Tenant under Section 2.05, and Base Rent due from Tenant for the Leased Premises leased originally hereunder shall increase by two percent (2%) per annum for the period that the Lease Term is extended under this Section 2.06, on each anniversary of the Commencement Date. In the event that Landlord does not construct the Expansion Space and expends no funds in connection with the Expansion Space, no additional Base Rent shall be due Landlord as a consequence of such construction.
 
(b) The Expansion Option shall be exercised only by written notice delivered to Landlord. The Expansion Option shall be exercisable by Tenant on the express conditions that at the time of the exercise, Tenant shall not be in default under any of the provisions of this Lease beyond the

 

 
 
 


 
expiration of any applicable notice and/or cure periods. If Landlord is performing the work necessary to complete the Expansion Space, following Substantial Completion and delivery of the Expansion Space to Tenant, Landlord shall prepare and Tenant shall execute and deliver to Landlord an amendment to this Lease confirming any new terms and conditions of this Lease.
 
(c) If Tenant does not elect to use Landlord for the construction of the Expansion Space, then (i) any such Expansion Space shall be constructed in accordance with all applicable laws, ordinances and codes; (ii) Landlord shall have no repair, up-keep or maintenance obligations whatsoever with respect to such Expansion Space; and (iii) such Expansion Space shall be subject to Landlord's consent, such consent not to be unreasonably withheld conditioned or delayed, as to the following matters: (1) both the initial plans and specifications for the Expansion Space, and the final construction drawings for the Expansion Space (solely for the purpose of Landlord confirming compliance with all applicable laws, ordinances and codes and the structural elements of the proposed Expansion Space, but expressly excluding rights to comment upon or deny consent for aesthetic or design issues or elements); (2) if the Expansion Space is to connect to the Leased Premises, the structural plans for the Leased Premises after such connection (and in connection therewith, Tenant shall deliver to Landlord an opinion from a structural engineer that there shall be no impairment of the structure of the Leased Premises by virtue of or in connection with the connection with the Expansion Space). All work on the Expansion Space shall be completed on a lien free basis, in substantial accordance with the plans, specifications and drawings submitted to and consented to by Landlord.
 
ARTICLE 3 - RENT
 
Section 3.01. Base Rent. Tenant shall pay to Landlord the Base Rent as set forth in the Basic Lease Provisions, in advance, without demand, deduction or offset, beginning on the Commencement Date and on or before the first day of each and every calendar month thereafter during the Lease Term. The monthly installment of Base Rent for any partial calendar months shall be prorated based upon the number of days in such calendar month.
 
Section 3.02. Additional Rent. In addition to the Base Rent due hereunder, Tenant shall pay to Landlord for each calendar year during the Lease Term, as "Additional Rent": Tenant's Proportionate Share of all costs and expenses incurred by Landlord during the Lease Term for Real Estate Taxes (as herein defined).
 
"Real Estate Taxes" shall include any form of real estate tax or assessment or service payments in lieu thereof, and any license fee, commercial rental tax, improvement bond or other similar charge or tax (other than inheritance, personal income or estate taxes) imposed upon the Leased Premises (or against Landlord's business of leasing the Building) by any authority having the power to so charge or tax, together with costs and expenses of contesting the validity or amount of Real Estate Taxes which at Landlord's option may be calculated as if such contesting work had been performed on a contingent fee basis (whether charged by Landlord's counsel or representative; provided, however, that said fees are reasonably comparable to the fees charged for similar services by others not affiliated with Landlord, but in no event shall fees exceed twenty (20%) of the good faith estimated tax savings). Additionally, Tenant shall pay, prior to delinquency, all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all personal property of Tenant contained in the Leased Premises. Real Estate Taxes shall not include any late charges or penalties charged to Landlord for the late payment of any installment of Real Estate Taxes, unless the late payment results from the default beyond any cure periods by Tenant in its obligation to pay Additional Rent hereunder.

 I

 
 
 


 
Section 3.03. Payment of Additional Rent. Landlord shall estimate the total amount of Additional Rent to be paid by Tenant during each calendar year of the Lease Term, prorated for any partial years. Commencing on the Commencement Date, Tenant shall pay to Landlord each month, at the same time the Base Rent is due, in advance, without demand, deduction or offset, an amount equal to one-twelfth (1/12) of the estimated Additional Rent for such year. Within a reasonable time after the end of each calendar year, Landlord shall submit to Tenant a statement of the actual amount of such Additional Rent and within thirty (30) days after receipt of such statement, Tenant shall pay any deficiency between the actual amount owed and the estimates paid during such calendar year. In the event of overpayment, Landlord shall credit the amount of such overpayment toward the next installments of Base Rent.
 
Section 3.04. Late Charges; Late Fee; Service Charges. Tenant acknowledges that Landlord shall incur certain additional unanticipated administrative and legal costs and expenses if Tenant fails to timely pay any payment required hereunder. Therefore, in addition to the other remedies available to Landlord hereunder, if any payment required to be paid by Tenant to Landlord hereunder shall become overdue, a late charge equal to four percent (4%) of the installment shall be assessed; provided that in no event may any late charge and/or interest provided in this Section 3.04 exceed the maximum permitted by law or be imposed prior to the date permitted by law. In the event any check, draft, money order or other instrument by which Tenant attempts to pay Rent hereunder is returned for insufficient funds or for any other reason is dishonored, Tenant shall pay Landlord a service charge equal to the service charge payable by Landlord to the bank in which it has its checking account.
 
Section 3.05. Cooperation by Landlord. Landlord hereby covenants and agrees to cooperate with and support on a reasonable basis any efforts by Tenant to obtain inducements or real estate ad valorem tax abatements from Jackson County, Georgia or the State of Georgia, and in obtaining signage rights or privileges with respect to the Leased Premises and Building, at no cost or out-of-pocket expense to Landlord, and Landlord shall have no obligation to agree to accept any additional liabilities in connection therewith or as a part thereof
 
ARTICLE 4 – SECURITY DEPOSIT
 
NONE
 
ARTICLE 5 - USE
 
Section 5.01. Use of Leased Premises. The Leased Premises are to be used by Tenant solely for the Permitted Use and for no other purposes without the prior written consent of Landlord. Landlord covenants and represents that all applicable governmental laws, ordinances, regulations, orders and directives generally permit the Permitted Use, and that the Leased Premises currently comply with the Americans with Disabilities Act and all OSHA requirements. Tenant shall, at its sole cost and expense (i) obtain any and all licenses and permits necessary for any such use and (ii) comply with all governmental laws, ordinances, regulations, orders and directives applicable to the use or misuse of the Leased Premises. Tenant shall not receive, store or otherwise handle any product, material or merchandise which is explosive or highly inflammable; or permit the Leased Premises to be used for any purpose which would render the insurance thereon void or the insurance risk more hazardous.
 
Section 5.02. Covenants of Tenant Regarding Use. Tenant shall (i) use and maintain the Leased Premises and conduct its business thereon in a safe, careful, reputable and lawful manner, (ii) comply with all laws, rules, regulations, orders, ordinances, directions and requirements of any governmental authority or agency, now in force or which may hereafter be in force, including without limitation those which shall impose upon Landlord or Tenant any duty with respect to or triggered by a

 

 
 
 


 
change in the use or occupation of, or any improvement or alteration to, the Leased Premises, and (iii) comply with and obey all reasonable directions of the Landlord, including any rules and regulations that may be adopted by Landlord from time to time. Tenant shall not do or permit anything to be done in or about the Leased Premises that will in any way obstruct or interfere with the rights of other tenants or occupants of the Park or injure or annoy them. Landlord shall not be responsible to Tenant for the nonperformance by any other tenant or occupant of the Park of its lease or of any rules and regulations, but Landlord shall use all reasonable business efforts to enforce same. Tenant shall not use the Leased Premises, or allow the Leased Premises to be used, for any purpose or in any manner which would invalidate any policy of insurance now or hereafter carried on the Building or increase the rate of premiums payable on any such insurance policy unless Tenant reimburses Landlord as Additional Rent for any increase in premiums charged. On or before the Commencement Date, Tenant shall take possession of, and, thereafter, continuously occupy the Leased Premises during the Lease Tenn, and operate thereon the normal business operations of Tenant.
 
Section 5.03. Landlord's Rights Regarding Use. hi addition to the rights specified elsewhere in this Lease, Landlord shall have the following rights regarding the use of the Leased Premises, each of which may be exercised without notice or liability to Tenant: Landlord or Landlord's agent shall be permitted to inspect or examine the Leased Premises at any reasonable time upon reasonable notice (except in an emergency when no notice shall be required), and Landlord shall have the right to make any repairs to the Leased Premises which are necessary for its preservation; provided, however, that any repairs made by Landlord shall be at Tenant's expense, except as provided in Section 7.02   hereof. Landlord shall incur no liability to Tenant for such entry, nor shall such entry constitute an eviction of Tenant or a termination of this Lease, or entitle Tenant to any abatement of rent therefore.
 
Section 5.04 Tenant's Signage. Tenant, at its sole cost and expense, may install identification signs ("Signs") at the Leased Premises, including, but not limited to, a billboard sign facing US Route I­85 (the "Billboard Sign"); provided, however, that (i) the Signs shall comply with all applicable governmental rules and regulations; (ii) the Signs shall not be painted directly on the Building; and (iii) Tenant's continuing signage right shall be contingent upon Tenant maintaining the Signs in a first-class condition. Tenant shall be responsible for all costs incurred in connection with the design, construction, installation, repair and maintenance of the Signs. Upon the expiration or earlier termination of this Lease, Tenant shall cause the Signs to be removed and shall repair any damage caused by such removal (including, but not limited to, patching and painting), all at Tenant's sole cost and expense, unless Landlord directs, as to all or any Signs, that they remain on the Leased Premises. Landlord agrees to cooperate with the Tenant in obtaining any variances and approvals that may be required to install the Signs.
 
Section 5.05 Street Naming. Landlord agrees to cooperate with Tenant in obtaining the right for Tenant to name the entrance drives to the Leased Premises.
 
Section 5.06 Tenant's Communications Equipment. Subject to applicable law, Tenant reserves to itself and its affiliates the exclusive right to (a) place antennae and related facilities and other equipment for the provision of communications services (the "Communications Equipment") on the rooftop (or other exterior portions) of the Building, and (b) enter into license agreements or leases for the use of such areas by commercial and other providers of communications services (the "Communications Agreements"), solely for Tenant's use, in connection with Tenant's use and occupancy of and Tenant's operations in, the Building. As used in this Article, "Communications Services" shall mean the implementation, provision, facilitation and maintenance of voice, data, video or other communication services (or any combination of the foregoing) including, without limitation: (a) the provision and resale of point-to-point telephone communications (including dedicated long distance service), (b) video

 
 
 


 
communications service, (c) 800-number service, (d) telephone credit or debit card service, (e) audio or video conferencing, paging, voice mail and message centers, (f) data transmission service, (g) access to computer "internet" or other networked computer-based communications, (h) satellite or cable television, (i) wideband digital networks, (j) security services, and (k) provision of telephone, video communication or other telecommunication equipment to consumers of such services; whether now existing or subsequently developed and however provided, including, without limitation, wireless transmission and reception of communication signals. Tenant shall be solely responsible for all costs and expenses related to the use and maintenance of the Communications Equipment. Tenant agrees that the use of the Communications Equipment shall in no way interfere with the operation and maintenance of the Park, the Building, or any of the Building's systems. Tenant shall indemnify and hold harmless Landlord (and Landlord's affiliates, agents, employees, and their affiliates) from all expenses, costs, damages, losses, claims or other expenses and liabilities arising from any such interference. If such interference occurs, Tenant agrees to suspend use of the Communications Equipment until the interference has been corrected to the reasonable satisfaction of Landlord. Tenant shall be responsible for all costs associated with any tests deemed necessary to resolve any and all interference caused by the Communications Equipment, or any use that is not permitted by this Article. If such interference has not been corrected within twenty (20) days, Landlord may require Tenant to remove those components of the Communications Equipment causing such interference, or Landlord will enjoin such interference at Tenant's sole cost and expense. All operations by Tenant pursuant to this Article shall be lawful and in compliance with all FCC rules and regulations. Any rooftop installation of Tenant's Communications Equipment shall be commenced and completed in full and strict compliance with the requirement to use a contractor or subcontractor selected by Landlord for any work involving possible roof penetrations.
 
Section 5.07 Hog Mountain Road Parcel. The 8.99 acre parcel described on Exhibit "D" attached hereto and incorporated herein (the "Cousins Parcel") is owned by CREC Property Holdings LLC, a Delaware limited liability company ("Cousins"), an affiliate of a member of Landlord. Cousins is executing this Lease for the sole purpose of confirming that it will record a restrictive covenant encumbering the Cousins Parcel in the form attached as Exhibit "I", by this reference incorporated herein, within three (3) business days after this Lease is duly executed and delivered by all parties hereto (the "Parcel Restriction Agreement"). The Parcel Restriction Agreement prohibits (a) the construction of any
improvements during the Lease  in the portion of the Cousins Parcel located with 200 feet of Hog
Mountain Road, except that ground-level parking lots or parking or driveway areas; monument and directional signage (not to exceed forty-two inches (42") in height without Tenant's reasonable approval); site lighting; and utilities (all in accordance with applicable Jackson County codes); and landscaping, may be constructed in such 200 foot zone; and (b)the construction of any improvements or structures in the area labeled as "View Corridor" as shown in the Parcel Restriction Agreement that will block the view from Interstate 85 of any then existing identification sign on the Leased Premises; and (c) the Cousins Parcel for being utilized for (i) the sale, installment sale, rental and/or repair of computer equipment or consumer electronics and appliances, whether powered by electricity, battery or solar power, including but not limited to, desktop or laptop computers, computer monitors, computer keyboards, computer components, music listening devices, televisions, video and photographic equipment, cell phones and telecommunications equipment, computer games, software, and DVDs, and those new and additional products created by evolving technologies related to the foregoing categories; or (ii) any of the following uses: (1) a manufacturing plant, amusement park or game parlor, billiards parlor, provided that an adult entertainment facility such as Dave & Buster's or Jillian's or a children's entertainment facility such as Chuck E. Cheese's, shall not be prohibited, nor shall any restaurant be prohibited from offering limited gaming (video or otherwise) as an incidental use; (2) automobile racing track; (3) coin-operated laundry: (4) funeral parlor; (5), off-track betting establishment, provided that any sale of state sponsored lottery games, if in accordance with state law, shall not be prohibited; (6) flea market, provided that antique

 

 
 
 


 
shops and second-hand shops shall not be prohibited; (7) massage parlor or tattoo parlor, provided that day spas, salons, nail spas and upscale massage uses (such as Massage Heights or Massage Envy) shall not be prohibited; (8) adult book store, adult movie parlor or other sexually oriented shop, provided that a bona fide bookstore selling new or used books which may have some explicit material as an incidental offering typical to bookstores such as Barnes and Noble or Borders, shall not be prohibited; and (9) nightclub, discotheque, cocktail lounge, bar or tavern or similar type of establishments, provided that this shall not prohibit any restaurant which offers alcohol as an incidental use (not to exceed 50% of gross sales from such restaurant). Notwithstanding anything to the contrary set forth herein, the foregoing restrictions in clauses (c)(i) and (c)(ii) shall not be deemed to prohibit or restrict any drugstore such as those typically operated under the tradenames "CVS", "Walgreens" or "Rite Aid".
 
ARTICLE 6 – UTILITIES AND SERVICES
 
All utilities servicing the Leased Premises (including, but not limited to, electrical, gas, telecommunications and fiber) have acceptable conduits running from the public streets and entering the Leased Premises. Tenant shall obtain in its own name and pay directly to the appropriate supplier the cost of all utilities and services serving the Leased Premises. Landlord shall not be liable in damages or otherwise for any failure or interruption of any utility or other service and no such failure or interruption shall entitle Tenant to terminate this Lease or withhold sums due hereunder.
 
ARTICLE 7 – MAINTENANCE AND REPAIRS
 
Section 7.01. Tenant Responsibility. (a) Except for the repair and replacement obligations for certain capital items to be performed by Landlord pursuant to Section 7.02 below, during the Lease Term, Tenant shall, at its own cost and expense, maintain the Leased Premises and every component of maintenance thereof, interior and exterior, in good condition and working order, regularly servicing and promptly making all repairs and replacements thereto, including but not limited to costs associated with off-site improvements benefitting the Leased Premises, through easement or otherwise, landscaping, electrical systems, heating and air conditioning systems, plate glass, floors, windows and doors, sprinkler and plumbing systems. Tenant shall also be responsible for the cost of any repairs or replacements of items arising out of a casualty insured or which, under the terms of this Lease, should have been insured.
 
( b ) Tenant shall obtain a preventive maintenance contract on the heating, ventilating and air-conditioning systems, which contract shall be in form and substance acceptable to Landlord and a copy of which shall be provided to Landlord on or before the Delivery Date. The preventive maintenance contract shall meet or exceed Landlord's standard maintenance criteria, and shall provide for the inspection and maintenance of the heating, ventilating and air conditioning system on not less than a semi-annual basis. Except as set forth in Section 7.02 hereof, Tenant shall have responsibility for and hereby covenants and agrees to maintain the interior and exterior of the Leased Premises. In the event Tenant fails to maintain the Leased Premises as required herein or fails to commence repairs (requested by Landlord in writing) within thirty (30) days after such request, or fails diligently to proceed thereafter to complete such repairs, Landlord shall have the right in order to preserve the Leased Premises or portion thereof, and/or the appearance thereof, to make such repairs or have a contractor make such repairs and charge Tenant for the cost thereof as Additional Rent, together with interest at the Default Rate from the date of making such payments.
 
Section 7.02. Landlord's Responsibility. During the Lease Term, Landlord, at its sole cost and expense and not as a part of Operating Expenses, shall make repairs to and replace as necessary, the roof, exterior walls, floor slab, parking areas and drives (except for any painting, striping or restriping thereof, which shall be a Tenant responsibility and cost), foundation and structural frame of the Building;

 
 
 


 
provided, however, that to the extent any of the foregoing items require replacement because of the negligence, misuse, or default of Tenant, its employees, agents, customers or invitees, Landlord shall make such repairs solely at Tenant's expense. Landlord has no obligation to provide any other repairs or general maintenance functions with respect to the Leased Premises. Further, Landlord shall have the responsibility to repair and replace any breakage or malfunction or improperly working system or improvement at the Leased Premises for a period of one (1) year after the Commencement Date, (expressly excluding repairs or replacements arising out of a casualty, which would be governed by Article 8, or any matter which would be covered by Article 9.03 or any intentional and malicious act by Tenant causing damage to Landlord's property).
 
Section 7.03. Alterations. Tenant shall not make, cause or permit to be made any alterations in or to the Leased Premises unless and until the plans and the contractor have been approved by Landlord in writing. Notwithstanding the above Tenant shall be entitled to perform work within the Leased Premises, with notice to, but not the consent of, Landlord as long as such work does not adversely affect the structural components of the Building; and Tenant delivers to Landlord, upon the completion of such work, complete, as-built plans and specifications for the work performed, to the extent available. Tenant shall not be required to remove Tenant's alterations and restore the Leased Premises to its original condition upon termination of this Lease. Tenant shall ensure that all alterations shall be made in accordance with all applicable laws, regulations and building codes, in a good and workmanlike manner and of quality equal to or better than the original construction of the Leased Premises. Upon completion of the work, Tenant shall provide lien waivers from the subcontractors or a final affidavit of lien waiver from the general contractor, and such lien waiver shall be in a form acceptable to Landlord. No person shall be entitled to any lien derived through or under Tenant for any labor or material furnished to the Leased Premises, and nothing in this Lease shall be construed to constitute the consent by Landlord to the creation of any lien. If any lien is filed against the Leased Premises for work claimed to have been done for or material claimed to have been furnished to Tenant, Tenant shall cause such lien to be discharged of record within thirty (30) days after filing. Tenant shall indemnify Landlord from all costs, losses, expenses and attorneys' fees in connection with any construction or alteration and any related lien.
 
ARTICLE 8 – CASUALTY
 
Section 8.01. Casualty. (a) In the event of total or partial destruction of the Leased Premises by fire or other casualty, Landlord agrees to promptly restore and repair the Leased Premises, as the case may be. Rent shall proportionately abate during the time that the Leased Premises or any part thereof is unusable because of any such damage. Notwithstanding the foregoing, if the Leased Premises are so destroyed that they cannot be repaired or rebuilt within one hundred eighty (180) days from the casualty date, then either party may, upon thirty (30) days' written notice to the other party, terminate this Lease, whereupon this Lease shall automatically terminate and the parties hereto shall have no further rights or obligations hereunder, except as may expressly be set forth herein. Tenant waives any right under applicable laws inconsistent with the terms of this paragraph. Notwithstanding the provisions of this paragraph, if any such significant damage or destruction occurs within the final two (2) years of the Lease Term, then either party, in its sole discretion, may terminate this Lease by written notice to the other party hereto, whereupon this Lease shall automatically terminate and the parties hereto shall have no further rights or obligations hereunder, except as may expressly be set forth herein.
 
(b) In the event that a material portion of the Leased Premises are destroyed, but the Lease is not terminated in accordance with Section 8.01(a), Landlord shall consult with Tenant to develop a replacement Leased Premises to meet Tenant's then-requirements.

 

 
 
 


 
ARTICLE 9 - INSURANCE
 
Section 9.01. Insurance.
 
(a) Tenant covenants and agrees that from and after the Commencement Date or any earlier date upon which Tenant enters or occupies the Leased Premises or any portion thereof, Tenant will carry and maintain, at its sole cost and expense, the following types of insurance, in the amounts specified and in the form hereinafter provided for:
 
(i)   Liability insurance in the Commercial General Liability form (or reasonable equivalent thereto) covering the Leased Premises and Tenant's use thereof against claims for bodily injury or death, property damage and product liability occurring upon, in or about the Leased Premises, such insurance to be written on an occurrence basis (not a claims made basis), to have per occurrence limits amounts not less than Three Million Dollars ($3,000,000.00) and to have general aggregate limits of not less than Ten Million Dollars ($10,000,000.00) for each policy year. The insurance coverage required under this Section 9.01(a)(i) shall, in addition, extend to any liability of Tenant arising out of the indemnities provided for in this Lease and, if necessary, the policy shall contain a contractual endorsement to that effect.
 
(ii)   (A) insurance on the "All-Risk" or equivalent form on a Replacement Cost Basis against loss or damage to the Leased Premises and all other improvements now or hereafter located on the Leased Premises (including, without in any manner limiting the generality of the foregoing, flood insurance if the Leased Premises are located in a flood hazard area and boiler and machinery insurance covering losses to or from any steam boilers, pressure vessels or similar apparatus requiring inspection under applicable state or municipal laws or regulations which are located at the Leased Premises or on any other building systems for which such coverage is available ), having a deductible not greater than One Hundred Thousand Dollars ($100,000.00); and in an amount sufficient to prevent Landlord or Tenant from becoming a co-insurer of any loss.
 
(B) insurance on the "All-Risk" or equivalent form against abatement or loss of rental by reason of the occurrences covered by the insurance described in clause (A) above, during the entire period of rebuilding, after a casualty;
 
(iii) worker's compensation insurance to the extent required by the laws of the state in which the Leased Premises are located and employer's liability insurance in the amount of at least $1,000,000.00.
 
( b ) All policies of the insurance provided for in Section 9.01 shall be issued in form acceptable to Landlord by insurance companies with a rating of not less than "A-", in the most current available ratings of Standard & Poor's, and licensed to do business in the state in which the Leased Premises is located. Tenant shall have the right to increase the deductible amounts under the policies of insurance required by Sections 9.01(a)(ii)(A), subject to the reasonable approval of Landlord, such approval not to be unreasonably withheld. Each and every such policy:
 
(i)   (other than the coverage described in Section 9.01(a)(iii)) shall name Landlord as well as any lender to Landlord, as an additional insured. In addition, the coverage described in Section 9.01(a)(ii)(A) and (B) shall also name Landlord as "loss payee";
 
(ii)   shall be delivered to Landlord, and in any year after the first year of the
 
Lease Term, in the foul ' of an insurance certificate reasonably acceptable to Landlord as evidence of such

 
 
 


 
policy, prior to delivery of possession of the Leased Premises to Tenant and thereafter within five (5) business days prior to the expiration of each such policy, and, as often as any such policy shall expire or terminate. Renewal or additional policies shall be procured and maintained by Tenant in like manner and to like extent (with a copy of the declarations page of the policy delivered the first time such policy is provided, and with a certificate of insurance with respect to that policy, thereafter);
 
(iii)   shall contain a provision that the insurer will give to Landlord and any lender to Landlord at least thirty (30) days notice in writing in advance of any material change, cancellation, termination or lapse, or the effective date of any reduction in the amounts of insurance; and
 
(iv)   shall be written as a primary policy which does not contribute to and is not in excess of coverage which Landlord may carry,
 
(c)   If Tenant fails to carry and maintain the insurance coverages set forth in this Section 9.01, Landlord may upon thirty (30) days notice to Tenant (unless such coverages will lapse in which event no such notice shall be necessary) procure such policies of insurance and Tenant shall promptly reimburse Landlord for the cost therefor.
 
(d)   Landlord may, at any time, but not more than (1) time in any twenty-four (24) month period, require a review of insurance coverage and limits of liability set forth in Section 9.01 to determine whether the coverage and the limits are reasonable and adequate in the then existing circumstances.
 
(e) Tenant shall have the right, at any time, by a written notice to Landlord, to require Landlord to maintain liability insurance in a Commercial General Liability form (or reasonable equivalent thereto) covering the Leased Premises thereof against claims for bodily injury or death, property damage and product liability occurring upon, in or about the Leased Premises, such insurance to be written on an occurrence basis (not a claims made basis), to have per occurrence limits amounts not less than One Million Dollars ($1,000,000.00) and to have general aggregate limits of not less than Ten Million Dollars ($10,000,000.00) for each policy year, such policy naming Landlord as the insured party and Tenant as an additional insured. Landlord shall procure such policy within ten (10) business days after such written notice from Tenant, and will, within such period, provide evidence to Tenant of the procurement of such policy. Tenant shall and hereby covenants and agrees to pay to Landlord all of Landlord's cost to procure and maintain such policy, such payment to be made by Tenant within ten (10) business days after evidence of the cost of such policy is provided in writing to Tenant.
 
Section 9.02. Waiver of Subrogation. Each policy of property insurance required by this Lease shall contain an endorsement in which the insurance company waives any right of subrogation that it may acquire against Landlord or Tenant by virtue of payment of any loss under such policy. In addition, Landlord and Tenant each waives any claims it may have against the other arising out of any casualty that would be covered by the policy of property insurance required to be maintained by it under this Lease, or that actually is covered by any policy of property insurance maintained by such party, without giving effect to any deductible amounts or self-insured risks. Said absence of liability shall exist whether or not the damage or destruction is caused by the negligence of either Landlord or Tenant or by any of their respective agents, servants or employees. It is the intention and agreement of Landlord and Tenant that the rentals reserved by this Lease have been fixed in contemplation that each party shall fully provide its own casualty insurance protection at his own expense, and that each party shall look to its respective casualty insurance carriers for reimbursement of any such loss, and further, that the insurance carriers involved shall not be entitled to subrogation under any circumstances against any party to this Lease.

 
 


 
Section 9.03. Indemnity. Tenant shall and does hereby indemnify, protect, defend (with counsel acceptable to Landlord) and hold Landlord harmless from claims, actions, damages, liabilities and expenses (including reasonable attorneys' fees and court costs) in connection with loss of life, bodily or personal injury or property damage: (i) arising from or out of any occurrence in, upon, at or from the Leased Premises; (ii) arising from the occupancy or use by Tenant of the Leased Premises; (iii) caused by any act or omission by Tenant, its agents, contractors, employees, licensees or concessionaires; (iv) resulting from a breach of this Lease by Tenant; or (v) the deductible component of any insured claims under Section 9.01. Landlord shall and does hereby indemnify, protect, defend (with counsel acceptable to Tenant) and hold Tenant harmless from claims, actions, damages, liabilities and expenses (including reasonable attorneys' fees and court costs) in connection with loss of life, bodily or personal injury or property damage: (i) arising from or out of any occurrence in, upon, at or from the any area of the Park not within Tenant's control; (ii) arising from the any work undertaken by Landlord at or with regard to the Leased Premises; (iii) caused by any act or omission by Landlord, its agents, contractors, employees, licensees or concessionaires; or (iv) resulting from a breach of this Lease by Landlord. For purposes of receiving the benefit of indemnification under this Section 9.03, the term "Landlord" shall include its partners, members, managers, shareholders, officers, directors and employees, as applicable, as well as the POA and any person or entity with which Landlord contracts to manage the Park, and the term "Tenant" shall include its corporate parent, affiliates, subsidiaries, shareholders, officers, directors and employees, as applicable,. The indemnification obligations under this Section 9.03 shall survive the expiration or earlier termination of the Lease Term with respect to any occurrences before the effective date of such expiration or termination.
 
ARTICLE 10 - EMINENT DOMAIN
 
If all or any substantial part of the Building or Leased Premises shall be acquired by the exercise of eminent domain, Landlord may terminate this Lease by giving written notice to Tenant on or before the date that actual possession thereof is so taken. If all or any part of the Leased Premises shall be acquired by the exercise of eminent domain so that the Leased Premises shall become impractical for Tenant to use for the Permitted Use, Tenant may terminate this Lease as of the date that actual possession thereof is so taken by giving written notice to Landlord. All damages awarded shall belong to Landlord; provided, however, that Tenant may claim dislocation damages if such amount is not subtracted from Landlord's award.
 
ARTICLE 11 - ASSIGNMENT AND SUBLEASE
 
Section 11.01. Assignment and Sublet Limitations. Tenant shall not assign this Lease or sublet the Leased Premises in whole or in part without Landlord's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, except to a "Related Party" as set forth in Section 11.02. In any assignment or subletting, Tenant (and any Guarantor) shall remain primarily liable hereunder, and any extension, expansion, rights of first offer, rights of first refusal or other options granted to Tenant under this Lease shall be rendered void and of no further force or effect. The acceptance of Rent from any other person shall not be deemed to be a waiver of any of the provisions of this Lease or to be the consent to the assignment of this Lease or the subletting of the Leased Premises. Without in any way limiting Landlord's right to refuse to consent to any assignment or subletting of this Lease, Landlord reserves the right to refuse to give such consent if in Landlord's opinion (i) the Leased Premises are or may be in any way adversely affected; or (ii) the business reputation of the proposed assignee or subtenant is unacceptable. If Tenant sublets the Leased Premises or any part thereof, or assigns this Lease and at any time receives rent and/or other consideration which exceeds that which Tenant would at that time be obligated to pay to Landlord, Tenant shall have to right the right to retain the gross excess of such rent as such rent is received by Tenant. Tenant agrees to reimburse Landlord for

 
 
 


 
reasonable accounting and attorneys' fees incurred in conjunction with the processing and documentation of any such requested assignment, subletting or any other hypothecation of this Lease or Tenant's interest in and to the Leased Premises.
 
Section 11.02. Related Parties. Tenant shall have the right to assign the Lease or sublet the Leased Premises, or any part thereof, without Landlord's consent, but subject to Landlord's rights to notice contained herein, to any parent, subsidiary, affiliate or controlled corporation or to corporation which Tenant may be converted or with which Tenant may merge (collectively, a "Related Party). In the event of an assignment, the name Tenant hereunder shall thereafter have no further liability under this Lease. Tenant shall in any event have the obligation to notify Landlord of its intent to enter into any such arrangement.
 
ARTICLE 12 – TRANSFERS BY LANDLORD
 
There is currently no deed to secure debt, mortgage or like instrument encumbering the Leased Premises. Provided that the affected lender executes and delivers to Tenant the Subordination, Non-Disturbance and Attornment Agreement ("SNDA") in the form attached hereto as Exhibit "F", this Lease shall be and hereby is made subject and subordinate at all times to the lien or security title of any mortgage granted by Landlord which may now or hereafter affect the real property of which the Premises forms a part, and to all renewals, modifications, consolidations, participations, replacements and extensions thereof. In the event of a sale or transfer of such interest (except a mortgage or other transfer as security for a debt), the "Landlord" named herein, or in the case of a subsequent transfer, the transferor shall, after the date of such transfer, be automatically released from all liability for the performance or observance of any term, condition, covenant or obligation required to be performed or observed by Landlord hereunder, and the transferee shall be deemed to have assumed all of such terms, conditions, covenants and obligations. Within ten (10) days following receipt of a written request from Landlord, Tenant shall execute and deliver to Landlord, without cost, any instrument which Landlord deems necessary or desirable to confirm the subordination of this Lease and an estoppel certificate in such form as Landlord may reasonably request certifying (i) that this Lease is in full force and effect and unmodified or stating the nature of any modification, (ii) the date to which Rent has been paid, (iii) that there are not, to Tenant's knowledge, any uncured defaults or specifying such defaults if any are claimed, and (iv) any other matters or state of facts reasonably required respecting the Lease. Such estoppel may be relied upon by Landlord and by any purchaser or mortgagee of the Leased Premises. Notwithstanding the foregoing, if the mortgagee shall take title to the Leased Premises through foreclosure or deed in lieu of foreclosure, Tenant shall be allowed to continue in possession of the Leased Premises as provided for in this Lease and the SNDA so long as Tenant shall not be in default.
 
ARTICLE 13 - DEFAULT AND REMEDY
 
Section 13.01. Default. The occurrence of any of the following shall be a "Default":
 
(a)   Tenant fails to pay any installment of Base Rent, Additional Rent, or any other amounts due Landlord from Tenant within ten (10) days of delivery of notice of non-payment of same.
 
(b)   Tenant fails to perform or observe any other term, condition, covenant or obligation required under this Lease for a period of thirty (30) days after notice thereof from Landlord; provided, however, that if the nature of Tenant's default is such that more than thirty (30) days are reasonably required to cure, then such default shall be deemed to have been cured if Tenant commences such performance within said fifteen-day period and thereafter diligently completes the required action within a reasonable time (which shall in no event exceed sixty (60) days).

 

 
 
 


 
(c)   Tenant shall assign or sublet all or a portion of the Leased Premises in contravention of the provisions of Article 11 of this Lease.
 
(d)   All or substantially all of Tenant's assets in the Leased Premises or Tenant's interest in this Lease are attached or levied under execution (and Tenant does not discharge the same within sixty (60) days thereafter); a petition in bankruptcy, insolvency or for reorganization or arrangement is filed by or against Tenant (and Tenant fails to secure a stay or discharge thereof within sixty (60) days thereafter); Tenant is insolvent and unable to pay its debts as they become due; Tenant makes a general assignment for the benefit of creditors; Tenant takes the benefit of any insolvency action or law; the appointment of a receiver or trustee in bankruptcy for Tenant or its assets if such receivership has not been vacated or set aside within thirty (30) days thereafter; or, dissolution or other termination of Tenant's corporate charter if Tenant is a corporation.
 
