EXIBIT 10.H2
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT entered into this 8th day of April, 1996, by
and between UNITED GROCERS, INC., an Oregon corporation, hereinafter designated
as Sublessor, and Xx Xxxxxxxxx'x Grocery Markets, Inc., dba Farmers Sentry
Markets, a California corporation, hereinafter designated as Sublessee;
W I T N E S S E T H
WHEREAS, the Sublessor has entered into a Lease dated March 13, 1996,
with Xxxx Xxxxxx Partners, a California Limited Partnership, for a supermarket
located at the NEC Shasta Dam & Wonderland Blvd.'s, City of Shasta Lake, CA
(more particularly described in Exhibit "A" attached to said lease), commencing
on the date set forth in the attached Exhibit "A" Lease, a copy of which is
hereby incorporated by reference, as fully as if its terms and conditions were
herein set forth.
WHEREAS, Sublessee desires to sublet said premises for a period not to
exceed 20 years, commencing on the date set forth in Article 4 of Exhibit "A,"
and Sublessor is willing to so sublet in accordance with the terms and
conditions hereinafter set forth; now, therefore,
IT IS HEREBY AGREED AS FOLLOWS:
(1) Sublessor hereby sublets unto Sublessee those premises described in
said Exhibit "A," for the term of 20 years.
1.1 The Sublessee, so long as he is not in default hereunder and
further provided that no event or condition exists that, with the passage of
time or giving of notice would constitute default, shall be granted the right to
exercise the renewal options contained in Exhibit "A," as set forth in Article 4
of said Exhibit.
(2) Sublessee covenants and agrees to pay for the whole of said term
the rental hereinafter provided, together with all affirmative covenants
including, without limitation, those pertaining to minimum rent, Common Area
Charges (CAM), taxes, assessments, insurance, and all of the covenants and
obligations to be performed by Lessee, as set forth in said Exhibit "A," and to
make such payments and provide such performance when due by the terms of the
lease and amendments thereto.
(3) Sublessee shall, upon execution hereof, pay any and all rental or
security deposits and all other sums including minimum rent, as required
pursuant to the terms and conditions of said Exhibit "A."
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(4) Sublessee shall pay, directly to Sublessor, a Finance Fee,
hereinafter referred to as "additional rent," in the amount hereinafter set
forth per month in advance on the first day of each calendar month during the
Original Term of the Sublease. The Finance Fee for any fractional calendar month
shall be prorated. The Finance Fee payable to Sublessor shall be in addition to
the amounts payable by Sublessee per the terms of Exhibit "A."
Months Monthly Finance Fee
1 - 30 $ 0.00
31 - 36 $1,818.00
37 - 60 $1,591.00
61 - 84 $1,735.00
85 - 120 $1,487.00
121 - 180 $1,606.00
181 - 240 $1,705.00
(5) Sublessee shall be bound by the same responsibilities, rights,
privileges and duties as Sublessor, as enumerated by Exhibit "A" and covenants
and agrees to fully indemnify and hold Sublessor harmless from any and all
responsibility and/or liability which Sublessor may incur by virtue of said
Exhibit "A," and/or Sublessee's occupancy of the premises. Furthermore,
Sublessee shall have the right to approve, which approval shall not be
unreasonably withheld, and shall be bound by any subsequent amendment, revision,
supplement, or addition to the prime lease between Sublessor and the prime
Lessor and to keep the Sublessor indemnified against all actions, claims and
demands whatsoever with respect to said Exhibit "A" and Sublessees use of the
demised premises.
5.1 ASSIGNMENT AND SUBLETTING. Sublessee acknowledges that
provisions for extension options and assignment and subletting in the Lease are
applicable to the prime Lessor and Sublessor only. Sublessee will not assign
this Sublease or sublet the premises without the prior written consent of
Sublessor which may be granted or withheld in its absolute discretion. A direct
or indirect transfer of ownership and control of a majority of the voting stock
of a corporate Sublessee, by whatever demands, shall be deemed an assignment of
this Sublease for the purposes of this paragraph.
