EXHIBIT 10.28
LEASE AGREEMENT
Basic Lease Information
Lease Date: August 3, 1998
Lessor: Valley Centre I, L.L.C.
Lessor's Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Lessee: United Natural Foods, Inc.,
a Delaware corporation
Lessee's Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Park: Valley Centre Corporate Park
Lot: The tax parcel on which the Building is
located (Exhibit A), which is legally
described in Exhibit A-1.
Building: The approximate 320,710 square foot building
to be constructed on the Lot by Lessor in
which the Premises will be located.
Premises: Approximately 204,804 square feet as outlined
in red on Exhibit A.
Premises Address: To Be Determined
Auburn, Washington
Term: ten (10) years commencing on. the
Commencement Date defined in Section 2,
subject to extension as provided in Section
30.
Early Occupancy Date: Twelve (12) weeks prior to the anticipated
completion of Lessor's Work defined in
Section 2.
Base Rent Schedule: Month 1: $ 0
Month 2 through 36: $ 62,762
Month 37-60: $ 65,931
Month 61-96; $ 69,577
Months 97-120 $ 74,955
Lessee's Share of Operating Expenses: 58.58%
Lessee's Share of Tax Expense: 58.58%
Lessee's Share of Common Utility Expenses: 58.58%
Permitted Uses: Any lawful purpose including general
office, receiving, storing, shipping,
assembly, light manufacturing, and selling
products, materials and merchandise made
and/or distributed by Lessee.
Insurance Amount: Bodily injury limit of not less than
$1,000,000.00 per occurrence. Property damage
limit of not less than $1,000,000.00 per
occurrence.
Parking Spaces: Lessee's pro rata share of the common area
parking at the Premises which shall include
not fewer than 120 spaces.
Exhibits: Exhibit A - Premises
Exhibit B - Work Letter
Exhibit C - Exclusion From Operating Expenses
Exhibit D - Rules and Regulations
(ii)
LEASE AGREEMENT
This Lease is made and entered into as of the Lease Date included in the
Basic Lease Information as set forth on pages (i) and (ii). The Basic Lease
Information is incorporated by reference herein, and the Basic Lease Information
and this Lease are and shall be construed as a single instrument.
1. Premises:
Lessor hereby leases to Lessee upon the terms and conditions contained herein
the Premises, together with (a) any and all easements, appurtenances, rights,
privileges and benefits now or hereafter belonging thereto or commonly enjoyed
therewith and (b) the right to use in common with Lessor and other lessees of
the Park, the Common Areas (defined below).
2. Commencement Date: The Term and the obligation to pay Rent shall commence on
the date (the "Commencement Date") which is the earlier of (a) the date of
Substantial Completion (as defined in Section 4.E) of Lessor's Work (defined
below) or (b) the date on which Lessee commences business in the ordinary course
in the Premises, and terminate on the date (the "Expiration Date") which is ten
(10) years after the Commencement Date or, if the Commencement Date is not the
first day of a month, on the tenth anniversary of the last day of the month in
which the Commencement Date occurs. Lessor shall permit Lessee to occupy the
Premises on the Early Occupancy Date at Lessee's risk in order to perform
Lessee's Work (defined in the Work Letter) attached hereto as Exhibit B and
incorporated by reference herein) and, to the extent
permitted under applicable laws, to deliver inventory to the Premises. Occupancy
by Lessee prior to the Commencement Date shall be subject to the terms of this
Lease, except Sections 3, 5, 7 and 10. References to the "Term of this Lease"
shall mean the original term as provided in this Section 2 and any Additional
Term (defined below) pursuant to Section 30.
3. Rent: Beginning on the Commencement Date, Lessee
shall pay to Lessor, without prior notice or demand, the Base Rent shown in the
Basic Lease Information, payable in advance at Lessor's address shown in the
Basic Lease Information on the first day of each month throughout the term of
the Lease. The term "Rent" as used in this Lease shall mean the Base Rent and
Lessee's share of Operating Expenses and Tax Expenses and Utilities as specified
in Sections 5.A, 5.B, and 6 of this Lease.
4. Construction:
A. Lessor's Work. Lessor, at its cost and expense, shall be responsible
for the construction of the Building and Common Areas and other improvements
(collectively, "Lessor's Work") as provided in the Work Letter.
B. Lessee's Work. Lessee, at its cost and expense shall be responsible for
the construction of Lessee's Work as defined in the Work Letter.
C. Redecoration Allowance. On the fifth anniversary of the Commencement
Date and on the first day of each Additional Term if this Lease remains in
effect, Lessor shall pay Lessee $40,000 to
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defray Lessee's costs of redecorating and refurbishing the Premises.
D. Completion of Construction. Lessor shall promptly commence and
diligently proceed to complete Lessor's Work on or before March 1, 1999 (the
"Anticipated Completion Date"). If Substantial Completion has not occurred on or
before April 30, 1999, Lessee shall have the right at any time thereafter to
terminate this Lease upon not less than thirty (30) days prior written notice to
Lessor, as Lessee's sole and exclusive remedy for Lessor's failure to
substantially complete Lessor's Work by such date, unless during such period,
Substantial Completion shall have occurred. In addition, if Substantial
Completion has not occurred on or before April 30, 1999, and (a) if Lessee is
required to reimburse or pay to a Sublessee Holdover Rent (as defined in each
Sublease), Lessor shall reimburse Lessee for all such amounts and (b) if a
Sublease (defined below) is terminated by a Sublessee or Lessee, Lessor shall
pay to Lessee all amounts which would have been paid to Lessee under the
applicable Sublease. All amounts payable to Lessee pursuant to this Section 4.E
shall be paid within ten (10) days of written request accompanied by reasonable
evidence of the amounts payable.
E. Substantial Completion. For purposes of this Lease, the term
"Substantial Completion" means completion of Lessor's Work in accordance with
the Work Letter as certified by (i) the architect for the Building, except
so-called "punch list" items not exceeding $37,500, in the aggregate, the
failure of which to complete does
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not interfere with Lessee's use of the Premises and Common Areas, and (ii) the
delivery of a certificate of occupancy by appropriate public officials having
jurisdiction confirming Lessee's right to occupy and use the Premises and Common
Areas in accordance with applicable laws, or if such certificate is not
available by reason of uncompleted Lessee's Work, other written evidence that
such certificate will be issued upon completion of Lessee's Work in accordance
with applicable laws.
F. Common Areas. For purposes of this Lease, the term "Common Areas" shall
mean and include, but not be limited to, any and all ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇, drives, passageways, sidewalks, landscaped areas, ramps, walkways,
entrances and exits, curb-cuts, lighting equipment, surface drainage facilities,
traffic control signs, fences, retaining walls, and other common areas and
improvements from time to time located on the Lot or in the Park. Without
Lessee's prior written consent, Lessor or its lessees shall not construct any
building, structure or improvement in those portions of the Lot and Park
designated as "NO BUILD AREA" on Exhibit A.
5. Expenses:
A. Operating Expenses. In addition to the Rent set forth in Section 3,
Lessee shall pay its share, which is defined in the Basic Lease Information, of
all Operating Expenses. "Operating Expenses" are defined as the all reasonable
amounts reasonably incurred and paid by Lessor in connection with the ownership,
maintenance, repair and operation of the Premises, the Building and
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the Park, and where applicable, of the Lot, except Operating Expenses shall not
include any of the amounts described in Exhibit C.