(e) Tenant deserts or abandons the Leased Premises.
 
Section 13.02. Remedies. Upon the occurrence of any Default, Landlord shall have the following rights and remedies, in addition to those allowed by law or in equity, any one or more of which may be exercised without further notice to Tenant:
 
(a)   Landlord may re-enter the Leased Premises and cure any default of Tenant, and Tenant shall reimburse Landlord as Additional Rent for any costs and expenses which Landlord thereby incurs; and Landlord shall not be liable to Tenant for any loss or damage which Tenant may sustain by reason of Landlord's action.
 
(b)   Landlord may terminate this Lease or, without terminating this Lease, terminate Tenant's right to possession of the Leased Premises as of the date of such Default, and thereafter (i) neither Tenant nor any person claiming under or through Tenant shall be entitled to possession of the Leased Premises, and Tenant shall immediately surrender the Leased Premises to Landlord; and (ii) Landlord may re-enter the Leased Premises and dispossess Tenant and any other occupants of the Leased Premises by any lawful means and may remove their effects, without prejudice to any other remedy which Landlord may have. Upon the termination of this Lease, Landlord may declare the present value (discounted at the prime rate of interest as published in the Wall Street Journal or a successor publication plus three (3%) percent) of all Rent which would have been due under this Lease for the balance of the Lease Term to be immediately due and payable, less the fair market value rental of the Leased Premises. Landlord and Tenant acknowledge that Landlord's actual damages in the event of a default by Tenant under this Lease will be difficult to ascertain, and that the liquidated damages provided above represent the parties' best estimate of such damages. The parties expressly acknowledge that the foregoing liquidated damages are intended not as a penalty, but as full liquidated damages, as permitted by Section 13-6-7 of the Official Code of Georgia Annotated. In addition, Tenant shall pay to Landlord all reasonable and necessary expenses incurred in connection with preparing the Leased Premises for re-letting, demolition, repairs, tenant finish improvements, brokers' commissions and attorneys' fees. The parties agree that the liabilities and remedies specified in this subsection (b) shall survive the termination of this Lease.
 
(c) Landlord may, without terminating this Lease, re-enter the Leased Premises and re-let all or any part thereof for a term different from that which would otherwise have constituted the balance of the Lease Tei in and for rent and on terms and conditions different from those contained herein, whereupon
 
Tenant shall be immediately obligated to pay to Landlord as liquidated damages the difference between the rent provided for herein and that provided for in any lease covering a subsequent re-letting of the Leased Premises, for the period which would otherwise have constituted the balance of the Lease Term.

 
 
 


 
(d) Landlord may sue for injunctive relief or to recover damages for any direct, and not consequential, loss resulting from the Default.
 
Section 13.03. Landlord's Default and Tenant's Remedies. If Landlord fails to maintain any portion of the Demised Premises which Landlord is expressly required to maintain in accordance with the terms of this Lease (expressly excluding any failure by Landlord to so maintain arising out of a casualty or condemnation, to which this provision shall not apply, and which are provided for in other provisions of the Lease), and (i) as a result of such failure, Tenant's use and enjoyment of the Leased Premises is interfered with in a material manner, and (ii) Landlord fails to commence to cure such failure within thirty (30) days after written notice from Tenant of such failure (specifying in such notice the nature of the failure and the suggested remedy therefore), and thereafter proceeds with due diligence to cure such failure until completion, then Tenant shall have the right to perform such maintenance work on and subject to the terms and limitations of this Paragraph. If Tenant is entitled and elects to perform any maintenance work as aforesaid, Tenant shall (i) perform such maintenance work in a reasonable manner, so as not to interfere with the rights of third parties; (ii) utilize only contractors or other such vendors with a first-class reputation; (iii) cause such work to be completed on a lien-free basis; (iv) cause such work to be completed in compliance with all applicable laws, ordinance, regulations and rules; and (v) utilize the same or similar materials as replaced. Landlord shall reimburse Tenant, within thirty (30) days after receipt of copies of the invoices or other written evidence, satisfactory to Landlord, in Landlord's reasonable judgment, of the costs incurred by Tenant for which Tenant claims reimbursement for the reasonable costs and expenses incurred by Tenant in curing Landlord's default as aforesaid.
 
If (i) Tenant obtains a final unappealable judgment against Landlord on account of any breach by Landlord of any covenant or obligation to be performed by Landlord under this Lease, and (ii) Landlord does not pay the amount due Tenant under such final unappealable judgment within the time provided for payment of such judgment or court order, Tenant may, at its option, offset such amount due Tenant, together with interest thereon at the rate provided for in the Lease for late payments of Rent, against its monthly payment of Base Rent payable under this Lease to the extent of such amount due, until Tenant is reimbursed for said costs on the basis of said judgment. Tenant shall also have the right to seek and pursue any other legal and/or equitable remedies or relief, including without limitation, specific performance, injunctive relief, actions for damages, and/or declaratory judgment actions, as are available under applicable Georgia law from time to time.
 
Section 13.04. Nonwaiver of Defaults. Neither party's failure or delay in exercising any of its rights or remedies or other provisions of this Lease shall constitute a waiver thereof or affect its right thereafter to exercise or enforce such right or remedy or other provision. No waiver of any default shall be deemed to be a waiver of any other default. Landlord's receipt of less than the full Rent due shall not be construed to be other than a payment on account of rent then due, nor shall any statement on Tenant's check or any letter accompanying Tenant's check be deemed an accord and satisfaction. No act or omission by Landlord or its employees or agents during the Lease Tenn shall be deemed an acceptance of a surrender of the Leased Premises, and no agreement to accept such a surrender shall be valid unless in writing and signed by Landlord. Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law (unless expressly stated herein to the contrary).
 
Section 13.05. Attorneys' Fees. If either party defaults in the performance or observance of any of the terms, conditions, covenants or obligations contained in this Lease and the non-defaulting party obtains a judgment against the defaulting party, then the defaulting party agrees to reimburse the non-defaulting party for reasonable and actual attorneys' fees incurred in connection therewith.

 

 
 
 

ARTICLE 14 - LANDLORD'S RIGHT TO RELOCATE TENANT
 
RESERVED
 
ARTICLE 15 - TENANT'S RESPONSIBILITY REGARDING
 
ENVIRONMENTAL LAWS AND HAZARDOUS SUBSTANCES
 
Section 15.01. Definitions.
 
(a)   "Environmental Laws" - All present or future federal, state and municipal laws, ordinances, rules and regulations applicable to the environmental and ecological condition of the Leased Premises, the rules and regulations of the Federal Environmental Protection Agency or any other federal, state or municipal agency or governmental board or entity having jurisdiction over the Leased Premises,
 
(b)   "Hazardous Substances" - Those substances included within the definitions of "hazardous substances," "hazardous materials," "toxic substances" "solid waste" or "infectious waste" under Environmental Laws and petroleum products.
 
Section 15.02. Compliance. Tenant, at its sole cost and expense, shall promptly comply with the Environmental Laws, including any notice from any source issued pursuant to the Environmental Laws or issued by any insurance company which shall impose any duty upon Tenant with respect to the use, occupancy, maintenance or alteration of the Leased Premises, whether such notice shall be served upon Landlord or Tenant.
 
Section 15.03. Restrictions on Tenant. Tenant shall operate its business and maintain the Leased Premises in compliance with all Environmental Laws. Tenant shall not cause or permit the use, generation, release, manufacture, refining, production, processing, storage or disposal of any Hazardous Substances on, under or about the Leased Premises, or the transportation to or from the Leased Premises of any Hazardous Substances, except as necessary and appropriate for its Permitted Use in which case the use, storage or disposal of such Hazardous Substances shall be performed in compliance with the Environmental Laws and the highest standards prevailing in the industry. Tenant shall notify Landlord in writing prior to any such storage of Hazardous Materials.
 
Section 15.04. Notices, Affidavits, Etc. Tenant shall immediately notify Landlord of (i) any violation by Tenant, its employees, agents, representatives, customers, invitees or contractors of the Environmental Laws on, under or about the Leased Premises, or (ii) the presence or suspected presence of any Hazardous Substances on, under or about the Leased Premises and shall immediately deliver to Landlord any notice received by Tenant relating to (i) and (ii) above from any source. Tenant shall execute affidavits, representations and the like within five (5) days of Landlord's request therefore concerning Tenant' s best knowledge and belief regarding the presence of any Hazardous Substances on, under or about the Leased Premises.
 
Section 15.05. Landlord's Rights. Landlord and its agents shall have the right, but not the duty, upon advance notice (except in the case of emergency when no notice shall be required) to inspect the Leased Premises and conduct tests thereon to determine whether or the extent to which there has been a violation of Environmental Laws by Tenant or whether there are Hazardous Substances on, under or about the Leased Premises. In exercising its rights herein, Landlord shall use reasonable efforts to minimize interference with Tenant's business but such entry shall not constitute an eviction of Tenant, in

 
 
 


 
whole or in part, and Landlord shall not be liable for any interference, loss, or damage to Tenant's property or business caused thereby.
 
Section 15.06. Tenant's Indemnification. Tenant shall indemnify Landlord and Landlord's managing agent from any and all claims, losses, liabilities, costs, expenses and damages, including attorneys' fees, costs of testing and remediation costs, incurred by Landlord in connection with any breach by Tenant of its obligations under this Article 15. The covenants and obligations under this Article 15 shall survive the expiration or earlier termination of this Lease.
 
Section 15.07 Landlord's Representation. Based upon that certain Phase I and Phase II environmental report of QORE Property Sciences, dated August 10, 2005, Landlord represents that the Leased Premises and adjoining common areas of the Park are currently free from the existence of any Hazardous Substances existing in violation of any Environmental Laws. Landlord shall indemnify Tenant from any and all claims, losses, liabilities, costs, expenses and damages, including attorneys' fees, costs of testing and remediation costs, incurred by Tenant in connection with any violation of Environmental Laws as of the Commencement Date or the existence of any unlawful Hazardous Substances at the Leased Premises as of the Commencement Date.
 
ARTICLE 16 - RIGHT OF FIRST REFUSAL
 
FOR LEASED PREMISES AND COUSINS PARCEL
 
16.01 Refusal Right. (a) If Landlord has offered the Leased Premises for sale to any third party, and Landlord has received a bona-fide written offer provided on an arms-length basis from a third-party unrelated to and affiliated with Landlord which Landlord is willing to accept (as applicable, the "BFP Offer") for either, then Landlord shall offer to sell the Leased Premises to Tenant for the specific purchase price (the "Refusal Purchase Price") and, upon such terms and conditions as are contained in the BFP Offer, indicating in such BFP Offer the party offering to purchase the Leased Premises. This right of Tenant shall be no longer of any force or effect if Tenant, once offered, declines or fails to purchase the Leased Premises unless Landlord does not consummate the sale of the Leased Premises within nine (9) months of the date of the BFP Offer in question.
 
(b)   Tenant shall have the right to accept the BFP Offer (the "Refusal Right") by giving Landlord written notice of such acceptance (the "Refusal Notice") within ten (10) days after delivery by Landlord to Tenant of the BFP Offer, and by providing Landlord, with such notice, the amount of earnest money, if any, offered in the BFP Offer, such earnest money to be held by Landlord and applied against the Refusal Purchase Price at the closing of the purchase and sale of the Leased Premises. Time shall be of the essence with respect to said ten (10) day period and delivery of the Refusal Notice by Tenant. If Tenant shall accept the BFP Offer, Tenant shall execute any documentation reasonably required by Landlord to reflect Tenant's acceptance of the Refusal Offer.
 
(c)   If Tenant does not accept, or fails to accept, the BFP Offer in accordance with the provisions of Article 16.01(b), Landlord shall thereafter be entitled to attempt to sell the Leased Premises, upon such terms and conditions as Landlord may determine, except that if the price (the "Later Refusal Purchase Price") for which Landlord enters into a binding contract (which contract must be subject to the terms of this Article 16) ("Third Party Contract") to sell the Leased Premises, is less than ninety-five percent (95%) of the Refusal Purchase Price, then Landlord must again offer the Leased Premises to Tenant for the Later Refusal Purchase Price, by a notice to Tenant. Tenant shall have ten (10) days after such notice in which to accept, or decline to accept, the sale of the Leased Premises for the Later Refusal Purchase Price. If Tenant accepts the Later Refusal Purchase Price, then the sale of the Leased Premises shall be accomplished and consummated under the other terms of this Article 16, for the Later Refusal

 

 
 
 


 
Purchase Price. If no further offer by Landlord to Tenant is required, Tenant shall, within ten (10) days after Landlord's request therefore, deliver an instrument in form reasonably satisfactory to Landlord confirming the aforesaid waiver, but no such instrument shall be necessary to make the provisions hereof effective.
 
(d)   If Tenant does not timely deliver the Refusal Notice and the Leased Premises are transferred to a third party, Tenant will attorn to such third party as Landlord so long as such third party and Landlord notify Tenant in writing of such transfer. At the request of Landlord, Tenant will execute such documents confirming the agreement referred to above and such other agreements as Landlord may reasonably request, provided that such agreements do not increase the liabilities and obligations of Tenant hereunder.
 
(e)   Notwithstanding anything to the contrary contained herein, the provisions of this Paragraph shall not apply to or prohibit (i) any mortgaging, subjection to deed to secure debt or other hypothecation of Landlord's interest in the Leased Premises, (ii) any sale of the Leased Premises pursuant to a private power of sale under or judicial foreclosure of any mortgage or other security instrument or device to which Landlord's interest in the Leased Premises is now or hereafter subject, (iii) any transfer of Landlord's interest in the Leased Premises to a lender, beneficiary under deed of trust or other hold of a security interest therein or their designees by deed in lieu of foreclosure, (iv) any transfer of the Leased Premises, or any portion thereof, to any governmental or quasi-governmental agency with power of condemnation, (v) any transfer of the Leased Premises, or any interest therein or in Landlord to any affiliate of Landlord, or (vi) any transfer of the Leased Premises to any of the successors or assigns of any of the persons or entities referred to in the foregoing clauses (i) through (iv).
 
(f)   If the Leased Premises is purchased by Tenant pursuant to this Paragraph, Tenant shall accept such on an "as is" basis, and shall accept such subject to all liens, exceptions and restrictions on, against or relating to any of the Leased Premises of record and to all applicable laws, but free of the lien of and security interest created by any mortgage or assignment of leases and rents and liens, exceptions and restrictions on, against or relating to the Leased Premises which have been created by or resulted solely from acts of Landlord after the date of this Lease, unless the same are customary utility easements benefiting the Leased Premises or were created with the concurrence of Tenant or as a result of a default by Tenant under this Lease.
 
(g)   Upon the date fixed for a purchase of the Leased Premises pursuant to this Paragraph which shall be the earlier date to occur of (i) sixty (60) days following acceptance of the BFP Offer, or (ii) the date specified in the Third Party Contract, if applicable, (the "Purchase Date"), Tenant shall pay to Landlord, or to any person or entity to whom Landlord directs payment, the Refusal Purchase Price (or Later Refusal Purchase Price, as applicable) and all other sums payable by Tenant under the BFP Offer, in immediately available funds, and Landlord shall deliver to Tenant or its designee (i) special warranty deed or its equivalent which describes the Leased Premises and conveys the title thereto as provided above and (ii) such other instruments as shall be necessary to transfer the Leased Premises to Tenant or its designee. Upon the completion of a purchase by Tenant or its designee of the Leased Premises, this Lease and all obligations and liabilities of Tenant hereunder shall terminate, except any obligations of Tenant under this Lease, actual or contingent, which arise on or prior to the expiration or termination of this Lease or which survive such expiration or termination by their own terms. Any prepaid monetary obligations paid to Landlord shall be prorated as of the Purchase Date, and the prorated unapplied balance shall be deducted from the Refusal Purchase Price (or Later Refusal Purchase Price, as applicable) due to Landlord.

 
 
 


 
(h)   If the completion of the purchase by Tenant or its designee pursuant to this Paragraph shall be delayed after the date scheduled for such purchase, Base Rent and Additional Rent shall continue to be due and payable until completion of such purchase.
 
(i)   If Tenant exercises its rights under this Article 16 by sending a ROFO Notice, but the purchase and sale of the Leased Premises does not close because of a default by Tenant, Tenant's liability in such circumstance shall be limited to the earnest money deposit provided by Tenant and held by Landlord, and such event shall not also be an Event of Default by Tenant under this Lease.
 
16.02 No Brokers for Sale. Landlord and Tenant each warrant and represent to the other that neither has employed or otherwise engaged or will employ or engage a real estate broker or agent in connection with the sale of the applicable components of the Leased Premises pursuant to the Refusal Right. Landlord and Tenant covenant and agree, each to the other, to indemnify the other against any loss, liability, costs (including reasonable attorneys' fees actually incurred), claims, demands, causes of action and suits arising out of the alleged employment or engagement by the indemnifying party of any real estate broker or agent in connection with the Refusal Right. The indemnities contained in this subsection shall survive Closing and any termination of this Lease.
 
16.03 Termination. Notwithstanding anything contained in this Paragraph to the contrary, if the Lease is terminated or expires prior to the exercise of the BFP Offer by Tenant, the Refusal Right shall terminate.
 
ARTICLE 17 - MISCELLANEOUS
 
Section 17.01. Benefit of Landlord and Tenant. This Lease shall inure to the benefit of and be binding upon Landlord and Tenant and their respective successors and assigns.
 
Section 17.02. Governing Law. This Lease shall be governed in accordance with the laws of the State where the Building is located.
 
Section 17.03. Force Majeure. Landlord and Tenant (except with respect to the payment of any monetary obligation) shall be excused for the period of any delay in the performance of any obligation hereunder when such delay is occasioned by causes beyond its control, including but not limited to work stoppages, boycotts, slowdowns or strikes; shortages of materials, equipment, labor or energy; unusual weather conditions; or acts or omissions of governmental or political bodies.
 
Section 17.04. Examination of Lease. Submission of this instrument for examination or signature to Tenant does not constitute a reservation of or option for Lease, and the Lease is not effective as a Lease or otherwise until execution by and delivery to both Landlord and Tenant, and the delivery to Landlord of a duly executed Guaranty.
 
Section 17.05. Indemnification for Leasing Commissions. The parties hereby represent and warrant that the only real estate brokers involved in the negotiation and execution of this Lease are the Brokers. Each party shall indemnify the other from any and all liability for the breach of this representation and warranty on its part and shall pay any compensation to any other broker or person who may be entitled thereto. Landlord shall be obligated to pay the Brokers a leasing commission pursuant to the terms of a separate agreement between Landlord and the Brokers. Landlord shall indemnify Tenant from any and all liability for Landlord's failure to pay such leasing commission.

 

 
 
 

Section 17.06. Notices. Any notice required or permitted to be given under this Lease or by law shall he deemed to have been given if it is written and delivered in person or by overnight courier or mailed by certified mail, postage prepaid, to the party who is to receive such notice at the address specified in Article 1. If delivered in person, notice shall be deemed given as of the delivery date. If sent by overnight courier, notice shall be deemed given as of the first business day after sending. If mailed, the notice shall be deemed to have been given on the date which is three business days after mailing. Either party may change its address by giving written notice thereof to the other party.
 
Section 17.07. Partial Invalidity; Complete Agreement. If any provision of this Lease shall be held to be invalid, void or unenforceable, the remaining provisions shall remain in full force and effect. This Lease represents the entire agreement between Landlord and Tenant covering everything agreed upon or understood in this transaction. There are no oral promises, conditions, representations, understandings, interpretations or terms of any kind as conditions or inducements to the execution hereof or in effect between the parties. No change or addition shall be made to this Lease except by a written agreement executed by Landlord and Tenant.
 
Section 17.08. Financial Statements. During the Lease Teiin and any extensions thereof,
 
Tenant shall provide to Landlord on an annual basis, within ninety (90) days following the end of Tenant's fiscal year, a copy of Tenant's and Guarantor's most recent financial statements prepared for the previous fiscal year, signed by an officer of Tenant; provided, however, if Guarantor's financial statement is readily obtainable and accessible through public sources, then Tenant shall not be required to provide such statement to Landlord. Such financial statements shall be certified and audited by a certified public accountant. Tenant hereby covenants and agrees that all such financial statements submitted to Landlord pursuant to this Section 17.08 shall be true and accurate. All financial statements provided by Tenant and Guarantor to Landlord hereunder shall be prepared in conformity with generally accepted accounting principles, consistently applied.
 
Section 17.09. Consent. Where the consent of a party is required, such consent will not be unreasonably withheld, unless otherwise expressly set forth herein.
 
Section 17.10. Time. Time is of the essence of each tem' and provision of this Lease.
 
Section 17.11. Representations and Warranties. Each party hereto hereby represents and warrants to the other that (i) it is duly organized, validly existing and in good standing (if applicable) in accordance with the laws of the state under which it was organized; (ii) it is authorized to do business in the State where the Leased Premises are located; and (iii) the individual executing and delivering this Lease has been properly authorized to do so, and such execution and delivery shall bind such party.
 
Section 17.12. Memo of Lease. Promptly upon execution of this Lease, Landlord shall cause to be recorded against the Land, a memorandum of lease in the form annexed hereto as Exhibit (the "Memo of Lease"), which Memo of Lease shall include the material terms of the Lease, including without limitation, the Expansion Option and Right of First Refusal.
 
Section 17.13. LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING CONTAINED IN THIS LEASE TO THE CONTRARY, TENANT AGREES THAT IT SHALL LOOK SOLELY TO THE INTEREST OF LANDLORD IN THE BUILDING FOR THE COLLECTION OF ANY JUDGMENT (OR OTHER JUDICIAL PROCESS) REQUIRING THE PAYMENT OF MONEY BY LANDLORD FOR ANY DEFAULT UNDER THIS LEASE, SUBJECT, HOWEVER, TO THE PRIOR RIGHTS OF ANY GROUND LANDLORD OR THE HOLDER OF ANY FIRST MORTGAGE OR DEED OF TRUST. NO OTHER ASSETS OF

 
 
 

LANDLORD, ITS OFFICERS, DIRECTORS, PARTNERS OR EMPLOYEES, SHALL BE SUBJECT TO LEVY, EXECUTION OR OTHER JUDICIAL PROCESS FOR THE SATISFACTION OF TENANT'S CLAIM. THIS PROVISION SHALL NOT BE DEEMED TO CONSTITUTE AN AGREEMENT, EXPRESS OR IMPLIED, BETWEEN LANDLORD AND TENANT THAT LANDLORD'S INTEREST IN THIS LEASE OR IN THE PARK SHALL BE SUBJECT TO IMPRESSMENT OF AN EQUITABLE LIEN.

 

 
 
 


 
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day and year first above written.
 
LANDLORD:
 
JEFFERSON MILL PROJECT I LLC, a Georgia limited liability company
[Missing Graphic Reference]
 
By: C/W Jefferson Mill, LLC a Georgia limited liability company, its sole member
 
[Missing Graphic Reference]
A. LaHtte
enior Vice President
COUSINS (for purposes of Section 5.07 only):
CREC PROPERTY HOLDINGS LLC, a Delaware limited liability company
 
[Missing Graphic Reference]
By: Cousins Real Estate Corporation, a Georgia corporation, its sole member
[Missing Graphic Reference]

 
Title:

 
 
 

 
TENANT:
   
 
SYX DISTRIBUTION INC.
By:' Name:                                                           
Title:
 
         
         
 
Attest:                                         
Name:                                                                        
Title:                                                                        

 
 
(CORPORATE SEAL)

 

 
 
 


 
EXHIBIT "A" Leased Premises

 
 
 


 
EXHIBIT "A-1"
 
Park Site Plan

 
 
 

EXHIBIT "B" Scope of Work

 
 
 
EXHIBIT "B-IA"


Landlord's Work not funded from the Allowance
 
1.
Construction of an additional 361 parking spaces and the required entrances (the "Parking Lot"),
 
 
as proximately outlined on the site plan dated January 9, 2010 prepared by TDK Engineers, (the final Parking Lot configuration shall be set forth in the Approved Plans to be attached to the Lease as Exhibit "B-3".
 
2,
Clearing a set-back line of 200 feet, more or less, on the Cousins Parcel adjacent to Hog
 
 
Mountain Road, and 300 feet more or less on the Leased Premises as shown on Exhibit "B-1A".

 
 
 
EXHIBIT "B-IA"


CLEARING LIMITS

 
 
 


 
F:X11113IT "B-2"
 
APPROVED PLANS
(A list of Approved Plans is to be attached on or before April 22, 2010,
and initialed by Landlord and Tenant)

 
 
 

EXHIBIT "C"
 
COMMENCEMENT DATE CERTIFICATE
 
Tenant:
 
Landlord:
 
Date Lease Signed:                                      
 
Address of Leased Premises:
 
located at
 
Commencement Date: Expiration Date:
The above described premises are accepted by Tenant as suitable for the purpose for which they were let. The above described lease term commences and expires on the dates set forth above. Tenant acknowledges that it has received form Landlord number of keys to the Leased Premises. It is
 
understood that there is a punch list which will be completed after move-in and will be an exhibit to the Tenant Estoppel.
 

 
TENANT
 
(Type Name of Tenant)
 
By:
(Signature)

LANDLORD
 
(Type Name of Landlord)
 
By:
(Signature)
 
(Type Name and Title) (Type Name and Title)

 
 
 

EXHIBIT "D" Cousins Parcel
 

 
 
 

EXHIBIT "E"
Intentionally Omitted

 
 
 

EXHIBIT' "F"
 
FORM OF SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
 
RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO:
 
 
Attn:
 
Loan No.
 
SUBORDINATION AGREEMENT; ACKNOWLEDGMENT OF LEASE ASSIGNMENT, ESTOPPEL,
 
ATTORNMENT AND NON-DISTURBANCE AGREEMENT
 
(Lease To Security Deed)
 
 
NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT.
 
THIS SUBORDINATION AGREEMENT; ACKNOWLEDGMENT OF LEASE ASSIGNMENT, ESTOPPEL, NI 1ORNMENT AND NON-DISTURBANCE AGREEMENT ("Agreement") is made DATE OF DOCUMENTS by and between BORROWER NAME, a ("Owner"), NAME OF TENANT HERE ("Tenant") and NAME OF LENDER HERE
 
("Lender").
 
RECITALS
 
A.  
Pursuant to the terms and provisions of a lease between Owner and Tenant dated DATE OF LEASE HERE ("Lease"), Owner, as "Landlord", leased to Tenant certain premises within the property described on Exhibit A attached hereto and incorporated herein by this reference (which property, together with all improvements now or hereafter located on the property, is defined as the "Property").
 
B.  
Owner has executed, or proposes to execute, a deed to secure debt with absolute assignment of leases and rents, security agreement and fixture filing ("Security Deed") securing, among other things, a promissory note ("Note") in the principal sum of LOAN AMOUNT AND NO/100THS DOLLARS ($LOAN AMOUNT), dated DATE OF DOCUMENTS, in favor of Lender, which Note is payable with interest and upon the terms and conditions described therein ("Loan"). The Security Deed is to be recorded concurrently herewith.

 

 
 
 


 
C.  
As a condition to making the Loan secured by the Security Deed, Lender requires that the Security Deed be unconditionally and at all times remain a lien on the Property, prior and superior to all the rights of Tenant under the Lease and that the Tenant specifically and unconditionally subordinate the Lease to the lien of the Security Deed.
 
D.  
Owner and Tenant have agreed to the subordination, attornment and other agreements herein in favor of Lender.
 
NOW THEREFORE, for valuable consideration and to induce Lender to make the Loan, Owner and Tenant hereby agree for the benefit of Lender as follows:
 
1.              
SUBORDINATION. Owner and Tenant hereby agree that:
 
Prior Lien. The Security Deed securing the Note in favor of Lender, and any modifications, renewals or extensions thereof, will unconditionally be and at all times remain a lien on the Property prior and superior to the Lease;
 
1.2 Subordination. Lender would not make the Loan without this agreement to subordinate; and
 
 
1.3 Whole Agreement. This Agreement constitutes the whole agreement and only agreement with regard to the subordination of the Lease to the lien of the Security Deed and will supersede and cancel, but only insofar as would affect the priority between the Security Deed and the Lease, any prior agreements as to such subordination, including, without limitation, those provisions, if any, contained in the Lease which provide for the subordination of the Lease to a deed or deeds of trust or to a mortgage or mortgages.
 
AND FURTHER, Tenant individually declares, agrees and acknowledges for the benefit of Lender, that:
 
 
1.4 Use of Proceeds. Lender, in making disbursements pursuant to the Note, the Security Deed or any loan agreements with respect to the Property, is under no obligation or duty to, nor has Lender represented that it will, see to the application of such proceeds by the person or persons to whom Lender disburses such proceeds, and any application or use of such proceeds for purposes other than those provided for in such agreement or agreements will not defeat this agreement to subordinate in whole or in part;
 
 
1.5 Waiver, Relinquishment and Subordination. Tenant intentionally and unconditionally waives, relinquishes and subordinates all of Tenant's right, title and interest in and to the Property to the lien of the Security Deed and understands that in reliance upon, and in consideration of, this waiver, relinquishment and subordination, specific loans and advances are being and will be made by Lender and, as part and parcel thereof, specific monetary and other obligations are being and will be entered into which would not be made or entered into but for said reliance upon this waiver, relinquishment and subordination.
 
2.              
ASSIGNMENT. Tenant acknowledges and consents to the assignment of the Lease by Owner in favor of Lender. ESTOPPEL. Tenant acknowledges and represents that:
 
 
3.1 Lease Effective. The Lease has been duly executed and delivered by Tenant and, subject to the terms and conditions thereof, the Lease is in full force and effect, the obligations of Tenant thereunder are valid and binding and there have been no modifications or additions to the Lease, written or oral;
 
 
3.2 No Default. To the best of Tenant's knowledge, as of the date hereof: (i) there exists no breach, default, or event or condition which, with the giving of notice or the passage of time or both, would constitute a breach or default under the Lease; and (ii) there are no existing claims, defenses or offsets against rental due or to become due under the Lease;

 
 
 

 
3.3
Entire Agreement. The Lease constitutes the entire agreement between Owner and Tenant with respect to the
 
Property and Tenant claims no rights with respect to the Property other than as set forth in the Lease; and
 
3.4             No Prepaid Rent. No deposits or prepayments of rent have been made in connection with the Lease, except
as follows: (if none, state ''None")                                                                                                          
 
4.
ADDITIONAL AGREEMENTS. Tenant covenants and agrees that, during all such times as Lender is the
 
 
Beneficiary or Grantee under the Security Deed:
 
 
4.1 Modification, Termination and Cancellation. Tenant will not consent to any modification, amendment, termination or cancellation of the Lease (in whole or in part) without Lender's prior written consent and will not make any payment to Owner in consideration of any modification, termination or cancellation of the Iease (in whole or in part) without Lender's prior written consent;
 
 
4.2 Notice of Default. Tenant will notify Lender in writing concurrently with any notice given to Owner of any default by Owner under the Lease, and Tenant agrees that Lender has the right (but not the obligation) to cure any breach or default specified in such notice within the time periods set forth below and Tenant will not declare a default of the Lease, as to Lender, if Lender cures such default within fifteen (15) days from and after the expiration of the time period provided in the Lease for the cure thereof by Owner; provided, however, that if such default cannot with diligence be cured by Lender within such fifteen (15) day period, the commencement of action by Lender within such fifteen (15) day period to remedy the same will be deemed sufficient so long as Lender pursues such cure with diligence;
 
 
4.3
No Advance Rents. Tenant will make no payments or prepayments of rent more than one (1) month in
 
 
advance of the time when the same become due under the Lease; and
 
 
4.4 Assignment of Rents. Upon receipt by Tenant of written notice from Lender that Lender has elected to terminate the license granted to Owner to collect rents, as provided in the Security Deed, and directing the payment of rents by Tenant to Lender, Tenant shall comply with such direction to pay and shall not be required to determine whether Owner is in default under the Loan and/or the Security Deed.
 
ATTORNMENT. In the event of a foreclosure under the Security Deed, Tenant agrees for the benefit of Lender (including for this purpose any transferee of Lender or any transferee of Owner's title in and to the Property by Lender's exercise of the remedy of sale by foreclosure under the Security Deed) as follows:
 
 
5.1
Payment of Rent. Tenant shall pay to Lender all rental payments required to be made by Tenant pursuant to
 
 
the terms of the Lease for the duration of the term of the Lease;
 
 
5.2 Continuation of Performance. Tenant shall be bound to Lender in accordance with all of the provisions of the Lease for the balance of the term thereof, and Tenant hereby attorns to Lender as its landlord, such attomment to be effective and self-operative without the execution of any further instrument immediately upon Lender succeeding to Owner's interest in the Lease and giving written notice thereof to Tenant;
 
 
5.3 No Offset. Lender will not be liable for the return of any sums which Tenant may have paid to Owner under the Lease as and for security deposits, advance rentals or otherwise, except to the extent that such sums are actually delivered by Owner to Lender; and
 
 
5.4 Subsequent Transfer. If Lender, by succeeding to the interest of Owner under the Lease, should become obligated to perform the covenants of Owner thereunder, then, upon any further transfer of Owner's interest by Lender, all of such obligations shall terminate as to Lender.

 

 
 
 


 
6.              
NON-DISTURBANCE. In the event of a foreclosure under the Security Deed, so long as there then exists no breach, default, or event of default on the part of Tenant under the Lease beyond any period for cure by Tenant thereunder, Lender agrees for itself and its successors and assigns that the rights and interests of Tenant under the Lease will not be extinguished or terminated by reason of such foreclosure, but rather the Lease will continue in full force and effect and Lender shall recognize and accept Tenant as tenant under the Lease subject to the terms and provisions of the Lease except as modified by this Agreement.
 
7.               MISCELLANEOUS.
 
 
7.1
Heirs, Successors, Assigns and Transferees. The covenants herein will be binding upon, and inure to the
 
 
benefit of, the heirs, successors and assigns of the parties hereto; and
 
 
  7.2 Notices. All notices or other communications required or permitted to be given pursuant to the provisions hereof will be deemed served upon delivery or, if mailed, upon the first to occur of receipt or the expiration of three (3) days after deposit in United States Postal Service, certified mail, postage prepaid and addressed to the address of Lessee or Lender appearing below:
 
"OWNER" "LENDER"
 
BORROWER NAME, a STREET ADDRESS CITY, STATE ZIP
 
LENDER NAME STREET ADDRESS CITY, STATE ZIP
 
   
   
Attn:
Loan No.
     