(A) In the event of an assignment, Sublessee shall thereafter
pay to Sublessor in connection with such assignment, fifty percent (50%) of all
sums and other consideration paid (or payable) to and for the benefit of
Sublessee by the Assignee on account of the assignment as and when such sums and
other considerations are paid (or are payable) by the Assignee.
(B) In the event the transfer is by virtue of a sublease,
fifty percent (50%) of any rent or other consideration received by Sublessee,
either initially or over the
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term of the sublease, in excess of such rent called for hereunder, or in the
case of a sublease of a portion of the Leased Premises, in excess of such rent
fairly allocable to such portion, after appropriate adjustments to ensure that
all other payments called for hereunder are taken into account, shall be paid by
Sublessee to Sublessor, promptly after its receipt by Sublessee.
5.2 COVENANTS, REPRESENTATIONS, AND WARRANTIES.
(A) MEMBERSHIP IN UNITED GROCERS, INC. Upon execution and
during the term hereof, Sublessee agrees to maintain or cause to be maintained
the membership of the store in good standing in United Grocers, in accordance
with the Bylaws of United Grocers, as long as this Sublease remains in effect.
(B) PURCHASES FROM SUBLESSOR. Sublessee agrees that throughout
the term of the Sublease and any extensions or renewals thereof, except as
hereinafter provided, Sublessee will purchase from Sublessor not less than
fifty-eight percent (58%) of its retail sales of all goods and merchandise
required by it for resale on the premises to the extent that Sublessor shall now
or hereafter be able to supply such goods and merchandise to the Sublessee, and
Sublessor will supply all of Sublessee's requirements at such prices and on such
terms as are reasonably comparable to those offered by Sublessor to other
purchasers from Sublessor carrying on businesses similar to that of the
Sublessee in the County of Shasta, State of California. If, at any time, the
Sublessees contend that Sublessor is not able to supply particular goods or
merchandise customarily stocked by retail supermarkets in the County of Shasta,
State of California, or that terms offered by Sublessor are not reasonably
comparable to those offered by Sublessor to other purchasers described above,
the Sublessee shall so advise Sublessor in writing, specifying such contention
with particularity. If, within 30 days after receipt of such notice, Sublessor
does not offer to supply goods or merchandise so specified or does not advise
Sublessee that the terms and conditions offered are reasonably comparable to
those offered to such other purchasers, Sublessee shall be free to secure such
specified goods and merchandise from any source which it desires. If Sublessor
demonstrates that it is offering reasonably comparable terms, and Sublessee
nonetheless purchases from another source, such purchase or purchases shall not
be an exception from the 58% requirement specified above. If the above
percentage requirements are not complied with, it shall constitute a default
hereunder. In the event of a breach of this purchase covenant, Sublessor may
terminate this sublease and, in addition to the remedies hereinafter offered
Sublessor, Sublessee agrees to pay Sublessor, as liquidated damages, and not as
a penalty or forfeiture, a sum computed as follows:
1. The average weekly purchases from the date of the
agreement to the date of the breach shall be determined;
2. The average weekly purchases so determined shall then
be multiplied by the number of weeks from the date of the breach to the end of
the term of the purchase agreement; and
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3. The computed sum shall be multiplied by two and one-
quarter percent (2 1/4%) to determine the liquidated damages due and owing
Sublessor by reason of Sublessee's default. Said sum shall become immediately
due and owing within 15 days from the date of written notice of the liquidated
damages.