Operating Expenses may include, but are not limited to:
(a) Lessor's cost of non-structural repairs to and maintenance of
the roof and exterior walls of the Building, including patching of the roof and
roof membrane;
(b) Lessor's cost of maintaining the outside paved area, landscaping
and other common areas of the Park;
(c) Lessor's annual cost of all risk and other insurance including
earthquake endorsements for the Building and the Park and rental loss insurance;
(d) Lessor's cost of modifications to the Building occasioned by any
rules, laws or regulations effective subsequent to the Commencement Date;
(e) Lessor's cost of modifications to the Building occasioned by any
rules, laws or regulations arising from Lessee's use of the Premises regardless
of when such rules, laws or regulations became effective, excluding such costs
relating to Lessor's Work on account of rules, laws and regulations in effect as
of the time such work is performed;
(f) Lessor's cost of preventative maintenance contracts including,
but not limited to, contracts for elevator systems and heating, ventilation and
air conditioning systems, with bi-monthly service;
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(g) Lessor's cost of security and fire protection services for the
Park, if in Lessor's sole discretion such services are provided; and
(h) Reasonable management fees and expenses and reasonable
accounting fees and expenses.
B. Tax Expenses. In addition to the Rent set forth in Section 3, Lessee
shall pay its share, which is defined in the Basic Lease Information, of all
real property taxes applicable to the land and improvements included within the
Park. The term "Tax Expense" means and includes any form of tax, assessment,
general assessment, special assessment, lien, levy, bond obligation, license
fee, license tax, tax or excise on rent, or any other levy, charge or expense,
together with any statutory interest thereon, (individually and collectively,
the "Impositions"), now or hereafter imposed or required by any authority having
the direct or indirect power to tax, including any federal, state, county or
city government or any school, agricultural, lighting, drainage or other
improvement or special assessment district thereof, (individually and
collectively, the "Governmental Agencies") on any interest of Lessor or Lessee
or both (including any legal or equitable interest of Lessor or its mortgagee,
if any) in the Premises or the Building or the Park, including without
limitation:
(a) any Impositions upon, allocable to or measured by the area of
the Premises or the Building or the Park, or the rental payable hereunder,
including without limitation, any gross income tax or excise tax levied by any
Governmental Agencies with respect
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to the receipt of such rental (except any business and occupation taxes imposed
on Lessor's gross income);
(b) any Impositions upon or with respect to the possession, leasing,
operation, management, maintenance, alteration, repair or use or occupancy by
Lessee of the Premises or any portion thereof;
(c) any Impositions upon or with respect to the building equipment
and personal property used in connection with the operation and maintenance of
the Building or the Park or upon or with respect to the furniture, fixtures and
decorations in the common areas of the Building or the Park;
(d) any Impositions upon this Lease or this transaction or any
document to which Lessee is a party creating or transferring an interest or an
estate in the Premises;
(e) any Impositions by Governmental Agencies (whether or not such
impositions constitute tax receipts) in substitution, partially or totally, of
any impositions now or previously included within the definition of real
property taxes, including those calculated to increase tax increments to
Governmental Agencies and to pay for such services as fire protection, water
drainage, street, sidewalk and road maintenance, refuse removal or other
governmental services formerly provided without charge to property owners or
occupants; or
(f) any and all reasonable costs, including without limitation, the
fees of attorneys, tax consultants and experts, reasonably incurred by Lessor in
negotiating or contesting the
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amount of such real property taxes in formal or informal proceedings before the
Governmental Agency imposing such real property taxes; provided, however, that
Impositions shall in no event include (i) Lessor's general income, inheritance,
estate, gift, franchise or transfer taxes, (ii) Impositions separately assessed
and directly attributable to particular improvements for the benefit of, or
owned by, other lessees of the Park or (iii) penalties, interest or late charges
on account of Lessor's failure to pay any of the Impositions, except to the
extent caused by Lessee's failure to pay its share of Impositions as provided in
this Section 7.B.
C. Payment of Expenses. Lessor shall estimate the Operating Expenses and
Tax Expense for the calendar year in which the Lease commences. Commencing on
the Commencement Date, one-twelfth (1/12th) of this estimate shall be paid by
Lessee to Lessor on the first day of each month of the remaining months of the
calendar year. Thereafter, Lessor may estimate such expenses as of the beginning
of each calendar year and require Lessee to pay one-twelfth (1/12th) of such
estimated amount as additional Rent hereunder on the first day of each month.
Not later than March 31 of the following calendar year, or as soon thereafter as
reasonably possible, including the year following the year in which this Lease
terminates, Lessor shall furnish Lessee with a true and correct accounting of
actual Operating Expenses and Tax Expense, and within thirty (30) days of
Lessor's delivery of such accounting, Lessee shall pay to Lessor, the amount of
any underpayment.
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Notwithstanding the foregoing, failure by Lessor to give such accounting by such
date shall not constitute a waiver of Lessor of its right to collect Lessee's
share of any underpayment. Lessor shall credit the amount of any overpayment by
Lessee toward the next estimated monthly installment(s) falling due, or where
the term of the Lease has expired, refund the amount of overpayment to Lessee.
D. Limitation. Notwithstanding the foregoing, in no event shall the
aggregate amount of Lessee's share of Operating Expenses and Tax Expense during
the first thirty-six (36) months of the Term exceed $405,803.52.
6. Utilities: Lessee shall pay the cost of all water, sewer use and connection
fees, gas, heat, electricity, telephone and other utilities billed or metered
separately to Lessee, except the cost of constructing utility lines and
installing utility meters included in Lessor's Work. For utility fees or use
charges that are not billed separately to Lessee, Lessee shall pay the amount
which Lessor reasonably determines by survey, separate meter or similar means is
attributable to Lessee's use of the Premises. In addition, Lessee shall within
fifteen (15) days after receiving a ▇▇▇▇ from Lessor pay Lessor its share, which
is described on page 1, of any common area utility costs.
7. Late Charges: Lessee acknowledges that late payment by Lessee to Lessor of
Rent, Lessee's share of Operating Expenses, Tax Expenses, utility costs or other
sums due hereunder, will cause Lessor to incur costs not contemplated by this
Lease and the exact
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amount of such costs are extremely difficult and impracticable to fix. Such
costs, include without limitation, processing and accounting charges, and late
charges that may be imposed on Lessor by the terms of any note secured by any
encumbrance against the Premises. Therefore, in the event any installment of
Rent or other sum remains unpaid for more than five (5) days from the date due,
upon Lessor's written request made within thirty (30) days of the date payment
was due, Lessee shall pay Lessor, a late charge of five percent (5%) of the
overdue amount; provided, however, that Lessor shall give one (1) written notice
during each year before assessing such late charge. The parties agree that this
late charge represents a fair and reasonable estimate of the costs that Lessor
will incur by reason of late payment by Lessee. Acceptance of any late charge
without concurrent or prior payment of the overdue amount shall not constitute a
waiver of Lessee's default with respect to the overdue amount, nor prevent
Lessor from exercising any of the other rights and remedies available to Lessor.
8. Use of Premises: The Premises are to be used for the uses stated in the Basic
Lease Information and for no other purposes without Lessor's prior written
consent. Lessee shall not do or permit anything to be done in or about the
Premises nor keep or bring anything therein which will increase the existing
rate of or affect any policy of fire or other insurance upon the Building or any
of its contents, or cause a cancellation of any insurance policy. Lessee shall
not do or permit anything to be done in or
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about the Premises which will unreasonably obstruct or interfere with the rights
of other tenants or occupants of the Building or other buildings in the Park or
injure or unreasonably annoy other tenants or use or allow the Premises to be
used for any improper, immoral, unlawful or objectionable purpose, nor shall
Lessee cause, maintain or permit any nuisance in, on or about the Premises.