         
           

 
""TENANT"
 
NAME OF TENANT HERE
TENANTS ADDRESS (STACKED) HERE
 
provided, however, any party will have the right to change its address for notice hereunder by the giving of written notice thereof to the other party in the manner set forth in this Agreement; and
 
 
 7.3 Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original and all of which together will constitute and be construed as one and the same instrument; and
 
 
 7.4 Remedies Cumulative. All rights of Lender herein to collect rents on behalf of Owner under the Lease are cumulative and are in addition to any and all other rights and remedies provided by law and by other agreements between Lender and Owner or others; and
 
 
7.5
Paragraph Headings. Paragraph headings in this Agreement are for convenience only and are not to be
 
 
construed as part of this Agreement or in any way limiting or applying the provisions hereof.
 
8.
INCORPORATION. Exhibit A and Lease Guarantor's Consent are attached hereto and incorporated herein by this
 
 
reference.
 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 
 
 


 
NOTICE:THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE
PERSON OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN A
PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF
THE LAND.
 
IT IS RECOMMENDED THAT, PRIOR TO THE EXECUTION OF THIS AGREEMENT, THE PARTIES CONSULT WITH THEIR Al I'ORNEYS WITH RESPECT HERETO.
 
Signed, sealed and delivered in the presence of: "OWNER"
 
BORROWER NAME, Witness                                                                                a
 
 
By:                                                                               
Name:                                                                               
Title:                                                                               
Notary Public
My Commission Expires:
(NOTARIAL SEAL)

 

 
Signed, sealed and delivered in the presence of:
 
 
Witness
 
Notary Public
My Commission Expires:                                                              
(NOTARIAL SEAL)

 
"LENDER"
 
LENDER NAME, a
 
By:                                                                         
Name:                                                                         
Title:                                                                         


 
 
 
 


 
Signed, sealed and delivered in the presence of: "TENANT"
 

 
Witness
 
Notary Public
My Commission Expires:                                                               
(NOTARIAL SEAL)

TENANT NAME, a
 
By:                                                                        
Name:                                                                        
Title:                                                                        


 
 
 


 
LEASE GUARANTOR'S CONSENT
 
The undersigned ("Lease Guarantor") consents to the foregoing Subordination Agreement; Acknowledgment of Lease Assignment, Estoppel, Attornment and Non-Disturbance Agreement and the transactions contemplated thereby and reaffirms its obligations under the lease guaranty ("Lease Guaranty") dated DATE OF LEASE GUARANTY HERE. Lease Guarantor further reaffirms that its obligations under the Lease Guaranty are separate and distinct from Tenant's obligations.
 
AGREED:
 
Signed, sealed and delivered in the presence of: "LEASE GUARANTOR"
 
LEASE GUARANTOR SIGNATURE BLOCK HERE
 
Witness
 
 
Notary Public
 
My Commission Expires:                                                                         
 
(NOTARIAL SEAL)

 
 
 


 
EXHIBIT A to Subordination Agreement; Acknowledgment of Lease Assignment, Estoppel, Attornment and Non-Disturbance Agreement dated as of DATE OF DOCUMENTS, executed by BORROWER NAME, a general partnership as "Owner", NAME OF TENANT HERE, as "Tenant", and NAME OF LENDER HERE, as "Lender".
 
All that certain real property located in the County of Fulton, State of Georgia, described as follows:
 
APN

 
 
 
DESCR I ION OF PROPERTY

EXHIBIT "G"
 
GUARANTY
 
In consideration of, and as an inducement for the granting, execution and delivery of the foregoing Lease Agreement, dated , 2010 (the "Lease"), by JEFFERSON MILL
 
PROJECT I LLC, landlord therein named ("Landlord", which term will be deemed to include the named Landlord, its successors and assigns), to SYX DISTRIBUTION, INC., tenant therein named ("Tenant", which term will be deemed to include the named Tenant and its successors and assigns), and in further consideration of the sum of One Dollar ($1.00) and other good and valuable consideration paid by Landlord to the undersigned, the receipt and sufficiency of which are hereby acknowledged, the undersigned, SYSTEMAX INC., ("Guarantor", which term will be deemed to include the named Guarantor and its successors and assigns), does hereby (jointly and severally if executed by two or more guarantors) guarantee, absolutely and unconditionally, to Landlord the full and prompt payment of Base Rental, additional rent and all other charges and sums (including, without limitation, Landlord's legal expenses and attorney's fees and disbursements) payable by Tenant under the Lease, and hereby further guarantees the full and timely performance and observance of all the covenants, terms, conditions and agreements therein provided to be performed and observed by Tenant; and Guarantor hereby covenants and agrees to and with Landlord that if default should at any time be made by Tenant in the payment of any Base Rental, additional rent or other charges and sums, or if Tenant should default in the performance and observance of any of the tei 4 s, covenants and conditions contained in the Lease, Guarantor shall and will forthwith pay Base Rental, additional rent and all other charges and sums, to Landlord and any arrears thereof, and shall and will forthwith faithfully perform and fulfill all of such terms, covenants and conditions and will forthwith pay to Landlord all direct costs that may arise in consequence of any default by Tenant under the Lease, including, without limitation, reasonable attorney's fees and disbursements incurred by Landlord or caused by any such default or the enforcement of this Guaranty.
 
This Guaranty is an absolute and unconditional guaranty of payment (and not of collection) and of performance. The liability of Guarantor is co-extensive with that of Tenant and also joint and several and this Guaranty will be enforceable against Guarantor without the necessity of any suit or proceeding on Landlord's part of any kind or nature whatsoever against Tenant and without the necessity of any notice of non-payment, non-performance or non-observance or of any notice of acceptance of this Guaranty or of any other notice or demand to which Guarantor might otherwise be entitled, all of which Guarantor hereby expressly waives. Guarantor hereby expressly agrees that the validity of this Guaranty and the obligations of Guarantor hereunder will in no way be terminated, affected, diminished or impaired by reason of (a) the assertion or the failure to assert by Landlord against Tenant of any of the rights or remedies reserved by Landlord pursuant to the terms, covenants and conditions of the Lease, or (b) any non-liability of Tenant under the Lease, whether by insolvency, discharge in bankruptcy, or any other defect or defense which may now or hereafter exist in favor of Tenant.
 
This Guaranty is a continuing guaranty, and the liability of Guarantor hereunder will in no way be affected, modified or diminished by reason of (a) any assignment, renewal, modification, amendment or extension of the Lease, or (b) any modification or waiver of or change in any of the terms, covenants and conditions of the Lease by Landlord and Tenant, or (c) any extension of time that may be granted by Landlord to Tenant, or (d) any consent, release, indulgence or other action, inaction or omission under or in respect of the Lease, or (e) any dealings or transactions or matter or thing occurring between Landlord and Tenant, or (f) any bankruptcy, insolvency, reorganization, liquidation, arrangement, assignment for the benefit of creditors, receivership, trusteeship or similar proceeding affecting Tenant, whether or not

 
 
 
 


 
notice thereof is given to Guarantor. Guarantor expressly waives the right to require Landlord to take action against Tenant as provided for in Official Code of Georgia Annotated Section 10-7-24 (Michie 1981, as amended or hereafter amended).
 
Should Landlord be obligated by any bankruptcy or other law to repay to Tenant or to Guarantor or to any trustee, receiver or other representative of either of them, any amounts previously paid, this Guaranty will be reinstated in the amount of such repayments. Landlord will not be required to litigate or otherwise dispute its obligations to make such repayments if it in good faith believes that such obligation exists.
 
In the event of the rejection or disaffirmance of the Lease by Tenant or Tenant's receiver or trustee pursuant to the United States Bankruptcy Code or any other law affecting creditors' rights, Guarantor shall, and does hereby (without the necessity of any further agreement or act), assume all obligations and liabilities of Tenant under or arising out of the Lease, to the same extent as if Guarantor had been originally named the Tenant under the Lease and there had been no such rejection or disaffirmance. At the request of Landlord upon or after such rejection or disaffirmance, Guarantor shall confirm such assumption in writing. Upon such assumption, Guarantor will succeed to all rights of Tenant under the Lease and will be entitled to a new lease on all of the terms and conditions of the Lease with respect to the remaining Lease Term (to the extent permitted by law). Guarantor shall execute and deliver such documents as Landlord may from time to time reasonably require to evidence such assumption and succession.
 
No delay on the part of Landlord in exercising any right, power or privilege under this Guaranty or failure to exercise the same will operate as a waiver of or otherwise affect any such right, power or privilege, nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
 
No waiver or modification of any provision of this Guaranty nor any termination of this Guaranty will be effective unless in writing, signed by Landlord; nor will any such waiver be applicable except in the specific instance for which given.
 
All of Landlord's rights and remedies under the Lease and under this Guaranty, now or hereafter existing at law or in equity or by statute or otherwise, are intended to be distinct, separate and cumulative and no exercise or partial exercise of any such right or remedy therein or herein mentioned is intended to be in exclusion of or a waiver of any of the others.
 
Guarantor agrees that whenever at any time or from time to time Guarantor makes any payment to Landlord or performs or fulfills any term, covenant or condition hereunder on account of the liability of Guarantor hereunder, Guarantor will notify Landlord in writing that such payment or performance, as the case may be, is for such purpose. No such payment or performance by Guarantor pursuant to any provision hereof will entitle Guarantor by subrogation or otherwise to the rights of Landlord to any payment by Tenant or out of the property of Tenant, except after payment of all sums or fulfillment of all covenants, terms, conditions or agreements to be paid or performed by Tenant.
 
Guarantor agrees that it will, at any time and from time to time, within ten (10) business days following written request by Landlord, execute, acknowledge and deliver to Landlord a statement certifying that this Guaranty is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating such modification). Guarantor agrees that such certificate may be relied on by anyone holding or proposing to acquire any

 
 
 


 
interest in the Building (as defined in the Lease) from or through Landlord or by any mortgagee (a defined in the Lease) or prospective mortgagee or lessor of the Building or of any interest therein.
 
Without regard to principles of conflicts of laws, the validity, interpretation, performance and enforcement of this Guaranty will be governed by and construed in accordance with the internal laws of the State of Georgia. Guarantor hereby submits to the non-exclusive personal jurisdiction in the State of Georgia, the courts thereof and the United States District Courts sitting therein, for the enforcement of this Guaranty, and Guarantor hereby waives any and all personal rights under the law of any jurisdiction to object on any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within the State of Georgia for the purpose of litigation to enforce this Guaranty.
 
 
IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty thisday of
 
 
2010.
 
GUARANTOR(S): SYSTEMAX INC.
 
Its:
 
By:
 
 
Attest: X
Its:
 
Address:
 
 
Federal Identification Number:' -

 
 
 
 

SECRETARY'S CERTIFICATE
 
 
The undersigned hereby certifies that he is the                                                                                       Secretary of Guarantor, and as
 
such has knowledge of the facts stated in this Certificate, that the foregoing Guaranty was executed and delivered by Guarantor pursuant to due authorization of the Board of Directors of Guarantor, and that the officers of the corporation who signed the Guaranty on behalf of the corporation were the then incumbents of the offices set forth under their respective names, and as such officers were duly authorized to execute said Guaranty on behalf of the Guarantor.
 
DATED this   4 1-   day of                                              , 20 .
 
Secreta
 
(CORPORATE SEAL)

 
 
 
EXHIBIT "1"


Schedule of Critical Dates

 
 
 
 
EXHIBIT "1"



 
After recording, please return to:
 
 
STATE OF GEORGIA
 
COUNTY OF FORSYTH
 
PARCEL RESTRICTION AGREEMENT
 
THIS PARCEL RESTRICTION AGREEMENT (this "Agreement") is made and entered into effective April , 2010, (the "Effective Date"), by and between CREC PROPERTY
HOLDINGS, LLC, a Delaware limited liability company ("CREC") and SYX DISTRIBUTION, INC. ("SYX").
 
WITNESSETH:
 
WHEREAS, CREC is the owner of the "CREC Parcel" described on Exhibit "A" attached hereto and incorporated herein by this reference ; and
 
WHEREAS, SYX is the "Tenant" pursuant to that certain Industrial Net Lease Agreement dated March , 2010 (the "SYX Lease") for the "Leased Premises" commonly known as 235 Hog Mountain Road, Jefferson, Georgia as such Leased Premises is more particularly described on Exhibit "B" attached hereto and incorporated herein; and
 
WHEREAS, CREC desires to place certain restrictive covenants on the use of the CREC Parcel for the benefit of SYX as provided herein.
 
NOW, THEREFORE, in consideration of TEN DOLLARS ($10.00) and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged by CREC and SYX, intending to be legally bound hereby, agree as follows:
 
1. Definitions. The following words and terms used or referred to in this Agreement
 
 
or any amendment or modification hereof shall have the following meanings:
 
"SYX Restricted Use" shall mean the use on any portion of the CREC Parcel for (i) the sale, installment sale, rental and/or repair of computer equipment or consumer electronics and appliances, whether powered by electricity, battery, solar power, including but not limited to, desktop or laptop computers, computer monitors, computer keyboards, computer components, music listening devices, televisions, video and photographic equipment, cell phones and telecommunications equipment, computer games, software, and DVDs, and those new and additional products created by evolving technologies related to the foregoing categories; or (ii) any of the following uses: (1) a manufacturing plant, amusement park or game parlor, billiards

 
 
 


 
parlor, provided that an adult entertainment facility such as Dave & Buster's or Jillian's or a children's entertainment facility such as Chuck E. Cheese's, shall not be prohibited, nor shall any restaurant be prohibited from offering limited gaming (video or otherwise) as an incidental use; (2) automobile racing track; (3) coin-operated laundry: (4) funeral parlor; (5), off-track betting establishment, provided that any sale of state sponsored lottery games, if in accordance with state law, shall not be prohibited; (6) flea market, provided that antique shops and second-hand shops shall not be prohibited; (7) massage parlor or tattoo parlor, provided that day spas, salons, nail spas and upscale massage uses (such as Massage Heights or Massage Envy) shall not be prohibited; (8) adult book store, adult movie parlor or other sexually oriented shop, provided that a bona fide bookstore selling new or used books which may have some explicit material as an incidental offering typical to bookstores such as Barnes and Noble or Borders, shall not be prohibited; and (9) nightclub, discotheque, cocktail lounge, bar or tavern or similar type of establishments, provided that this shall not prohibit any restaurant which offers alcohol as an incidental use (not to exceed 50% of gross sales from such restaurant). Notwithstanding anything to the contrary set forth herein, the foregoing restrictions in clauses (c)(i) and (c)(ii) shall not be deemed to prohibit or restrict any drugstore such as those typically operated under the tradenames "CVS", "Walgreens" or "Rite Aid".
 
"Restriction Period" shall mean the period of time commencing on the date hereof and continuing until the expiration or termination of the SYX Lease unless earlier terminated as provided hereinafter.
 
2.                Restricted Use. CREC hereby covenants and agrees that, during the Restriction Period, no business shall be conducted on the CREC Parcel in violation of the SYX Restricted Use.
 
3.                Covenant to Respond by SYX. If at any time CREC provides a notice to SYX under the terms of this Agreement, requesting a response as to whether a proposed use of the CREC Parcel will violate the terms of the SYX Restricted Use, SYX will respond to CREC by a notice within twenty (20) days, indicating whether or not the use proposed by CREC will violate the SYX Restricted Use. A failure by SYX to respond to CREC within said twenty (20) day period shall be deemed for all purposes to be a (i) the consent by SYX to the use so proposed by CREC on the CREC Parcel; and (ii) an acknowledgment by SYX that the use proposed by CREC does not violate the SYX Restricted Use.
 
4.                No Build Area. CREC hereby covenants and agrees that it will not construct any improvements during the Restriction Period in the area described on Exhibit "C" attached hereto and incorporated herein (the "No Build Area"), except that CREC may construct and place within the No Build Area ground-level parking lots or parking or driveway areas; monument and directional signage (not to exceed thirty (30') inches in height without Tenant's reasonable approval); site lighting, and utilities (all in accordance with applicable Jackson County codes); and landscaping. Tenant shall have the right to conduct all landscaping activities in the No-Build Area.
 
5.               View Corridor. CREC hereby covenants and agrees during the Restriction Period that it will not construct or permit to be constructed any improvements or structures in the area labeled as "View Corridor" as shown on Exhibit "D", attached hereto and by this reference

 
 
 


 
incorporated herein, that will block the view from Interstate 85 of any identification sign on Syx's building.
 
6.               Covenant Running with the Land; Successors and Assigns. CREC and SYX hereby agree that the covenants set forth in this Agreement shall be deemed to be covenants running with the title to the CREC Parcel, which covenants shall remain in full force and effect and be binding upon the CREC Parcel owner and its successors-in-title and which shall inure to the benefit of SYX and their successors-in-interest during the Restriction Period.
 
7.               Constructive Notice and Acceptance. Every person or entity which now has or hereafter acquires any right, title, estate or interest in or to the CREC Parcel is and shall conclusively be deemed to have consented and agreed to and be bound by the covenants and agreements contained, whether or not any reference to this Agreement is contained in the instrument by which such person or entity acquires its interest.
 
8.               Enforcement. The covenant set forth in this Agreement is made solely for the benefit of SYX, and shall not be enforceable by any party other than SYX. SYX shall have the right to grant waivers or variances on a case by case basis, but no such waiver or variance shall be effective unless the same shall be in writing and signed by SYX. Any failure to enforce any covenants contained herein shall in no event be deemed to be a waiver of the right to do so thereafter.
 
9.               Amendments. This Agreement may be modified or amended only by the recordation with the Clerk of the Superior Court, Jackson County, Georgia, of a written instrument setting forth such modification or amendment and executed by the owner of the CREC Parcel and SYX.
 
10. Notices. Unless otherwise specified in this Agreement, all notices, requests or other communications that any party may desire or be required to give hereunder shall be in writing and shall be given by hand, or by depositing the same in the United States mail, first class postage prepaid, certified mail, return receipt requested, or by a recognized overnight courier service providing confirmation of delivery, and addressed as follows:
 
 
If to CREC:
CREC Property Holdings, LLC
 
 
191 Peachtree Street
Suite 3600
Atlanta, Georgia 30303-1740 Attn: Corporate Secretary
 
If to SYX:  SYX Distribution, Inc.
11 Harbor Park Drive
Port Washington, NY 11050 Attn:
 
or such other address as either party may from time to time specify in writing to the other. All notices given pursuant to this Paragraph 10 shall be deemed to have been given (i) if delivered

 
 
 


 
by hand on the date of delivery or on the date delivery was refused by the addressee, or (ii) if delivered by the United States mail or by overnight courier on the date of delivery as established by the return receipt or courier service confirmation (or the date on which the return receipt or courier service confirms that acceptance of delivery was refused by the addressee).
 
11. Miscellaneous. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. All rights, powers and remedies provided herein may be exercised only to the extent that the exercise thereof does not violate applicable law and shall be limited to the extent necessary to render this Agreement valid and enforceable. If any term, provision, covenant or agreement contained herein or the application thereof to any person or circumstance shall be held to be invalid, illegal or unenforceable, such holding shall not affect the validity of the remainder of this Agreement or the application of such term, provision, covenant or agreement to persons or circumstances other than those to which it is held invalid or unenforceable. Exhibit "A", Exhibit "B", Exhibit "C" and Exhibit "D" are hereby incorporated into this Agreement and made a part hereof by reference thereto.
 
[signatures on following page]

 
 
 
 


 
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized representatives to execute this Agreement as of the day and year first above written.
 
"CREC"
 

 
Signed, sealed and delivered in the presence of:
 
 
Witness
 
Notary Public

CREC PROPERTY HOLDINGS, LLC, a Delaware limited liability company
 
By:           Cousins Real Estate Corporation, a Georgia
 
corporation, its sole member
 
By:                                                     
Its:                                                     
 

 
My commission expires: [CORPORATE E SEAL]
 
[NOTARY SEAL]
 
"SYX"
 

 
Signed, sealed and delivered in the presence of:
 
Witness

SYX DISTRIBUTION, INC., a
 
 corporation
 
By:                                                     
Its:                                                     
Notary Public
 
My commission expires:                                                                                                          [CORPORATE SEAL]
 
[NOTARY SEAL]

 
 
 


 

Exhibit "A" CREC Parcel

 
 
 
Exhibit "B"



 
Leased Premises

2162575v4

 
 
 
Exhibit "B"



 

Exhibit "C" No Build Area

 
 
 

[Missing Graphic Reference]
Exhibit "D"
View Corridor
2162575v4


 
 
 



                                                                          Exhibit .10.2
FIRST AMENDMENT TO INDUSTRIAL  NET LEASE AGREEMENT
 
THIS FIRST AMENDMENT TO LEASE AGREEMENT (the "First Amendment"), is made this 24 th day of August, 2010 involving Jefferson Mill Project I LLC, a Georgia limited liability corporation (as "Landlord") and Syx Distribution Inc. (as "Tenant").
 
WITNESSETH:
 
WHEREAS, Landlord and Tenant did enter into that certain Industrial Net Lease Agreement (the "Original Lease"), dated as of April 16, 2010, pursuant to which Tenant leased from Landlord the building located at 235 Hog Mountain Road, Jefferson, Georgia ("Leased Premises"); and
 
WHEREAS, pursuant to the terms of the Original Lease, Landlord was to construct various improvements to the Leased Premises; and
 
WHEREAS. Landlord has completed construction of the improvements, Tenant has begun occupancy of the Leased Premises, and Tenant is entitled to a credit against Base Rent resulting from the actual Cost of Interior Construction coming in $342,133.00 below the budgeted amount of $5,069,000.00 and
 
WHEREAS, Landlord and Tenant desire to modify and amend the Original Lease, in the manner and for the purposes herein set forth.
 
NOW, THEREFORE, for and in consideration of the mutual covenants contained herein, and for Ten and No/100 Dollars ($10.00) and other good and valuable consideration, paid by the parties hereto to one another, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereto hereby covenant and agree as follows:
 
1.  
Defined Terms. All capitalized terms not defined herein shall have the same meaning as set forth in the Original Lease. The terms and conditions of this First Amendment shall constitute part of the Original Lease and shall be incorporated therein by reference.
 
2.  
Commencement Date .   Section 1.01(K) of the Original Lease entitled "Commencement Date" is hereby deleted in it entirety and replaced with the following:
 
"Commencement Date: "Commencement Date" shall mean August 1, 2010."
 
3.  
Section 2,02. Construction of Leased Premises . Section 2.02 of the Original Lease entitled "Construction of Leased Premises" is hereby deleted in its entirety. In addition, Exhibits "B" (Scope of Work), "B-1" (Work Not Funded by Allowance), "B-IA" (Clearing Limits), "B-27 (Approved Plans), and "H" (Schedule of Critical Dates") are hereby deleted in their entirety.
 
4.  
Base__Rent. Section 1.01(F) of the Original Lease entitled "Base Rent" is hereby amended by deleting the following three (3) lines:
 
"Lease Year
Per Square Foot
Annual Rent
Monthly Installment
Months 1-8
$0
$0
$0
Months 9-12                                                  $3.35
and replacing them with the following:
 
$128,174.91"
"Lease Year
Per Square Foot
Annual Rent
Monthly Installment
Months 1-10
$0
$0
$0
Month            11
   
$ 42,391.73
Months 12
$3.35
 
$128,174 91"

 
 
 


 
 
5. Recordation of Additional Documents. Tenant hereby acknowledges that Landlord has recorded the following (copies of which have been provided to Tenant).
 
a.  
That certain Supplemental Declaration of Covenants, conditions, Restrictions and Easements for Jefferson Mill Distribution Park in Deed Book 570, page 796 Jackson County, Georgia real estate records in compliance with Section 1.03 of the Original Lease;
 
b.  
That certain Parcel Restriction Agreement in Deed Book 570, page 800 Jackson County, Georgia real estate records in compliance with Section 5.07 of the Original Lease; and
 
 
c. That certain Memorandum of Lease in Deed Book 570, page 791 Jackson County, Georgia real estate records in compliance with Section 17.12 of the Original Lease.
 
 
6. No Other Modifications. Except as expressly modified herein, the Original Lease shall remain in full force and effect and, as modified herein, is expressly ratified and confirmed by the parties hereto.
 
7.  
Legal   Representatives, Successors and A' ‘ siins. This First Amendment shall be binding upon and shall inure to the benefit of Landlord and Tenant and their respective legal representatives, successors and assigns.
 
8.  
Acknowledgement and Consent of Guarantor. As a material inducement for Landlord to enter into this First Amendment, Tenant hereby covenants and agrees to cause to be duly executed and delivered, with the due execution and delivery of this First Amendment, the form of Acknowledgement, Consent and Reaffirmation of Guarantor of Lease, attached hereto as Exhibit   "A'", by this reference incorporated hereto.
 
9.  
Georgia Law. This First Amendment shall he construed and interpreted under the laws of the State of Georgia.
 
10.   
Time of Essence. Time is of the essence of this First Amendment.
 
[signatures appear on following page)

 
 
 


 
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as of the day, month and year first above written.
 
LANDLORD:
 
JEFFERSON MILL PROJECT I LLC, a Georgia limited liability company
 
By: C/W Jefferson Mill, LLC a Georgia limited liability company, its sole member
 
By: Cousins P . perties Incorporated
 
Name: Title: .
 
 
[Missing Graphic Reference]
 
a ue
 
entor Vice President
 

 
[Missing Graphic Reference]
By:
TENANT
 
[Missing Graphic Reference]

 
 
 


 
ACKNOWLEDGMENT, CONSENT
 
 
AND REAFFIRMATION OF GUARANTOR OF LEASE
 
THIS ACKNOWLEDGMENT, CONSENT AND REAFFIRMATION OF GUARANTOR OF LEASE (the "Consent"), is made this 24' h day of August, 2010, by SYSTEMAX INC ("Guarantor"), to and for the benefit of JEFFERSON MILL PROJECT I, LLC ("Landlord").
 
WITNESSETH:
 
WHEREAS, Guarantor did duly execute and deliver that certain Guaranty of Lease (the "Original Guaranty"), On April 16, 2010, in connection with and as a material inducement for that certain Lease Agreement, as may have been amended previously (the "Original Lease"), involving Landlord and Syx Distribution, Inc. ("Tenant").
 
WHEREAS, Landlord and Tenant have entered into an amendment to the Original Lease the "Lease Amendment"), dated August 24, 2010, subject to and conditioned upon the execution and delivery of this Consent.
 
WHEREAS, Landlord would not have entered into or agreed to the Lease Amendment, were it not for the execution and delivery of this Consent to Landlord, which Consent was a material inducement to Landlord to enter into the Lease Amendment,
 
WHEREAS, Guarantor, which will derive material and substantial benefit from the Lease Amendment, desires to provide this Consent, in connection with the Lease Amendment.
 
NOW THEREFORE, for and in consideration of the mutual covenants contained herein, and for Ten and No/100 Dollars (S10.00) and other good and valuable consideration, paid by the parties hereto to one another, the receipt and sufficiency of which are acknowledged by the parties hereto, the parties hereto hereby covenant and agree as follows:
 
1.                Amendment to Lease. Guarantor hereby acknowledges and consents to the fact that the Original Lease has been modified and amended by virtue of the Lease Amendment
 
2.               No Modification. The ranting of this Consent by Guarantor to Landlord and 'I enant in no way modifies or amends the Guaranty or any Guarantor's obligations and duties under the Guaranty. Said Guaranty is and shall remain in full force and effect and is a valid and continuing obligation of Guarantor according to its terms.
 
3.                Warranties and Representations. The warranties and representations made by Guarantor the Guaranty are made and ratified as of the date hereof with respect to this Consent.
 
4.                No Further Consent Required. The request made by Landlord herein and the giving of this Consent by Guarantor shall in no way be or be deemed to be a waiver of Landlord's rights under the Guaranty.
 
3.             Binding Nature. This Consent shall inure to the benefit of Landlord, Tenant and their
respective heirs, legal representatives, successors and assigns

 
 
 


 
G.             Georgia Law. This Consent has been given, and shall be construed under, the laws of the
 
State of Georgia.
 
IN WITNESS WHEREOF, the undersigned have caused this Consent to be executed under seal and delivered on the day and year first above written.
 
"Guarantor-
 
SYSTEMAX INC.
 
By:                                                                                                                     
 
Name:   LAcoreocs.. rLQ.i-A-)pjci
Title .   C_A4e_A- Fi' U O dit s y L ci   es,c-
 

Attest: Name: Title:
0-rr .   (.44-QS
'15 5*CA N '" -- ( 1 1 . 2 4 5X-4 4.)%004.1 6.741-1


 
 
 


                                                                   Exhibit       10.3
LEASE AGREEMENT

dated

February 27, 2012

made between

PR I Washington Township NJ, L.L.C. ,
a New Jersey limited liability company

as Landlord,


and


Global Equipment Company Inc.,
a New York corporation,

as Tenant,


with respect to
certain Premises comprising
approximately 500,102 rentable square feet of space
at 24 Applegate Drive
in the
Northeast Business Park
in
Robbinsville, New Jersey

 
 
 

LEASE AGREEMENT

THIS LEASE AGREEMENT is made this _____ day of February, 2012, between PR I Washington Township NJ, L.L.C., a New Jersey limited liability company ("Landlord"), and Global Equipment Company Inc., a New York corporation t/a Global Industrial, Global Industrial Products, Global Industrial Equipment and Global Industrial.com (“Tenant”).

Annual Base Rent:
$1,625,331.50 during the first Lease Year of the Lease Term, subject to annual two and one-half percent (2.5%) increases each Lease Year thereafter.

Broker:
Matrix Realty, Inc. and Cushman & Wakefield of New Jersey, Inc.

Building:
That portion of the Northeast Business Park, Exit 7A, NJ Turnpike and Route 195, Robbinsville, New Jersey, and the improvements constructed thereon, having an address of 24 Applegate Drive, comprising approximately 1,000,630 square feet

Initial Monthly Base Rent:
$135,444.29

 
Initial Estimated Monthly
Operating Expense Payments:
1.
Common Area Charges: $17,086.82
(estimates only and subject to
($0.41 per square foot per annum)
adjustments to actual costs
and expenses according to the        
2.
Taxes:  $38,341.15
provisions of this Lease)
($0.92 per square foot per annum)

                        
3.
Insurance:  $2,500.51
 
($0.06 per square foot per annum)

                        
4.
Utilities in Premises:  $18,753.83
 
($0.45 per square foot per annum)

 
Initial Monthly Base Rent and
Operating Expense Payments:
$212,126.60

Lease Commencement Date:
One (1) month after full execution of this Lease

Lease Term:
Beginning on the Lease Commencement Date and ending on the last day of the twentieth (20 th ) full lease year after the Lease Commencement Date plus an additional six (6) months.

Lease Year:
Each respective period of twelve (12) successive calendar months during the Lease Term, except that the first lease year will commence on the Lease Commencement Date and will include (a) the first full twelve (12) calendar months following the Lease Commencement Date and, (b) if the Lease Commencement Date does not begin on the first day of a month, the period from the Lease Commencement Date until the first day of the following month.

Park:
The entire Northeast Business Park, Exit 7A, NJ Turnpike and Route 195, Robbinsville, New Jersey, comprising approximately 425 acres

Premises:
That portion of the Building known as Bay A shown on Exhibit A containing approximately five hundred thousand one hundred two (500,102) rentable square feet.

Riders:
Expansion Option Rider, Roof Access Rider
 
Security Deposit:
Initially, $3,000,000.00, subject to annual reduction as further specified in Section 5
 
 
Tenant's Proportionate
Share of Operating Expenses:
49.98%
(500,102 ¸ 1,000,630)

1.   Granting Clause .
 
In consideration of the obligation of Tenant to pay rent as herein provided and in consideration of the other terms, covenants and conditions hereof, Landlord leases to Tenant, and Tenant takes from Landlord, the Premises, to have and to hold for the Lease Term, subject to the terms, covenants and conditions of this Lease.  Tenant does not rely on, nor does Landlord represent, the tenancy of any specific tenant(s) in the Park.  No rights to any view or to light or air over any property, whether belonging to Landlord or any other person, are granted to Tenant by this Lease.
 
2.   Acceptance of Premises .
 
(a)   Attached hereto as " Exhibit B " and incorporated by reference herein is a copy of plans and specifications pursuant to which Landlord shall have the Premises constructed (the “Landlord’s Work”).  Landlord agrees to pay the costs and expenses for the completion of the Landlord’s Work in accordance with Exhibit B .  No changes will be made to the Landlord’s Work unless the change request is made in writing by Tenant. Tenant shall be responsible for all costs of any changes that are not included within the Landlord’s Work described on Exhibit B hereto.  All sums due Landlord for changes shall be considered additional rent under the terms of the Lease and shall be payable within thirty (30) days of receipt of Landlord's invoice therefor.  Upon delivery of possession of the Premises to Tenant, and with the exception of Landlord’s Work, Tenant shall be responsible, at its sole cost and expense, for the renovation and finishing of the Premises for the conduct of Tenant’s business, pursuant to “ Exhibit C ” hereto.
 
(b)   Except for Landlord’s Work, Tenant acknowledges:  (i) Tenant shall accept the Premises and all improvements, betterments and equipment in its “as is” condition as of the Lease Commencement Date, subject to all applicable laws, ordinances, regulations, covenants and restrictions, and (ii) Landlord has no obligation to improve or repair the Premises or the Building, except as specifically set forth in Section 10 of this Lease. Landlord has made no representation or warranty as to the suitability of the Premises for the conduct of Tenant's business, and Tenant waives any implied warranty that the Premises are suitable for Tenant's intended purposes. Except as provided in Section 10, in no event shall Landlord have any obligation for any defects in the Premises or any limitation on its use. The taking of possession of the Premises shall be conclusive that Tenant accepts the Premises and that the Premises were in good condition at the time possession was taken, except for items that are Landlord's responsibility under Exhibit B.  Landlord and Tenant agree that, upon the Landlord’s completion of the Landlord’s Work, a representative of each shall promptly inspect the Premises together and develop a mutually agreed upon punch list of defects (if any) in the Landlord’s Work in the Premises, which defects shall be promptly corrected by Landlord at its expense.  Any disagreement that may arise between Landlord and Tenant with respect to whether an item on the punch list constitutes a valid defect or incomplete work shall be conclusively resolved by the decision of Landlord’s architect.  The existence of such punch list shall not postpone delivery of the Premises by Landlord to Tenant.
 