(C) Sublessee covenants that as long as this Sublease remains
in effect, and for the additional period of six (6) months thereafter, Sublessee
shall not directly or indirectly sell or permit the sale of the store and the
owners of Sublessee shall not directly or indirectly sell controlling interests
(whether in one or a series of related transactions) without first offering to
sell said store or controlling interest, as the case may be, to Sublessor upon
the same terms and conditions as the Sublessee or their owners, as the case may
be, are prepared to accept from a third party. Prior to such sale by the
Sublessee or their owners, the Sublessee shall first notify Sublessor of the
desire to sell the store or controlling interest and of all the terms and
conditions of such sale and shall provide to Sublessor all documents,
instruments, agreements, offers, acceptances, appraisals, inventories, equipment
lists, leases, financial statements and such other material and information as
Sublessor may reasonably request to aid in its decision to exercise or decline
its right to purchase as hereinafter provided. Within 30 days following receipt
of such notice of desire to sell and all materials and information reasonably
requested by Sublessor, Sublessor shall advise Sublessee whether Sublessor
elects to purchase or declines to purchase the store or such controlling
interest upon the offered terms and conditions. If Sublessor shall elect to
purchase, Sublessor shall purchase and the Sublessee or their owners shall sell,
such retail grocery business or such controlling interest, as the case may be,
all on the terms set forth in the offer. If Sublessor declines the purchase, the
Sublessee or their owners shall be free to sell the store or controlling
interest, as the case may be, upon (and only upon) the terms and conditions
offered as aforesaid to Sublessor; provided that such sale is consummated within
one hundred twenty (120) days following the date Sublessor declined the
purchase, and if such sale is not consummated in accordance with the offered
terms and conditions with said one hundred twenty (120) day period, the
provisions of this paragraph shall apply again and no subsequent sale of any
portion of the offered store or controlling interest may be effected without
again offering the same to Sublessor as provided herein. Sublessor may waive its
rights under this section provided such waiver is in writing. The foregoing
provisions shall not apply to transfers of assets or interests by sale, gift or
as a result of death to the lawful heirs at law of Sublessee or any shareholder
or heir at law of any shareholder, or transfers of assets to a corporation or
partnership or transfers of a controlling interest to a trust as long as such
corporation, partnership or trust is controlled by the transferor; provided such
transferee agrees that it holds such assets or controlling interest subject to
the restrictions contained in this paragraph.
(D) Sublessee represents and warrants there are no brokers,
finders or other persons entitled to any fee, commission or other compensation
in connection with this Sublease, and agree to hold Sublessor harmless from any
claims for such fees, commissions and/or compensation.
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(E) Sublessee hereby represents and warrants to Sublessor that
the financial statements, appraisals and other documents submitted to Sublessor
in connection herewith or pursuant hereto are and shall be true, correct,
complete and accurate in every respect and said financial statements fairly and
accurately present the assets, liabilities, financial condition and results of
operations reflected herein.
(6) SECURITY AGREEMENT.
6.1 GRANT, COLLATERAL AND OBLIGATIONS. Sublessee and Sublessor
agree that this Sublease shall constitute a security agreement within the
meaning of the California Uniform Commercial Code (hereinafter referred to as
the "Code") with respect to:
(A) required cash deposits (as defined in the Bylaws of
Sublessor) presently or hereafter held by or deposited with Sublessor by
Sublessee;
(B) any and all patronage rebates and rebate notes
representing patronage rebates (as defined in the Bylaws of Sublessor) earned or
hereafter earned by reason of patronage of Sublessor by Sublessee;
(C) subject to liens securing purchase money financing
therefor as described in Exhibit "B," all trade, store and other fixtures and
all leasehold improvements and all equipment and other personal property of
Sublessees used or useful in the operation of the store in or on the premises,
whether now owned or hereafter acquired including, without limitation, the
property described in Exhibit "C," attached hereto, if any; and
(D) all replacements of substitutions for, and additions to
the foregoing, and the proceeds thereof (all of said personal property and the
replacements, substitutions and additions thereto and the proceeds thereof being
sometimes hereinafter collectively referred to as the "Collateral"), and that a
security interest in and to the Collateral is hereby granted to the Sublessor,
and the Collateral and all of the Sublessees' right, title and interest therein
are hereby assigned to the Sublessor, all to secure all presently existing or
hereafter incurred direct, indirect, absolute or contingent indebtedness,
liabilities and other obligations of Sublessees to Sublessor (referred to as
"the Obligations" herein) including, but not limited to, the payment of all rent
and other sums and the performance of all other obligations of Sublessee under
this Sublease, all renewals and extensions thereof, the price of goods, services
and merchandise purchased by Sublessee from Sublessor from time to time, and all
costs of collection, legal expenses and attorneys' fees paid or incurred by
Sublessor in enforcing any rights in respect to the Obligations or in connection
with assembling, collecting, selling or otherwise dealing with or realizing upon
the Collateral.