Lessee shall not damage or deface or otherwise commit or suffer to be committed
any waste in or upon the Premises. Lessee shall honor the terms of all
covenants, conditions and restrictions relating to the Park listed in Exhibit D
hereto. Lessee shall honor the rules and regulations attached to and made a part
of this Lease and any other reasonable regulations of the Lessor related to
parking and the operation of the Building. All such rules and regulations shall
be uniformly applied and enforced.
9. Alterations and Additions: Lessee shall not install any signs, fixtures or
improvements to the Premises (collectively, "Alterations") without the prior
written consent of Lessor, which consent shall not be unreasonably withheld,
delayed or conditioned; provided, however, that Lessee shall make no structural
alterations and shall make no roof penetrations without Lessor's consent in
Lessor's sole discretion except as provided below. Lessor acknowledges that
Lessee may wish to expand freezer and cooler areas and equipment. Lessor agrees
that it will not unreasonably withhold its consent to such expansion provided
the structural integrity of the Building is maintained and the work is of a
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quality consistent with Lessee's Work. Lessor expressly consents to Lessee's
Work. Lessee shall keep the Premises and the property on which the Premises are
situated free from any liens arising out of any work performed, materials
furnished or obligations incurred by or on behalf of Lessee. Prior to the
commencement of Alterations involving a cost of more than Two Hundred Thousand
Dollars ($200,000), Lessor may require Lessee to post a completion bond for up
to 125% of the cost of the work. Lessee shall have the right to contest the
correctness or validity of any such lien if,within thirty (30) days of demand by
Lessor, it procures and records a lien release bond issued by a responsible
corporate surety in an amount sufficient to satisfy statutory requirements
therefor in the State of Washington. Lessee shall promptly pay or cause to be
paid all sums awarded to the claimant on its suit, and, in any event, before any
execution is issued with respect to any judgment obtained by the claimant in its
suit or before such judgment becomes a lien on the Premises, whichever is
earlier. Upon termination of this Lease, Lessee shall remove all signs,
fixtures, furniture and furnishings and if requested by Lessor, remove any
improvements made by Lessee (including freezers and coolers included in Lessee's
Work) and repair any damage caused by the installation or removal of such signs,
fixtures, furniture, furnishings and improvements and leave Premises in as good
condition as they were at the time of the commencement of this Lease, excepting
for reasonable wear and tear and damage by fire or casualty. Notwithstanding the
foregoing, Lessee may, without
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Lessor's consent, install and replace its trade fixtures and equipment and make
interior, non-structural alterations to the Premises.
10. Repairs and Maintenance: Lessee shall, at Lessee's sole cost and expense,
maintain the Premises in the condition delivered, reasonable wear and tear and
damage by fire or other casualty excepted, and in clean and safe condition.
Lessee shall keep the sidewalks, loading areas, driveways and other areas
immediately adjacent to the Premises free from rubbish and other debris. Lessee,
at its sole cost and expense, shall repair to its prior condition any damage to
the Premises caused by Lessee or its employees, agents, invitees, licensees or
contractors. Without limiting the generality of the foregoing, Lessee shall be
solely responsible for maintaining and repairing all plumbing, lighting,
electrical wiring and equipment within the Premises and interior walls. Lessee
shall repair and maintain the heating, ventilation and air conditioning ("HVAC")
systems for the Premises pursuant to a maintenance contract with a recognized
HVAC contractor.
Except for repairs rendered necessary by the negligence of Lessee, its
agents, employees and contractors, Lessor shall maintain, repair and replace, if
necessary, in good condition, reasonable wear and tear excepted, the roof,
foundations and exterior walls of the Building (exclusive of glass and exterior
doors within the Premises), utility and sewer pipes outside the Premises and all
parking areas, sidewalks, driveways and other Common Areas and to keep the
Common Areas in a neat, clean, safe,
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good and orderly condition. Lessor shall be responsible for the removal of all
snow and ice from the Common Areas. Except as otherwise provided in Section 5.A,
costs incurred by Lessor pursuant to this Section 10 shall be Operating
Expenses.
Except for normal maintenance and repair of the items outlined above,
Lessee shall have no right of access to or install any device on the roof of the
Building nor make any penetrations of the roof of the Building without the
express prior written consent of Lessor, except as set forth in the last
paragraph of Section 9. 11. Insurance: A. Lessee shall at all times during the
term of this Lease, and at its sole cost and expense, maintain workers
compensation insurance and comprehensive general liability insurance against
liability for bodily injury and property damage by reason of the use and
occupancy of the Premises by Lessee, its Authorized Representative (defined
below) and its invitees, with liability limits as set forth in the Basic Lease
Information with such insurance naming Lessor and any mortgagee of Lessor as an
additional insured and including such endorsements as may be reasonably required
by Lessor. In no event shall the limits of said policy or policies be considered
as limiting the liability of Lessee under this Lease.
All insurance required to be carried by Lessee under this Lease shall: (i)
be issued by insurance companies authorized to do business in the State of
Washington with a rating of A/VI or better as rated in the most recent edition
of Best's Insurance Reports; (ii) be issued as a primary policy, and (iii)
contain an
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endorsement requiring thirty (30) days' prior written notice from the insurance
company to both parties, and, if requested by Lessor, to Lessor's lender, before
cancellation or change in the coverage, scope, or amount of any policy. Each
policy or a certificate of the policy, together with evidence of payment of
premiums, shall be deposited with Lessor on or before the Commencement Date, and
on renewal of the policy not less than ten (10) days before the expiration of
the term of the policy.
▇. ▇▇▇▇▇▇ shall at all times during the term of the Lease maintain
comprehensive general liability insurance on the Park (including the Building)
against liability for bodily injury and property damage with liability limits as
set forth in the Basic Lease Information. Lessor shall also maintain with
respect to the Park (including the Building) fire insurance with "all risk"
endorsements, including flood and earthquake, in an amount not less than the
full replacement cost thereof. All such insurance shall be issued by companies
and otherwise meet the standards set forth in the second paragraph of Section
11A.
12. Indemnity and Limitation of Liability:
A. Generally. Lessee agrees to save and hold Lessor harmless and indemnify
Lessor from and against all liabilities, charges and expenses (including
reasonable attorneys' fees, costs of court and expenses necessary in the
prosecution or defense of any litigation) by reason of injury to person or
property (a) occurring in, on or about the Premises resulting from the acts or
omissions of Lessee, its Authorized Representatives, its customers or invitees
and (b)
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occurring in, on or about the Building or the Park resulting from the acts or
omissions of Lessee or its Authorized Representatives. Lessor agrees to save and
hold Lessee harmless and indemnify Lessee from and against all liabilities,
charges and expenses (including reasonable attorneys' fees, costs of court and
expenses necessary in the prosecution or defense of any litigation) by reason of
injury to person or property occurring in, on or about the Premises or the
Building or the Park resulting from the acts or omissions of Lessor or its
Authorized Representatives. A party's obligation under this Section to indemnify
and hold the other party harmless shall be limited to the sum that exceeds the
amount of insurance proceeds, if any, received by the party being indemnified.
B. Concurrent Negligence of Lessor and Lessee. Notwithstanding Section
12.A above, in the event of concurrent negligence of Lessee, or its Authorized
Representatives, on the one hand, and that of Lessor, or its Authorized
Representatives, on the other hand, which concurrent negligence results in
damage to any persons or property occurring in, on or about the Premises or the
Building or the Park, either party's obligation to indemnify the other party as
set forth in Section 12.A shall be limited to the extent of the negligence of
the indemnifying party, or its authorized representatives, including the
indemnifying party's proportional share of costs and attorneys' fees incurred in
connection with any claims, actions or proceedings brought with respect to such
damage.