(c)   Landlord agrees to use commercially reasonable efforts to complete Landlord’s Work as soon as reasonably practicable after full execution of this Lease; provided, however, Tenant acknowledges that such Landlord’s Work is not anticipated to have been completed by Landlord prior to the Lease Commencement Date.  After the Lease Commencement Date, Tenant agrees that Landlord may enter the Premises and construct the Landlord’s Work simultaneously with Tenant’s construction of the Tenant Improvements (as such term is defined in Exhibit C hereto), and each party shall reasonably coordinate the work by its contractors, mechanics, workmen, or such others who may enter, so that they do not materially disturb the other party’s contractors, subcontractors, workmen, mechanics, or other agents, in the performance each party’s respective construction work to ensure that no delays are caused in the construction of such work.  In the event that Landlord’s Work is not substantially completed within forty-five (45) days after the date of full execution of this Lease, and solely as a result of such failure Tenant is substantially and materially delayed in completing the Tenant Improvements work despite the mutual and good faith efforts of both parties to coordinate their respective work to prevent any such delays, then Tenant shall receive a credit equal to $4,452.96 per day for every day between the forty-sixth (46 th ) day through the sixty-fifth (65 th ) day that the delay in Landlord’s substantial completion of the Landlord’s Work actually prevents Tenant from performing the Tenant Improvements work in the Premises.   In the event that Landlord’s Work is not substantially completed within sixty-five (65) days after the date of full execution of this Lease, and solely as a result of such failure Tenant is substantially and materially delayed in completing its work despite the mutual and good faith efforts of both parties to coordinate their respective work to prevent any such delays, then Tenant shall receive a credit equal to $8,905.92 per day for every day between the sixty-sixth (66 th ) day through the date of substantial completion of Landlord’s Work, that the delay in Landlord’s substantial completion of the Landlord’s Work actually prevents Tenant from completing the Tenant Improvements work in the Premises.  Notwithstanding the foregoing, it is acknowledged and agreed that Tenant shall only be entitled to a credit under this paragraph if Tenant’s inability to complete the Tenant Improvements work in the Premises is conclusively and materially determined to be solely as a result of Landlord’s failure to timely substantially complete the Landlord’s Work, and Tenant shall not be entitled to any credit if the delay in performance of the Tenant Improvements work is as a result of (i) Tenant's failure to timely furnish plans or required information for the completion of the Tenant Improvements or Landlord’s Work; (ii) Tenant's failure to promptly review any and all submittals or timely furnish approvals or information necessary for the completion of the Tenant Improvements work or Landlord’s Work; (iii) Tenant’s inability or any delay in obtaining any permits or other approvals for the Tenant’s Improvements work; (iv) Tenant's request for changes to the Tenant Improvements work or the Landlord’s Work; (v) Tenant's request for materials, finishes or installations that constitute long-lead items; or (vi) Actions or inaction of Tenant, or any person, firm or corporation employed by Tenant.
 
3.   Use .
 
The Premises shall be used only for the purpose of general warehouse purposes and for such other lawful purposes as may be incidental thereto. Under no circumstances may Tenant use the Premises for any purpose that is not permitted under applicable zoning and other municipal regulations or any existing association agreement, covenant or easement applicable to the Building, including, but not limited to the Applegate Road Owners Association, or, if in Landlord’s reasonable judgment, such use (i) would impair or interfere with the character, reputation or appearance of the Building as a high quality industrial and warehouse building, (ii) involves in a business which is not in keeping with the standards of Landlord for the Building, including without limitation warehousing or distribution of “adult” or pornographic materials; (iii) would violate any term or condition of any existing covenant or agreement of Landlord involving the Building or any other tenant lease within the Building; (iv) could have an adverse environmental impact on the Premises, including without limitation a dry cleaning plant; (v) would exceed the allowable floor load capacity for the Building and structure thereof; (vi) is not a use that could be expected to be operated in the Premises based upon the construction characteristics of the Premises; (vii) would require an overhead crane system; (viii) would impair or interfere with any of the Building services or systems; or (ix) is otherwise not in compliance with any of the terms of this Lease.  Tenant represents that its proposed use of the Premises will not subject the Premises or the Building to the Industrial Site Recovery Act, N.J.S.A. 13:1 K-6 et seq. (“ISRA”), and Tenant covenants and agrees that Tenant will not change its use of the Premises to any operation which would or might subject the Premises to ISRA applicability.  Tenant shall not conduct or give notice of any auction, liquidation or going out of business sale on the Premises. Tenant will use the Premises in a careful, safe and proper manner and will not commit waste, overload the floor or structure of the Premises or subject the Premises to use that would damage the Premises. Tenant shall not permit any objectionable or unpleasant odors, smoke, dust, gas, noise or vibrations to emanate from the Premises or take any other action that would constitute a nuisance or would disturb, unreasonably interfere with or endanger Landlord or any other tenants or occupants of the Park. Tenant, at its sole expense, shall use and occupy the Premises in compliance with all laws, including without limitation, the Americans With Disabilities Act, orders, judgments, ordinances, regulations, codes, directives, permits, licenses, covenants and restrictions now or hereafter applicable to the Premises (collectively, "Legal Requirements"). Without limitation of the foregoing, Tenant shall be responsible, at its sole cost and expense, for obtaining a Use and Occupancy Permit for the Premises from the Township of Robbinsville.  The Premises shall not be used as a place of public accommodation under the Americans With Disabilities Act or similar state statutes or local ordinances or any regulations promulgated thereunder, all as may be amended from time to time. Tenant shall, at its expense, make any alterations or modifications, within or without the Premises, which are required by Legal Requirements related to Tenant's use or occupation of the Premises. Tenant will not use or permit the Premises to be used for any purpose or in any manner that would void Tenant's or Landlord's insurance, increase the insurance risk or cause the disallowance of any sprinkler credits. If any increase in the cost of any insurance on the Premises or the Building is caused by Tenant's use or occupation of the Premises, or because Tenant vacates the Premises, then Tenant shall pay the amount of such increase to Landlord.  Any occupation of the Premises by Tenant prior to the Lease Commencement Date shall be subject to all obligations of Tenant under this Lease.
 
Landlord agrees that, as of the Lease Commencement Date, the Premises shall be delivered to Tenant in compliance with all Legal Requirements necessary to permit use and occupancy of the Premises under existing zoning and association requirements; provided, however, nothing herein shall be deemed to require Landlord to be financially responsible for making any alterations or modifications required by Legal Requirements due to Tenant’s particular use or occupancy of the Premises, including but not limited to any alterations or modifications that are not included in the original plans and specifications for Landlord’s Work on Exhibit B hereto or that arise from making of any of the Tenant Improvements pursuant to Exhibit C hereto or any other Tenant-Made Alterations (as such term is defined in Section 12).
 
4.   Base Rent .
 
Beginning on the Lease Commencement Date, Tenant shall pay Base Rent in the amount set forth above. The approximation of square footage for the Premises set forth on the first page of this Lease shall in no way affect the Base Rent specified on page one (1) above should any variance be found to exist between the approximation and the actual square footage.  The first month's Base Rent, the Security Deposit, and the first monthly installment of estimated Operating Expenses (as hereinafter defined) shall be due and payable on the date hereof and Landlord's receipt thereof shall be confirmed by Landlord in the Lease Commencement Agreement.  Such amounts shall not be deemed to have been paid by Tenant unless and until Landlord's receipt thereof is so confirmed. Tenant promises to pay to Landlord in advance, without demand, deduction or set-off, monthly installments of Base Rent on or before the first day of each and every calendar month succeeding the Lease Commencement Date. Payments of Base Rent for any fractional calendar month, including the month in which the Lease Commencement Date shall occur, shall be prorated based upon the number of days in each such partial month.  All payments required to be made by Tenant to Landlord hereunder shall be payable at such address as Landlord may specify from time to time by written notice delivered in accordance herewith. The obligation of Tenant to pay Base Rent and other sums to Landlord and the obligations of Landlord under this Lease are independent obligations. Tenant shall have no right at any time to abate, reduce, or set-off any rent due hereunder except as may be expressly provided in this Lease. If Tenant is delinquent in any monthly installment of Base Rent or of estimated Operating Expenses for more than five (5) days, Tenant shall pay to Landlord on demand a late charge equal to five percent (5%) of such delinquent sum. Notwithstanding the foregoing, Landlord agrees to waive imposition of the above-described late charge on up to one (1) occasion in any twelve (12) month period, provided Tenant tenders the overdue payment to Landlord within five (5) business days after Tenant’s receipt of written notice from Landlord stating that the payment was not received when due.  The provision for such late charge shall be in addition to all of Landlord's other rights and remedies hereunder or at law and shall not be construed as a penalty.
 
Notwithstanding anything in this Section 4 to the contrary, Landlord agrees to abate the monthly installments of Base Rent (but not any of the additional rent) due for the first thirteen (13) months of the Lease Term, for a total Base Rent abatement of One Million Seven Hundred Sixty Four Thousand One Hundred Sixty One and 80/100 Dollars ($1,764,161.80).
 
5.   Security Deposit .
 
The Security Deposit shall be held by Landlord as security for the performance of Tenant's obligations under this Lease. The Security Deposit is not an advance rental deposit nor is it a measure of Landlord's damages in case of Tenant's default. Upon each occurrence of an Event of Default (hereinafter defined), Landlord may use all or part of the Security Deposit to pay delinquent payments due under this Lease, and the cost of any damage, injury, expense or liability caused by such Event of Default, without prejudice to any other remedy provided herein or provided by law. Tenant shall pay Landlord on demand the amount necessary to restore the Security Deposit to its original amount. Landlord's obligation respecting the Security Deposit is that of a debtor, not a trustee and no interest shall accrue thereon. The Security Deposit shall be the property of Landlord, but shall be paid to Tenant when all of Tenant's obligations under this Lease have been completely fulfilled. Landlord shall be released from any obligation with respect to the Security Deposit upon transfer of this Lease and the Premises to a person or entity assuming Landlord's obligations under this Section.
 
The Security Deposit shall be in the form of a standby letter of credit, in form and substance acceptable to Landlord and issued by a bank approved by Landlord.  Landlord may draw upon, use, apply, or retain the proceeds of the letter of credit, in whole or in part, to the same extent that Landlord may use, apply, or retain the cash Security Deposit, as set forth above.  The letter of credit shall be, among other things, (i) subject to the International Standby Practices 1998, International Chamber of Commerce Publication No. 590; (ii) irrevocable and unconditional; (iii) conditioned for payment solely upon presentation of the letter of credit and a sight draft; and (iv) transferable one or more times by Landlord without the consent of Tenant.
 
Such letter of credit shall be for a term of not less than one year, and shall provide that the same shall be automatically renewed for successive twelve (12) month periods through a date which is not earlier than sixty (60) days after the expiration date of the Lease, or any renewal or extension thereof, unless written notice of non-renewal has been given by the issuing bank to Landlord by certified mail, return receipt requested, not less than sixty (60) days prior to the expiration of the current period.  In the event that at any time during the Lease Term the financial condition of the bank issuing the letter of credit becomes unacceptable to Landlord, in Landlord's reasonable judgment, then Tenant shall replace the letter of credit with a new letter of credit subject to the foregoing criteria within ninety (90) days of Landlord's written notice ("Landlord's Replacement Notice") to Tenant requesting Tenant to replace the letter of credit.  If the issuing bank does not renew the letter of credit and if Tenant does not deliver a substitute letter of credit at least thirty (30) days prior to the expiration of the current period, or of Tenant fails to renew or replace the letter of credit at least ninety (90) days after Landlord's Replacement Notice, Landlord may draw upon the entire amount of said letter of credit and hold the proceeds thereof as a cash Security Deposit as provided above.  In the event the letter of credit is lost, stolen, mutilated, or destroyed, Tenant agrees to take such actions as are reasonably necessary to ensure that Landlord is always fully secured with a letter of credit meeting the requirements of this Article, including taking any actions necessary to replace such lost, stolen, mutilated or destroyed letter of credit.
 
Provided that there are no Events of Default (after expiration of any applicable notice and cure period) hereunder, the amount of the Security Deposit shall be conditionally subject to an annual reduction, as follows:
 
(i)   If there has been no Event of Default (after expiration of any applicable notice and cure period) at any time during the first (1 st ) Lease Year, then effective on the first day of the second (2 nd ) Lease Year the amount of the Security Deposit shall be reduced by $600,000.00, such that the amount of the Security Deposit thereafter shall be $2,400,000.00.
 
(ii)   If there has been no Event of Default (after expiration of any applicable notice and cure period) at any time during the first (1 st ) and second (2 nd ) Lease Years, then effective on the first day of the third (3 rd ) Lease Year the amount of the Security Deposit shall be reduced by another $600,000.00, such that the amount of the Security Deposit thereafter shall be $1,800,000.00.
 
(iii)   If there has been no Event of Default (after expiration of any applicable notice and cure period) at any time during the first (1 st ), second (2 nd ) and third (3 rd ) Lease Years, then effective on the first day of the fourth (4 th ) Lease Year the amount of the Security Deposit shall be reduced by another $600,000.00, such that the amount of the Security Deposit thereafter shall be $1,200,000.00.
 
(iv)   If there has been no Event of Default (after expiration of any applicable notice and cure period) at any time during the first (1 st ), second (2 nd ), third (3 rd ) and fourth (4 th ) Lease Years, then effective on the first day of the fifth (5 th ) Lease Year the amount of the Security Deposit shall be reduced by another $600,000.00, such that the amount of the Security Deposit thereafter shall be $600,000.00.
 
(v)   If there has been no Event of Default (after expiration of any applicable notice and cure period) at any time during the first (1 st ), second (2 nd ), third (3 rd ), fourth (4 th ) and fifth (5 th ) Lease Years, then effective on the first day of the sixth (6 th ) Lease Year the amount of the Security Deposit shall be reduced by another $600,000.00, such that thereafter Landlord shall not hold any amount as a Security Deposit under the Lease.
 
6.   Operating Expense Payments .
 
Commencing six (6) months after the Lease Commencement Date and continuing thereafter on the first day of each and every month of the Lease Term, Tenant shall pay Landlord an amount equal to one-twelfth (1/l2th) of the annual cost, as estimated by Landlord from time to time, of Tenant's Proportionate Share of Operating Expenses for the Building, including Building specific expenses and expenses shared by all buildings within the Park, as the case may be. Payments thereof for any fractional calendar month shall be prorated. The term "Operating Expenses" means all costs and expenses incurred by Landlord with respect to the ownership, maintenance, and operation of the Building including, but not limited to costs of: Taxes (as hereinafter defined) and fees payable to tax consultants and attorneys for consultation and contesting taxes; insurance; exterior lighting; utilities and utility lines, plus any utility service or billing charges, including, but not limited to, monthly billing fees, account set-up fees, and account move-out fees, to cover the actual costs of administrative expenses and billing charged to Landlord by any third party utility billing service; maintenance, repair and replacement of all portions of the Building, including without limitation, paving and parking areas, roads, roofs, alleys, and driveways; mowing and landscaping; marquee or pylon signs; snow removal; exterior painting; electrical systems and other mechanical and building systems, including, without limitation, fire sprinklers and fire protection systems; stormwater management expenses; amounts paid to contractors and subcontractors for work or services performed in connection with any of the foregoing; charges or assessments of any association to which the Building is subject and the Building’s pro rata share of certain expenses incurred for the Park; property management fees payable to a property manager, including any affiliate of Landlord (in all events not to exceed three percent (3%) of the total rent for the Building); security services, if any; trash collection, sweeping and removal; and additions or alterations made by Landlord to the Building in order to comply with Legal Requirements that result from a violation that first occurs after the Lease Commencement Date (other than those expressly required herein to be made by Tenant), that result from a Legal Requirement first enacted or an amendment to an existing Legal Requirement after the date hereof, or that are reasonably appropriate to the continued operation of the Building in the market area, provided that the cost of additions or alterations that are required to be capitalized for federal income tax purposes shall be amortized on a straight line basis over a period equal to the lesser of the useful life thereof for federal income tax purposes or 10 years. Operating Expenses shall include the costs and expenses for capital repairs and capital replacements required to be made by Landlord under Section 10 of this Lease provided such costs are amortized or depreciated in accordance with consistently applied accounting principles.
 
Operating Expenses shall not include (a) debt service under mortgages, (b) costs of restoration to the extent of net insurance proceeds received by Landlord with respect thereto, (c) leasing and sale commissions, (d) the costs of renovating space for tenants, including without limitation, the Tenant, (e) the costs of litigation against any tenant of the Building, which litigation costs are to be reimbursed directly to Landlord under the provisions of such tenant’s lease, (f) capital costs of expanding the Building, (g) Costs of decorating, redecorating, or special cleaning services provided with respect to the leased areas of the Building but not provided to all tenants of the Building; (h) Salaries, wages or other compensation paid to members, partners, officers or executives of Landlord or managing agent in their capacities as partners, officers and executives; (i) Charges for depreciation of the Building or equipment and any interest or other financing charge or refinancing costs; (j) Inheritance, gift, transfer, franchise, excise, net income and profit taxes or capital levies imposed on Landlord’s business, (k) capital costs relating to the original construction of the Building or the correction of latent defects in such work (except for capital repairs permitted pursuant to the preceding paragraph and provided that, without limitation, costs for ordinary wear and tear in any event will not be deemed to be defects for the purpose of this category), (l) Any operating expense representing an amount paid to a related corporation, entity, or person which is in excess of the amount which would be paid in the absence of such relationship; or any amounts paid to any person, firm or corporation related to or otherwise affiliated with Landlord or any member, general partner, officer, director or shareholder of Landlord or any of the foregoing, to the extent the same exceeds arms-length competitive prices paid in the Robbinsville, New Jersey area for similar services or goods provided, (m) any repair, replacement, removal or damage of any solar panel system that may be installed on the roof of the Building or any damage to the Building directly and solely resulting from the operation, repair or replacement of the solar panel system (provided that in the event Tenant or any of its employees, agents or contractors cause any such damage, Tenant shall be liable therefor as provided elsewhere in this Lease), and (o) costs incurred to remove any Hazardous Materials from the Building (but this exclusion shall not constitute a release by Landlord of Tenant for any such costs for which Tenant is liable pursuant to Section 30 of this Lease).
 
If Tenant's total payments of Operating Expenses for any year are less than Tenant's Proportionate Share of actual Operating Expenses for such year, then Tenant shall pay the difference to Landlord within thirty (30) days after demand, and if more, then Landlord shall retain such excess and credit it against Tenant's next monthly installment of Base Rent.  Unless Tenant gives Landlord written notice of its exception to any such demand within thirty (30) days after delivery thereof, the same shall be conclusive and binding on Tenant; provided, however, that in the event that Tenant shall give Landlord written notice of any exception within such thirty (30) day period, Tenant shall nevertheless be obligated to pay the additional rent.  For purposes of calculating Tenant's Proportionate Share of Operating Expenses, a year shall mean a calendar year except the first year, which shall begin on the Lease Commencement Date, and the last year, which shall end on the expiration of this Lease. Landlord may equitably increase Tenant's Proportionate Share for any item of expense or cost reimbursable by Tenant that relates to a repair, replacement, or service that benefits only the Premises or only a portion of the Building that includes the Premises or that varies with occupancy or use. The estimated Operating Expenses for the Premises set forth on the first page of this Lease are only estimates, and Landlord makes no guaranty or warranty that such estimates will be accurate.
 
In the event Tenant shall dispute the amount set forth in Landlord's statement of the annual reconciliation of the prior calendar year’s Operating Expenses, Tenant shall notify Landlord (“Tenant’s Exception Notice”) within thirty (30) days of Tenant’s receipt of the statement.  Provided Tenant has paid the full amount set forth in Landlord's statement, then within thirty (30) days of Tenant’s Exception Notice, Tenant shall have the right to cause Landlord's books and records with respect to the year to which such statement applies to be audited at Tenant’s sole cost and expense by an independent certified public accountant or accounting firm reasonably and mutually acceptable to Landlord and Tenant, and who shall not be compensated on a contingency basis.  Such audit shall be solely for the purpose of verifying Landlord’s statement and shall occur on a date and at a time reasonably acceptable to Landlord, at Landlord's place of business or the actual location of Landlord's books and records if different from Landlord's place of business (provided that in any event the location shall be in the State of New Jersey), during Landlord's normal business hours.  Prior to conducting such audit, both Tenant and its auditor shall execute confidentiality agreements reasonably acceptable in form and scope to Landlord and specifically including the obligation not to share the results of such inspection and audit with any other tenant of the Project.  Tenant shall notify Landlord of the results of such audit and provide Landlord with any written report and related materials and documentation in connection therewith within fifteen (15) days of the completion of the audit.  If, after such examination, it is finally determined and agreed that Landlord's statement overstated the annual Operating Expenses, Tenant shall be entitled to a credit against the monthly installment(s) of Base Rent and additional rent for any overcharge; if the statement understated the annual Operating Expenses, Tenant shall pay the balance within thirty (30) days.
 
Upon Tenant’s written request, Landlord shall provide Tenant with copies of any existing or proposed contracts for goods or services for the Building costing in excess of $25,000 and that are passed through to Tenant as part of Operating Expenses.  Landlord shall not enter into any contracts for the provision of any services or goods for the Building in excess of $25,000.00 that are passed through to Tenant as part of Operating Expenses with any corporation, entity, or person that is related to or otherwise affiliated with Landlord, unless Landlord first has competitively bid such contract or the price for such contract is not in excess of arms-length competitive prices paid in the Robbinsville, New Jersey area for similar services or goods provided in the absence of such relationship.
 
7.   Utilities .
 
Beginning on the Lease Commencement Date, Tenant shall be responsible for the cost of all utilities and services of every kind and nature used on the Premises and/or serving the Premises, including but not limited to water, gas, electricity, heat, light, power, telephone, sewer, sprinkler services, refuse and trash collection.  Without limitation of the generality of the foregoing, Tenant shall pay all maintenance charges for utilities and any similar charges for utilities imposed by a governmental entity or utility provider, together with any taxes, penalties, surcharges or the like pertaining to Tenant’s use of the Premises.
 
Gas to the Premises shall be separately metered, and Tenant shall have such meter placed in its own name and pay the costs thereof directly to the provider of said utility.  Water and sewer to the Premises shall be submetered, and Tenant shall pay Landlord its share of the cost of such utility as reflected on a submeter.  Electricity and solar energy to the Premises shall be separately sub metered by an Energy Monitoring Products System (E-Mon), which will segregate Tenant’s electricity usage and peak demand in the Premises from other parts of the Building.   The E-Mon system will monitor, report and provide meter billing statements based upon actual usage and peak demand.   Tenant shall pay electricity and solar energy to the Premises as part of the Operating Expenses of the Building as set forth in Section 6 above, except that (a) rather than paying Tenant’s Proportionate Share of such utilities in the percentage in the Basic Lease Information as set forth at the front of this Lease, Tenant shall pay for its share as determined by Landlord or its utility billing service provider based upon its review of Tenant’s usage of such utility through the E-Mon system, and (b) Tenant’s obligation to pay for such utilities that are included in Operating Expenses shall commence on the Lease Commencement Date rather than six (6) months thereafter when Tenant’s obligation to pay other non-utility Operating Expenses commences, and (c) at Landlord’s option, Landlord may separately reconcile, on a more frequent basis than it does for other Operating Expenses, the utility charges component of Operating Expenses and adjust Tenant’s estimated contribution thereto and also may bill or credit Tenant for any differences in the amounts paid by Tenant for estimated utilities and the actual utility charges on a quarterly, rather than annual, basis.
 
Tenant must not allow any utilities to be disconnected, terminated or interrupted for any reason, including for a failure to pay bills, and shall be responsible for maintaining the Premises at least at a minimum temperature of 55° so as to prevent freezing of pipes; and Tenant shall be responsible for any and all damage caused thereby, including, without limitation, damage caused by frozen pipes.  Upon expiration or termination of the Lease, any separate meter or submeter installed for or on behalf of Tenant, whether paid for by Tenant or not, shall remain on the Premises and shall be surrendered with the Premises to Landlord.  It is agreed that Landlord shall not be liable in any way for any failure to furnish or in any way for any damage or inconvenience caused by the cessation or interruption of any services of utilities whether caused by fire, accidents, strikes, breakdowns, maintenance, alterations, repairs, scarcity of labor or materials, acts of God or any other causes.  It is further agreed that any such failure or inability to furnish such utilities or services shall not be considered an eviction, actual or constructive, of Tenant from the Premises, and shall not entitle Tenant to terminate this Lease or to an abatement of rent payable hereunder.
 
8.   Taxes .
 
Landlord shall pay all Taxes that accrue against the Building during the Lease Term, which shall be included as part of the Operating Expenses charged to Tenant pursuant to Section 6.  "Taxes" shall mean any present or future federal, state, municipal, local and/or any other taxes, assessments, levies, benefit charges, and/or other governmental and/or private impositions (including business park charges and dues), levied, assessed and/or agreed to be imposed upon the real property of which the Premises are a part or any part or parts of said property, or upon the rent due and payable hereunder, whether or not now customary or within the contemplation of the parties hereto and regardless of whether the same shall be extraordinary or ordinary, general or special, foreseen or unforeseen, or similar or dissimilar to any of the foregoing but shall not include any inheritance, estate, succession, income, profits or franchise tax, provided, however, if at any time during the Lease Term or any extension thereof the method of taxation prevailing at the commencement of the Lease Term shall be altered or eliminated so as to cause the whole or any part of the items defined as Taxes above to be replaced by a levy, assessment or imposition, wholly or partly as a capital levy, or otherwise, on the rents or income (provided the tax on such income is not a tax levied on taxable income generally) received from the buildings, wholly or partly in place of an imposition on or as a substitute for, or an increase of, taxes in the nature of real estate taxes issued against the real property, then the charge to Landlord resulting from such altered or replacement method of taxation shall be deemed to be within the definition of "Taxes".  All reasonable expenses incurred by Landlord (including attorneys' fees and costs) in contesting any increase in Taxes or any increase in the assessment of the Real Property shall be included as an item of Taxes.  If, as a result of any such contest, Landlord receives during the Lease Term a refund of any portion of Taxes pertaining to a time period for which Tenant has paid Taxes under this Lease, Tenant shall be entitled to a credit for Tenant’s Proportionate Share of the refund received by Landlord for such period (less all the expenses incurred by Landlord (including attorneys’ fees and costs) in connection with such contest.  If any such tax or excise is levied or assessed directly against Tenant, then Tenant shall be responsible for and shall pay the same at such times and in such manner as the taxing authority shall require. Tenant shall be liable for all taxes levied or assessed against any personal property of fixtures placed in the Premises, whether levied or assessed against Landlord or Tenant.
 
9.   Insurance.
 
Landlord shall maintain all risk property insurance covering the full replacement cost of the Building, less a commercially reasonable deductible. Landlord shall also maintain commercial liability insurance for the common areas of the Building.  The commercial liability policy for the common areas of the Building shall name Tenant as an additional insured.  Certificates thereof shall be delivered to Tenant by Landlord upon commencement of the Lease Term and upon each renewal of said insurance.  Landlord may, but is not obligated to, maintain such other insurance and additional coverage as it may deem necessary, including, but not limited to, rent loss insurance. All such insurance shall be included as part of the Operating Expenses charged to Tenant pursuant to Section 6.  The Building may be included in a blanket policy (in which case the cost of such insurance allocable to the Building will be determined by Landlord based upon the insurer's cost calculations). Tenant shall also reimburse Landlord for any increased premiums or additional insurance which Landlord reasonably deems necessary as a result of Tenant's use of the Premises.
 
Effective as of the earlier of the date Tenant enters or occupies the Premises or the Lease Commencement Date and continuing during the Lease Term, Tenant, at its expense, shall maintain: (i) all risk property insurance covering the full replacement cost of all property and improvements installed or placed in the Premises by Tenant or by Landlord on Tenant’s behalf, including but not limited to any initial Tenant improvements or Landlord’s work, and whether at Landlord’s or Tenant’s expense, less a commercially reasonable deductible; (ii) worker's compensation insurance with no less than the greater of the minimum limits required by law or $1,000,000; (iii) employer's liability insurance with such limits as the greater of those required by law or $1,000,000; and, (iv) commercial liability insurance with a minimum limit of $2,000,000 per occurrence and a minimum umbrella of $2,000,000, for a total minimum combined general liability and umbrella limit of $4,000,000 (together with such additional umbrella coverage as Landlord may reasonably require) for property damage, personal injuries or deaths of persons occurring in or about the Premises. Landlord may from time to time require reasonable increases in any such limits. The commercial liability policies shall name Landlord and Landlord’s property management agent (and, upon request, any holder of any mortgage securing the Building) as additional insureds, insure on an occurrence and not a claims-made basis, be issued by insurance companies which are reasonably acceptable to Landlord, not be cancelable unless thirty (30) days prior written notice shall be given to Landlord, contain a hostile fire endorsement and a contractual liability endorsement and provide primary coverage to Landlord (any policy issued to Landlord providing duplicate or similar coverage shall be deemed excess over Tenant's policies). Such policies or certificates thereof shall be delivered to Landlord by Tenant upon commencement of the Lease Term and upon each renewal of said insurance.
 
The all risk property insurance obtained by Landlord and Tenant shall include a waiver of subrogation by the insurers and all rights based upon an assignment from its insured, against Landlord and Tenant, their officers, directors, employees, managers, agents, invitees and contractors, in connection with any loss or damage thereby insured against. Neither party nor its officers, directors, employees, managers, agents, invitees or contractors shall be liable to the other for loss or damage caused by a risk which is covered by all risk property insurance actually in place, and each party waives any claims against the other party and its officers, directors, employees, managers, agents, invitees and contractors for such loss or damage; however, Landlord’s waiver shall not apply to any deductible amounts maintained by Landlord under its insurance. The failure of a party to insure its property shall not void this waiver. Each party and its agents, employees and contractors shall not be liable for, and the other party hereto hereby waives all claims against such parties for, business interruption and losses occasioned thereby sustained by the waiving party or any person claiming through Tenant resulting from any accident or occurrence in or upon the Premises or the Building from any cause whatsoever, including without limitation, damage caused in whole or in part, directly or indirectly, by the negligence of the other party or its agents, employees or contractors.
 
For any subcontractors or vendors that Tenant brings onto the Building, Tenant shall confirm that they have insurance coverage, at the subcontractor's or vendor’s expense, in the following minimum amounts: (a) Workers Compensation - Statutory Amount in the state of New Jersey; (b)  Employer's Liability - $500,000 or such other higher limits imposed in accordance with the requirement, if any, of the laws of the state of New Jersey; (c) Commercial General Liability - Unless otherwise approved in writing by Landlord, $1,000,000 per occurrence for “high risk” and “medium risk” subcontractors (and $500,000 per occurrence for “low risk” subcontractors), $2,000,000 general aggregate for “high risk” and “medium risk” subcontractors (and $1,000,000 general aggregate for “low risk” subcontractors) with Products/Completed Operations coverage (with evidence of Products/Completed Operations Coverage shown for a minimum of two years following completion of the work described in the contract); (d) Commercial Automobile Liability including hired and non-owned auto coverage - $1,000,000 combined single limit for “high risk” subcontractors and any towing subcontractor (and $500,000 for “medium risk” and “low risk” subcontractors); and (e) Umbrella/Excess - $4,000,000 for “high risk” subcontractors (and $2,000,000 for “medium risk” subcontractors and $1,000,000 for “low risk” subcontractors). (f) Such other insurance as may be necessary or desirable based on the nature of the subcontractor, including Liquor Liability for caterers and bartenders, and garage liability for any towing service. This insurance will be primary and noncontributory with respect to the insurance carried by Landlord.  Tenant shall ensure that Landlord and its property manager (and, upon request, any holder of any mortgage securing the Building) are named as additional insureds on the subcontractor's or vendor’s Commercial General Liability and Commercial Automobile Liability insurance.  The subcontractor's or vendor’s respective insurance carriers shall waive all rights of subrogation against Landlord and its property manager (and, upon request, any holder of any mortgage securing the Building) with respect to losses payable under such policies.  Higher limits of coverage may be required if the work to be done is hazardous or extensive.   Such policies or certificates thereof shall be delivered to Landlord by Tenant prior to the subcontractor’s or vendor’s entry onto the Building. 
 
10.   Landlord's Repairs .
 
Landlord shall be responsible, at its sole cost and expense and not as part of Operating Expenses, for the cost to correct any violations of Legal Requirements that pertain to the structural portions of the Premises and that exist as of the Lease Commencement Date; provided, however, Landlord shall not be required to correct such violation (and instead it shall be Tenant’s responsibility) if the same have been imposed or are imposed or are applicable as a result of the negligence of Tenant or any person and/or entity retained by or acting on Tenant’s behalf, of Tenant’s use of the Premises, of any of the Tenant Improvements or any other Tenant-Made Alterations, or of Tenant’s failure to comply with any of its obligations under this Lease including without limitation any repair obligations of Tenant.  Landlord additionally shall maintain at its own cost and expense (and not as part of Operating Expenses) the structural soundness of the roof, the structural soundness of the concrete floors and foundation, and the structural soundness of the exterior walls of the Building in good repair and condition (including replacement of any items when necessary), reasonable wear and tear and uninsured losses and damages caused by Tenant, its agents and contractors excluded. The term "walls" as used in this Section shall not include windows, glass or plate glass, doors or overhead doors, special store fronts, dock seals, dock bumpers, dock plates or levelers, or office entries. Landlord shall also maintain in good repair and condition the parking areas and other common areas of the Building, including but not limited to, roofs, driveways, alleys, landscape and grounds surrounding the Premises, the costs of which shall be included as part of the Operating Expenses charged to Tenant pursuant to Section 6.  Tenant shall promptly give Landlord written notice of any repair or replacement required by Landlord pursuant to this Section, after which Landlord shall have a reasonable opportunity to repair or replace.  To the extent that any such needed repair or replacement materially and adversely affects Tenant’s use and occupancy of the Premises, Landlord agrees to timely commence and diligently pursue the completion of any such repair or replacement.
 
If Landlord fails to timely make any repair that it is required to perform under this Lease, and such failure materially and adversely impairs Tenant’s ability to use and occupy the Premises for the operation of its business pursuant to the terms of this Lease, then Tenant shall send Landlord a second written notice informing Landlord of its failure to make such repair and informing Landlord that Tenant intends to complete such repair.  If Landlord fails to commence and diligently pursue completion of such repair within five (5) days of receipt of such notice from Tenant, then Tenant at its option shall have the right to make such repair identified in its notice, and to be reimbursed by Landlord for the reasonable costs thereof; provided that Tenant shall have no right to deduct any costs that it incurs pursuant to this paragraph from the Rent payable under this Lease.  In performing any repairs under this paragraph, Tenant shall not breach any term or condition of any existing warranties on any Building system or roof, and all repair work done in accordance with this paragraph must be performed at a reasonable and competitive cost and expense and by duly licensed and insured contractors.  Anything in this Lease to the contrary notwithstanding, Landlord agrees that in the event of an emergency which: (A) poses the threat of imminent, severe damage to Tenant’s customers or employees or to Tenant’s property; and (B) necessitates prompt repair of items which are otherwise required by this Lease to be repaired by Landlord, then Tenant may at its option proceed forthwith to make such emergency repair as is reasonably necessary to abate the emergency condition if (1) Tenant is unable to notify Landlord of such emergency condition after using diligent efforts to contact Landlord and advise it of same, or (2) Landlord fails to make immediate repairs after being notified of the emergency condition.
 