6.2 SECURITY AGREEMENT WARRANTIES. In addition to and without
limiting the force or effect of any other covenants, representations and
warranties of Sublessee contained in this Sublease, Sublessee hereby covenant,
represent and warrant to and with Sublessor as follows:
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(A) Sublessee is the owner of the Collateral free and clear of
liens, security interests and encumbrances of every kind and description, except
liens, security interests and encumbrances securing indebtedness to Sublessor
and liens described on Exhibit "B," hereto to which Secured Party has consented
("Permitted Liens").
(B) Sublessee will not sell, dispose of, encumber or permit
any other security interest, lien or encumbrance to attach to the Collateral
except the security interest of Sublessor and the Permitted Liens and except in
the ordinary course of business so long as any security interests are
subordinate to the security interest of sublessor.
(C) All tangible Collateral shall be kept at Sublessees'
place(s) of business located on the premises, and Sublessee shall not permit the
same to be removed therefrom without the prior written consent of Sublessor.
(D) Sublessee shall keep the tangible Collateral at all times
insured against risks of loss or damage by fire (including so-called extended
coverage), theft and such other casualties as Sublessor may reasonably require,
all in such amounts, under such forms of policies, upon such terms, for such
periods and written by such companies or underwriters as Sublessor may approve.
All such policies of insurance shall name Sublessor as loss payee thereon as its
interest may appear and shall provide for at least 30 days' prior written notice
of modification or cancellation to Sublessor. Sublessee shall furnish Sublessor
with certificates of such insurance or other evidence satisfactory to Sublessor
as to compliance with the provisions of this paragraph. Sublessor may act as
attorney-in-fact for Sublessee in making, adjusting and settling claims under
and canceling such insurance and endorsing Sublessees' name on any drafts drawn
by insurers of the Collateral.
(E) Sublessee will keep the Collateral in good order and
repair, shall not waste or destroy the Collateral or any part thereof, and shall
not use the Collateral in violation of any statute, ordinance or policy of
insurance thereon. Sublessor may examine and inspect the Collateral at any
reasonable time or times, wherever located.
(F) Sublessee will pay promptly when due all taxes and
assessments upon the Collateral or for its use or operation or upon this
Sublease or upon any instruments evidencing the obligations.
(G) Sublessee will pay promptly when due all indebtedness
secured by any lien or other security interest in the Collateral, whether
superior or junior to the security interest established hereby.
6.3 ADDITIONAL REMEDIES. Upon any default hereunder and at any
time thereafter (such default not having previously been cured) , Sublessor at
its option may declare all Obligations immediately due and payable and shall
have the remedies of a secured party under the Uniform Commercial Code of
California (the "Code") , including without limitation the right to take
immediate and exclusive possession of the Collateral.
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6.4 FINANCING STATEMENTS. Sublessee will at their own cost and
expense, upon demand, furnish to Sublessor such financing statements and other
documents in form satisfactory to Sublessor and will do all such acts and things
as Sublessor may at any time or from time to time request or as may be necessary
or appropriate to establish and maintain a perfected security interest in the
Collateral.
6.5 ATTORNEYS' FEES. In the event of the institution of any
suit or action to terminate this Sublease, or to enforce the terms or provisions
hereto, Sublessee shall and do hereby agree to pay, in addition to the costs and
disbursements provided by statute, reasonable attorneys' fees in such
proceedings or on any appeal from any judgment or decree entered therein.