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C. Waiver of Worker's Compensation Immunity. The indemnification
obligations contained in this Section shall not be limited by any worker's
compensation, benefit or disability laws, and each indemnifying party hereby
waives (solely for the benefit of the indemnified party) any immunity that said
indemnifying party may have under the Industrial Insurance Act, Title 51 RCW and
similar worker's compensation, benefit or disability laws.
D. Provisions Specifically Negotiated. LESSOR AND LESSEE ACKNOWLEDGE BY
THEIR EXECUTION OF THIS LEASE THAT EACH OF THE INDEMNIFICATION PROVISIONS OF
THIS LEASE (SPECIFICALLY INCLUDING BUT NOT LIMITED THOSE RELATING TO WORKER'S
COMPENSATION BENEFITS AND LAWS) WAS SPECIFICALLY NEGOTIATED AND AGREED TO BY
LESSOR AND LESSEE.
E. Exemption of Lessor from Liability. Except as provided in Section 4.D,
and except for damage resulting from the negligence of Lessor or its Authorized
Representatives or as a result of any misrepresentation, breach of warranty or
failure to perform its obligations hereunder, Lessor shall not be liable to
Lessee for any damage to Lessee or Lessee's property, for any injury to or loss
of Lessee's business or for any damage or injury to any person from any cause.
F. Definitions. The term "Authorized Representatives" means any
shareholder, director, officer, partner, agent, employee or independent
contractor of either party.
13. Assignment and Subleasing:
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A. Lessee shall not assign or transfer this Lease or sublet more than
thirty percent (30%) of the Premises except to a Permitted Transferee (defined
below) without the written consent of Lessor, which shall not be unreasonably
withheld. If Lessee seeks to sublet or assign all or any portion of the Premises
for which Lessor's consent is required, Lessee shall give written notice (the
"Transfer Notice") together with a copy of the proposed sublease or assignment
agreement and all agreements collateral thereto, to Lessor at least thirty (30)
days prior to the commencement of the sublease or assignment. If Lessor has not
given Lessee written notice of its objection to the proposed assignment or
sublease within fifteen (15) days of receipt of the Transfer Notice, Lessor
shall be deemed to have consented thereto. Each permitted assignee or sublessee
shall assume and be deemed to assume this Lease and shall be and remain liable
jointly and severally with Lessee for payment of Rent and for the due
performance of, and compliance with all the terms, covenants, conditions and
agreements herein contained on Lessee's part to be performed or complied with,
for the term of this Lease. In the event of any sublease or assignment of all or
any portion of the Premises for which Lessor's consent is required where the
Rent reserved in the sublease or assignment exceeds the sum of (a) the Rent or
pro rata portion of the Rent, as the case may be, for such space reserved in the
Lease and (b) amounts payable by Lessee under the Current Lease not reimbursed
by a Sublessee, Lessee shall pay the Lessor monthly, as additional Rent, at the
same time as the monthly installments of Rent
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hereunder, one-half (1/2) of the excess of the Rent reserved in the sublease
over the Rent reserved in this Lease applicable to the sublease space.
B. For purposes of this Lease, the term "Permitted Transferee" means a
corporation or other business entity which controls, is controlled by, or is
under common control with, Lessee, and the term "control" means the ownership of
a majority of the outstanding voting stock or similar equity interest of such
corporation or other entity.
14. Subrogation: Subject to the approval of their respective insurers, Lessor
and Lessee hereby mutually waive their respective rights of recovery against
each other from any insured loss. Each party shall obtain any special
endorsements, if required by their insurer, to evidence compliance with the
aforementioned waiver.
15. Ad Valorem Taxes: Lessee shall pay before delinquent all taxes assessed
against the personal property of the Lessee and all taxes attributable to any
leasehold improvements made by Lessee.
16. Subordination; Landlord's Waiver:
A. This Lease is and shall be prior to any mortgage or deed of trust (a
"Mortgage") recorded after the date of this Lease affecting the Premises, the
Building, the Park or the Lot. If, however, a lender requires that this Lease be
subordinate to any Mortgage, this Lease shall be subordinate to that Mortgage if
Lessor first obtains from the lender a written agreement reasonably acceptable
to Lessee that provides substantially the following:
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"As long as Lessee performs its obligations under this Lease, no
foreclosure of, deed given in lieu of foreclosure of or sale under the
mortgage, and no steps or procedures taken under the mortgage, shall
affect Lessee's rights under this Lease."
Lessee shall attorn to any purchaser at any foreclosure sale, or to any
grantee or transferee designated in any deed given in lieu of foreclosure.
Lessee shall execute the written agreement and any other documents reasonably
required by the lender to accomplish the purposes of this Section.
▇. ▇▇▇▇▇▇ agrees to pay and perform as and when due each of its
obligations under each Mortgage.
▇. ▇▇▇▇▇▇ agrees to execute and deliver from time to time such documents
and instruments reasonably requested by Lessee's lenders waiving any security
interest of Lessor in any of Lessee's property, permitting such lender to enter
the Premises to enforce its rights against Lessee and including other customary
provisions; provided such agreement (i) requires lender to repair any damage to
the Premises caused in connection therewith and to pay Rent during any period of
occupancy and (ii) does not permit such lender to occupy the Premises for more
than sixty (60) days.
17. Right of Entry: Lessee grants Lessor or its agents the right to enter the
Premises at all reasonable times after twenty-four (24) hours notice for
purposes of inspection, exhibition, repair and alteration. Lessor shall at all
times have and retain a key with which to unlock all the doors in, upon and
about the Premises, excluding Lessee's vaults and safes, and Lessor shall have
the right to use any and all reasonable means Lessor deems necessary to
20
enter the Premises in an emergency. Lessor shall also have the right to place
"for rent" and/or "for sale" signs on the outside of the Premises during the
last six (6) months of the term of this Lease. Lessee hereby waives any claim
from damages or for any injury or inconvenience to or interference with Lessee's
business, or any other loss occasioned thereby except for any claim for any of
the foregoing arising out of the negligent acts or omissions of Lessor or its
authorized representatives.
18. Estoppel Certificate: Upon the reasonable request of either party, at any
time or from time to time, Lessor and Lessee agree to execute, acknowledge and
deliver to the other, within twenty (20) days after request, a written
instrument, duly executed and acknowledged, (a) certifying that this Lease has
not been modified and is in full force and effect or, if there has been a
modification of this Lease, that this Lease is in full force and effect as
modified, stating such modifications, (b) specifying the dates to which the Rent
and other amounts have been paid, (c) stating whether or not, to the knowledge
of the party executing such instrument, the other party hereto is in default
and, if such party is in default, stating the nature of such default and (d)
stating whether or not, to the knowledge of the party executing such instrument,
there are then existing any set-offs or defenses against the enforcement of any
of the obligations hereunder upon the part of Lessor or Lessee, as the case may
be, to be performed or complied with and, if so, specifying the same. Any such
21
statement may be conclusively relied upon by any prospective purchaser or
encumbrance of the Premises. Lessee's failure to deliver such statement within
such time shall be conclusive upon the Lessee that (x) this Lease is in full
force and effect, without modification except as may be represented by Lessor;
(y) there are no uncured defaults in the Lessor's performance, and (z) not more
than one month's rent has been paid in advance.
19. Lessee's Default: The occurrence of any one or more of the following events
shall constitute a default and breach of this Lease by Lessee:
(a) The vacation or abandonment of the Premises by the Lessee.
(b) The failure by Lessee to make any payment of Rent or any other
payment required hereunder after receiving ten (10) days written notice that
Lessee has failed to make such payment by the date said payment is due.