11.   Tenant's Repairs .
 
Subject to Landlord's obligation in Section 10 and subject to Sections 9 and 15, Tenant, at its expense, shall repair, replace and maintain in good condition all portions of the Premises and all areas, improvements and systems exclusively serving the Premises including, without limitation, entries, doors, ceilings, windows, interior walls, the interior side of demising walls and the heating, ventilation and air conditioning system. Tenant shall also be responsible for any in-rack fire sprinklers or other fire sprinklers and fire sprinkler systems exclusively serving the Premises and not part of the Building-standard fire sprinklers and fire sprinkler system.  Such repair and replacements include capital expenditures and repairs whose benefit may extend beyond the Term. At Tenant’s expense, Tenant shall maintain maintenance and repair contracts for the heating, ventilation and air conditioning systems and other mechanical and building systems serving the Premises and shall, upon Landlord's request, provide Landlord with a copy thereof and proof that such contract is in full force and effect.  The scope of services and contractors under such maintenance and repair contracts shall be subject to Landlord’s prior written approval, which shall not be unreasonably withheld, delayed or conditioned.  If Tenant fails to perform any maintenance, repair or replacement for which it is responsible within a commercially reasonable period after Landlord’s notice to do so (except in case of an emergency or situation involving imminent harm to persons or property, in which case Landlord may act immediately), Landlord may, but shall not have the obligation to, perform such work and shall be reimbursed by Tenant, as additional rent hereunder, within 10 days after demand therefor. Subject to Sections 9 and 15, Tenant shall bear the full cost of any repair or replacement to any part of the Building that results from damage caused by Tenant, its agents, contractors, or invitees, and any repair that benefits only the Premises.
 
12.   Tenant-Made Alterations and Trade Fixtures .
 
Any alterations, additions, or improvements to the Premises made by or on behalf of Tenant ("Tenant-Made Alterations"), shall be subject to Landlord's prior written consent, which shall not be unreasonably withheld, conditioned or delayed provided that such Tenant-Made Alterations do not affect any of the Building’s structure, foundation, roof, appearance or building systems.  Notwithstanding the foregoing, Tenant shall have the right to make certain Tenant-Made Alterations without Landlord’s consent provided (i) such Tenant-Made Alterations do not affect any of the Building’s structure, concrete floors, foundation, roof, walls, appearance or building systems, including, without limitation plumbing, electrical, and HVAC systems, (ii) do not exceed One Hundred Thousand and No/100 Dollars ($100,000.00) in any one instance or Two Hundred Thousand and No/100 Dollars ($200,000.00) cumulatively during any calendar year, and (iii) at least ten (10) days prior to making any such Tenant-Made Alterations, Tenant will notify Landlord of its intention to do so and will provide Landlord with a copy  of all plans or drawings, if any, for such Tenant-Made Alterations, copies of any required licenses or permits, and certificates of insurance for worker's compensation and other coverage in amounts from an insurance company reasonably satisfactory to Landlord protecting Landlord and its property manager against liability for personal injury or property damage during construction. Tenant shall cause, at its expense, all Tenant-Made Alterations to comply with insurance requirements and with Legal Requirements as a result of any Tenant-Made Alterations, including all applicable zoning and municipal regulations as well as any requirements under any association agreements, covenants or easements applicable to the Building.  Tenant shall obtain at its cost and expense all applicable governmental permits and approvals for Tenant-Made Alterations. All Tenant-Made Alterations shall be constructed in a good and workmanlike manner by contractors reasonably acceptable to Landlord and only grades of materials acceptable to Landlord shall be used. All plans and specifications for any Tenant-Made Alterations shall be submitted to Landlord for its prior written approval, as provided above. Landlord may monitor construction of the Tenant-Made Alterations. Tenant shall reimburse Landlord for its reasonable out-of-pocket costs in reviewing plans and specifications. Landlord's right to review plans and specifications and to monitor construction shall be solely for its own benefit, and Landlord shall have no duty to see that such plans and specifications or construction comply with applicable laws, codes, rules and regulations. Tenant shall provide Landlord with the identities and mailing addresses of all persons performing work or supplying materials, prior to beginning such construction, and Landlord may post on and about the Premises notices of non-responsibility pursuant to applicable law. Tenant shall be responsible at its sole cost and expense for the payment of all work and for the completion of all work free and clear of liens and shall provide certificates of insurance for worker's compensation and other coverage in amounts from an insurance company satisfactory to Landlord protecting Landlord against liability for personal injury or property damage during construction. Upon completion of any Tenant-Made Alterations, Tenant shall deliver to Landlord sworn statements setting forth the names of all contractors and subcontractors who did work on the Tenant-Made Alterations and final lien waivers from all such contractors and subcontractors. Upon surrender of the Premises, all Tenant-Made Alterations and any leasehold improvements constructed by Landlord or Tenant shall remain on the Premises as Landlord's property, except to the extent Landlord requires removal at Tenant's expense of any such items pursuant to Section 21 of this Lease or Landlord and Tenant have otherwise agreed in writing in connection with Landlord's consent to any Tenant-Made Alterations. Tenant shall repair any damage caused by such removal.
 
Tenant, at its own cost and expense and without Landlord's prior approval, may erect such removable shelves, bins, and normal office equipment (collectively "Trade Fixtures") and paint any portion of the interior of the Premises in the ordinary course of its business provided that such items do not alter the basic character of the Premises, do not overload or damage the Premises or any component thereof, and may be removed without injury to the Premises. The construction, erection, installation thereof must also comply with all Legal Requirements and with Landlord's requirements set forth above. Upon expiration or termination of the Lease, Tenant shall remove its Trade Fixtures and shall repair any damage caused by such removal.  Notwithstanding the foregoing, Landlord acknowledges and agrees that Tenant’s racking will be anchored to the concrete slab of the Building and that, upon Tenant vacating the Premises, these anchors will be cut flush with the slab and neither removed nor filled.
 
13.   Signs .
 
Tenant shall be permitted to place signs in the locations shown in Exhibit C-2 , as more particularly depicted in such Exhibit.  Tenant shall not make any changes to the exterior of the Premises, install any exterior lights, decorations, balloons, flags, pennants, banners, or painting, or erect or install any signs, placards, decorations, or advertising media of any type which can be viewed from the exterior of the Premises, without Landlord's prior written consent.  With Landlord’s prior consent, which shall not be unreasonably withheld, conditioned or delayed provided such signs otherwise comply with the requirements of this section, Tenant may place signs designating reserved employee, visitor or customer parking (in areas expressly permitted for same pursuant to the parking provisions of this Lease), directional signs indicating shipping and receiving areas of the Premises, and canopies over  the retail entrance, the public entrance, and shipping and receiving doors. In its discretion, and with Landlord’s prior consent, which shall not be unreasonably withheld, conditioned or delayed provided such signs otherwise comply with the requirements of this section, Tenant may place other signs relating to Tenant’s business at the Premises, provided such signs are similar to other signs for businesses in the Project, the Applegate Road Owners Association gives its written approval prior to installation and such signs otherwise comply with the requirements of this section.  Provided that Landlord has approved Tenant’s signage at issue, Landlord agrees, at Tenant’s sole cost and expense, to support Tenant’s signage requests during any approval process for such signage before the Applegate Road Owners Association.  Signs shall be properly installed and maintained by Tenant at Tenant’s sole cost and expense.  Upon surrender or vacation of the Premises, Tenant shall have removed all signs and repair, paint, and/or replace the building fascia surface to which its signs are attached. Signs shall conform to all applicable zoning and municipal regulations as well as any requirements under any association agreement, covenants or easements applicable to the Building, including, but not limited to the Applegate Road Owners Association, and Tenant shall obtain all applicable governmental and association permits and approvals for sign and exterior treatments.
 
14.   Parking .
 
Tenant shall be entitled to the exclusive use of the car and truck parking areas marked as “Exclusive” on Exhibit A-1.  Tenant additionally shall have the option to fence in a portion of the parking area and fence in the west truck docks limiting traffic and access to that side of the Building in front of Tenant’s docks, as shown on Exhibit A-1, to be used for parking and truck and trailer storage, subject to Tenant’s compliance with all Legal Requirements, including without limitation any fire/life safety and permitting requirements.  Landlord shall not be responsible for enforcing Tenant's parking rights against any third parties.
 
15.   Restoration .
 
If at any time the Premises are damaged by a fire or other casualty, Landlord shall notify Tenant within sixty (60) days after such damage as to the amount of time Landlord reasonably estimates it will take to restore the Premises. If the restoration time is estimated to exceed six (6) months, either Landlord or Tenant may elect to terminate this Lease upon notice to the other party given no later than thirty (30) days after Landlord's notice. If neither party elects to terminate this Lease or if Landlord estimates that restoration will take six (6) months or less, then, subject to receipt of sufficient insurance proceeds, Landlord shall promptly restore the Premises excluding the improvements installed by Tenant or by Landlord on Tenant’s behalf, subject to delays arising from the collection of insurance proceeds or from Force Majeure events. Tenant at Tenant's expense shall promptly perform, subject to delays arising from the collection of insurance proceeds or from Force Majeure events, all repairs or restoration not required to be done by Landlord and shall promptly re-enter the Premises and commence doing business in accordance with this Lease. Notwithstanding the foregoing, either party may terminate this Lease if the Premises are damaged during the last year of the Lease Term and Landlord reasonably estimates that it will take more than one month to repair such damage. Tenant shall pay to Landlord with respect to any damage to the Premises the amount of the commercially reasonably deductible under Landlord's insurance policy within ten (10) days after the presentment of Landlord's invoice. If the damage involves the premises of other tenants, Tenant shall pay the portion of the deductible that the cost of the restoration of the Premises bears to the total cost of restoration, as determined by Landlord. Base Rent and Operating Expenses shall be abated for the period of repair and restoration in the proportion which the area of the Premises, if any, which is not usable by Tenant bears to the total area of the Premises. Such abatement shall be the sole remedy of Tenant, and except as provided herein, Tenant waives any right to terminate the Lease by reason of damage or casualty loss.  Tenant further waives all claims (i) for any damage or injury resulting from any damage or destruction, (ii) for any loss of profits or interruption of business resulting from Tenant’s inability to use and occupy the Premises or any part thereof as a result of any damage or destruction, or (iii) by reason of any required surrender of possession of the Premises pursuant to this Section.  Tenant also waives the benefit of New Jersey Revised Statutes, Title 46, Chapter 8, Sections 6 and 7, and agrees that Tenant will not be relieved of the obligation to pay Rent in case of damage or destruction to the Premises or the Building, except as expressly provided in this Section.
 
16.   Condemnation .
 
If any part of the Premises should be taken for any public or quasi-public use under governmental law, ordinance, or regulation, or by right of eminent domain, or by private purchase in lieu thereof (a "Taking" or "Taken"), and the Taking  materially interferes with Tenant's use of the entire Premises or would materially interfere with or impair Landlord’s ownership or operation of the Building, then upon written notice by Landlord this Lease shall terminate and Base Rent shall be apportioned as of said date. If part of the Premises shall be Taken, and this Lease is not terminated as provided above, the Base Rent payable hereunder during the unexpired Lease Term shall be reduced to such extent as may be fair and reasonable under the circumstances. In the event of any such Taking, Landlord shall be entitled to receive the entire price or award from any such Taking without any payment to Tenant, and Tenant hereby assigns to Landlord Tenant's interest, if any, in such award. Tenant shall have the right, to the extent that same shall not diminish Landlord's award, to make a separate claim against the condemning authority (but not Landlord) for such compensation as may be separately awarded or recoverable by Tenant for moving expenses, and damage to Tenant's Trade Fixtures, if a separate award for such items is made to Tenant.
 
This Section of the Lease constitutes an express agreement and stipulation governing any case of damage or destruction of the Premises or the Building by fire or other casualty for the purposes of N.J.S.A. 46:8-6 and 7, and Tenant hereby waives the provisions of such statute and any similar laws which provide additional rights and remedies in such instance.
 
17.   Assignment and Subletting .
 
Without Landlord's prior written consent, which shall not be unreasonably withheld,  conditioned or delayed, Tenant shall not assign this Lease or sublease the Premises or any part thereof or mortgage, pledge, or hypothecate its leasehold interest or grant any concession or license within the Premises and any attempt to do any of the foregoing shall be void and of no effect. For purposes of this Section, a transfer of the majority of the ownership interests controlling Tenant shall be deemed an assignment of this Lease unless such ownership interests are publicly traded. Notwithstanding the above, Tenant may assign or sublet the Premises or any part thereof, to any entity controlling Tenant, controlled by Tenant or under common control with Tenant (a "Tenant Affiliate"), without the prior written consent of Landlord but with prior written notice to Landlord, provided the assignee assumes, in full, the obligations of Tenant under this Lease and any such assignment or sublease shall not relieve Tenant of its obligations hereunder, and provided further that the Tenant Affiliate is utilizing the space for a similar operation as Tenant. Tenant shall reimburse Landlord for all of Landlord's reasonable out-of-pocket expenses in connection with any assignment or sublease. Upon Landlord's receipt of Tenant's written notice of a desire to assign the Lease or sublet the Premises, or any part thereof, (provided that any such sublease is for all or substantially all of the entire remaining Term) (other than to a Tenant Affiliate that is utilizing the space for a similar operation as Tenant), Landlord may, by giving written notice to Tenant within thirty (30) days after receipt of Tenant's notice, terminate this Lease with respect to the space described in Tenant's notice, as of the date specified in Tenant's notice for the commencement of the proposed assignment or sublease.
 
Notwithstanding any assignment or subletting, Tenant and any guarantor or surety of Tenant's obligations under this Lease shall at all times remain fully responsible and liable for the payment of all rent and for compliance with all of Tenant's other obligations under this Lease (regardless of whether Landlord's approval has been obtained for any such assignments or sublettings). In the event that (a) the rent due and payable by a sublessee or assignee (or a combination of the rent payable under such sublease or assignment plus any bonus or other consideration therefor or incident thereto) exceeds (b) the rent payable under this Lease   plus Tenant’s third-party costs actually and reasonably incurred in preparing the Premises for such assignee or sublessee, brokerage commissions and legal expenses, and any other third-party expense that is reasonable and not in excess of arms-length competitive prices paid in the Robbinsville, New Jersey market, then Tenant shall be bound and obligated to pay Landlord fifty percent (50%) of all such excess rent and other excess consideration within ten (10) days following receipt thereof by Tenant. Tenant expressly waives any right that it might have to retain such excess pursuant to the provisions of section 365(f) of the Bankruptcy Code.  Landlord shall have the right to inspect and audit Tenant's books and records relating to any sublease, assignment or other transfer.
 
If this Lease be assigned or if the Premises be subleased (whether in whole or in part) or in the event of the mortgage, pledge or hypothecation of Tenant's leasehold interest or grant of any concession or license within the Premises or if the Premises be occupied in whole or in part by anyone other than Tenant, then upon a default by Tenant hereunder, Landlord may collect any rent due hereunder from the assignee, sublessee, mortgagee, pledgee, party to whom the leasehold interest was hypothecated, concessionee or licensee or other occupant and, except to the extent set forth in the preceding paragraph, apply the amount collected to the rent due hereunder; and all such rent collected by Tenant shall be held in trust for Landlord and immediately forwarded to Landlord. No such transaction or collection of any rent due hereunder or application thereof by Landlord, however, shall be deemed a waiver of these provisions or a release of Tenant from the further performance by Tenant of its covenants, duties, or obligations hereunder.
 
18.   Indemnification .
 
Landlord, its employees and agents shall not be liable to Tenant, its employees, agents, invitees or any other person or entity claiming through Tenant for any damage, and Tenant and all those claiming by, through or under Tenant shall store their property in and shall occupy and use the Premises and any improvements therein and appurtenances thereto and all other portions of the Building solely at their own risk.  To the extent permitted by law, Tenant agrees to indemnify, defend (with counsel reasonably acceptable to Landlord) and hold harmless Landlord, and Landlord's managers, agents, employees and contractors, from and against any and all claims, demands, losses, liabilities, causes of action, suits, judgments, damages, costs and expenses (including attorneys' fees) arising from any occurrence on the Premises, the use and occupancy of the Premises, or from any activity, work or things done, permitted or suffered by Tenant in or about the Premises or due to any other act or omission of Tenant, its subtenants, assignees, invitees, employees, contractors and agents, or from Tenant’s failure to perform its non-monetary obligations under this Lease (Tenant shall be liable for damages for breach of any monetary obligations under this Lease pursuant to the provisions of Section 24 hereunder and at law and in equity); provided that Tenant shall not indemnify Landlord against the negligence or reckless behavior of Landlord or any of Landlord’s managers, agents, employees and contractors.  This indemnity provision shall survive termination or expiration of this Lease.  The furnishing of insurance required hereunder shall not be deemed to limit Tenant's obligations under this Section.
 
19.   Inspection and Access .
 
Landlord and its agents, representatives, and contractors may enter the Premises at any reasonable time upon reasonable prior notice (which may be verbal and which shall not be required, however, in an emergency) to inspect the Premises and to make such repairs as may be required or permitted pursuant to this Lease and for any other business purpose. Landlord and Landlord's representatives may enter the Premises during business hours upon reasonable prior notice (which may be verbal) for the purpose of showing the Premises to prospective purchasers and, during the last year of the Lease Term, to prospective tenants. Landlord may erect a suitable sign on the Premises stating the Premises are available to let or that the Building is available for sale. Landlord may grant easements, make public dedications, designate common areas and create restrictions on or about the Premises, provided that no such easement, dedication, designation or restriction materially and adversely interferes with Tenant's use or occupancy of the Premises, the parking areas of the Premises or Tenant’s access thereto. At Landlord's request, Tenant shall execute such instruments as may be necessary for such easements, dedications or restrictions.
 
20.   Quiet Enjoyment .
 
If, at all times during the Lease Term, Tenant shall perform all of the covenants and agreements herein required to be performed by Tenant, Tenant, subject to the terms of this Lease and all matters of record, shall have peaceful and quiet enjoyment of the Premises against any person claiming by, through or under Landlord.
 

 
 
 

21.   Surrender .
 
No act by Landlord shall be an acceptance of a surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid unless it is in writing and signed by Landlord.  Upon termination of the Lease Term or earlier termination of Tenant's right of possession, Tenant shall surrender the Premises to Landlord in good condition, broom clean, ordinary wear and tear and casualty loss and condemnation covered by Sections 15 and 16 excepted. All Tenant-Made Alterations, including the initial Tenant Improvements to the Premises, shall, at Landlord’s option, remain upon the Premises and be surrendered without disturbance, molestation or damage.  Should Landlord elect that any Tenant-Made Alterations be removed upon expiration or termination of the Lease, Tenant hereby agrees to cause same to be removed at Tenant’s sole cost and expense.  Any Trade Fixtures, Tenant-Made Alterations and property not so removed by Tenant as permitted or required herein shall be deemed abandoned and may be stored, removed, and disposed of by Landlord at Tenant's expense, and Tenant waives all claims against Landlord for any damages resulting from Landlord's retention and disposition of such property. All obligations of Tenant hereunder not fully performed as of the termination of the Lease Term shall survive the expiration or termination of the Lease Term, including without limitation, indemnity obligations, payment obligations with respect to Operating Expenses and obligations concerning the condition and repair of the Premises.
 
Notwithstanding the foregoing, Tenant, upon submitting its request to Landlord to make any Tenant-Made Alterations, including all or any portion of the initial Tenant Improvements pursuant to Exhibit C hereto, shall have the right to request therein that Landlord specify whether and to what extent Landlord will require Tenant to remove the Tenant-Made Alterations, for which consent is being sought, at or prior to the end of the Lease Term.  If Tenant shall fail to request such information in its request to make any Tenant-Made Alterations, then all such Tenant-Made Alterations shall thereafter be subject to the exercise of Landlord's rights to require removal of such Tenant-Made Alterations. If Tenant submits its request for such information in accordance with the foregoing provisions and Landlord consents to the Tenant-Made Alterations requested, Landlord shall, together with its consent, specify in writing whether and to what extent it will require Tenant to remove the Tenant-Made Alterations in question at or prior to the end of the Lease Term, and if Landlord fails so to specify, Tenant shall have no further obligation to remove the Tenant-Made Alterations which were the subject of Tenant's request.
 
22.   Holding Over .
 
If Tenant retains possession of the Premises after the termination of the Lease Term, unless otherwise agreed in writing, such possession shall be subject to immediate termination by Landlord at any time, and all of the other terms and provisions of this Lease (excluding any expansion or renewal option or other similar right or option) shall be applicable during such holdover period, except that Tenant shall pay Landlord as an occupancy fee for the holdover period, an amount equal to one hundred twenty five percent (125%) of the Base Rent in effect on the termination date for the first month after the termination date and one hundred fifty percent (150%) of the Base Rent in effect on the termination date, computed on a monthly basis for each month or part thereof during such holding over. All other payments shall continue under the terms of this Lease. In addition, Tenant shall be liable for all damages incurred by Landlord as a result of such holding over. No holding over by Tenant, whether with or without consent of Landlord, shall operate to extend this Lease except as otherwise expressly provided, and this Section shall not be construed as consent for Tenant to retain possession of the Premises.
 
23.   Events of Default .
 
Each of the following events shall be an event of default ("Event of Default") by Tenant under this Lease :
 
(a)           Tenant shall fail to pay any installment of Base Rent or any other payment required herein when due, and such failure shall continue for a period of five (5) days from the date such payment was due; provided that, on up to one (1) occasion in any twelve (12) month period, there shall exist no Event of Default unless Tenant shall have been given written notice of such failure and shall not have made the payment within five (5) business days following the giving of such notice.
 
(b)           Tenant or any guarantor or surety of Tenant's obligations hereunder shall (i) make a general assignment for the benefit of creditors; (ii) commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or of any substantial part of its property (collectively a “proceeding for relief”); (iii) become the subject of any proceeding for relief which is not dismissed within ninety (90) days of its filing or entry; (iv) die or suffer a legal disability (if Tenant, guarantor, or surety is an individual) or be dissolved or otherwise fail to maintain its legal existence (if Tenant, guarantor or surety is a corporation, partnership or other entity).
 
(c)           Any insurance required to be maintained by Tenant pursuant to this Lease shall be canceled or terminated or shall expire or shall be reduced or materially changed, except, in each case, as permitted in this Lease or as simultaneously replaced by new insurance complying with the provisions of this Lease so as to prevent any lapse in coverage.
 
(d)           Tenant shall not occupy or shall vacate the Premises or shall fail to continuously operate its business at the Premises for the permitted use set forth herein, whether or not Tenant is in monetary or other default under this Lease.
 
(e)           Tenant shall attempt or there shall occur any assignment, subleasing or other transfer of Tenant's interest in or with respect to this Lease except as otherwise permitted in this Lease.
 
(f)           Tenant shall fail to discharge any lien placed upon the Premises in violation of this Lease within sixty (60) days after any such lien or encumbrance is filed against the Premises.
 
(g)           Tenant shall fail to comply with any provision of this Lease other than those specifically referred to in this Section, and except as otherwise expressly provided herein, such default shall continue for more than thirty (30) days after Landlord shall have given Tenant written notice of such default (provided that, if such failure is curable but is not reasonably capable of being cured within thirty (30) days, then such cure period shall be extended for such additional period as may be reasonably required up to a maximum of ninety (90) days, so long as Tenant commences such cure within said thirty (30) days period and thereafter diligently and in good faith pursues such cure to completion).
 
24.   Landlord's Remedies .
 
Upon each occurrence of an Event of Default, Landlord may at any time thereafter at its election, terminate this Lease or Tenant's right of possession, (but Tenant shall remain liable as hereinafter provided) and/or pursue any other remedies at law or in equity. Upon the termination of this Lease or termination of Tenant's right of possession, it shall be lawful for Landlord, without formal demand or notice of any kind, to re-enter the Premises by summary dispossession proceedings or any other action or proceeding authorized by law and to remove Tenant and all persons and property therefrom. If Landlord re­enters the Premises, Landlord shall have the right to keep in place and use, or remove and store, all of the furniture, fixtures and equipment at the Premises.
 
If Landlord terminates this Lease, Landlord may recover from Tenant the sum of: all Base Rent and all other amounts accrued hereunder to the date of such termination; the cost of reletting the whole or any part of the Premises, including without limitation brokerage fees and/or leasing commissions incurred by Landlord, and costs of removing and storing Tenant's or any other occupant's property, repairing, altering, remodeling, or otherwise putting the Premises into condition acceptable to a new tenant or tenants, and all  expenses incurred by Landlord in pursuing its remedies, including reasonable attorneys' fees and court costs; and an amount in cash equal to the then present value of the Base Rent and other amounts payable by Tenant under this Lease as would otherwise have been required to be paid by Tenant to Landlord during the period following the termination of this Lease measured from the date of such termination to the expiration date stated in this Lease, less the fair market value of the Premises (which shall include a reasonable period of vacancy following Landlord’s recovery of legal possession and the reletting of the Premises to a new tenant, as well as any market rate tenant inducements or tenant concessions). If Landlord has relet the Premises at the time of the determination of the fair market value, the fair market value shall conclusively be determined by the net rents payable under the new lease for the Premises.  Such present value shall be calculated at a discount rate equal to the 90-day U.S. Treasury bill rate at the date of such termination.
 
If Landlord terminates Tenant's right of possession (but not this Lease), Landlord may, but shall be under no obligation to, relet the Premises for the account of Tenant for such rent and upon such terms as shall be satisfactory to Landlord without thereby releasing Tenant from any liability hereunder and without demand or notice of any kind to Tenant. For the purpose of such reletting Landlord is authorized to make any repairs, changes, alterations, or additions in or to the Premises as Landlord deems reasonably necessary or desirable. If the Premises are not relet, then Tenant shall pay to Landlord as damages a sum equal to the amount of the rental reserved in this Lease for such period or periods, plus the cost of recovering possession of the Premises (including attorneys' fees and costs of suit), the unpaid Base Rent and other amounts accrued hereunder at the time of repossession, and the costs incurred in any attempt by Landlord to relet the Premises. If the Premises are relet and a sufficient sum shall not be realized from such reletting (after first deducting therefrom, for retention by Landlord, the unpaid Base Rent and other amounts accrued hereunder at the time of reletting, the cost of recovering possession (including attorneys' fees and costs of suit), all of the costs and expense of repairs, changes, alterations, and additions, the expense of such reletting (including without limitation brokerage fees and leasing commissions) and the cost of collection of the rent accruing therefrom) to satisfy all rental provided for in this Lease to be paid, then Tenant shall immediately satisfy and pay any such deficiency. Any such payments due Landlord shall be made upon demand therefor from time to time and Tenant agrees that Landlord may file suit to recover any sums falling due from time to time. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect in writing to terminate this Lease for such previous breach.
 
Exercise by Landlord of any one or more remedies hereunder granted or otherwise available shall not be deemed to be an acceptance of surrender of the Premises and/or a termination of this Lease by Landlord, whether by agreement or by operation of law, it being understood that such surrender and/or termination can be effected only by the written agreement of Landlord and Tenant. Any law, usage, or custom to the contrary notwithstanding, Landlord shall have the right at all times to enforce the provisions of this Lease in strict accordance with the terms hereof; and the failure of Landlord at any time to enforce its rights under this Lease strictly in accordance with the same shall not be construed as having created a custom in any way or manner contrary to the specific terms, provisions, and covenants of this Lease or as having modified the same. Tenant and Landlord further agree that forbearance or waiver by Landlord to enforce its rights pursuant to this Lease or at law or in equity, shall not be a waiver of Landlord's right to enforce one or more of its rights in connection with any subsequent default. A receipt by Landlord of any rental due under this Lease or other payment with knowledge of the breach of any covenant hereof shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Landlord. To the greatest extent permitted by law, Tenant waives the service of notice of Landlord's intention to re-enter as provided for in any statute, or to institute legal proceedings to that end.  Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event Tenant shall be evicted or dispossessed from the Premises for any cause, or Landlord re-enters the Premises following the occurrence of any default hereunder, or this Lease is terminated before the lease expiration date, as well as any rights it may have under N.J.S.A. 2A:18-60.
 
The terms "enter" "re-enter", "entry" or "re-entry", as used in this Lease, are not restricted to their technical legal meanings. Any reletting of the Premises shall be on such terms and conditions as Landlord in its sole discretion may determine (including without limitation a term different than the remaining Lease Term, rental concessions, alterations and repair of the Premises, lease of less than the entire Premises to any tenant and leasing any or all other portions of the Building before reletting the Premises). Landlord shall not be liable, nor shall Tenant's obligations hereunder be diminished because of, Landlord's failure to relet the Premises or collect rent due in respect of such reletting.
 
25.   Tenant's Remedies .
 
Landlord shall not be in default hereunder unless Landlord fails to perform any of its obligations hereunder within thirty (30) days after written notice from Tenant specifying such failure (unless such performance will, due to the nature of the obligation, require a period of time in excess of thirty (30) days, then after such period of time as is reasonably necessary). All obligations of Landlord hereunder shall be construed as covenants, not conditions; and, except as may be otherwise expressly provided in this Lease, Tenant may not terminate this Lease for breach of Landlord's obligations hereunder. Subject to the terms and conditions of Section 40, all obligations of Landlord under this Lease shall be binding upon Landlord only during the period of its ownership of the Premises and not thereafter. The term "Landlord" in this Lease shall mean only the owner, for the time being of the Premises, and in the event of the transfer by such owner of its interest in the Premises, such owner shall thereupon be released and discharged from all obligations of Landlord thereafter accruing, but such obligations shall be binding during the Lease Term upon each new owner for the duration of such owner's ownership.
 
26.   Waiver of Jury Trial .
 
TENANT AND LANDLORD EACH WAIVE ANY RIGHT TO TRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.
 
27.   Subordination .
 
This Lease and Tenant's interest and rights hereunder (including, without limitation, options to purchase and rights of first refusal, if any) are and shall be subject and subordinate at all times to the lien of any mortgage, now existing or hereafter created on or against the Building, and all amendments, restatements, renewals, modifications, consolidations, refinancing, assignments and extensions thereof, without the necessity of any further instrument or act on the part of Tenant.  Tenant agrees, at the election of the holder of any such mortgage, to attorn to any such holder.  The provisions of this Section shall be self-operative and no further instrument shall be required to effect such subordination or attornment; however, Tenant agrees upon demand to execute, acknowledge and deliver such instruments, confirming such subordination and such instruments of attornment as shall be requested by any such holder within ten (10) days of such request.  Tenant’s obligation to furnish each such instrument requested hereunder in the time period provided is a material inducement for Landlord’s execution of this Lease and if Tenant fails to timely deliver any such instrument within such ten (10) day period, then Landlord shall send to Tenant’s CFO or CEO a second notice requesting that Tenant return the executed instrument within five (5) days of the second notice notifying Tenant’s CFO or CEO that if Tenant fails to do so, an Event of Default shall be deemed to have occurred hereunder and Landlord will execute the instrument as Tenant’s attorney-in-fact under the provisions of this Section 27.  Tenant’s failure to deliver the instrument within said 5-day period after the second notice shall be deemed an immediate Event of Default by Tenant under this Lease, and no further notice or cure period provided in Section 23 of this Lease shall be applicable. Further, Tenant hereby irrevocably appoints Landlord as its attorney in fact (such power of attorney being coupled with an interest) to execute on its behalf and in its name any such instrument and to cause any such instrument to be recorded, if Tenant fails to execute and deliver the instrument within five (5) days after Landlord's second written request thereof.  Notwithstanding the foregoing, any such holder may at any time subordinate its mortgage to this Lease, without Tenant's consent, by notice in writing to Tenant, and thereupon, this Lease shall be deemed prior to such mortgage without regard to their respective dates of execution, delivery or recording and in that event such holder shall have the same rights with respect to this Lease as though this Lease had been executed prior to the execution, delivery and recording of such mortgage and had been assigned to such holder. The term "mortgage" whenever used in this Lease shall be deemed to include deeds of trust, security assignments and any other encumbrances, and any reference to the "holder" of a mortgage shall be deemed to include the beneficiary under a deed of trust.
 
Landlord agrees to use best efforts to obtain from any future holder of any mortgage or deed of trust securing the Land or the Building ("Mortgagee") a subordination, non-disturbance and attornment agreement for the benefit of Tenant and which is acceptable to Mortgagee.  Landlord shall have no liability if such Mortgagee refuses to give Tenant a subordination, non-disturbance and attornment agreement.
 
28.   Mechanic's Liens .
 
Tenant has no express or implied authority to create or place any lien or encumbrance of any kind upon, or in any manner to bind the interest of Landlord or Tenant in, the Premises or any part of the Building or to charge the rentals payable hereunder for any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs.  To the fullest extent permitted by the New Jersey Construction Lien Law, N.J.S.A. 2A:4A-1, et seq., or any other applicable Legal Requirement, Landlord’s consent to the making of any Tenant-Made Alterations shall not be deemed an agreement by Landlord to subject Landlord or any Mortgagee, or its or their interest in the Premises or the Building, to any lien, charge or encumbrance that may be filed in connection with such permitted Tenant-Made Alterations.  Tenant covenants and agrees that it will pay or cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed on the Premises or with respect to the Equipment (as such term is defined in Rider Two) and that it will save and hold Landlord harmless from all loss, cost or expense based on or arising out of asserted claims or liens against the leasehold estate or against the interest of Landlord in the Premises, or with respect to the Equipment, or under this Lease. Tenant shall give Landlord immediate written notice of the placing of any lien or encumbrance against the Premises or with respect to the Equipment and cause such lien or encumbrance to be discharged within 60 days of the filing or recording thereof; provided, however, Tenant may contest such liens or encumbrances as long as such contest prevents foreclosure of the lien or encumbrance and Tenant causes such lien or encumbrance to be bonded or insured over in a manner satisfactory to Landlord within such 60 day period.
 
