EXHIBIT 10.J
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT entered into this 4th day of June, 1993, by and
between UNITED GROCERS, INC., an Oregon corporation, hereinafter designated as
Sublessor, and Food Club of California Incorporated, a California Corporation,
Xxxxxxx X. Xxxxxxx, and Xxxx and Xxxxxx Xxxxxx (husband and wife), hereinafter
jointly and severally designated as Sublessee;
W I T N E S S E T H
WHEREAS, the Sublessor has entered into a Lease dated 5 September, 1991,
with Xxxxx X. Dress, Trust Acct #202 and Joy Dress Xxxxxxxx, Trust Accct.
#303, commencing on the date set forth in the attached Exhibit "A", the "Prime
Lease", which Prime Lease will be in the same format as said Exhibit "A". A
copy of the final Prime Lease will be the final and prevailing Exhibit "A",
being attached hereto and made a part hereof upon its execution, as fully as
if its terms and conditions were herein set forth.
WHEREAS, Sublessee's desire to sublet said premises for a period of 20
years, commencing on date set forth in paragraph 10 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 Sublessees those premises described
in said Exhibit "A," for the term of 20 years.
1.1 The Sublessees, so long as they are not in default hereunder,
shall be granted the right to exercise the renewal options contained in
Exhibit "A," as set forth in paragraphs 3 and 7 of said Exhibit, upon the
condition that Sublessees are not in default and provide Sublessor with lease
guaranty insurance for the renewal term. Said insurance shall be in form and
substance acceptable to Sublessor and shall designate Sublessor as the insured
thereunder.
(2) Sublessees covenant and agree to pay for the whole of said term the
same rental, together with all affirmative covenants including, without
limitation, those pertaining to basic rent, percentage of gross sales, taxes,
assessments, insurance and all of the covenants and obligations to be
performed by Sublessees, 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) Sublessees shall, upon execution hereof, pay any and all rental, or
security deposits, as required pursuant to the terms and conditions of said
Exhibit "A."
(4) Sublessees shall be bound by the same responsibilities, rights,
privileges and duties as Sublessor, as enumerated in Exhibit "A", except for
provisions of paragraph 45, which rights are retained by Sublessor, 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 Sublessees' occupancy of the premises. Furthermore,
Sublessees 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 in respect to said exhibit "A," and Sublessees use of the demised
premises.
4.1 Assignment and Subletting. Sublessees acknowledge that provisions
for extension options and assignment and subletting in the Lease are
applicable to the prime Lessor and Sublessor only. Sublessees 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 Sublessees, by whatever demands, shall be deemed
an assignment of this Sublease for the purposes of this paragraph.
Notwithstanding the foregoing, if Sublessee's desire to transfer by sale,
gift, or as a result of death, its interest herein to its lawful issue, the
Sublessor shall not unreasonably withhold consent to such a transfer,
provided, such transferee agrees that it holds such interest subject to the
restrictions and conditions contained in this sublease agreement.
4.2 Covenants, Representations and Warranties.
(a) Membership in United Grocers, Inc. Upon execution and during
the term hereof, Sublessees agree 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. Sublessees agree that throughout
the term of the Sublease and any extensions or renewals thereof, except as
hereinafter provided, Sublessees will purchase from Sublessor not less than
fifty-five percent (55%), based on a quarterly basis, 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 Sublessees, and Sublessor will supply all of Sublessees'
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 Sublessees in Oroville, 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 Oroville, California area, or that terms offered by Sublessor are not
reasonably comparable to those offered by Sublessor to other purchasers
described above, the Sublessees 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 Sublessees that the terms and
conditions offered are reasonably comparable to those offered to such other
purchasers, Sublessees 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 Sublessees nonetheless
purchase from another source, such purchase or purchases shall not be an
exception from the 55% 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 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 date of
written notice of the liquidated damages.
(c) Sublessees covenant that as long as this Sublease remains in
effect, and for an additional period of six (6) months thereafter, Sublessees
shall not directly or indirectly sell or permit the sale of the store and the
owners of Sublessees shall not directly or indirectly sell controlling
interests in Sublessees (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 Sublessees or
their owners, as the case may be, are prepared to accept from a third party.
Prior to such sale by the Sublessees or their owners, the Sublessees shall
first notify Sublessor of the desire to sell the store or controlling interest
in the Sublessees 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 Sublessees 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 Sublessees 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
Sublessees 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 120 days following the date Sublessor declined the purchase, and if
such sale is not consummated in accordance with the offered terms and
conditions within said 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 issue of Sublessees, 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) Sublessees represent and warrant that 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.
(e) Sublessees hereby represent and warrant 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.
(5) Security Agreement.
5.1 Grant, Collateral and Obligations. Sublessees 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
Sublessees;
(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 Sublessees;
(c) subject to liens securing purchase money financing
therefor as described in Exhibit "X," 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 "Y', 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 Sublessees under this Sublease, all renewals and extensions
thereof, the price of goods, services and merchandise purchased by Sublessees
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.