(c) The failure of Lessee to observe, perform or comply with any of
the conditions or provisions of this Lease for a period of thirty (30) days
after written notice, or such additional time as may be reasonably required to
remedy the same by appropriate action promptly commenced and diligently
continued.
(d) Lessee becoming the subject of any bankruptcy (including
reorganization or arrangement proceedings pursuant to any bankruptcy act) or
insolvency proceeding whether voluntary or involuntary.
22
(e) The use or storage by Lessee of Hazardous Materials on the
Premises other than as permitted by the provisions of Section 27 of this Lease
for a period of thirty (30) days after written notice or such additional time as
may be reasonably necessary to remedy the same by appropriate action promptly
commenced and diligently continued.
20. Remedies for Lessee's Default: In the event of Lessee's default or breach of
the Lease, Lessor may terminate Lessee's right to possession of the Premises by
any lawful means in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In addition, the
Lessor shall have the immediate right of re-entry, and if this right of re-entry
is exercised following abandonment of the Premises by Lessee, Lessor may
consider any personal property belonging to Lessee and left on the Premises to
also have been abandoned.
If Lessee breaches this Lease and abandons the property before the end of
the term, or if Lessee's right to possession is terminated by Lessor because of
a breach of the Lease, then in either such case, Lessor shall be entitled to
recover from Lessee all damages incurred by Lessor by reason of Lessee's default
including without limitation thereto, the following: (i) the worth at the time
of award of any unpaid Rent which had been earned at the time of such
termination; plus (ii) the worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the time of
award exceeds the amount
23
of such rental loss that Lessee proves could have been reasonably avoided; plus
(iii) the worth at the time of award of the amount by which the unpaid Rent for
the balance of the Term after the time of award exceeds the amount of such
rental loss that is proved could be reasonably avoided; plus (iv) any other
amount necessary to compensate Lessor for all the detriment proximately caused
by Lessee's failure to perform its obligations under this Lease or which in the
ordinary course of things would be likely to result therefrom, including without
limitation, any reasonable costs or expenses incurred by Lessor in (A) retaking
possession of the Premises, including reasonable attorney fees therefor, (B)
maintaining or preserving the Premises after such default, (C) preparing the
Premises for reletting to a new Lessee, including repairs or necessary
alterations to the Premises for such reletting, (D) leasing commissions, and (E)
any other costs reasonably necessary or appropriate to relet the Premises; plus
(v) at Lessor's election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable state law. Upon
any such re-entry Lessor shall have the right to make any reasonable repairs,
alterations or modifications to the Premises, which Lessor in its reasonable
discretion deems necessary. As used in Subsection 20(i) the "worth at the time
of award" is computed by allowing interest at the rate of twelve percent (12%)
per year from the date of default. As used in Subsections 20(ii) and 20(iii) the
"worth at the time of award" is
24
computed by discounting such amounts at the discount rate of twelve percent
(12%) per year.
The foregoing remedies are not exclusive; they are cumulative in addition
to any remedies now or later allowed by law or to any equitable remedies Lessor
may have, and to any remedies Lessor may have under bankruptcy laws or laws
affecting creditor's rights generally.
The waiver by Lessor of any breach of any term of this Lease shall not be
deemed a waiver of such term or of any subsequent breach thereof.
21. Holding Over: If Lessee holds possession of the Premises after the Term of
this Lease with Lessor's consent, Lessee shall become a tenant from month to
month upon the terms specified at a monthly Rent of one hundred twenty-five
percent (125%) of the Rent due on the last month of the Lease Term, payable in
advance on or before the first day of each month. All options, if any, granted
under the terms of this Lease shall be deemed terminated and be of no effect
during said month to month tenancy. Lessee shall continue in possession until
such tenancy shall be terminated by either Lessor or Lessee giving written
notice of termination to the other party at least thirty (30) days prior to the
effective date of termination.
22. Lessor's Default: Lessee agrees to give any holder of a deed of trust
encumbering the Premises and of which Lessee has actual notice ("Trust Deed
Holders"), by certified mail, a copy of any notice of default served upon the
Lessor by Lessee, provided that
25
prior to such notice Lessee has been notified in writing (by way of actual
delivery of Notice of Assignment of Rents and Leases, or otherwise) of the
address of such Trust Deed Holder. Lessee further agrees that if Lessor shall
have failed to cure such default within the time, if any, provided for in this
Lease, then the Trust Deed Holders shall have an additional thirty (30) days
within which to cure such default or, if such default cannot be cured within
that time, then such additional time as may be necessary, if the Trust Deed
Holder has commenced and is diligently pursuing the remedies necessary to cure
such default (including but not limited to commencement of foreclosure
proceedings, if necessary to effect such cure), in which event this Lease shall
not be terminated while such remedies are being so diligently pursued. The
failure by Lessee to give any notice to a Trust Deed Holder pursuant to this
Section 22 shall not in any way release or limit Lessor's obligations to Lessee.
23. Sale of Premises: In the event of a sale of the Building and Lot (including
the Common Areas) and the assumption in writing by the purchaser of all
obligations of Lessor hereunder arising after such sale, Lessor shall have no
liability to Lessee on account of obligations of Lessor arising after such sale.
The foregoing shall not release Lessor of any obligations on account of acts or
events occurring prior to such sale.
24. Waiver: No delay or omission in the exercise of any right or remedy of
Lessor on any default by Lessee shall impair such a right of remedy or be
construed as a waiver. The subsequent acceptance
26
of Rent by Lessor after breach by Lessee of any covenant or term of this Lease
shall not be deemed a waiver of such breach, other than a waiver of timely
payment for the particular Rent payment involved, and shall not prevent Lessor
from maintaining an unlawful detainer or other action based on such breach. No
payment by Lessee or receipt by Lessor of a lesser amount than the monthly Rent
and other sums due hereunder shall be deemed to be other than on account of the
earliest Rent or other sums due, nor shall any endorsement or statement on any
check or accompanying any check or payment be deemed an accord and satisfaction;
and Lessor may accept such check or payment without prejudice to Lessor's right
to recover the balance of such Rent or other sum or pursue any other remedy
provided in this Lease.
25. Casualty Damage: If the Premises or any part thereof shall be damaged by
fire or other casualty (a "Casualty"), Lessee shall give prompt written notice
thereof to Lessor. In case of Substantial Damage (described below), each of
Lessor and Lessee may, at its option, terminate this Lease as of the date of
such damage by notifying the other in writing of such termination within thirty
(30) days after the date of such damage. If this Lease is not terminated by
Lessor or Lessee, Lessor shall promptly commence to repair and restore the
Building and shall proceed with reasonable diligence to restore the Building and
the Premises within two hundred ten (210) days from the date of the Casualty
(except that Lessor shall not be responsible for delays outside its control) to
27
substantially the same condition in which it was immediately prior to the
happening of the casualty, except that Lessor shall not be required to rebuild,
repair or replace any part of Lessee's furniture, furnishings or fixtures and
equipment removable by Lessee or, except to the extent of insurance proceeds
available therefor, any improvements installed by Lessee under the provisions of
this Lease. Lessor shall not be liable for any inconvenience or annoyance to
Lessee, injury to the business of Lessee, loss of use of any part of the
Premises by the Lessee or loss of Lessee's personal property resulting in any
way from such damage or the repair thereof. If this Lease is not terminated as
provided above, there shall be an appropriate abatement of Rent and other
amounts payable hereunder from the date of such damage until restoration
thereof, according to the extent to which Lessee is unable to use the Premises
and Common Areas in the ordinary course of its business. For purposes of this
Lease, "Substantial Damage" means damage or destruction to (a) the Building or
the Premises which, in the reasonable opinion of Lessor's independent architect
or engineer, cannot be repaired both (i) within two hundred ten (210) days from
the date of the Casualty and (ii) more than ninety (90) days prior to the
expiration of the term of this Lease, including any Additional Term the option
for which shall have been exercised or (b) the Common Areas which, in the
reasonable opinion of Lessee, materially interferes with the conduct of Lessee's
business and which cannot be repaired within the period set forth in clause (a).