29.   Estoppel Certificates .
 
Tenant agrees, from time to time, within ten (10) days after request of Landlord, to execute and deliver to Landlord, or Landlord's designee, any estoppel certificate requested by Landlord, stating that this Lease is in full force and effect, the date to which rent has been paid, that Landlord is not in default hereunder (or specifying in detail the nature of Landlord's default), the termination date of this Lease and such other matters pertaining to this Lease as may be requested by Landlord. Tenant's obligation to furnish each estoppel certificate in a timely fashion is a material inducement for Landlord's execution of this Lease, and if Tenant fails to timely deliver any such certificate within ten (10) day period, then Landlord shall send to Tenant’s CFO or CEO a second notice requesting that Tenant return the executed certificate within five (5) days of the second notice and notifying Tenant’s CFO or CEO that if Tenant fails to do so, an Event of Default shall be deemed to have occurred hereunder and Landlord will execute the certificate as Tenant’s attorney-in-fact under the provisions of this Section 29.  Tenant’s failure to deliver an estoppel certificate within said 5-day period after the second notice shall be deemed an immediate Event of Default by Tenant under this Lease, and no further notice or cure period provided in Section 23 of this Lease shall be applicable. Tenant hereby irrevocably appoints Landlord as its attorney in fact (coupled with an interest) to execute on its behalf and in its name any such certificate if Tenant fails to execute and deliver the certificate within five (5) days after Landlord's second written request thereof.
 
30.   Environmental Requirements .
 
Except for Hazardous Material contained in products used by Tenant in de minimis quantities for ordinary cleaning and office purposes, Tenant shall not permit or cause any party to bring any Hazardous Material upon the Premises or transport, store, use, generate, manufacture or release any Hazardous Material in or about the Premises without Landlord’s prior written consent in its sole and absolute discretion.
 
Any storage, use or handling by Tenant at the Premises of any Hazardous Materials shall be subject to the prior written consent of Landlord, in its sole and absolute discretion.  In its request for Landlord’s consent, Tenant shall identify the Hazardous Materials in question, the quantity thereof, the manner in which such Hazardous Materials are contemplated to be used, stored or handled, the estimated times and time frames within which such Hazardous Materials are contemplated to be used, stored and/or handled at the Premises by Tenant, and true and complete copies of MSDS Sheets (showing applicable NFPA Risk Levels) relating thereto.  In the event Landlord consents to any such storage, use or handling of Hazardous Materials in the Premises, such use, storage and handling shall be at all times (i) in accordance with the terms and conditions of this Section 30, (ii) in accordance with all applicable state, local and federal laws, codes, ordinances and regulations, including but not limited to all applicable Environmental Requirements (hereinafter defined) and regulations of the fire marshal for the fire department having jurisdiction with respect to the Building (iii) only after taking all reasonable precautions and utilizing such engineering controls, at its sole cost and expense, as are necessary to adequately ventilate odors and fumes in the Premises in accordance with health and safety standards and to prevent any odors and fumes from emanating from the Premises, including the installation of such reasonable control devices and the establishment of reasonable control procedures to eliminate such odors wherever such Hazardous Substances are used, handled and/or stored in the Premises; (iv) subject to obtaining, and in accordance with the conditions under, any and all required permits and governmental approvals, and (v) in amounts not in excess of the maximum amounts for same at any one time as have been approved by Landlord.  Without limitation of the foregoing and any other requirements of this Section 30, Tenant shall be responsible for obtaining any and all governmental or quasi-governmental approvals and/or permits required in connection with the presence, use, storage, handling, treatment, generation, release or disposal of all such Hazardous Materials.  Tenant shall provide Landlord with a copy of all such approvals and/or permits; in addition, Tenant shall provide Landlord with any reports filed with, and correspondence, with, governmental agencies; storage and management plans filed with governmental agencies; notices of violations of any legal requirements; and any other documents that Landlord may reasonably request with respect to such Hazardous Materials.  Tenant shall maintain Material Safety Data Sheets (MSDS) for each Hazardous Material on the Premises; and the Tenant’s use, storage and disposal of such Hazardous Materials shall be consistent with the corresponding MSDS.
 

 
Tenant, at its sole cost and expense, shall operate its business in the Premises in strict compliance with all Environmental Requirements and shall remediate in a manner satisfactory to Landlord any Hazardous Materials released on or from the Premises by Tenant, its agents, employees, contractors, subtenants or invitees. Tenant shall complete and certify to disclosure statements as requested by Landlord from time to time relating to Tenant’s transportation, storage, use, generation, manufacture or release of Hazardous Materials on the Premises. Without limitation of the generality of the foregoing, Tenant shall, at its sole cost, comply with ISRA, including but not limited to making all submissions to, providing all information to, and complying with all requirements of the Industrial Site Evaluation Element or its successor of the New Jersey Department of Environmental Protection or its successor (the “NJDEP”).  Tenant shall further promptly provide to Landlord all information requested by Landlord, a licensed site remediation professional as defined in the Site Remediation Reform Act, P.L. 2009, c. 60, and the regulations promulgated thereunder (“LSRP”) or NJDEP for preparation of an ISRA Affidavit, de minimis quantity exemption, limited conveyance application or other submission to be made by Landlord, and shall promptly sign such affidavits and submissions when requested by Landlord, an LSRP or NJDEP.
 
The term “Environmental Requirements” means all applicable present and future statutes, regulations, ordinances, rules, codes, judgments, orders or other similar enactments of any governmental authority or agency regulating or relating to health, safety, or environmental conditions on, under, or about the Premises or the environment, including without limitation, the following: the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §9601 et seq.), as amended from time to time; the Resource Conservation and Recovery Act (42 U.S.C. §6901 et seq.), as amended from time to time; and all state and local counterparts thereto, and any regulations or policies promulgated or issued thereunder. The term “Hazardous Materials” means and includes any substance, material, waste, pollutant, or contaminant listed or defined as hazardous or toxic, under any Environmental Requirements, including without limitation any regulated substance, toxic substance, hazardous substance, hazardous waste, pollution, pollutant or contaminant, as defined or referred to in the Site Remediation Reform Act, P.L. 2009, c. 60; the New Jersey Environmental Rights Act, N.J.S.A. 2A:35A-1 et seq.; the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq.; the New Jersey Air Pollution Control Act, N.J.S.A. 26:2C-1 et seq.; the Hazardous Substances Discharge: Reports and Notices Act, N.J.S.A. 13:1K-15 et seq.; ISRA; asbestos and petroleum, including crude oil or any fraction thereof; natural gas liquids; liquefied natural gas; or synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas). As defined in Environmental Requirements, Tenant is and shall be deemed to be the “operator” of Tenant’s “facility” and the “owner” of all Hazardous materials brought on the Premises by Tenant, its agents, employees, contractors or invitees, and the wastes, by-products, or residues generated, resulting, or produced therefrom.
 
Tenant shall indemnify, defend, and hold Landlord, and its managers and agents, harmless from and against any and all losses (including, without limitation, diminution in value of the Premises or the Building and loss of rental income from the Building, claims, demands, actions, suits, damages (including, without limitation, punitive damages), expenses (including, without limitation, remediation, removal, repair, corrective action, or cleanup expenses), and costs (including, without limitation, actual attorneys’ fees, consultant fees or expert fees and including, without limitation, removal or management of any asbestos brought into the property or disturbed by Tenant in breach of the requirements of this Section, regardless of whether such removal or management is required by law) which are brought or recoverable against, or suffered or incurred by Landlord, or its managers and agents, as a result of any release of Hazardous Materials for which Tenant is obligated to remediate as provided above or any other breach of the requirements under this Section by Tenant, its agents, employees, contractors, subtenants, assignees or invitees, regardless of whether Tenant had knowledge of such non-compliance. The obligations of Tenant under this Section shall survive any expiration or termination of this Lease.
 
Landlord shall have access to, and a right to perform inspections and tests of, the Premises to determine Tenant’s compliance with Environmental Requirements, its obligations under this Section, or the environmental condition of the Premises. Access shall be granted to Landlord upon Landlord’s prior notice to Tenant and at such times so as to minimize, so far as may be reasonable under the circumstances, any disturbance to Tenant’s operations. Such inspections and tests shall be conducted at Landlord’s expense, unless such inspections or tests reveal that Tenant has not complied with any Environmental Requirement, in which case, Tenant shall reimburse Landlord for the reasonable cost of such inspection and tests. Landlord’s receipt of or satisfaction with any environmental assessment in no way waives any rights that Landlord holds against Tenant. Tenant shall promptly notify Landlord of any communication or report that Tenant makes to any governmental authority regarding any possible violation of Environmental Requirements or release or threat of release of any Hazardous Materials onto or from the Premises.  Tenant shall, within five (5) days of receipt thereof, provide Landlord with a copy of any documents or correspondence received from any governmental agency or other party relating to a violation or possible violation of Environmental Requirements or claim or liability associated with the release or threat of release of any Hazardous Materials onto or from the Premises, whether currently or hereafter existing.
 
In addition to all other rights and remedies available to Landlord under this Lease or otherwise, Landlord may, in the event of a breach of the requirements of this Section that are not cured within thirty (30) days following notice of such breach by Landlord, require Tenant to provide financial assurance (such as insurance, escrow of funds or third party guarantee) in an amount and form satisfactory to Landlord.  The requirements of this Section are in addition to and not in lieu of any other provision of this Lease.
 
Nothing in this Lease shall be deemed to make Tenant responsible for any required removal, remediation, containment or abatement of any Hazardous Materials discharged in the Premises prior to the Commencement Date of this Lease or not discharged in or about the Premises by Tenant, its agents, employees, contractors, subtenants, assignees or invitees, unless, in either such case, the presence of the Hazardous Materials was exacerbated by the acts or omission of Tenant, its agents, employees, contractors, subtenants or invitees.
 
31.   Rules and Regulations .
 
Tenant shall, at all times during the Lease Term and any extension thereof, comply with all reasonable rules and regulations at any time or from time to time established by Landlord covering use of the Premises and the Building. The current rules and regulations are attached hereto as Exhibit E . In the event of any conflict between said rules and regulations and other provisions of this Lease, the other terms and provisions of this Lease shall control. Landlord shall not have any liability or obligation for the breach of any rules or regulations by other tenants in the Building.
 
32.   Security Service .
 
Tenant acknowledges and agrees that Landlord is not providing any security services with respect to the Premises and that Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with respect to, any loss by theft or any other damage suffered or incurred by Tenant in connection with any unauthorized entry into the Premises or any other breach of security with respect to the Premises.
 
Landlord agrees that, at Tenant’s sole cost and expense, Tenant may staff the existing guardhouse for the Building.  Tenant’s staff at the guardhouse may not restrict access of any third parties to any portion of the Building that is not part of the Premises but may direct such third parties to their appropriate destination at the property.  All such guardhouse employees shall be deemed the sole responsibility of Tenant and shall not be the employees of the Landlord or its managing agent.  Tenant agrees that it shall be solely responsible for all payments due or to become due to such guardhouse employees, including the withholding of appropriate taxes, and for the compliance with workers' compensation laws and all other legal requirements with respect to such employees.  Any such employees of Tenant at the guardhouse shall have been trained and shall be competent to perform such services, shall be properly supervised and directed by Tenant, and shall be properly uniformed or suitably attired.  Tenant agrees to maintain good order and shall be responsible for the conduct and good behavior of such employees.  Tenant shall indemnify, defend (with counsel reasonably acceptable to Landlord) and hold harmless Landlord, and Landlord's managers, agents, employees and contractors, from and against any and all claims, demands, losses, liabilities, causes of action, suits, judgments, damages, costs and expenses (including attorneys' fees) arising therefrom the use by Tenant of such staff at the guardhouse.
 
33.   Force Majeure .
 
Neither party shall be held responsible for delays in the performance of its obligations hereunder when caused by strikes, lockouts, labor disputes, acts of God, inability to obtain labor or materials or reasonable substitutes therefor, governmental restrictions, governmental regulations, governmental controls, delay in issuance of permits, enemy or hostile governmental action, civil commotion, fire or other casualty, and other causes beyond the reasonable control of such party (Force Majeure"); provided, however, that this provision shall not serve to excuse Tenant of any of its obligations to timely pay Base Rent, additional rent or any other sum due or to excuse Tenant of any of its obligations relating to environmental requirements.
 
34.   Entire Agreement .
 
This Lease constitutes the complete agreement of Landlord and Tenant with respect to the subject matter hereof. No representations, inducements, promises or agreements, oral or written, have been made by Landlord or Tenant, or anyone acting on behalf of Landlord or Tenant, which are not contained herein, and any prior agreements, promises, negotiations, or representations are superseded by this Lease. If any printed provision of this Lease is deleted by the parties, such deletion may not be utilized in interpreting the rights of the parties hereunder; but each party shall have all rights which it would have had, at law or otherwise, if such deleted provision had never been printed herein. This Lease may not be amended except by an instrument in writing signed by both parties hereto.
 
35.   Severability .
 
If any clause or provision of this Lease is illegal, invalid or unenforceable under present or future laws, then and in that event, it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby. It is also the intention of the parties to this Lease that in lieu of each clause or provision of this Lease that is illegal, invalid or unenforceable, there be added, as a part of this Lease, a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable.
 
36.   Brokers .
 
Landlord and Tenant each represent and warrant to the other that it has dealt with no broker, agent or other person in connection with this transaction and that no broker, agent or other person brought about this transaction, other than the Brokers set forth on the first page of this Lease, and each party agrees to indemnify and hold the other harmless from and against any claims by any other broker, agent or other person claiming a commission or other form of compensation by virtue of having dealt with the indemnifying party with regard to this leasing transaction.
 
37.   Intentionally Deleted .
 
38.   Miscellaneous .
 
(a)           Any payments or charges due from Tenant to Landlord hereunder shall be considered rent for all purposes of this Lease.
 
(b)           If and when included within the term "Tenant", as used in this instrument, there is more than one person, firm or corporation, each shall be jointly and severally liable for the obligations of Tenant.
 
(c)           Except as otherwise expressly provided in this Lease or as otherwise required by law, Landlord retains the absolute right to withhold any consent or approval.
 
(d)           At Landlord's request from time to time, Tenant shall furnish Landlord with true and complete copies of its most recent annual and quarterly financial statements prepared by Tenant or Tenant's accountants and any other financial information or summaries that Tenant typically provides to its lenders or shareholders.
 
(e)           Landlord and Tenant agree to execute a memorandum of the Lease, setting forth the Lease Term and Tenant’s expansion option and other required provisions, which memorandum shall be substantially in the form attached hereto as Exhibit F-1 (“Memorandum of Lease”).  Tenant shall have the right to record the Memorandum of Lease at its sole cost and expense; provided, however, that simultaneously with the parties’ execution of the Memorandum of Lease, Tenant has delivered to Landlord a memorandum of lease termination in the form attached hereto as Exhibit F-2 (“Memorandum of Lease Termination”) executed by Tenant, which Landlord shall hold in trust pending the expiration or earlier termination of this Lease.  Tenant hereby agrees that Landlord shall have the right to record the Memorandum of Lease Termination upon the termination or expiration of this Lease or upon the occurrence of any Event of Default with respect to which Landlord is pursuing legal or equitable remedies.  Additionally, in connection with any future modification of this Lease that modify any of the terms set forth on the recorded Memorandum of Lease, the parties hereby agree to execute a memorandum of lease modification, in a commercially reasonable form, setting forth such modified terms, which if recorded shall be recorded at Tenant’s expense, as well as an updated Memorandum of Lease Termination.
 
(f)           The normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Lease or any exhibits or amendments hereto.
 
(g)           The submission by Landlord to Tenant of this Lease shall have no binding force or effect, shall not constitute an option for the leasing of the Premises, nor confer any right or impose any obligations upon either party until execution of this Lease by both parties.
 
(h)           Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. The captions inserted in this Lease are for convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof, or in any way affect the interpretation of this Lease.
 
(i)           Any amount not paid by Tenant within five (5) days after its due date in accordance with the terms of this Lease shall bear interest from such due date until paid in full at the lesser of the highest rate permitted by applicable law or fifteen percent (15%) per year. It is expressly the intent of Landlord and Tenant at all times to comply with applicable law governing the maximum rate or amount of any interest payable on or in connection with this Lease. If applicable law is ever judicially interpreted so as to render usurious any interest called for under this Lease, or contracted for, charged, taken, reserved, or received with respect to this Lease, then it is Landlord's and Tenant's express intent that all excess amounts theretofore collected by Landlord be credited on the applicable obligation (or, if the obligation has been or would thereby be paid in full, refunded to Tenant), and the provisions of this Lease immediately shall be deemed reformed and the amounts thereafter collectible hereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder.
 
(j)           This Lease has been executed and delivered in the State of New Jersey and shall be construed and interpreted in accordance with the laws of the State of New Jersey, without regard to principles of conflicts of laws.  Landlord and Tenant hereby irrevocably agree that any legal action or proceeding arising out of or relating to this Lease shall only be brought in the Courts of the State of New Jersey, or the Federal District Court for the District of New Jersey.  By execution and delivery of this Lease, Landlord and Tenant hereby irrevocably accept and submit generally and unconditionally for itself and with respect to its properties, to the jurisdiction of any such court in any such action or proceeding, and hereby waive in the case of any such action or proceeding brought in the courts of the State of New Jersey, or Federal District Court for the District of New Jersey, any defenses based on jurisdiction, venue or forum non coveniens.  The name and address of Tenant's resident agent in the state of New Jersey is Corporation Service Company, 830 Bear Tavern Road, West Trenton, NJ  08628.  Tenant shall advise Landlord in writing if the name and address of its resident agent is changed during the Term hereof.
 
(k)           Time is of the essence as to the performance of Tenant's obligations under this Lease.
 
(l)           All exhibits and addenda attached hereto are hereby incorporated into this Lease and made a part hereof. In the event of any conflict between such exhibits or addenda and the terms of this Lease, such exhibits or addenda shall control.
 
39.   Intentionally Deleted .
 
40.   Limitation of Liability of Landlord .
 
It is understood that Landlord is a limited liability company and that any obligation or liability whatsoever of Landlord, which may arise at any time under this Lease or any obligation or liability which may be incurred by it pursuant to any other instrument, transaction, or undertaking contemplated hereby, shall not be personally binding upon, nor shall any such liability or obligation  be enforced against the property of Landlord (other than the Building), nor be enforced against the property of Landlord’s  members, managers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort, or otherwise. Tenant agrees that Tenant shall look solely to Landlord's equity in the Building for the collection of any judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default or breach by Landlord with respect to any of the terms and provisions of this Lease to be kept, observed and performed by Landlord, subject, however, to the prior rights of any ground or underlying landlords or any mortgagee of all or any part of the Building, and no other assets of Landlord shall be subject to levy, execution or other judicial process for the satisfaction of Tenant's claim.  In no event shall Landlord be liable to Tenant for any indirect or consequential damage, injury, loss or claim.
 
41.   ERISA Representation.
 
Tenant hereby represents and warrants to Landlord, for the benefit of the Prudential Insurance Company of America (“Prudential”), as follows:
 
(a)           Neither Tenant nor any of its “affiliates” (within the meaning of Part VI(c) of Prohibited Transaction Exemption 84­14, 49 Fed. Reg. 9494 (1984), as amended ("PTE 84­14")) has, or during the immediately preceding year has exercised the authority to:
 
(i)           appoint or terminate Landlord as investment manager over assets of any "employee benefit plan" (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") invested in, or sponsored by, Prudential; or
 
(ii)           negotiate the terms of a management agreement (including renewals or modifications thereof) with Landlord on behalf of any such plan;
 

(b)           Tenant is not "related" to Prudential (as determined under in Part VI(h) of PTE 84­14);

(c)           Tenant has negotiated and determined the terms of this Lease at arm's length, as such terms would be negotiated and determined by the Tenant with unrelated parties; and

(d)           Tenant is not an "employee benefit plan" as defined in Section 3(3) of ERISA, a "plan" as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended, or an entity deemed to hold "plan assets" within the meaning of 29 C.F.R. §2510.3­101 of any such employee benefit plan or plan.

42.   OFAC Certification.
 
Tenant certifies that:  (a) Tenant is not, and shall not during the term of this Lease become, a person or entity with whom Landlord is restricted from doing business under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, H. R. 3162, Public Law 107-56 (commonly known as the “USA Patriot Act”) and Executive Order Number 13224 on Terrorism Financing, effective September 24, 2001 and regulations promulgated pursuant thereto (collectively, “Anti-Terrorism Laws”), including without limitation persons and entities named on the Office of Foreign Asset Control Specially Designated Nationals and Blocked Persons List (collectively, “Prohibited Persons”).  (b) To the best of its knowledge, Tenant is not currently engaged in any transactions or dealings, or otherwise associated with, any Prohibited Persons in connection with the use or occupancy of the Premises or the Building.  Tenant will not, during the Term of this Lease, engage in any transactions or dealings, or be otherwise associated with, any Prohibited Persons in connection with the use or occupancy of the Premises or the Building.  If at any time after the date hereof Tenant becomes a Prohibited Person, then Tenant shall notify Landlord within five (5) business days after becoming aware of such designation.  (c) If Tenant breaches any representation or covenant set forth in this Section, or Tenant hereafter becomes a Prohibited Person, then in any such event, same shall constitute an Event of Default under the Lease, entitling Landlord to any and all remedies under the Lease or at law or in equity (including the right to terminate the Lease), without affording Tenant any notice or cure period.  Tenant hereby agrees to defend, indemnify, and hold harmless Landlord from and against any and all claim, damages, losses, risks, liabilities, and expenses (including attorney’s fees and costs) arising from or related to any breach of the foregoing certification.
 
43.   Notices.
 
           All notices required or permitted to be given under this Lease shall be in writing and shall be sent by registered or certified mail, return receipt requested, or by a reputable national overnight courier service, postage prepaid, or by hand delivery addressed, if to Tenant, at
 
Global Equipment Company Inc.
11 Harbor Park Drive
Port Washington, NY, 11050
Attn:  Mr. Alan Schaeffer,
 
with a copy to
 
Systemax, Inc.
11 Harbor Park Drive
Port Washington, NY  11050
Office of the General Counsel,

 
and if to Landlord, to:
 
PR I Washington Township NJ, L.L.C.
c/o Matrix Realty, Inc.
CN 4000, Forsgate Drive
Cranbury, NJ 08512
Attn:  Property Manager, Northeast Business Park,
 
with a copy to
 
Mr. William H. Anderson, Principal
Prudential Real Estate Investors
8 Campus Drive
Parsippany, NJ  07054,
 
with a copy to
 
Joan Hayden, Esq., Vice President & Corporate Counsel, Law Department
Prudential Real Estate Investors
8 Campus Drive
Parsippany, NJ  07054.
 
Either party may by notice given aforesaid change its address for all subsequent notices. Except where otherwise expressly provided to the contrary, notice shall be deemed given upon attempted delivery if delivery is refused for any reason or upon actual receipt.
 
44.   Additional Rent .
 
All costs and expenses other than Base Rent that Tenant assumes or agrees to pay to Landlord pursuant to this Lease, including without limitation, Operating Expenses, shall be deemed to be additional rent and, in the event of nonpayment thereof, Landlord shall have all the rights and remedies provided for in case of nonpayment of rent, including the assessment of interest and late charges.  Base Rent and additional rent are sometimes referred to collectively herein as "rent."
 
45.   Riders .
 
Two (2) Riders, Expansion Option Rider and Roof Access Rider, are attached to this Lease and made a part hereof.
 

 

 
 
 

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease under seal as of the day and year first above written.
 


WITNESS/ATTEST:                                                                LANDLORD:

PR I WASHINGTON TOWNSHIP NJ, L.L.C,
a New Jersey limited liability company




By: (SEAL)
(Corporate Seal)                                                                          Name:                                                       
Title:   Authorized Person
 
 
Date:                                                                

TENANT

GLOBAL EQUIPMENT COMPANY INC.,
a New York corporation


By: (SEAL)
(Corporate Seal)                                                                          Name:                                                       
Title:                                                       
                                                                                      Duly Authorized Officer
Tax ID:                                                                           

Date:                                                                

 
 
 

RIDER ONE – TENANT’S EXPANSION OPTION

During the initial Lease Term, and subject to the other terms of this Rider, prior to leasing any available, contiguous space in the Building (hereinafter, the “Expansion Area”) to a third party, Landlord will first offer Tenant the right to lease that Expansion Area by providing Tenant with a written notice identifying the Expansion Area and the terms and conditions upon which Landlord is willing to lease the Expansion Area to Tenant (the “Expansion Area Offer Notice”).  For purposes herein, space in the Building shall be deemed to be “available” when the lease for the current occupant of the space expires or is otherwise terminated.  Notwithstanding the foregoing, the Expansion Area shall not be deemed to become available if such space is: (A) assigned or subleased by the current tenant of the space; (B) re-leased by the current tenant of the space by renewal or extension in accordance with the terms of its lease; (C) subject to a specific expansion or other right of any other tenant in the Building existing as of the Lease Commencement Date unless and until such other tenant(s) has/have failed to timely exercise its/their option(s) or right(s); or (D) not leased to a tenant as of the date of this Lease (until that space is leased, and then subsequently ``becomes available'').  Additionally, space shall not be deemed to be “available” if Landlord has previously offered such space to Tenant under this Rider, and Tenant declines or fails to duly and timely exercise its expansion option or otherwise fails to meet all of the conditions provided in this Rider for such space.

Tenant shall have ten (10) days to notify Landlord in writing (“Tenant’s Acceptance Notice”) that it desires to lease the Expansion Space upon such terms and conditions set forth in Landlord’s Expansion Area Offer Notice.  In the event Tenant elects to lease less than all of the Expansion Area, then the portion of the Expansion Area that Tenant leases must be the portion that is immediately adjacent to Tenant’s existing Premises and must comply, at Tenant's sole cost and expense, with all applicable building and safety codes.  Further, Tenant shall be responsible, at its sole cost and expense, for all costs associated with separately demising the portion of the Expansion Area that Tenant elects to lease from the remaining portion of the Expansion Area that Tenant did not elect to lease.  In addition, all of the remaining Expansion Area not leased by Tenant pursuant to this Rider must (i) also comply with all applicable building and safety codes, (ii) be regular in shape with adequate means of ingress and egress and (iii) contain a minimum of 226,000 rentable square feet and be suitable and marketable for normal renting purposes as office/warehouse space at Landlord’s sole discretion.  Tenant’s Acceptance Notice must be accompanied by a copy of its most recent financial statements (quarterly and annual financial statements including at least its income statements, balance sheets, and cash flow statement) reflecting Tenant’s current financial condition.  Upon receipt of Tenant’s Acceptance Notice and satisfactory financial statements, Landlord shall prepare, and the parties shall promptly execute, an amendment to the Lease incorporating such terms.

Exercise of Tenant’s rights under this Rider shall be conditioned upon the following:  (1) The Premises must continue to be used as set forth in the Lease; (2) at the time of exercise of the option or commencement of the option term, none of the space in the Premises shall have been subleased for all or substantially all of the term; (3) The Lease shall not have been assigned by Tenant to any person or entity, Tenant agreeing that this option is personal to Global Equipment Company Inc., a New York corporation, (4) Tenant shall not be in default under the Lease at the time the Expansion Space became available or any time thereafter up through the date the lease amendment is executed (if Tenant is in default at any such time, Landlord may terminate this option by delivering written notice to Tenant notifying Tenant of Landlord’s election to terminate this option, in which event Tenant’s rights under this Rider shall be null and void and of no further force or effect whatsoever, and Landlord may lease all or any portion of the Expansion Space to others at any time thereafter without regard to the restrictions in this Rider and on whatever terms and conditions Landlord may decide in its sole discretion); (5) The Lease must be in full force and effect; (6) Tenant's current financial condition, as revealed by its most recent financial statements, must demonstrate either that:  (A) Tenant meets the financial criteria that Landlord generally uses to lease space to tenants; or (B) Tenant's net worth is at least equal to its net worth at the time the Lease was signed; and (7) more than two (2) years must remain in the term of this Lease.  Landlord shall incur no liability, and the expiration date of the term for which the Expansion Area is leased shall not be extended, if Landlord is unable to deliver possession of the Expansion Area to Tenant due to any holdover tenant's refusal to vacate, or for any other reason not within Landlord's reasonable control.
 
If Tenant declines or fails to duly and timely exercise its expansion option or fails to meet all of the conditions provided in this Rider, Landlord shall thereafter be free to lease the Expansion Space in portions or in its entirety to any other person at any time without regard to the restrictions in this Rider and on whatever terms and conditions Landlord may decide in its sole discretion.  Tenant’s expansion option under this Rider shall be one-time only and upon Tenant’s rejection or failure to meet conditions, it shall thereafter be null and void and of no further force or effect whatsoever.
 
WITNESS/ATTEST:                                                                LANDLORD:

PR I WASHINGTON TOWNSHIP NJ, L.L.C., a New Jersey limited liability company



By: (SEAL)
(Corporate Seal)                                                                          Name:                                                       
Title:   Authorized Person
 
 


TENANT

GLOBAL EQUIPMENT COMPANY INC.,
a New York corporation


By: (SEAL)
(Corporate Seal)                                                                          Name:                                                       
Title:                                                       
                                                                                      Duly Authorized Officer
Tax ID:                                                                           

 
 
 

RIDER TWO – ROOF ACCESS

Provided that the same is permitted under applicable zoning and other municipal regulations, and subject to the terms and conditions set forth in this Rider, Tenant shall have limited, non-exclusive access to the roof of the Building over the Premises (the “Roof Area”) for the purpose of installing and maintaining the following equipment (the “Equipment”):  (i) an antenna for satellite television service in the Premises,  and (ii) such other equipment as may be used by Tenant in the ordinary conduct of Tenant’s customary business at the Premises, such as HVAC equipment.

(a)   Tenant, at its sole cost and expense, shall procure all necessary governmental and association approvals, permits and licenses for such Equipment.  All plans and specifications concerning the Equipment shall be subject to Landlord’s prior written approval, including but not limited to size and location.  The Equipment may not cause any structural or other type of damage to the roof or otherwise to the Building.  In the event a structural platform is necessary or advisable to support the Equipment, Tenant shall be responsible for installing such platform at its sole cost and expense.  Tenant shall not disturb the roof membrane or make any other penetration of the roof or the exterior facade of the Building.  In the event Tenant’s use of the Roof Space causes the Building’s roof warranty to become invalid, Tenant shall immediately restore such warranty.  All work must be performed in a good and workmanlike manner by a contractor reasonably approved by Landlord.
 
(b)   Tenant acknowledges that Landlord has entered into or will be entering into a contract (the “Solar Lease”) with a third party to lease roof space on the Building, including the Roof Area, to such third party for the purpose of installation of solar panels, and that the rights granted to such lessee under such Solar Lease shall have precedence over any rights to the Roof Space that Tenant may have under this Rider.  Without limitation of the generality of the foregoing, Landlord may require Tenant to move the Equipment, at Tenant’s cost and expense, to another part of the roof or to temporarily remove the Equipment in order for Landlord or such lessee to perform any renovation, improvement, alteration or expansion to the Building, including, without limitation, installation or replacement of solar panels on the roof.  Additionally, Tenant’s Equipment shall not interfere with the structure of the Building, any of the building systems, or the equipment (including airwaves reception and other equipment) of the Landlord or any other lessee or occupant.
 
(c)   All access to the roof by Tenant shall be subject to the continuing control of, and reasonable security and safety procedures established by, Landlord and shall require reasonable prior notice (which may be verbal) to the Landlord or Landlord's managing agent.  Tenant shall coordinate its access to the roof with any access or work being done on the roof by Landlord or any other party.
 
(d)   Tenant shall at all times comply with all applicable requirements of laws, zoning and other ordinances and rules of all public authorities and insurance companies and all orders, rules and regulations of any public authority, which shall impose any order or duty upon Landlord or Tenant with respect to or affecting the Equipment or arising out of Tenant’s installation, maintenance, operation, repair, removal, replacement, use or manner of use thereof.
 
(e)   The installation, maintenance, operation, repair, removal, replacement, and use and manner of use of the Equipment shall be at Tenant’s sole risk, cost and expense.  Tenant shall promptly pay and discharge all out-of-pocket costs and expenses incidental to and/or connected with the Equipment.  Without limitation of the generality of the foregoing, Tenant shall be responsible for paying the costs of any utility consumption by the Equipment.  Additionally, Tenant shall pay any and all increases in real estate taxes, personal property taxes, use taxes and any other charge(s) imposed by any governmental authority as a result of the Equipment, as well as any increases in the rate of any insurance carried by Landlord for the Building as a result of the Equipment.
 
(f)   Tenant shall maintain the Equipment in a clean and safe manner and in good condition throughout the entire Term and any renewals or extensions thereof.  Upon expiration or termination of this Lease, Tenant agrees that it will immediately remove the Equipment (including, but not limited to all wiring, cabling and other accessories associated with the Equipment) and shall repair any damage to the Building including the Roof Space caused thereby.  In the event Tenant fails to remove the Equipment (or fails to repair any damage caused by such removal), at its discretion Landlord may remove and dispose of such Equipment and/or repair any damage caused by such removal and charge Tenant the entire cost thereof with absolutely no liability accruing whatsoever to Landlord.
 
(g)   Tenant shall maintain such insurance as is reasonably required by Landlord with respect to the installation, maintenance, operation, repair, removal, replacement, use or manner of use of the Equipment.  Landlord shall have no liability on account of any damage to, loss of, or interference with, the Equipment.  Tenant hereby agrees to indemnify and hold harmless and defend Landlord, its managing agent, servants and employees against any and all claims, losses, costs, damages, expenses or liabilities, including, without limitation, reasonable attorney’s fees for any injury or damage to any person or property whatsoever, arising out of Tenant’s access to the roof and/or the Equipment, including but not limited to installation, maintenance, operation, repair, removal, replacement, use or manner of use thereof.
 

WITNESS/ATTEST:                                                                LANDLORD:

PR I WASHINGTON TOWNSHIP NJ, L.L.C.,
a New Jersey limited liability company



By: (SEAL)
(Corporate Seal)                                                                          Name:                                                       
Title:   Authorized Person
 
 


TENANT

GLOBAL EQUIPMENT COMPANY INC.,
a New York corporation


By: (SEAL)
(Corporate Seal)                                                                          Name:                                                       
Title:                                                       
                                                                                      Duly Authorized Officer
Tax ID:                                                                           

 
 
 

EXHIBIT A

Premises & Parking

 
 
 

EXHIBIT B

LANDLORD’S WORK


Landlord will deliver the Premises with the following improvements included in the base building:

o  
Demising Wall: a full height demising wall   with 1 hour fire rating, pursuant to the plan attached hereto as Exhibit B-1
o  
Draft Curtain:   minimum 24” around main office area, pursuant to the plan attached hereto as Exhibit B-1
o  
ESFR Sprinkler System:   pursuant to the plan attached hereto as Exhibit B-2 and the FM Global Project Report dated February 15, 2012 attached hereto as Exhibit B-3
o  
Warehouse Heating:   Designed to meet ASHRE standards of an indoor temperature of 60° F with an outdoor temperature of 11° F.
o  
Utilities:   Utilities shall be separated as specified in Section 7 of the Lease.
o  
Water main Pipe:   Relocate water main pipes and any other ESFR conversion obstructions as set forth in Exhibit B-3
o  
Broom Clean:   The Premises shall be delivered broom-clean.