5.2 Security Agreement Warranties. In addition to and without
limiting the force or effect of any other covenants, representations and
warranties of Sublessees contained in this Sublease, Sublessees hereby
covenant, represent and warrant to and with Sublessor as follows:
(a) Sublessees are the owners 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 "X," hereto to which
Secured Party has consented ("Permitted Liens").
(b) Sublessees 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, for the
notes or any note extensions.
(c) Sublessor warrants that Sublessor is the legal Lessee of
the property and that the sublease is allowed pursuant to the terms of
Sublessor's primary lease; and,
(d) Sublessor warrants and agrees to hold Sublessees harmless
as to any and all liabilities that Sublessor may owe to the owner of the
leased premises. Not withstanding the foregoing, in the event the sublessee's
are liable under the master lease, this will not apply.
(e) All tangible Collateral shall be kept at Sublessees'
place(s) of business located on the premises, and Sublessees shall not permit
the same to be removed therefrom without the prior written consent of
Sublessor.
(f) Sublessees 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.
Sublessees 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 Sublessees in
making, adjusting, and settling claims under and canceling such insurance and
endorsing Sublessees' name on any drafts drawn by insurers of the Collateral.
(g) Sublessees 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.
(h) Sublessees 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.
(i) Sublessees 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.
5.3 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 within 10 days 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.
5.4 Financing Statements. Sublessees 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 existing and replacement Collateral.
5.5 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, the prevailing party hereby agrees 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.
(6) Default. The following shall constitute a default under this
Sublease:
6.1 Any failure by Sublessees 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;
6.2 Any failure by Sublessees to pay when due rent or any other
amount due under this Sublease or to perform when due any other obligation of
Sublessees hereunder;
6.3 If any warranty, representation or statement made or
furnished to Sublessor by or on behalf of the Sublessees is false in any
material respect when made or furnished;
6.4 Any failure by Sublessees to pay when due and/or satisfy any
other present or hereinafter incurred indebtedness or obligation of Sublessees
to Sublessor, including but not limited to those arising from Sublessees'
purchases of goods and services from Sublessor any other loans or leases
Sublessees may have or enter into with Sublessor, and Sublessees' obligations
under the Bylaws of Sublessor and its application for membership in Sublessor;
6.5 If Sublessees vacate or abandon the premises or allow the
premises to remain vacant or unoccupied;
6.6 If Sublessees make an assignment for the benefit of
creditors, or if, with or without Sublessees' acquiescence, a petition in
bankruptcy is filed against Sublessees, or Sublessees are 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
6.7 If Sublessees sell or otherwise dispose of all or any
substantial portion of the secured assets of Sublessees located at or
associated with the store, other than inventory sold at retail in the ordinary
course of business.
(7) Remedies. In the event of any uncured default under this Sublease:
7.1 Sublessor shall have the right at its election then or at any
time thereafter, upon notice to Sublessees, to terminate this Sublease or to
terminate Sublessees' rights of possession in the premises without
terminating this Sublease;
7.2 Sublessor shall have the immediate right whether or not the
Sublease shall have been terminated pursuant to paragraph 7.1, 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;
7.3 Sublessor may (but shall be under no obligation to), whether
or not this Sublease shall have been terminated pursuant to paragraph 7. 1,
resublet the premises, or any part thereof, in the name of Sublessees,
Sublessor or otherwise, without notice to Sublessees, 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);
7.4 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 Sublessees 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
7.5 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 (8) 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.
7.6 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 Sublessees of their liabilities and obligations
under this Sublease, all of which shall survive such expiration, termination,
repossession or resubletting.
(8) Damages.
8.1 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 Sublessees will pay
to Sublessor the rent and other sums required to be paid by Sublessees 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, Sublessees
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 Sublessees in the absence of such expiration,
termination or repossession, less the net proceeds, if any, of any
resubletting effected for the account of Sublessees, 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).
Sublessees 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 Sublessees on each such day.
8.2 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 8.1,
Sublessor shall be entitled to recover from Sublessees, and Sublessees 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 Sublessees shall have
satisfied in full their obligations under paragraph 8.1 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.
(9) 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 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.
(10) 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.
(11) 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, 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, 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-day period.
(12) Additional Provisions.
None
IN WITNESS WHEREOF, the parties have executed the foregoing Sublease
Agreement the day and year first above written.
SUBLESSOR:
United Grocers, Inc., an Oregon Corporation
0000 XX Xxxx Xxxx
XX Xxx 00000
Xxxxxxxx, Xxxxxx 00000
by: /s/ X.X. Xxxxxxx
Title: Assistant Secretary
SUBLESSEES:
/s/ Xxxxxxx X. Xxxxxxx /s/ Xxxx X. Xxxxxx XX
Xxxxxxx X. Xxxxxxx Xxxx Xxxxxx
Food Club of California,
Incorporated /s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
by: /s/ Xxxxxxx X. Xxxxxxx