Notwithstanding the foregoing, Lessor shall not in any event be
28
required to spend for such work an amount in excess of the insurance proceeds
actually received by Lessor as a result of fire or other casualty. If Lessor is
unable to restore the Building and Premises to substantially their condition
prior to such casualty because insurance proceeds are not available, Lessee may
terminate this Lease.
26. Condemnation: If more than fifteen percent (15%) of the Premises is taken
for any public or quasi-public purpose of any lawful government power or
authority or sold to a governmental entity to prevent such taking, Lessee or
Lessor may terminate this Lease as of the date when physical possession of the
Premises is taken by the taking authority. If any portion of the Common Areas
designated as "Access and Parking" on Exhibit A which, in the reasonable opinion
of Lessee, materially interferes with the conduct of Lessee's business in the
ordinary course is so taken or sold and Lessor is unable to provide within a
reasonable time an alternative reasonably acceptable to Lessee, Lessee may
terminate this Lease as of the date when physical possession of such Common
Areas is taken by the taking authority. Lessee shall not because of such taking
assert any claim against Lessor or the taking authority for any compensation
because of such taking, and Lessor shall be entitled to receive the portion of
the award attributable to the Lot and Building without deduction for any estate
or interest of Lessee, and Lessee shall be entitled to receive the portion of
the award attributable to Lessee's furniture, fixtures
29
and equipment and for business interruption. If this Lease is not terminated by
Lessor or Lessee, Lessor shall promptly proceed to restore the Premises,
Building or Common Areas to substantially the same condition prior to such
partial taking, allowing for the reasonable effects of such taking, and a
proportionate allowance shall be made to Lessee for the Rent and a reduction in
Lessee's share of other amounts shall be made, in each case corresponding to the
time during which, and to the part of the Premises of which, Lessee is deprived
and to the extent of the permanent interference with Lessee's business on
account of such taking and restoration. Lessor shall not be required to spend
funds for restoration in excess of the amount received by Lessor as compensation
awarded.
27. Environmental Matters/Hazardous Materials:
A. Hazardous Materials Disclosure Certificate. Concurrently with executing
this Lease, and within thirty (30) days of each anniversary of the Commencement
Date during the Term of this Lease, Lessee shall execute, and deliver to Lessor,
the Hazardous Materials Disclosure Certificate (the "HazMat Certificate") in
substantially the form attached hereto as Exhibit__, and any other reasonably
necessary documents as requested by Lessor.
B. Definition of Hazardous Materials. As used in this Lease, the term
Hazardous Materials shall mean and include (a) any hazardous or toxic wastes,
materials or substances, and other pollutants or contaminants, which are or
become regulated by any Environmental Laws; (b) petroleum, petroleum byproducts,
crude oil or any fraction thereof; (c) asbestos; (d) polychlorinated
30
biphenyls; (e) radioactive materials; (f) any other material or substance
displaying toxic, reactive, ignitable or corrosive characteristics, as all such
terms are used in their broadest sense, and are defined or become defined by any
Environmental Law (defined below); or (g) any materials which cause a nuisance
upon or waste to the Premises, the Building, the Lot, the Park or any portion of
any of the foregoing.
C. Prohibition; Environmental Laws. Subject to the remaining provisions of
this Section 29, Lessee shall be entitled to use and store only those Hazardous
Materials that are necessary for Lessee's business and to the extent disclosed
in the HazMat Certificate, provided that such usage and storage is only to the
extent of the quantities of Hazardous Materials as specified in the then
applicable HazMat Certificate and provided further that such usage and storage
is in full compliance with any and all local, state and federal environmental,
health and/or safety-related laws, statutes, orders, standards, courts'
decisions, ordinances, rules and regulations (as interpreted by judicial and
administrative decisions), decrees, directives, guidelines, permits or permit
conditions, currently existing and as amended, enacted, issued or adopted in the
future which are or become applicable to Lessee or all or any portion of the
Premises (collectively, the "Environmental Laws"). Lessee agrees that any
changes to the type and/or quantities of Hazardous Materials specified in the
most recent HazMat Certificate may be implemented only with the prior written
consent of Lessor, which consent shall not be unreasonably
31
withheld. The HazMat Certificate need not disclose minor quantities of cleaning
solvents, office products and similar materials used in the ordinary course of
business ("Excluded Materials"). Lessee shall not be entitled nor permitted to
install any tanks under, on or about the Premises for the storage of Hazardous
Materials without the express written consent of Lessor, which may be given or
withheld in Lessor's sole discretion. Lessor shall have the right at all times
during the Term of this Lease at reasonable times and upon reasonable notice to
(i) inspect the Premises, (ii) conduct tests and investigations to determine
whether Lessee is in compliance with the provisions of this Section 27 and (iii)
request lists of all Hazardous Materials used, stored or otherwise located on,
under or about the Premises, the Common Areas and/or the parking lots (to the
extent the Common Areas and/or parking lots are not considered part of the
Premises), except such lists need not include Excepted Materials or fuel and
similar materials in motor vehicles. The cost of all such inspections, tests and
investigations shall be borne solely by Lessor.
D. Lessee's Environmental Obligations. Lessee shall give to Lessor
immediate verbal and follow-up written notice of any spills, releases,
discharges, disposals, emissions, migrations, removals or transportation of
Hazardous Materials in violation of or required to be reported under
Environmental Laws on, under or about the Premises, or in any Common Areas or
parking lots (to the extent
32
such areas are not considered part of the Premises). Lessee covenants and
warrants to promptly investigate, clean up, remove, restore and otherwise
remediate (including, without limitation, preparation of any feasibility studies
or reports and the performance of any and all closures) any spill, release,
discharge, disposal, emission, migration or transportation of Hazardous
Materials arising from or related to the intentional or negligent acts or
omissions of Lessee or Lessee's Representatives at Lessee's sole cost and
expense. Any such investigation, clean up, removal, restoration and other
remediation shall only be performed after Lessee has obtained Lessor's prior
written consent, which consent shall not be unreasonably withheld so long as
such actions would not potentially have a material adverse long-term or
short-term effect on the Premises, the Building, the Lot or the Park, or any
portion of any of the foregoing. Notwithstanding the foregoing, Lessee shall be
entitled to respond immediately to an emergency without first obtaining Lessor's
prior written consent. Lessee, at its sole cost and expense, shall conduct and
perform, or cause to be conducted and performed, all closures as required by any
Environmental Laws or any agencies or other governmental authorities having
jurisdiction thereof. If Lessee fails to so promptly investigate, clean up,
remove, restore, provide closure or otherwise so remediate as required by this
paragraph, Lessor may, but without obligation to do so, take any and all steps
necessary to rectify the same and Lessee shall promptly reimburse Lessor, upon
demand, for all reasonable costs and expenses to Lessor of
33
performing investigation, clean up, removal, restoration, closure and
remediation work. All such work undertaken by Lessee, as required herein, shall
be performed in such a manner so as to enable Lessor to make full economic use
of the Premises, the Building, the Lot and the Park for lawful commercial
purposes after the satisfactory completion of such work.