 
 
 

EXHIBIT B-1

Demising Wall & Draft Curtain Plan

 
 
 

EXHIBIT B-2

ESFR Sprinkler Conversion Plan

 
 
 

EXHIBIT B-3

FM Global Project Report – February 15, 2012


 
 
 

 EXHIBIT C

TENANT IMPROVEMENTS

1.            Tenant Improvements .  The “Tenant Improvements" shall mean the provision of all labor, materials, coordination, supervision and planning services necessary to renovate and finish the Premises for the conduct of Tenant’s business, provided Landlord approves the final plans and working drawings therefore (the “Tenant Construction Documents”).  Landlord hereby approves the Tenant’s specifications set forth in Exhibit C-1, Exhibit C-2 and C-3, including any exterior generators, signage, and entrance canopies as shown on such Exhibits.  Additionally, the Tenant Improvements may include the labor, materials, coordination, supervision and planning services necessary to construct the additional parking area shown on Exhibit A-1, provided Landlord approves the final plans and working drawings therefore as shown on the Tenant Construction Documents.  The Tenant Construction Documents shall be prepared at Tenant's expense by architects and engineers licensed in the State of New Jersey and employed by Tenant; and they shall comply with the requirements of the Americans with Disabilities Act of 1990, as amended, and any other laws, rules, ordinances, codes or regulations of any governmental authority having jurisdiction over the Demised Premises or the Building, as well as insurance requirements and any requirements under any association agreement, covenants or easements applicable to the Building.  Tenant agrees to indemnify Landlord for any loss, claim or damages incurred by Landlord as a result of Tenant's failure to so comply.  The Tenant Construction Documents will, in complete detail, describe partitions, doors, reflected ceilings, telephone outlets, electrical switches and outlets, finishes, and HVAC equipment and controls for the Tenant Improvements.  Tenant shall be responsible for the coordination of the Tenant Construction Documents with the plans and specifications for the Building, and, for the parking area, with the plans and specifications for the Applegate Road Owners Association and applicable township and county requirements. The Tenant Construction Documents, and any changes or modifications thereto, shall be subject to Landlord's prior written approval.  Landlord's approval of the Tenant Construction Documents shall not be deemed to constitute a representation or warranty that such plans and working drawings were prepared in accordance with applicable legal requirements or are otherwise sufficient and correct.  Landlord agrees that it will not unreasonably withhold or delay its approval of Tenant’s Construction Documents for the Tenant Improvements, or any of the changes or modifications thereof; provided, however, that Landlord shall have sole and absolute discretion to approve or disapprove any Tenant Improvements that may affect the integrity of the Building structure or the base-building mechanical, plumbing, electrical or HVAC systems or that affect the common areas, the exterior appearance of the Building or are visible from outside of the Premises.  Tenant shall obtain all necessary permits and approvals for the Tenant Improvements from any governmental entity having jurisdiction over the Premises or Building and from the Applegate Road Owners Association, at Tenant's sole cost and expense; without limitation, Tenant shall be responsible, at its sole cost and expense, for obtaining a Use and Occupancy Permit for the Premises from the Township of Robbinsville.  Landlord shall have no liability to Tenant on account of any delay by applicable governmental or association authorities in issuing any required building permits or association consents, and any delay in the completion of the Tenant Improvements shall not postpone Tenant’s obligation for payment of Rent under the Lease nor shall Landlord be liable for any loss, damage or expense arising in any manner from such delay.

2.            Construction of Tenant Improvements.   Upon the Lease Commencement Date, Landlord shall deliver the Premises to Tenant in “as is” condition.  Tenant shall be responsible, at its sole cost and expense (subject to Landlord’s Contribution as specified in Section 3 below) for building out the Premises pursuant to the final, approved Tenant Construction Documents.   In performing the Tenant Improvements, except as otherwise expressly provided in this Exhibit C , Tenant shall comply with all of the provisions of the Lease with respect to Alterations.  Tenant shall cause the Tenant Improvements to the Premises pursuant to the Tenant Construction Documents to be built out by a contractor designated and employed by Tenant, subject to the following terms and conditions:  (i) The contractor designated by Tenant ("Tenant's Contractor") must be qualified and experienced in constructing tenant improvements in first-class buildings comparable to the Building, and must be approved by Landlord in its reasonable discretion.  Subcontractors employed by Tenant's Contractor shall be subject to similar approval by Landlord.  (ii) All work performed by Tenant's Contractor and its subcontractors shall be performed in a good and workmanlike manner, in accordance with all applicable laws and regulations and with the final approved Tenant Construction Documents.  Landlord shall have the right to cause Tenant to correct, replace or remove any improvements installed in the Premises by Tenant's Contractor or subcontractors that do not comply with the preceding sentence.  (iii) Tenant's Contractor and all subcontractors employed by Tenant's Contractor shall comply with all reasonable work rules and regulations adopted by Landlord for the Building, and shall coordinate on a weekly basis with Landlord's property manager concerning construction-related matters.  (iv) Tenant's Contractor and subcontractors shall post payment and performance bonds if required to do so by Landlord, and shall maintain such insurance coverages as may be reasonably required by Landlord. (v) Should any mechanic's or materialman's lien or other construction lien be filed against the Premises or the Building with respect to the Tenant Improvements, Tenant shall promptly bond or pay off such lien. (vi) Tenant shall be solely responsible for the progress of construction for the Tenant Improvements to the Premises and for the quality or fitness thereof.  Tenant shall be strictly liable for any damage to the Building or the base-building systems caused by Tenant, Tenant's Contractor, or any subcontractor (notwithstanding anything to the contrary contained in the Lease). (vii) Copies of all building permits, certificates of occupancy and other governmental and association notices, permits or licenses received with respect to the Tenant Improvements shall be promptly furnished to Landlord. (viii) Upon completion of the Tenant Improvements, Tenant shall deliver to Landlord a set of Mylar-reproducible "as-built" drawings of the Tenant Improvements.

Notwithstanding anything to the contrary, in the event that Tenant desires, as part of its Tenant Improvements and as shown on the approved Tenant Construction Documents, to convert the south-eastern car parking area to an area for trailer storage, then Landlord agrees to use commercially reasonable efforts to obtain approval from the Township of Robbinsville for such modification; provided that Tenant shall be responsible, at its sole cost and expense (but subject to the Landlord’s Contribution, as set forth below), for all costs and expenses of constructing such trailer storage area, including without limitation any architectural and engineering costs and other costs associated therewith.

3.            Costs of Construction .  Tenant shall be responsible for all costs and expenses of constructing the Tenant Improvements, including a reasonable construction monitoring fee to Landlord’s manager and any out-of-pocket expenses incurred by Landlord in reviewing Tenant’s plans and specifications.  Landlord hereby agrees to grant Tenant an allowance toward the costs of the Tenant Improvements to the Premises in the amount of Two Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00) (the "Landlord’s Contribution").  Provided that Tenant is not then in default of the Lease, Landlord shall pay to Tenant progress payments towards the cost of such Tenant Improvements up to the amount of the Landlord's Contribution from time to time (but no more frequently than monthly) during the buildout of the Premises within ten (10) business days of (i) Landlord’s receipt of Tenant’s written certification that (x) the invoices are solely for work completed at and/or materials delivered to the Premises in connection with the approved Tenant Improvements, (y) the sums remaining in the Landlord’s Contribution are sufficient to pay for the remainder of the Tenant Improvements, other than any sum which Tenant has agreed to pay, and (z) no construction or other liens have been filed against the Building with regard to the Tenant Improvements, (ii) Landlord's receipt of partial lien waivers from Tenant's general contractor and all subcontractors for all materials furnished and labor provided through the date of the invoice, (iii) Landlord's receipt of all invoices, indicating they were paid, for the reimbursement of the costs of the construction of the Tenant Improvements for which reimbursement is sought, and (iv) Landlord's receipt of any other information reasonably requested by Landlord to verify the construction costs of the Tenant Improvements and payment thereof.  Landlord may withhold from any progress payments a ten percent (10%) retainage; the ten percent (10%) retainage will be paid by Landlord to Tenant upon the last to occur of the following, in addition to the items set forth above:  (a) Landlord's receipt of Tenant's written certification signed by an officer of Tenant stating that Tenant has completed the Tenant Improvements in accordance with the Tenant Construction Documents that were approved by Landlord; (b) issuance of a certificate of occupancy for the Premises; and (c) submission of written evidence to Landlord that all of Tenant’s Improvements in the Premises have been completed free of all liens and other encumbrances, including, without limitation, receipt by Landlord of final, unconditional lien waivers from all contractors and subcontractors.

Upon receipt of the foregoing from Tenant, Landlord shall have twenty (20) business days to inspect the work.  In making an inspection of the work, if Landlord, in its reasonable opinion, finds that the work has not been completed to its reasonable satisfaction   and in accordance with the plans approved by Landlord, then Landlord shall notify Tenant in writing which portions of the work have not been completed or are not satisfactory and Landlord shall have the right to withhold the cost of such uncompleted or unsatisfactory work from its payment to Tenant until such time as the work in question has been completed to the reasonable satisfaction of Landlord and in accordance with the Tenant Construction Documents approved by Landlord.

Notwithstanding anything to the contrary contained herein, all of the Tenant Improvement work for which Tenant is seeking reimbursement from Landlord out of the Landlord’s Contribution must be completed on the date that is five (5) years after the Lease Commencement Date (the “Landlord’s Contribution Cut-off Date”), and all requests by Tenant for reimbursement of the Landlord’s Contribution must be submitted to Landlord by such Landlord’s Contribution Cut-off Date.  In the event that the cost and expense of constructing the Tenant Improvements is less than the Landlord’s Contribution, or Tenant fails to timely complete and submit its complete request for reimbursement for the cost of its Tenant Improvements pursuant to this Section by the Landlord’s Contribution Cut-off Date, then neither the Base Rent nor any additional rent shall be reduced nor shall Tenant be entitled to any credit for unused portions of the Landlord’s Contribution.  In the event that the cost and expense of the Tenant's Improvements exceed the Landlord’s Contribution, then Tenant shall pay any and all costs and expenses that exceed the Landlord’s Contribution (the “Excess Costs”).

WITNESS/ATTEST:                                                                LANDLORD:

PR I WASHINGTON TOWNSHIP NJ, L.L.C,
a New Jersey limited liability company



By: (SEAL)
(Corporate Seal)                                                                          Name:                                                       
Title:   Authorized Person
 
 
TENANT

GLOBAL EQUIPMENT COMPANY INC.,
a New York corporation


By: (SEAL)
(Corporate Seal)                                                                          Name:                                                       
Title:                                                        

 
 
 

EXHIBIT C-1

Tenant’s Specifications

 
 
 

EXHIBIT C-2

Tenant’s Signs

 
 
 

EXHIBIT C-3

Tenant’s Racking Plan



 
 
 

EXHIBIT D
 
Intentionally Deleted
 

 
 
 

EXHIBIT E

Rules and Regulations

1.   The sidewalk, entries, and driveways of the Building shall, not be obstructed by Tenant, or its agents, or used by them for any purpose other than ingress and egress to and from the Premises.
 
2.   Tenant shall not place any objects, including antennas, outdoor furniture, etc., in the parking areas, landscaped areas or other areas outside of its Premises, and Tenant shall not place any objects, including antennas, on the roof of the Building except as otherwise expressly permitted under Rider Two of the Lease.
 
3.   Except for aid animals for persons with disabilities, no animals shall be allowed in the Building.
 
4.   Tenant shall not disturb the occupants of the Building or adjoining buildings by the use of any radio or musical instrument or by the making of loud or improper noises.
 
5.   If Tenant desires telegraphic, telephonic or other electric connections in the Premises, Landlord or its agent will direct the electrician as to where and how the wires may be introduced; and, without such direction, no boring or cutting of wires will be permitted. Any such installation or connection shall be made at Tenant's expense.
 
6.   Tenant shall not install or operate any steam or gas engine or boiler, or other mechanical apparatus in the Premises, except as specifically approved in the Lease. The use of oil, gas or inflammable liquids for heating, lighting or any other purpose is expressly prohibited. Explosives or other articles deemed extra hazardous shall not be brought into the Building.  Tenant shall have the right to utilize forklifts that operate on propane gas engines, provided Tenant complies with all Legal Requirements pertaining to same and ensures that proper exhaust/ventilation controls are followed so as to prevent any damage to building systems or injury to persons.
 
7.   Parking any type of recreational vehicle is specifically prohibited on or about the Building. Except for the overnight parking of operating vehicles, no vehicle of any type shall be stored in the parking areas at any time. In the event that a vehicle is disabled, it shall be removed within 48 hours. There shall be no "For Sale" or other advertising signs on or about any parked vehicle. All vehicles shall be parked in the designated parking areas in conformity with all signs and other markings. Except as otherwise provided in the parking section of the Lease, all parking will be open parking, and no reserved parking, numbering or lettering of individual spaces will be permitted except as specified by Landlord.
 
8.   Tenant shall maintain the Premises free from rodents, insects and other pests.
 
9.   Landlord reserves the right to exclude or expel from the Building any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs or who shall in any manner do any act in violation of the Rules and Regulations of the Building.
 
10.   Tenant shall not cause any unnecessary labor by reason of Tenant's carelessness or indifference in the preservation of good order and cleanliness. Landlord shall not be responsible to Tenant for any loss of property on the Premises, however occurring, or for any damage done to the effects of Tenant by the janitors or any other employee or person.
 
11.   Tenant shall give Landlord prompt notice of any defects in the water, lawn sprinkler, sewage, gas pipes, electrical lights and fixtures, heating apparatus, or any other service equipment affecting the Premises.
 
12.   Tenant shall not permit storage or dumping of any waste or refuse outside the Premises, or permit any harmful materials to be placed in any drainage system or sanitary system in or about the Premises.  Tenant shall have the right to store trucks and trailers in the parking area in conformance with all Legal Requirements and any requirements of the Applegate Road Owners Association.
 
13.   All movable trash receptacles provided by the trash disposal firm for the Premises must be kept in the trash enclosure areas, if any, provided for that purpose, or in the loading dock area if permitted by and in conformance with all Legal Requirements and the requirements of the Applegate Road Owners Association.
 
14.   No auction, public or private, will be permitted on the Premises or the Building.
 
15.   No awnings shall be placed over the windows in the Premises except with the prior written consent of Landlord.
 
16.   The Premises shall not be used for lodging, sleeping or cooking or for any immoral or illegal purposes or for any purpose other than that specified in the Lease. No gaming devices shall be operated in the Premises.
 
17.   Tenant shall ascertain from Landlord the maximum amount of electrical current which can safely be used in the Premises, taking into account the capacity of the electrical wiring in the Building and the Premises and the needs of other tenants, and shall not use more than such safe capacity. Landlord's consent to the installation of electric equipment shall not relieve Tenant from the obligation not to use more electricity than such safe capacity.
 
18.   Tenant assumes full responsibility for protecting the Premises from theft, robbery and pilferage.
 
19.   Tenant shall not install or operate on the Premises any machinery or mechanical devices of a nature not directly related to Tenant's ordinary use of the Premises and shall keep all machinery free of vibration, noise and air waves which may be transmitted beyond the Premises.
 

 
 
 

EXHIBIT F-1

Memorandum of Lease

Recording Requested By:




When Recorded, Return to:                                                                                                           




THIS MEMORANDUM OF LEASE (“Memorandum of Lease”) is made and entered into as of this ___ day of February, 2012, by and between PR I Washington Township NJ, L.L.C., a New Jersey limited liability company ("Landlord"), and Global Equipment Company Inc., a New York corporation t/a Global Industrial, Global Industrial Equipment and Global Industrial.com (“Tenant”).

1.  
Landlord is the owner of that certain real property, and improvements located thereon, located in the Township of Robbinsville, County of Mercer, State of New Jersey, more particular described on Exhibit 1 hereto (the “Property”).

2.  
For and in consideration of the mutual covenants, agreements, and conditions set forth in that certain unrecorded Lease Agreement dated _______________ (the “Lease”), Landlord has leased to Tenant and Tenant has leased from Landlord, upon the terms and conditions of the Lease, the Premises, as more particularly described in the Lease.

3.  
In accordance with the terms and conditions of the Lease, the term of the Lease shall be for a period of _______ years commencing on ______________________ and expiring on _________________.  Tenant has one (1) option to lease additional, adjacent space in the Building, as more particularly set forth in Rider One of the Lease.

4.  
This Memorandum of Lease has been prepared to provide notice that the Property is subject to the terms and conditions of the Lease, which terms are hereby incorporated by reference into this Memorandum of Lease.

5.  
In no event shall the terms of this Memorandum of Lease be deemed to modify, amend, limit, or otherwise affect the terms and conditions of the Lease.  In the event of any inconsistency between the terms of this Memorandum of Lease and the terms of the Lease, the terms of the Lease shall control.

6.  
This Memorandum of Lease may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which, when taken together, shall be deemed to be one and the same document.  Signature pages may be taken from a counterpart and attached to other counterparts to form one document, which shall constitutes a fully executed document that may be recorded.

IN WITNESS WHEREOF, Landlord and Tenant have caused their duly authorized representatives to execute this Memorandum of Lease as of the date first written above.


 
 
 

WITNESS/ATTEST:                                                                LANDLORD:

PR I WASHINGTON TOWNSHIP NJ, L.L.C,
a New Jersey limited liability company


By: (SEAL)
(Corporate Seal)                                                                          Name:                                                       
Title:   Authorized Person

STATE OF                                                       )
  )  ss:
COUNTY OF                                                    )

On this the          day of                                                                  , 20   , before me,                              , the undersigned officer, personally appeared , known to me (or satisfactorily proven) to be the person whose name is subscribed to the foregoing document, and acknowledged that he/she executed the foregoing document for the purposes therein contained and that he/she is duly authorized to execute said document.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.

                                 Notary Public

My Commission Expires:
 
 
TENANT

GLOBAL EQUIPMENT COMPANY INC.,
a New York corporation


By: (SEAL)
(Corporate Seal)                                                                          Name:                                                       
Title:                                                        

STATE OF                                                       )
  )  ss:
COUNTY OF                                                    )

On this the          day of                                                                  , 20   , before me,                              , the undersigned officer, personally appeared , known to me (or satisfactorily proven) to be the person whose name is subscribed to the foregoing document, and acknowledged that he/she executed the foregoing document for the purposes therein contained and that he/she is duly authorized to execute said document.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.

                                 Notary Public

My Commission Expires:
 
 

 
 
 

EXHIBIT F-2

Memorandum of Termination of Lease

Recording Requested By:




When Recorded, Return to:                                                                                                           




THIS MEMORANDUM OF TERMINATION OF LEASE (“Memorandum of Termination of Lease”) is made and entered into as of this ___ day of _____________, 20__, by and between PR I Washington Township NJ, L.L.C., a New Jersey limited liability company ("Landlord"), and Global Equipment Company Inc., a New York corporation t/a Global Industrial, Global Industrial Equipment and Global Industrial.com (“Tenant”).

RECITALS

Landlord and Tenant entered into the Memorandum of Lease (Memorandum) dated as of _____________, 20__, recorded and filed with the Office of the _____________, Mercer County, New Jersey, on ________________, 20__, as Document No. _____________.  The Memorandum evidenced an unrecorded Lease Agreement dated as of February __, 2012 (the “Lease”), between Landlord, as landlord, and Tenant, as tenant, which Lease covered the real property in Robbinsville, Mercer County, New Jersey, as more particularly described on Exhibit 1 hereto.

 
Landlord and Tenant now desire to cause this Memorandum of Termination of Lease to be recorded in the Official Records of Mercer County, New Jersey, in order to put interested parties on notice that the Lease and the Memorandum have been terminated.
 
 
Agreement
 
1.  
Now, therefore, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree that the Lease and the Memorandum have been terminated and are of no further force or effect.

2.  
This Memorandum of Lease Termination may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which, when taken together, shall be deemed to be one and the same document.  Signature pages may be taken from a counterpart and attached to other counterparts to form one document, which shall constitutes a fully executed document that may be recorded.

IN WITNESS WHEREOF, Landlord and Tenant have caused their duly authorized representatives to execute this Memorandum of Termination of Lease as of the date first written above.


 
 
 

WITNESS/ATTEST:                                                                LANDLORD:

PR I WASHINGTON TOWNSHIP NJ, L.L.C,
a New Jersey limited liability company


By: (SEAL)
(Corporate Seal)                                                                          Name:                                                       
Title:   Authorized Person

STATE OF                                                       )
  )  ss:
COUNTY OF                                                    )

On this the          day of                                                                  , 20   , before me,                              , the undersigned officer, personally appeared , known to me (or satisfactorily proven) to be the person whose name is subscribed to the foregoing document, and acknowledged that he/she executed the foregoing document for the purposes therein contained and that he/she is duly authorized to execute said document.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.

                                 Notary Public

My Commission Expires:
 
 
TENANT

GLOBAL EQUIPMENT COMPANY INC.,
a New York corporation


By: (SEAL)
(Corporate Seal)                                                                          Name:                                                       
Title:                                                        

STATE OF                                                       )
  )  ss:
COUNTY OF                                                    )

On this the          day of                                                                  , 20   , before me,                              , the undersigned officer, personally appeared , known to me (or satisfactorily proven) to be the person whose name is subscribed to the foregoing document, and acknowledged that he/she executed the foregoing document for the purposes therein contained and that he/she is duly authorized to execute said document.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.

                                 Notary Public

My Commission Expires:

 
 
 


 
 
 

TABLE OF CONTENTS
 
for
LEASE AGREEMENT
between
PR I WASHINGTON TOWNSHIP NJ, L.L.C.
and
GLOBAL EQUIPMENT COMPANY INC.

SECTION ………………………………………………………........................................................................................................................................................................................................…  PAGE #
 
1.
GRANTING CLAUSE …….…….………………………………………………………………...........................................................................................................................................................3
 
 
2.
ACCEPTANCE OF PREMISES …….………………………………………………........................................................................................................................................................…………....3
 
 
3.
USE… ….…………………….…………………………………………..…………………........................................................................................................................................................…….…4
 
 
4.
BASE RENT ………………….………………………………………..……………………........................................................................................................................................................….…..5
 
 
5.
SECURITY DEPOSIT ……………………………………………………………….........................................................................................................................................................………….....6
 
 
6.
OPERATING EXPENSE PAYMENTS ..................................................................................................................................................................................................................................................6
 
 
7.
UTILITIES ……..…..…………………………………………………………………………..........................................................................................................................................................……8
 
 
8.
TAXES ………………………………………………………………………………….........................................................................................................................................................………..….9
 
 
9.
INSURANCE ………………………………………….……………………………..........................................................................................................................................................………….…10
 
 
10.
LANDLORD’S REPAIRS ………………..……………………..………………………….......................................................................................................................................................……..11
 
 
11.
TENANT’S REPAIRS …………………………………………………………………….......................................................................................................................................................…….....11
 
 
12.
TENANT-MADE ALTERATIONS AND TRADE FIXTURES …….......................................................................................................................................................…………………………..12
 
 
13.
SIGNS ……………………………………………………………………………………………...........................................................................................................................................................13
 
 
14.
PARKING …………………………………………………........................................................................................................................................................………………………………………14
 
 
15.
RESTORATION ……………………………………………………………………….......................................................................................................................................................………..…14
 
 
16.
CONDEMNATION ………………………………………………………………………........................................................................................................................................................……….14
 
 
17.
ASSIGNMENT AND SUBLETTING …..…………………………………………………….......................................................................................................................................................…..15
 
 
18.
INDEMNIFICATION …………………………………………………………………………..........................................................................................................................................................…16
 
 
19.
INSPECTION AND ACCESS ………………………………………………………………….......................................................................................................................................................…16
 
 
20.
QUIET ENJOYMENT ….……………………………………………………………….........................................................................................................................................................………...16
 
 
21.
SURRENDER ……….……………………………………………………………………….........................................................................................................................................................…….16
 
 
22.
HOLDING OVER ………………………………………………………………….........................................................................................................................................................………...……17
 
 
23.
EVENTS OF DEFAULT …………………………………………………………….........................................................................................................................................................……………17
 
 
24.
LANDLORD’S REMEDIES …………………………..…………………………………........................................................................................................................................................………18
 
 
25.
TENANT’S REMEDIES ………………………………………………………………….........................................................................................................................................................………20
 
 
26.
WAIVER OF JURY TRIAL …………………………………………………………….........................................................................................................................................................………..20
 
 
27.
SUBORDINATION …………………………………………………………........................................................................................................................................................…………..….….…20
 
 
28.
MECHANIC’S LIENS …………………………………………………………….,.......................................................................................................................................................……….…..…21
 
 
29.
ESTOPPEL CERTIFICATES …………………………………………………….........................................................................................................................................................……………...21
 
 
30.
ENVIRONMENTAL REQUIREMENTS ………………………………………….........................................................................................................................................................……….……22
 
 
31.
RULES & REGULATIONS ……………………………………………………………........................................................................................................................................................……...…24
 
 
32.
SECURITY SERVICE ………………………………………………………………………..........................................................................................................................................................…...24
 
 
33.
FORCE MAJEURE ……………………………………………………………….........................................................................................................................................................………………24
 
 
34.
ENTIRE AGREEMENT ………………………………………………………...........................................................................................................................................................………………....25
 
 
35.
SEVERABILITY ……………………………………………………………………….........................................................................................................................................................………….25
 
 
36.
BROKERS ………………………………………………………………………........................................................................................................................................................………………...25
 
 
37.
RELOCATION ........................................................................................................................................................................................................................................................................................25
 
 
38.
MISCELLANEOUS …………………………………………………………………........................................................................................................................................................……………25
 
 
39.
LANDLORD’S LIEN/SECURITY INTEREST ………………………………….........................................................................................................................................................………..……27
 
 
40.
LIMITATION OF LIABILITY OF LANDLORD ……….…………………………………..........................................................................................................................................................…27
 
 
41.
ERISA REPRESENTATION ………………………………………………………………...........................................................................................................................................................…..27
 
 
42.
OFAC CERTIFICATION ……………………………………………………..........................................................................................................................................................…………….……28
 
 
43.
NOTICES ……………………………………………………………………………………..................................................................................................................................................................28
 
 
44.
ADDITIONAL RENT ………………………………………………………………………..........................................................................................................................................................…...29
 
 
45.
RIDERS ……………………………………………………………………………………............................................................................................................................................................……29
 


EXHIBITS

A – Premises & Parking
B – Landlord’s Work
B-1 - Demising Wall and Draft Curtain Plan
B-2 – ESFR Sprinkler Conversion Plan
B-3 - FM Global Project Report – February 15, 2012
C - Tenant Improvements
C-1 – Tenant’s Specifications
C-2 – Tenant’s Signs
C-3 – Tenant’s Racking Plan
D – Intentionally Deleted
E - Rules and Regulations
F-1 Form of Memorandum of Lease
F-2 Form of Memorandum of Lease Termination

RIDERS

Rider One – Expansion Option
Rider Two – Roof Access


 
 
 




 
 
 



                                                                                                                                                                                                                                                                                                                    Exhibit 10.4
EMPLOYMENT AGREEMENT
 
EMPLOYMENT AGREEMENT, made as of the 12th day of April, 2012, by and between SYSTEMAX INC. (the “ Company ” or “ Systemax ”) and ERIC M. LERNER (“ you ” or the “ Employee ”).
 
 
RECITALS
 
 
WHEREAS, the Company wishes to employ the Employee upon the terms and conditions set forth in this Agreement.
 
 
WHEREAS, the Employee is willing to make his services available to the Company on the terms and conditions hereinafter set forth.
 
 
NOW, THEREFORE, it is mutually agreed by the Company and the Employee as follows:
 
1.   Employment .
 
(a)   Employment; Title . The Company hereby agrees to employ the Employee as the Company’s Senior Vice President and General Counsel (the “ Title ”), and the Employee hereby accepts such employment, effective on the date hereof, on the terms and conditions set forth herein.  The Employee shall hold such other positions with the Company and/or its subsidiaries (collectively the “ Systemax Companies ”) as shall be reasonably requested by the “Reporting Person” (as defined below) so long as such other positions are reasonably consistent with such Title.  As Senior Vice President and General Counsel, the Employee shall be the chief legal officer of the Systemax Companies.
 
(b)   Term . The term of employment of the Employee by the Company under this Agreement shall commence on May 2, 2012 (the “ Commencement Date ”) and shall continue until terminated as provided in Section 3 hereof (the “ Employment Period ”).  Employee is not being offered employment for a definite period of time, and either Employee or the Company may terminate the employment relationship at any time and for any reason without prior notice and without additional compensation to Employee, except as provided herein.
 
(c)   Duties . The Employee shall have general responsibility for overseeing and managing the global legal affairs of the Systemax Companies and the Company’s Office of the General Counsel (“ Legal Department ”).  You will perform the duties, undertake the responsibilities and exercise the authority customarily performed, undertaken and exercised by persons employed in a similar executive capacity and/or, to the extent consistent with your position (subject to Section 3(c) or 3(d) in the case of your voluntary resignation without Good Reason (as defined below)), as directed by the Chief Financial Officer of the Company (the “ Reporting Person ”).  In this regard, you will directly manage and supervise (i) the Legal Department’s staff, (ii) the Company’s outside counsel, including foreign counsel, (iii) together with outside counsel, the Company’s litigations, regulatory proceedings and other actions, (iv) the Company’s contracting processes and activities, including contracts record management, (v) together with the Reporting Person and the appropriate Committees of the Company’s Board of Directors, the Company’s corporate governance, legal compliance and disclosure programs and policies, including under applicable securities and stock exchange regulations, including the Company’s reporting obligations under the Securities Exchange Act of 1934, as amended, and (vi) together with local and foreign counsel, the Company’s compliance with applicable laws and regulations in the jurisdictions where the Company does business. You shall report directly to the Reporting Person.  You agree to devote your full working time, attention and skill to the business and affairs of the Company and to use your reasonable commercial efforts and skills to advance the best interests of the Company.  The Employee shall perform his duties primarily at the Company’s offices located in Port Washington, New York, subject to travel and other duties outside of such location consistent with the Company’s business as determined by the Reporting Person, including travel, on an as needed basis, to the Company’s Florida and foreign offices.  Nothing in this Agreement shall be construed to prohibit the Employee from serving on the board of directors and/or on the advisory board of any not-for profit or other corporation, including the Board of Directors of 33380 Ownership Corp., provided that (a) such service does not create an actual or apparent conflict of interest with the business of the Company, (b) such service is approved by the Board of Directors of the Company (the “Board”), and (c) such service does not conflict with any applicable federal or state law, regulation or New York Stock Exchange (“ NYSE ”)  rule.
 
2.   Compensation .
 
(a)   Base Salary . For the performance of all duties, responsibilities and services by the Employee hereunder during the Employment Period, the Company shall pay to the Employee, and the Employee agrees to accept, a base salary (the “Base Salary”) at an annual rate of Four Hundred Eighty Thousand Dollars ($480,000), payable in accordance with the Company’s normal payroll practices for its senior executives.  Your Base Salary will be reviewed annually by the Company and may be increased (but not decreased except pursuant to clause (iii) of the definition of “Good Reason” in Section 3(d) hereof) in the discretion of the Company.
 
(b)   Annual Cash Bonus .  You shall be eligible to earn a target cash bonus of 50% of your base salary during each year of the Employment Period based on meeting the performance objectives established for you by the Company (the “Bonus”).  In calculating your total Bonus to be paid in respect of any year (or portion thereof) for which you are employed, 50% of the Bonus will be based on individual performance objectives for the Legal Department’s accomplishments and 50% of the Bonus will be based on the performance objectives for the Company under its NEO Cash Bonus Plan for the applicable year.  Depending upon achievement of these performance objectives in any year, Bonuses may be paid in amounts greater or lesser than the target cash Bonus amount.  The Bonus, if earned, shall be paid by the Company to you within 75 days following the end of each year during the Employment Period in accordance with the Company’s annual bonus practices for its senior executives.  Your annual target cash Bonus will be reviewed annually by the Company and may be increased (but not decreased) in the discretion of the Company.  The Bonus for the portion of the first year of the Employment Period for which you are employed shall be prorated for the portion of the year in which you were employed.
 
(c)   Participation in Benefit Plans . The Employee shall be entitled to participate in and receive benefits under all medical plans or other employee insurance or benefit plans and arrangements that are made generally available to executive employees of the Company and on the terms that such plans, insurance and arrangements are made generally available to executive employees of the Company. To the extent that any such plan or arrangement generally permits the participation or coverage of dependents and the spouses of the employees of the Company, the Employee’s dependents and his spouse shall have the right to participate in or be covered under such plan or program as in effect from time to time. Notwithstanding the foregoing, the Employee’s coverage (and coverage for his spouse and dependents) under the Company’s medical and dental plans shall become effective immediately upon the date hereof.  The Company agrees to pay you, as additional compensation, your share of any healthcare contributions, for you, your spouse and dependents.  Notwithstanding the foregoing, you shall not be entitled to participate in any Company severance plan other than as provided specifically herein.
 
(d)   Expenses . During the Employment Period (except as limited by Section 2(g) hereof), the Employee shall be entitled to receive reimbursement for all ordinary and necessary business expenses reasonably incurred by his in accordance with industry custom in performing services hereunder, provided that the Employee provides the Company with written documentation, satisfactory to the Company, evidencing such expenses.  Such expenses will include bar association dues and attorney state registration fees, and continuing legal education courses in order to maintain state attorney registration.
 
(e)   Vacations and Holidays . The Employee shall be entitled to four (4) weeks of paid vacation in each calendar year, provided, that your paid vacation for the portion of the first year of the Employment Period shall be prorated for the portion of the year in which the Employee was employed.  At no time, however, shall you take more than two (2) weeks of vacation consecutively unless approved by the Reporting Person.  The Employee shall have the holidays and sick days as determined by the Company’s policies in effect on the date hereof and as amended.  You must report your vacation days used to the appropriate Company payroll office promptly after such vacation days occur.
 