(7) DEFAULT. The following shall constitute a default under this
Sublease:
7.1 Any failure by Sublessee to pay, when due, rent or any
other amount due under the Lease or to perform any other obligation of Sublessor
under the Lease or any other default under the Lease which continues for up to
one-half of the cure period as defined in the lease, provided with respect
thereto in the Lease;
7.2 Any failure by Sublessee to pay when due rent or any other
amount due under this Sublease or to perform when due any other obligation of
Sublessees hereunder;
7.3 If any warranty, representation or statement made or
furnished to Sublessor by or on behalf of the Sublessee is false in any material
respect when made or furnished;
7.4 Any failure by Sublessee to pay when due and/or satisfy
any other present or hereinafter incurred indebtedness or obligation of
Sublessee to Sublessor, including but not limited to those arising from
Sublessees' purchases of goods and services from Sublessor any other loans or
leases Sublessee may have or enter into with Sublessor, and Sublessees'
obligations under the Bylaws of Sublessor and its application for membership in
Sublessor;
7.5 If Sublessee vacate or abandon the premises or allow the
premises to remain vacant or unoccupied;
7.6 If Sublessee make an assignment for the benefit of
creditors, or if, with or without Sublessees' acquiescence, a petition in
bankruptcy is filed against Sublessee, or Sublessee is adjudicated a bankrupt or
insolvent, or a trustee, receiver or liquidator is appointed for all or part of
Sublessees' assets, or a petition or answer is filed by or against Sublessees
seeking or acquiescing in any reorganization, liquidation or similar relief
under any federal, state or local law relating to bankruptcy, insolvency or
other relief for debtors; and
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7.7 If Sublessee sell or otherwise dispose of all or any
substantial portion of the assets of Sublessee located at or associated with the
store, other than inventory sold at retail in the ordinary course of business.
(8) REMEDIES. In the event of any default under this Sublease:
8.1 Sublessor shall have the right, at its election then or at
any time thereafter, upon notice to Sublessee, to terminate this Sublease or to
terminate Sublessees' rights of possession in the premises without terminating
this Sublease;
8.2 Sublessor shall have the immediate right, whether or not
the Sublease shall have been terminated pursuant to paragraph 8.1, to re-enter
and repossess the premises or any part thereof by force, summary proceedings,
ejectment or any other legal or equitable process, all without any liability on
Sublessor's part for such entry, repossession or removal;
8.3 Sublessor may (but shall be under no obligation to),
whether or not this Sublease shall have been terminated pursuant to paragraph
8.1, resublet the premises, or any part thereof, in the name of Sublessee,
Sublessor or otherwise, without notice to Sublessee, for such term or terms and
for such uses as Sublessor, in its absolute discretion, may determine and may
collect and receive rents payable by reason of such resubletting (without any
liability for any failure to collect such rents);
8.4 Sublessor may (but shall be under no obligation to)
procure any insurance, pay any rentals, taxes or liens, make any repairs, pay
any sums required to be paid, and to do and perform such other acts as may be
required of Sublessee hereunder, and any payments so made shall bear interest at
the rate of 12 percent per annum from the time of such payment until repaid; and
8.5 Sublessor may exercise any and all other rights and
remedies afforded to the prime Lessor upon default under the Lease and any and
all other rights and remedies Sublessor may have as provided herein, pursuant to
the laws of the State of California. In addition to the other remedies provided
above, Sublessor shall be entitled to current damages and final damages as
provided in paragraph (9) below, and, to the extent permitted by applicable law,
to injunctive relief in case of the violation, or attempted or threatened
violation, of any of the provisions of this Sublease, or to a decree compelling
performance of this Sublease.
8.6 No expiration or termination of this Sublease,
repossession of the premises or any part thereof, or resubletting of the
premises or any part thereof, whether pursuant to the above paragraph or by
operation of law or otherwise, shall relieve Sublessee of its liabilities and
obligations under this Sublease, all of which shall survive such expiration,
termination, repossession or resubletting.
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(9) DAMAGES.
9.1 CURRENT DAMAGES. In the event of any expiration or
termination of this Sublease or repossession of the premises or any part thereof
by reason of the occurrence of an event of default, Sublessee will pay to
Sublessor the rent and other sums required to be paid by Sublessee for the
period to and including the date of such expiration, termination or
repossession; and, thereafter, until the end of what would have been the term in
the absence of such expiration, termination or repossession, and whether or not
the premises or any part thereof shall have been resublet, Sublessee shall be
liable to Sublessor for, and shall pay to Sublessor, as liquidated and agreed
current damages the rent and other sums which would be payable under this
Sublease by Sublessee in the absence of such expiration, termination or
repossession, less the net proceeds, if any, of any resubletting effected for
the account of Sublessee, after deducting from such proceeds all of Sublessor's
expenses reasonably incurred in connection with such resubletting (including,
without limitation, all repossession costs, brokerage commissions, legal
expenses, attorney's fees, employee expenses, alteration costs and expenses of
preparation for such resubletting). Sublessee will pay such current damages on
the days on which rent would have been payable under this Sublease in the
absence of such expiration, termination or repossession, and Sublessor shall be
entitled to recover the same from Sublessee on each such day.