E. Lessee's Environmental Indemnity. In addition to Lessee's obligations
set forth above, Lessee agrees to, and shall, protect, indemnify, defend (with
counsel reasonably acceptable to Lessor) and hold Lessor and Lessor's lenders,
partners, property management company (if other than Lessor), agents, directors,
officers, employees, representatives, contractors, shareholders, successors and
assigns and each of their respective partners, directors, employees,
representatives, agents, contracts, shareholders, successors and assigns
harmless from and against any and all claims, judgments, damages, penalties,
fines, liabilities, losses (including, without limitation, diminution in value
of the Premises, the Building, the Lot, the Park, or any portion of any of the
foregoing, damages for the loss of or restriction on the use of rentable or
usable space), suits, administrative proceedings and costs (including, but not
limited to, reasonable attorneys' and consultant fees and court costs) arising
at any time during or after the Term of this Lease in connection with or related
to, directly or indirectly, the use, presence, transportation, storage,
disposal, migration, removal, spill, release or discharge of Hazardous Materials
on, in or about the Premises, or in any Common
34
Areas or parking lots (to the extent such areas are not considered part of the
Premises) as a result (directly or indirectly) of the intentional or negligent
acts or omissions of Lessee or Lessee's Authorized Representatives. Neither the
written consent of Lessor to the presence of Hazardous Materials on, under or
about the Premises nor the strict compliance by Lessee with all Environmental
Laws shall excuse Lessee and Lessee's officers and directors from its
obligations of indemnification pursuant hereto.
▇. ▇▇▇▇▇▇'▇ Environmental Indemnity. Lessor agrees to, and shall, protect,
indemnify, defend (with counsel acceptable to Lessee) and hold Lessee and
Lessee's partners, agents, directors, officers, employees, representatives,
contractors, shareholders, successors and assigns and each of their respective
partners, directors, employees, representatives, agents, contractors,
shareholders, successors and assigns harmless from and against any and all
claims, judgments, damages, penalties, fines, liabilities, losses, suits,
administrative proceedings and costs (including, but not limited to, attorneys'
and consultant fees and court costs) arising at any time during or after the
Term of this Lease in connection with or related to, directly or indirectly, the
use, presence, transportation, storage, disposal, migration, removal, spill,
release or discharge of Hazardous Materials on, in or about the Premises, or in
any Common Areas or parking lots (to the extent such areas are not considered
part of the Premises) as a result (directly or indirectly) of the intentional or
negligent acts or omissions of Lessor or Lessor's Authorized Representatives.
35
In addition, Lessor expressly agrees that Lessor shall protect, indemnify,
defend and hold Lessee and Lessee's partners, agents, directors, officers,
employees, representatives, contractors, shareholders, successors and assigns
harmless for any and all claims, judgments, damages, penalties, fines,
liabilities, losses, suits, administrative proceedings and costs arising at any
time during or after the term of this Lease related to, directly or indirectly,
any of the contamination and/or hazardous substances located on the Premises or
in any Common Areas or parking lots prior to execution of this Lease, including
the contamination and/or hazardous substances identified in the "Remedial Action
Summary and Site Closure Request, Former Sewage Lagoon Site, Auburn Washington",
dated February 25, 1998, by GeoEngineers, or any of the studies and/or reports
referenced in that document.
▇. ▇▇▇▇▇▇'▇ Obligations. Lessor represents, warrants and agrees that,
except as set forth in the Remedial Action Summary and Site Closure Request
dated February 25, 1998 submitted by GeoEngineers, Inc. to the Washington
Department of Ecology:
(a) Lessor has not, and to the best of Lessor's knowledge no other
party, has used, generated, manufactured, produced, stored, released, discharged
or disposed of on, under or about the Premises or transported to or from the
Premises any Hazardous Material, except for any Hazardous Material used in the
ordinary operation, repair and maintenance of the Premises and Building.
(b) Lessor will not use, generate, manufacture, produce, store,
release, discharge or dispose of on, under or about the
36
Premises or transport to or from the Premises any Hazardous Material, except for
any Hazardous Material used in the ordinary operation, repair and maintenance of
the Premises and Building.
(c) Lessor has not, and to the best of Lessor's knowledge no other
party has, removed any underground storage tanks from the Premises, and no
underground storage tanks are located on the Premises.
(d) Lessor will give prompt written notice to Lessee of:
(1) any proceeding or inquiry by any governmental authority
known to Lessor with respect to the presence of any Hazardous Material on the
Premises or relating to any loss or injury resulting from any Hazardous Material
not caused by Lessee;
(2) any action filed in State or Federal Court by any third
party against Lessor or the Premises relating to any loss or injury resulting
from any Hazardous Material; and
(3) Lessor's discovery as evidenced by receipt of written
notice from any governmental authority or agency or by receipt of any
environment report from a third party of any occurrence or condition on the
Premises that could cause the Premises or any part thereof to be subject to any
restrictions on occupancy or use of the Premises under any environmental law.
The provisions of Section 40D shall not apply to the obligations of Lessor
or in any way limit the obligations of Lessor set forth in this Section 27G.
37
H. Survival. Lessee's and Lessor's obligations and liabilities pursuant to
the provisions of this Section 27 shall survive the expiration or earlier
termination of this Lease.
28. Right to Audit: Lessee shall have the right to inspect and audit Lessor's
books and records relating to actual Operating Expenses and Tax Expenses. Such
inspection and audit shall be conducted by Lessee during normal business hours
at the principal place of business of Lessor's Agent or such other place of
business of Lessor in the Seattle, Washington, area at which such books and
records shall be kept in the ordinary course of business. If Lessee does not
give Lessor notice of its intent to conduct such an inspection and audit within
twelve (12) months of the date on which Lessor furnished Lessee with a statement
for a calendar year during the Term, then such statement shall conclusively be
deemed to be true and correct and Lessee shall have no further right to audit
Lessor's books and records relating to actual Operating Expenses and Tax
Expenses for such calendar year. If it shall be determined as a result of such
audit that the Statement overstated the actual Operating Expenses and Tax
Expenses, then Lessor shall immediately pay to Lessee an amount equal to
Lessee's share of the amount by which the actual Operating Expenses and Tax
Expenses were overstated. In addition, if the statement overstated the actual
Operating Expenses and Tax Expenses by four percent (4%) or more, then Lessor
shall pay to Lessee the reasonable and necessary fees and costs incurred by
Lessee in conducting such audit. Any information gained by Lessee from such
inspection and audit shall
38
be confidential and shall not be disclosed other than to carry out the purpose
hereof.
29. First Refusal - Lease: If Lessor intends to offer any unoccupied space in
the Building (the "Option Space") for lease to a prospective tenant (the
"Prospective Lease"), it will so advise Lessee in writing the ("Offer Notice").
The Offer Notice shall include all of the material terms and conditions
(including allowances and free rent) on which Lessor is willing to lease the
Option Space to the Prospective Lessee. Lessee shall have five (5) business days
within which to elect in writing to lease the Option Space on terms and
conditions set forth in the Offer Notice. If Lessee exercises its rights under
this Section 29, Lessee and Lessor shall enter into a new lease or an amendment
to this Lease reflecting the leasing of the Option Space on such terms.
30. Extension:
A. Lessee shall have the options to renew this Lease for three (3)
successive additional terms of five (5) years each (each an "Additional Term")
on the same terms and conditions as are provided herein except that (a) Rent for
each Additional Term shall be determined in accordance with the provisions of
Section 30.C and (b) there shall be no additional option to renew or extend this
Lease.
B. Each such option shall be exercised by Lessee by written notice (the
"Extension Notice") to Lessor at least six (6) months before the expiration of
the original or prior Additional Term. Any termination of this Lease by Lessor
in accordance with the
39
terms hereof shall automatically terminate such options without further act by
Lessor. It shall be a condition to the exercise of such second and third options
that the prior option shall have been validly exercised.