(f)   Options. Upon execution of this Agreement, and as approved by the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) on or   prior to the Commencement Date, the Employee shall receive an option to purchase 25,000 shares of the Company’s common stock (in accordance with the Company’s 2010 Long Term Incentive Plan) (a) exercisable at an exercise price per share equal to the fair market value of a share of the Company’s common stock as quoted on the NYSE at close of business on the date of grant, (b) vesting over a period of four years with 25% of the options vesting on the first, second, third and fourth anniversary dates of the grant date, and (c) containing such other terms and conditions as may be set forth in the Company’s stock option agreement with you. On each of the first, second and third anniversary dates of the Commencement Date and provided you are then still employed by the Company, the Company will issue to you an additional option to acquire at least an additional 25,000 shares of the Company’s common stock (the Additional Options ”); it being understood and agreed that the Employee shall be eligible for additional equity grants in addition to the Additional Options, based upon Executive’s performance of his duties hereunder, as determined in the sole discretion of the Compensation Committee. The Additional Options will be on the terms provided above for the initial option grant, provided , that in the event the Company implements a Long Term Incentive Plan for its executives that provides for annual equity option grants for executives at the Senior Vice President level for an amount of shares greater than 25,000 shares per year, then Additional Options will be granted at
 
such higher amount of shares in the aggregate.  The stock option agreement with you shall provide that if your employment with the Company (or its successor) shall be terminated by the Company (or its successor) without “Cause” (as defined below) or by the Employee for “Good Reason” (as defined below) within six (6) months following a “Change in Control” (defined below), all of Employee’s outstanding unvested stock options shall immediately vest and all of Employee’s outstanding options shall remain exercisable in accordance with their terms, but in no event for less than 90 days after such termination.  For purposes of this Agreement, “Change in Control” shall mean:  (i) the sale or other disposition of all or substantially all of the assets of the Company; (ii) any sale or exchange of the capital stock of the Company by the stockholders of the Company in one transaction or series of related transactions as a result of which more than fifty percent (50%) of the outstanding voting securities of the Company is acquired by a person or entity or group of related persons or entities; (iii) any reorganization, consolidation or merger of the Company where the outstanding voting securities of the Company immediately before the transaction represent or are converted into less than fifty percent (50%) of the outstanding voting power of the surviving entity (or its parent corporation) immediately after the transaction; or (iv) the consummation of the acquisition of fifty-one percent (51%) or more of the outstanding stock of the Company pursuant to a tender offer validly made under any federal or state law (other than a tender offer by the Company).
 
(g)   Car Allowance. During the Employment Period the Employee shall receive a car allowance of fifteen hundred dollars ($1,500) per month to cover the Employee’s automobile expenses including any car lease or loan payment, insurance, fuel, maintenance, repairs, registration fees, local travel, etc.
 
3.   Termination of Employment .  The Employee’s employment under this Agreement may be terminated only under any of the circumstances set forth in this Section 3. Upon termination, the Employee (or his beneficiary or estate, as the case may be) shall be entitled to receive the compensation and benefits described in Section 4 below.
 
(a)   Death . The Employee’s employment hereunder shall terminate upon his death.
 
(b)   Termination Resulting from Total Disability . The Company may terminate the Employee’s employment upon his becoming “Totally Disabled” and thereafter providing “Notice of Termination” (defined below). For purposes of this Agreement, the Employee shall be “Totally Disabled” if the Employee is physically or mentally incapacitated so as to render the Employee incapable of performing the essential functions of his position under this Agreement with or without reasonable accommodation for a period of three (3) consecutive months or for an aggregate of ninety (90) days within any consecutive six month period. The Employee’s receipt of disability benefits under the Company’s long-term disability plan, if any, or receipt of Social Security disability benefits shall be deemed conclusive evidence of Total Disability for purpose of this Agreement; provided, however, that in the absence of the Employee’s receipt of such long-term disability benefits or Social Security benefits, the Board of Directors may, in its reasonable discretion (but based upon appropriate medical evidence), determine that the Employee is Totally Disabled.
 
(c)   Cause . The Company may terminate your employment at any time for “Cause”.  For the purposes of this Agreement, the Company shall have “Cause” to terminate your employment hereunder upon (i) your indictment, conviction of or plea of nolo contendere to a felony or any other crime involving deceit, dishonesty, fraud or moral turpitude; (ii) your engaging in conduct which brings, or if publicly known would bring, the Company into public disrepute or disgrace and which the Board believes has had or will have a detrimental effect on the Company’s reputation or business; (iii) your engaging in an act of gross negligence or willful misconduct in the performance of your employment obligations and duties, and/or your violation of the Company’s corporate ethics policies, in any such case that has had or will have a material adverse effect on the Company’s reputation or business; (iv) your making any false, disparaging or malicious statement, oral or written, about the Systemax Companies or any director, officer or employee of the Systemax Companies which is injurious to the business or operations of any of the Systemax Companies, or which may in any material respect interfere with the goodwill of any of the Systemax Companies or its relations with customers or suppliers; (v) your committing an act of embezzlement of or fraud against, or theft or misappropriation of property belonging to, the Company, or your engaging in any intentional “kickback” scheme involving the Company’s vendors; (vi) your breach of your covenants under Sections 6, 7 and/or 8 of this Agreement, which, to the extent curable, is not cured within 30 days of written notice thereof; (vii) you cease at any time during the term hereof to be a member in good standing of and duly admitted to the Bar of the State of New York or at any time during the term hereof cease to be licensed to practice law in the State of New York, or (viii) following thirty (30) days notice and opportunity to cure (to the extent curable) during such thirty (30) day period, you (a) repeatedly fail to perform the material duties of your office as described in this Agreement and/or as reasonably directed by the Reporting Person in writing (provided that mere poor job performance shall not be considered such failure) or (b) you commit a material breach of this Agreement, which, if curable, is not cured within 30 days of written notice thereof.
 
(d)   Voluntary Resignation; Resignation for Good Reason . The Employee may terminate his employment (i.e. voluntarily resign) by providing the Company with Notice of Termination. If the Employee terminates his employment for “Good Reason” (as defined below) such termination shall be treated as a termination of the Employee’s employment by the Company without “Cause” and the Employee shall be entitled to receive compensation upon termination in accordance with Section 4(e) hereof.
 
For purposes of this Agreement, “Good Reason” shall mean any of the following taken without your written consent and provided the Company fails to cure the event within thirty (30) days after receipt of written notice thereof:  (i) a material change, adverse to you, in your position, titles or corporate offices; (ii) an assignment of any significant duties to you that are materially inconsistent with your positions or offices held with the Company; (iii) a decrease in your then current annual base salary, bonus formula or other compensation and benefits hereunder (other than in connection with a general decrease in the foregoing applicable to  all employees with a title of senior vice president or above including, without limitation, changes under the Company’s NEO Cash Bonus Plan and/or benefits plan); (iv) your relocation to a facility or a location more than fifty (50) miles from your then current location; (v) your reporting to anyone other than the Chief Financial Officer or the Chief Executive Officer of the Company; or (vi) the Company’s material breach of this Agreement.  A termination by the Employee shall not be deemed for Good Reason unless the Employee has notified the Company in writing of his intention to terminate for Good Reason within 30 days of the date on which the Employee learns that the event causing the alleged Good Reason has occurred and the Company fails to remedy such Good Reason within 30 days following the receipt of such notice. Any termination by the Employee for Good Reason has to be made promptly (and in any case within one month) after the end of the 30-day period within which the Company may remedy the events giving rise to the right to terminate for Good Reason.
 
(e)   Without Cause . The Company may terminate the Employee without “Cause” at any time after providing Notice of Termination, subject to § 3(g)(iv).
 
(f)   Notice of Termination . Any termination of Employee’s employment by the Company or by Employee (other than by reason of Employee’s death) shall be communicated by written Notice of Termination to the other party in accordance with Section 10 below. For purposes of this Agreement, a “Notice of Termination” shall mean a notice in writing which shall indicate the applicable specific termination provision in this Agreement relied upon to terminate Employee’s employment and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment under the provision so indicated.
 
(g)   Date of Termination . The effective date of Employee’s termination of employment (“Date of Termination”) shall be:
 
(i)   in the event of his death, the date of death;
 
(ii)   in the event of termination for Total Disability, thirty (30) days after Notice of Termination is given (provided that Employee shall not have returned to the performance of his duties on a full-time basis during such 30-day period);
 
(iii)   in the event of termination for Cause  the date specified in the Notice of Termination;
 
(iv)   in the event of termination without Cause, the last day of the fifteen (15) day period beginning on the date on which written Notice of Termination is given, or such earlier date as may be mutually agreed by the parties;
 
(v)   in the event of resignation by the Employee (other than for Good Reason), the last day of the thirty (30) period beginning on the date on which written Notice of Termination is given, or such earlier date as may be mutually agreed by the parties; and
 
(vi)   in the event of the Employee’s resignation for Good Reason, the date of termination shall be the effective date of Employee’s termination of employment in accordance with Section 3 (d) hereof.
 
4.   Compensation Following Termination of Employment
 
(a)   Total Disability . If the Employee’s employment is terminated pursuant to Section 3(b) as a result of the Employee’s Total Disability, the Company shall within 10 business days of the Date of Termination (x) pay to the Employee the applicable portion of his Base Salary and car allowance due through the Date of Termination at the rate in effect at the time Notice of Termination is given, and (y) reimburse the Employee for all outstanding expenses in accordance with § 2(d), and following such payments the Company shall have no further obligation to the Employee under this Agreement; provided, however, that the foregoing shall have no effect upon any benefits due the Employee under any disability or medical plan or other employee benefit plan or arrangement of the Company then in effect and provided further that any stock option or restricted stock held by the Employee shall be treated in accordance with the provisions of the applicable stock option agreement or applicable restricted stock agreement, respectively.  In addition, the Company shall pay to the Employee that portion of the annual target Bonus, on the date set forth herein for when executive bonuses are otherwise payable, that is equal to the number of days the Employee was employed by the Company (based on the Date of Termination), in the year that such termination occurred, divided by 365 and multiplying the result thereof by the annual target Bonus otherwise payable through the end of the year in which such termination occurred (or based on the average annual Bonus paid to the Employee for the Employee’s two prior years of employment if the Employee has been employed two or more years), as if such termination had not occurred.
 
(b)   Death .  If the Employee’s employment shall be terminated by reason of his death, the Company shall within 10 business days of the Date of Termination (x) pay to such person as the Employee shall have previously designated, in a notice filed with the Company, or, if no such person shall have been designated, to his spouse (and if none, to his estate), the applicable portion of his Base Salary and car allowance due through the applicable Date of Termination at the rate in effect on the date of death, and (y) reimburse the Employee for all outstanding expenses in accordance with § 2(d), and following such payments, the Company shall have no further obligations to such designated person or the Employee’s estate, as the case may be, under this Agreement provided, however, that the foregoing shall have no effect upon any benefits due the Employee under any disability or medical plan or other employee benefit plan or arrangement of the Company then in effect and provided further that any stock option or restricted stock held by the Employee shall be treated in accordance with the provisions of the applicable stock option agreement or applicable restricted stock agreement, respectively.  In addition, the Company shall pay to such designated person or the estate that portion of the annual target Bonus, on the date set forth herein for when executive bonuses are otherwise payable, that is equal to the number of days the Employee was employed by the Company (based on the Date of Termination), in the year that such termination occurred, divided by 365 and multiplying the result thereof by the annual Bonus otherwise payable through the end of the year in which such termination occurred (or based on the average annual Bonus paid to the Employee for the Employee’s two prior years of employment if the Employee has been employed two or more years), as if such termination had not occurred.
 
(c)   Cause . If the Employee’s employment shall be terminated pursuant to Section 3(c), the Company shall within ten (10) business days of the Date of Termination (x) pay to the Employee the applicable portion of his Base Salary and car allowance due through the applicable Date of Termination at the rate in effect at the time Notice of Termination is given and, (y) reimburse the Employee for all outstanding expenses in accordance with § 2(d), and, following such payments, the Company shall have no further obligation to the Employee under this Agreement provided, however, that the foregoing shall have no effect upon any benefits due the Employee under any disability or medical plan or other employee benefit plan or arrangement of the Company then in effect and provided further that any stock option or restricted stock held by the Employee shall be treated in accordance with the provisions of the applicable stock option agreement or applicable restricted stock agreement, respectively.
 
(d)   Voluntary Resignation . If the Employee voluntarily resigns pursuant to Section 3(d) (except for Good Reason) the Company shall pay Employee within ten (10) business days of the Date of Termination the applicable portion of his Base Salary and car allowance due through the applicable Date of Termination at the rate in effect at the time Notice of Termination is given to the Company and reimbursement of outstanding expenses pursuant to Section 2(d) and, following such payments, the Company shall have no further obligation to the Employee under this Agreement; provided, however, that the foregoing shall have no effect upon any benefits due the Employee under any disability or medical plan or other employee benefit plan or arrangement of the Company then in effect and provided further that any stock option or restricted stock held by the Employee shall be treated in accordance with the provisions of the applicable stock option agreement or applicable restricted stock agreement, respectively.
 
(e)   Without Cause; For Good Reason . If the Employee’s employment shall be terminated by the Company without “Cause” pursuant to Section 3(e) or by the Employee for “Good Reason” pursuant to Section 3(d), the Company shall pay the Employee the following compensation:
 
(i)   The Company shall (x) pay the Employee within ten (10) business days of the Date of Termination the applicable portion of his Base Salary and car allowance due through the applicable Date of Termination at the rate in effect at the time Notice of Termination is given, and (y) reimburse the Employee for all outstanding expenses in accordance with § 2(d);
 
(ii)   The Company shall pay the Employee, as severance pay and as express consideration, for, and contingent upon, Employee complying with his obligations under Section 6 hereof, his Base Salary in effect at the time Notice of Termination is given for a period of twelve (12) months (the “Severance Period”) following the applicable Date of Termination, such Base Salary to be paid pursuant to the Company’s normal payroll practices for its senior executives;
 
(iii)   The Company shall pay you, as severance pay and as express consideration for, and contingent upon, Employee complying with his obligations under Section 6 hereof, the average annual Bonus earned by you during the two years prior to the year of the termination of your employment; provided, that, if your employment is terminated within two years of the Commencement Date, the Company shall pay you an amount equal to the annual target Bonus; such amount to be paid in substantially equal installments at the time of payment of the Base Salary being paid to you pursuant to the Company’s normal payroll practices for its senior executives; and
 
(iv)   During the Severance Period the Company shall reimburse the Employee for any COBRA payments the Employee may be required to make in order to maintain the medical and dental benefits he received as an employee of the Company(including family coverage to the extent in effect immediately prior to the Date of Termination), until the earlier of the end of the Severance Period or the date you become eligible to receive coverage under the medical and dental benefit plans or programs of a subsequent employer.
 
Other than such payments and subject to the conditions thereto provided above, the Company shall have no further obligation to the Employee under this Agreement provided, however, that the foregoing shall have no effect upon any benefits due the Employee under any disability or medical plan or other employee benefit plan or arrangement of the Company then in effect and provided further that any stock option or restricted stock held by the Employee shall be treated in accordance with the applicable stock option agreement or restricted stock agreement, respectively.
 
The payment of any amounts pursuant to clauses (ii), (iii) and (iv) of this Section 4(e) is further expressly conditioned upon the delivery by you to the Company, within thirty (30) days after the Date of Termination (and the revocation period for the release lapsing without revocation within such thirty (30) day period), of a general release in form and substance reasonably satisfactory to the Company of any and all claims you may have against the Company and its directors, officers, employees, subsidiaries, affiliates, stockholders, successors, assigns, agents and representatives.  The payments to you subject to receipt of the release shall be made to you at the later of (A) such times as specified in the applicable provisions of this Section 4, (B) after the end of the revocation period for the release has lapsed without revocation, and (C) if the thirtieth (30 th ) calendar day following the Date of Termination is in a different calendar year than the date of termination, then on the thirtieth (30 th ) calendar day.
 
The Company acknowledges and agrees that the Employee shall have no duty at any time to seek other employment or to mitigate his damages hereunder.  The amounts payable to the Employee under this Agreement shall be paid regardless of whether the Employee obtains other employment.
 
(f)   Accrued Vacation Upon Termination . Upon termination of employment for any reason, the Company shall pay the Employee within ten (10) business of the Date of Termination for all accrued but unused vacation up to a maximum of four (4) weeks based on the Base Salary then in effect.
 
5.   Successors .  This Agreement and all rights of the Employee hereunder shall inure to the benefit of and be enforceable by the Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees. This Agreement and all rights and obligations of the Company hereunder shall inure and be binding on any person, firm or corporation which shall become the owner of substantially all of the assets or capital stock of the Company or which shall succeed to the business of the Company or with which the Company may be consolidated or merged; provided, that the Company require any successor to expressly assume and agree to perform its obligations to Employee in the event of any such transaction, and the Company shall be deemed to guaranty the obligations of such person, firm or corporation to the Employee under this Agreement in the event of such transaction.
 
6.   Covenants .
 
(a)   Confidential Information . During the course of the Employee’s employment with the Company, the Employee will acquire and have access to Confidential Information and Trade Secrets (defined below) belonging to the Systemax Companies. Such Confidential Information and Trade Secrets relate both to the Systemax Companies, their customers and their employees, and consist of any information which is not generally known, that is or may be used in the Systemax Companies’ business and that could reasonably give competitors an advantage if they knew about it or could impact upon the Systemax Companies’ internal operations.  Confidential Information and Trade Secrets shall mean and include, but is not limited to: (i) financial and business information, such as information with respect to costs, commission, fees, profits, sales, markets, mailing lists, strategies and plans for future business, new business, product or other development, potential acquisitions or divestitures, and new marketing ideas; (ii) product and technical information, such as devices, formulas and compositions of matter and processes relating to the manufacture of the Systemax Companies’ products, designs, drawings, specifications and blueprints of machinery and equipment, new and innovative product ideas, methods, procedures, devices, sourcing information, vendor information, supplier information, data processing programs, software, software codes, computer models, research and development projects; (iii) marketing information, such as information on markets, end users and applications, the identity of the Systemax Companies’ customers and distributors, their names and addresses, the names of representatives of the Systemax Companies’ customers and distributors responsible for entering into contracts with the Company, the Company’s financial arrangements with its customers and distributors, the amounts paid by such customers to the Company, specific customer needs and requirements, leads and referrals to prospective customers; (iv) personnel information, such as the identity and number of the Systemax Companies’ other employees, their salaries, bonuses, benefits, skills, qualifications, and abilities; and (v) confidential information disclosed to the Legal Department. The Employee acknowledges and agrees that the Confidential Information and Trade Secrets are not generally known or available to the general public, but have been developed, complied or acquired by the Company at its great effort and expense and for commercial advantage and, therefore, takes every reasonable precaution to prevent the use or disclosure of any part of it by or to unauthorized persons. Confidential Information and Trade Secrets can be in any form: oral, written or machine readable, including electronic files.
 
(b)   Non-Disclosure of Confidential Information . The Employee agrees he will not, while associated with the Company and for so long thereafter as the pertinent information or documentation remains confidential, directly or indirectly use, disclose or disseminate to any other person, organization or entity or otherwise use any Confidential Information and Trade Secrets, except as specifically required in the performance of Employee’s duties on behalf of the Company or with prior written authorization of the Reporting Person.
 
(c)   Return of Materials . The Employee further agrees to deliver to the Company, immediately upon termination from employment or at any time the Company so requests, (i) any and all documents, files, notes, memoranda, models, databases, computer files and/or other computer programs reflecting any Confidential Information whatsoever or otherwise relating to the Company’s business; (ii) lists of the Systemax Companies’ clients or leads or referrals to prospective clients; and (iii) any computer equipment, home office equipment, automobile or other business equipment belonging to the Company which Employee may then possess or have under his control.
 
(d)   Non-competition . The Employee acknowledges and agrees that the Company is engaged in a highly competitive business and that by virtue of Employee’s position and responsibilities with the Company and Employee’s access to the Confidential Information and Trade Secrets, engaging in any business that is directly competitive with the Company will cause it great and irreparable harm. Accordingly, Employee covenants and agrees that so long as Employee is employed by the Company and for a period of one (1) year after such employment is terminated, whether voluntarily or involuntarily, Employee will not, without the express written consent of the Reporting Person, directly or indirectly, own, manage, operate, control, consult with or be employed in a capacity similar to the position(s) held by Employee with the Company by any company or other for-profit entity engaged in the sale of computer, consumer electronic and/or industrial products.  In recognition of the national and international nature of the Company’s business, which includes the sale of its products and services throughout the United States of America and its territories and possessions, Canada and Europe, this restriction shall apply throughout the United States of America and its territories and possessions, Canada and throughout any country that is a member of the European Union.
 
(e)   Non-Solicitation of Customers . The Employee acknowledges and agrees that solely by reason of employment by the Company, Employee will come into contact with some, most or all of the Company’s customers and will have access to Confidential Information and Trade Secrets regarding the Company’s customers, as set forth in this Agreement. Consequently, Employee covenants and agrees that in the event of separation from employment with the Company, whether such separation is voluntary or involuntary, the Employee will not, for a period of one (1) year following such separation, directly or indirectly, solicit or initiate contact with any customer, former customer or prospective customer of the Company for the purpose of selling computer, consumer electronic and industrial products of the type offered for sale by the Company during the Employment Period.  This restriction shall apply to any customer, former customer or prospective customer of the Company with whom the Employee had contact or about whom Employee obtained Confidential Information or Trade Secrets during the last two (2) years of employment with the Company. For the purposes of this Section 6, “contact” means interaction between the Employee and the customer or prospective customer which takes place to further the business relationship, or making sales to or performing services for the customer or prospective customer on behalf of the Company.
 
(f)   Non-Solicitation of Employees . The Employee acknowledges and agrees that solely as a result of employment with the Company, the Employee will come into contact with and acquire confidential information regarding some, most or all of the Company’s employees and consultants. Accordingly, both during the Employee’s employment and for a period of one (1) year following the cessation of the Employee’s employment with the Company, whether such cessation of employment is voluntarily or involuntarily, the Employee will not, directly or indirectly, induce or attempt to influence any employee or consultant of the Company to terminate his or her employment or refrain from providing services to the Company, or solicit or seek to retain the services of any person employed or providing services to the Company as an employee or a contractor except by means of a general advertisement not directed at any specific person.
 
(g)   Restrictions on Employment With Company . The Employee affirms he is not presently subject to a restrictive covenant or other prior agreement, which would prohibit or restrict employment with the Company. If the Employee learns or is advised that he is subject to an actual or alleged restrictive covenant or other prior agreement, which may prohibit or restrict employment with the Company, the Employee must notify the Company immediately. The Employee agrees that he shall not disclose to the Company, use for the Company’s benefit, or induce the Company to use any trade secret or confidential information he may possess belonging to any former employer or other third party.
 
(h)   Non-Disparagement and Protection of Reputation .  You shall not, at any time during or after the Employment Period, make or publish any derogatory, unfavorable, negative, disparaging, false, damaging or deleterious written or oral statements or remarks regarding the Company, any Systemax Company or any of its affiliates or any members of their respective boards of directors or managements, or any of their respective business affairs or performance.  During the Employment Period and thereafter, you shall not take any action which is intended, or would reasonably be expected, to harm the reputation of the Company or any of its affiliates or which would reasonably be expected to lead to unwanted or unfavorable publicity to the Company or its affiliates.  Nothing herein shall prevent you from making any truthful statement in connection with any investigation by the Company or any governmental authority or in any legal proceeding.
 
(i)   Cooperation .  Following termination of your employment with the Company for any reason, you shall cooperate with the Company, as reasonably requested by the Company, to effect a transition of your responsibilities and to ensure that the Company is aware of all matters being handled by you prior to the Date of Termination.  The Company shall reimburse you for your reasonable out of pocket expenses incurred in connection with such pre-approved work.
 
(j)   Assistance in Proceedings, Etc.   You shall, during and after your employment, upon reasonable notice, furnish such information and proper assistance to the Company as may reasonably be required by the Company in connection with any legal or quasi-legal proceeding, including any external or internal investigation, involving the Company or any of its affiliates.  The Company shall reimburse you for your reasonable expenses incurred in connection with the foregoing obligations.  In addition, if such obligations are being performed after the Date of Termination, the Company shall pay for your time spent performing such obligations on a per diem basis, based upon your Base Salary in effect immediately prior to the Date of Termination.
 
(k)   Enforcement of Covenants . The Employee acknowledges and agrees that compliance with the covenants set forth in this Section 6 of this Agreement is necessary to protect the business and goodwill of the Company and that any breach of this Section 6 or any subparagraph hereof will result in irreparable and continuing harm to the Company, for which money damages may not provide adequate relief. Accordingly, in the event of any breach or threatened breach of Section 6 by Employee, the Company and Employee agree that the Company shall be entitled to injunctions, both preliminary and permanent, enjoining or restraining such breach or threatened breach, in addition to any remedies otherwise available to it at law or equity.
 
(l)   Blue Pencil and Severability . If any provision of this Agreement is held to be unenforceable, then this Agreement will be deemed amended to the extent necessary to render the otherwise unenforceable provision, and the rest of this Agreement, valid and enforceable.  If a court declines to amend this Agreement as provided herein, the invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of the remaining provisions, which shall be enforced as if the offending provision had not been included in this Agreement.
 
7.   Conflict of Interest; Code of Ethics; “Clawback” Policy .  The Employee may not use his position, influence, knowledge of Confidential Information and Trade Secrets or Company assets for personal gain, and you shall be subject in all respects to the Company’s Code of Ethics and corporate governance policies, as amended from time to time.  In this regard, you hereby acknowledge and agree that your compensation hereunder is subject to forfeiture and repayment to the Company in accordance with the Company’s “clawback policy”, as amended from time to time, as described in its Annual Proxy Statement and which clawback policy is hereby incorporated by reference herein.  A direct or indirect financial interest, including joint ventures in or with a supplier, vendor, client or prospective client without disclosure and written approval from the Reporting Person is strictly prohibited and constitutes cause for dismissal. This provision shall not apply in respect of any publicly traded corporation of which the Employee is less than a one percent (1%) stockholder or with respect to any financial interest as a result of any investment by the Employee in a publicly traded mutual fund.
 
8.   Intellectual Property .
 
(a)   The Employee covenants and agrees that all inventions, improvements, products, designs, specifications, trademarks, service marks, discoveries, formulae, processes, software or computer programs, modifications of software or computer programs, data processing systems, analyses, techniques, trade secrets, creations, ideas, work product or contributions thereto, and any other intellectual property, regardless of whether patented, registered or otherwise protected or protectable, and regardless of whether containing or constituting Trade Secrets or Confidential Information as defined in Section 6 hereof (referred to collectively as “Intellectual Property”), that were conceived, developed or made by Employee during employment by the Company, including Intellectual Property related to the sale of computer, consumer electronic and industrial products (the “Proprietary Interests”), shall belong to and be the property of the Company.
 
(b)   The Employee further covenants and agrees that he will: (i) promptly disclose such Intellectual Property to the Company; (ii) assign to the Company, without additional compensation, the entire rights to Intellectual Property for the United States and all foreign countries; (iii) execute assignments and all other papers and do all acts necessary to carry out the above, including enabling the Company to file and prosecute applications for, acquire, ascertain and enforce in all countries, letters patent, trademark registrations and/or copyrights covering or otherwise relating to Intellectual Property and to enable the Company to protect its proprietary interests therein; and (iv) give testimony, at the Company’s expense, in any action or proceeding to enforce rights in the Intellectual Property.
 
(c)   The Employee further covenants and agrees that the Company shall be entitled to shop rights with respect to any Intellectual Property conceived or made by him during employment with the Company that is not related in any manner to the Proprietary Interests but which was conceived or made on the Company’s time or with the use of the Company’s facilities or materials.
 
(d)   The Employee further covenants and agrees that it shall be conclusively presumed as against him that any Intellectual Property related to the Proprietary Interests described by the Employee in a patent, service mark, trademark, or copyright application, disclosed by the Employee in any manner to a third person, or created by the Employee or any person with whom he has any business, financial or confidential relationship, within one (1) year after cessation of his employment with the Company, was conceived or made by the Employee during the period of employment by the Company and that such Intellectual Property be the sole property of the Company.
 
9.   Withholding. Anything in this Agreement to the contrary notwithstanding, all payments required to be made by the Company hereunder to the Employee or his estate or beneficiaries shall be subject to the withholding of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Company may, in its sole discretion, accept other provisions for payment of taxes and withholding as required by law, provided it is satisfied that all requirements of law affecting its responsibilities to withhold have been satisfied.
 
10.   Notices .  Any notice, request, instruction or other document to be given hereunder by any party hereto to any other party shall be in writing and delivered personally, sent by registered or certified mail, postage prepaid.
 
 
If to the Employee:
 
 
Mr. Eric M. Lerner
333 East 80 th Street, Apt. 6G
New York, New York  10075

If to the Company:

 
Mr. Larry Reinhold, CFO
Systemax Inc.
11 Harbor Park Drive
Port Washington, N.Y. 11050

or at such other address for a party as shall be specified by like notice. Any notice which is delivered personally in the manner provided herein shall be deemed to have been duly given to the party to whom it is directed upon actual receipt by such party. Any notice which is addressed and mailed in the manner herein provided shall be conclusively presumed to have been given to the party to whom it is addressed at the close of business, local time of the recipient, forty-eight hours after the day it is so placed in the mail.
 
11.   Indemnification; D&O Insurance . The Employee shall be entitled to be indemnified and insured by the Company against liability and expense relating to his employment to the same extent and subject to the same conditions and limitations as all other executive officers of the Company in accordance with and as authorized by the Company’s Certificate of Incorporation, by-laws, Board of Directors resolutions and applicable law.  The Company shall pay directly the fees and expenses of counsel and other experts incurred in connection with such indemnification obligation, as they may be incurred by or on behalf of the Employee
 
12.   Entire Agreement . This Agreement sets forth the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, written or oral, between them as to such subject matter. This Agreement may not be amended, nor may any provision hereof be modified or waived, except by an instrument in writing duly signed by the party to be charged.
 
13.   Governing Law . The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York, without regard to the conflicts of law rules thereof.  The Company and you agree that any action, suit or proceeding in respect of or arising out of this Agreement shall be initiated and prosecuted in the federal courts located in New York and the parties hereby consent to the jurisdiction of such courts.
 
14.   Validity . The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
 
15.   Counterparts . This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement.
 
16.   Waivers . No waiver by either party of any breach or non-performance of any provision or obligation of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision of this Agreement.
 
17.   Section 409A .  The Company makes no representations or warranties regarding the tax implications of the compensation and benefits to be paid to you under this Agreement, including, without limitation, under Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), and applicable administrative guidance and regulations (“ Section 409A ”).  It is the intention of the parties hereto that payments under this Agreement be interpreted to be exempt from or in compliance with Section 409A and accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be exempt from or in compliance with Section 409A.  To the extent any payments of money or other benefits due to you under this Agreement could cause the application of an acceleration or additional tax under Section 409A, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A, or otherwise such payments or other benefits shall be restructured, to the extent possible, in a manner determined by the Company that does not cause such acceleration or additional tax.  All references in this Agreement to the termination of your employment shall mean your separation from service within the meaning of Section 409A. With respect to any payments due to you as a result of the termination of your employment, if necessary to comply with Section 409A, and if you are deemed on the date of termination to be a “specified employee” within the meaning of that term under Section 409A, such payments shall be made as follows: (i) no payments shall be made for a six-month period following the date of termination and  (ii) an amount equal to the aggregate sum that would have been otherwise payable during the initial six-months period shall be paid in a lump sum six (6) months plus one (1) day following the date of termination.   With respect to any reimbursements under this Agreement, such reimbursement shall be made on or before the last day of your taxable year following the taxable year in which the expense was incurred by you.  The amount of any expenses eligible for reimbursement or the amount of any in-kind benefits provided, as the case may be, under this Agreement during any calendar year shall not affect the amount of expenses eligible for reimbursement or the amount of any in-kind benefits provided during any other calendar year.  The right to reimbursement or to any in-kind benefit pursuant to this Agreement shall not be subject to liquidation or exchange for any other benefit.  For the avoidance of doubt, any payment due under this Agreement within a period following the termination of your employment or other event shall be made on a date during such period as determined by the Company in its sole discretion.  Each payment made under this Agreement shall be designated as a “separate payment” within the meaning of Section 409A.
 
18.   Assignment and Transfer .  This Agreement shall inure to the benefit of and be enforceable by, and may be assigned by the Company without your consent to, any affiliate or purchaser of all or substantially all of the Company’s business or assets, any successor to the Company or any assignee thereof (whether direct or indirect, by purchase, merger, consolidation or otherwise). Your rights and obligations under this Agreement shall not be transferable by you by assignment or otherwise, and any purported assignment, transfer or delegation thereof shall be void; provided, however, that if you shall die, all amounts then payable to you hereunder shall be paid in accordance with the terms of this Agreement to your estate.
 
19.   Offset of Payments . You authorize the Company, where permitted by applicable law and Section 409A of the Code, to offset any payment the Company owes you by the amount determined by the Company to be owed by you to the Company.
 
 
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.
 
 
SYSTEMAX INC.
 
By: _________________________________
Larry Reinhold, Chief Financial Officer
 
 
 
_______________________________
ERIC M. LERNER


 
 
 


 
 
 

CERTIFICATION UNDER SECTION 312 OF THE
SARBANES-OXLEY ACT OF 2002

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

 
I, Richard Leeds, certify that:
 
 
1.  
I have reviewed this quarterly report on Form 10-Q of Systemax Inc.
 
 
2.  
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
 
3.  
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
 
4.  
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
a)  
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b)  
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c)  
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d)  
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
 
5.  
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
 
a)  
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
b)  
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 

 Dated: May 8, 2012
/s/ Richard Leeds
Richard Leeds, Chief Executive Officer


 
 
 


 
 
 

CERTIFICATION UNDER SECTION 312 OF THE
SARBANES-OXLEY ACT OF 2002

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

 
I, Lawrence P. Reinhold, certify that:
 
 
1.  
I have reviewed this quarterly report on Form 10-Q of Systemax Inc.
 
 
2.  
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
 
3.  
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
 
4.  
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
a)  
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b)  
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c)  
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
d)  
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
 
5.  
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
 
a)  
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
b)  
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
 Dated: May 8, 2012
/s/ Lawrence P. Reinhold
Lawrence P. Reinhold, Chief Financial Officer



 
 
 


 
 
 

Exhibit 32.1


CERTIFICATION PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002


CERTIFICATION OF CHIEF EXECUTIVE OFFICER

The undersigned, the Chief Executive Officer of Systemax Inc., hereby certifies that Systemax Inc.’s Form 10-Q for the period ended September 30, 2011 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o (d)), and that the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Systemax Inc.


Dated:           May 8, 2012

/s/Richard Leeds_
Richard Leeds, Chief Executive Officer



 
 
 


 
 
 

Exhibit 32.2

 
 
CERTIFICATION PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002


CERTIFICATION OF CHIEF FINANCIAL OFFICER

The undersigned, the Chief Financial Officer of Systemax Inc., hereby certifies that Systemax Inc.’s Form 10-Q for the period ended September 30, 2011 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78 o (d)), and that the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Systemax Inc.


Dated:           May 8, 2012

/s/Lawrence P. Reinhold
Lawrence P. Reinhold, Chief Financial Officer