9.2 FINAL DAMAGES. At any time after any such expiration or
termination of this Sublease or repossession of the premises or any part thereof
by reason of the occurrence of an event of default, whether or not Sublessor
shall have collected any current damages pursuant to paragraph 9.1, Sublessor
shall be entitled to recover from Sublessee, and Sublessee will pay to Sublessor
on demand, as and for liquidated and agreed final damages for Sublessees'
default and in lieu of all current damages beyond the date of such demand (it
being agreed that it would be impracticable or extremely difficult to fix the
actual damages), an amount equal to the excess, if any, of (a) the rent and
other sums which would be payable under this Sublease from the date of such
demand (or, if it be earlier, the date to which Sublessee shall have satisfied
in full their obligations under paragraph 9.1 to pay current damages) for what
would be the then unexpired term in the absence of such expiration, termination
or repossession, discounted to present value at an assumed interest rate of
seven percent (7%) per annum, over (b) the then net rental value of the premises
discounted to present value at an assumed interest rate of seven percent (7%)
per annum for the same period. Rental value shall be established by reference to
the terms and conditions upon which Sublessor resublets the premises if such
resubletting is accomplished within a reasonable period of time after such
expiration, termination or repossession, and otherwise established on the basis
of Sublessor's estimates and assumptions of fact regarding market and other
relevant circumstances, which shall govern unless shown to be erroneous. If any
statute or rule of law shall validly limit the amount of such liquidated final
damages to less than the amount above agreed upon, Sublessor shall be entitled
to the maximum amount allowable under such statute or rule of law.
(10) RIGHTS CUMULATIVE, NONWAIVER. No right or remedy herein conferred
upon or reserved to Sublessor is intended to be exclusive of any other right or
remedy, and each
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and every right and remedy shall be cumulative and in addition to any other
right or remedy given hereunder or now or hereafter existing at law or in equity
or by statute. The failure of Sublessor to insist at any time upon the strict
performance of any covenant or agreement or to exercise any option, right, power
or remedy contained in this Sublease shall not be construed as a waiver or
relinquishment thereof for the future. No waiver by Sublessor of any provision
of this Sublease shall be deemed to have been made whether due in the receipt of
rent or otherwise, unless expressed in writing and signed by Sublessor.
(11) NOTICES. Any notice or demand required or permitted to be given
under this Sublease shall be deemed to have been properly given when, and only
when, the same is in writing and has been deposited in the United States Mail,
with postage prepaid, to be forwarded by registered or certified mail and
addressed to the party to be notified at the address appearing below its
signature. Such addresses may be changed from time to time by serving of notice
as above provided.
(12) RIGHT OF REFUSAL. If, during the term of this sublease, or any
extension hereof, Sublessee or any successor to Sublessee shall receive a bona
fide offer to purchase the business being operated under this sublease, i.e.,
goodwill, fixtures and/or equipment and inventory or the property of which the
premises are a part, which offer is acceptable to Sublessee, Sublessor shall
have the right to purchase the business (or the property) upon the same terms
and conditions. Sublessee agrees to immediately, upon receipt of such offer, to
give Sublessor written notice of the terms and conditions thereof, and the
Sublessor shall have the right, for thirty (30) days after receipt of such
notice, to exercise its option to purchase under the identical terms and
conditions of such offer. Sublessor's exercise of its option shall be given in
writing, within said thirty (30) day period.
IN WITNESS WHEREOF, Sublessor and Sublessee have executed this Sublease.
Xx Xxxxxxxxx'x Grocery Markets, Inc. United Grocers, Inc.,
(a California corporation) (an Oregon corporation)
By /s/ Xxx Xxxxxxxxx By /s/ Xxxx Xxxxx
Its President Xxxx Xxxxx, Its President
Date: 4/29/96 Date: 5/13/96
(Sublessee) (Sublessor)
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