C. The Rent for each Additional Term shall be an amount (the "FMV Rent")
equal to the then fair market value of comparable space in the Kent Valley,
Washington area (including Kent and Auburn, Washington) for each such Additional
Term as determined below, but in no event less than the Rent then payable for
the then current Term of this Lease. Within thirty (30) days of its receipt of
the Extension Notice for an Additional Term, Lessor shall deliver to Lessee
notice ("Lessor's Rental Notice") of Lessor's estimate of the FMV Rent for the
Premises for the applicable Additional Term. If Lessor and Lessee cannot agree
on the FMV Rent within fourteen (14) days of Lessee's receipt of Lessor's Rental
Notice (the "Rental Notice Date"), the parties shall, within thirty (30) days
after the Rental Notice Date, select a single appraiser who will determine the
FMV Rent. If the parties cannot agree on a single appraiser, then each party
will select an appraiser within said thirty (30) days, and such two (2)
appraisers will select a third appraiser within seven (7) days of the date of
the selection of such two (2) appraisers. The appraisers so selected shall all
be members of the American Institute of Real Estate Appraisers, and in the case
of the third appraiser chosen by the other two (2) appraisers, shall not have
acted in any capacity for either Lessor or Lessee within five (5) years of such
appraiser's selection.
40
The three (3) appraisers shall render their decision as to the FMV Rent for the
Premises for the applicable Additional Term, and a decision by a majority of the
appraisers shall be binding upon Lessor and Lessee. The costs of the foregoing
appraisers will be borne equally by Lessor and Lessee.
31. Parking. Lessee shall have the use of the number of undesignated
parking spaces set forth in the Basic Lease Information. Lessor agrees to use
its reasonable best efforts to provide such parking adjacent to the Building.
32. Lessor's Title: If at the time of recording by Lessee of a notice or
memorandum of lease there shall be any mortgage or mortgages affecting the
Premises or the Park, or any portion thereof, Lessor shall obtain and deliver to
Lessee within thirty (30) days after the date of such recording, an Agreement
with respect to such mortgage or mortgages (in accordance with the provisions of
Section 16.A). Lessee shall have the right, within thirty (30) days after the
date of this Lease, at Lessee's cost and expense (except as hereinafter
provided), to obtain a commitment for leasehold title insurance from a title
insurance company of Lessee's selection, committing to insure Lessee's leasehold
interest under this Lease. Lessor's will cooperate with Lessee with regard to
such title insurance commitment, including using reasonable efforts (i) to cause
such commitment to be issued by any title insurance company that may have issued
a title insurance policy to Lessor, and (ii) to procure any "simultaneous issue"
rate
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(or similar discount) for the benefit of Lessee in conjunction with the issuance
of any other title insurance policy on the Park. 33. Quiet Enjoyment:
Lessor covenants and agrees that Lessee, upon performance of its
obligations under this Lease, shall peaceably and quietly hold and enjoy the
Premises and shall have the rights to the Common Areas as provided for herein,
throughout the Term of this Lease.
34. Lessee's Right to Cure:
If Lessor shall be in default hereunder, which default shall continue for
thirty (30) days after written notice thereof from Lessee, then, in addition to
any other right or remedy of Lessee under this Lease or otherwise, Lessee shall
have the right, but not the obligation, to cure such default, in which event
Lessor shall pay to Lessee, upon demand, the reasonable cost thereof plus
interest (as hereinafter provided) from the date of such cure by Lessee to the
date of reimbursement to Lessee; provided, however, if such default is not
susceptible of being cured within a period of thirty (30) days then, as long as
Lessor shall commence the curing thereof within such time and shall proceed
continuously with due diligence to cure the same, Lessee shall not have such
right. If Lessor shall not reimburse Lessee as provided herein, Lessee, after
the entering of a judgment in favor of Lessee in the Superior Court for King
County, Washington or by the United States District Court for the Western
District of Washington, shall have the right to deduct such amount to be
reimbursed from any installment or installments of Rent or other charges due or
becoming due under
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this Lease. If in Lessee's reasonable judgment an emergency shall exist, the
thirty (30) day period shall be shortened to such reduced period, following
notice, as shall be reasonable in the circumstances prior to Lessee curing such
default; and Lessee's notice, in such an event, may be given by fax transmission
or other substitute means of writing.
35. Payment of Costs:
A. Lessor acknowledges that Lessee currently is the lessee under a certain
lease dated as of August 23, 1989 (the "Current Lease") of space at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (the "Current Space") between the Executors of
the Estate of ▇.▇. ▇▇▇▇▇ ("▇▇▇▇▇") and Lessee (as successor to NutraSource) and
that Lessee has entered into negotiations to sublease (a "Sublease" or the
"Subleases") the Current Space to one or more persons (a "Sublessee" or the
"Sublessees"). Lessor agrees to reimburse Lessee for the payment of fifty
percent (50%) of the Subleasing Costs (defined below), up to a maximum payment
by Lessor of $100,000. Payments by Lessor shall be made within ten (10) days
following written request by Lessee (but in no event prior to August 31, 1998)
setting forth in reasonable detail the amounts of Subleasing Costs paid by
Lessee.
B. For purposes of this Lease, the term "Subleasing Costs" means all
reasonable costs, typical fees and expenses incurred or payable by Lessee in
connection with the Subleases, including (a) rent and other charges and payments
payable under the Current Lease in excess of those received by Lessee under the
Subleases, (b)
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costs of demising walls, tenant improvements and similar work to the Current
Space necessary for such subleasing or required under the Subleases and (c)
brokerage fees relating to such subleasing.
36. Tax Incentives:
Lessor expressly acknowledges and agrees that Lessee would not enter into
this Lease unless the Washington state sales and use tax exemption provided by
RCW 82.08.820 and RCW 82.12.820 (the "Warehouse Tax Exemption") is available for
Lessor's Work, Lessee's Work and other equipment and property to be installed by
Lessee. Lessor shall take no action which would result in the loss or
unavailability of the Warehouse Tax Exemption. Lessor and Lessee shall cooperate
in filing quarterly applications for remittance with the Washington Department
of Revenue, together with all other applications for refunds, reports, returns
and other documents and keeping and disclosing all records and information
necessary to take advantage of the Warehouse Tax Exemption and all other
available state and local tax incentive programs. Lessor shall assign to Lessee
the right to receive all tax refunds available to Lessor under the Warehouse Tax
Exemption. If such assignment is not permitted, Lessor shall pay to Lessee,
within ten (10) days of receipt, all tax refunds received by Lessor under the
Warehouse Tax Exemption.
37. Reduction in Premises:
If within forty-five (45) days of the date hereof, Lessee has not received
written assurances reasonably acceptable to it confirming that the Warehouse Tax
Exemption and the full benefit
44
thereunder relating to the Park (exclusive of buildings other than the Building)
will be available exclusively for the benefit of Lessee, Lessee may elect to
reduce the size of the Premises to approximately 160,000 square feet in
accordance with revisions to Lessor's Plans (defined in the Work Letter)
reasonably acceptable to Lessor and Lessee. In such event, the Rent and Lessee's
share of Operating Expenses, Tax Expense and utilities shall be reduced in
proportion to the reduction in the size of the Premises. Lessor and Lessee shall
cooperate in good faith in carrying out the provisions of this Section 37.C and
shall execute and deliver such amendments to this Lease and other documents and
instruments as may be reasonably requested in connection therewith.
38. Special Termination: Notwithstanding anything to the contrary
contained herein, in the event the Commencement Date has not occurred on or
before August 1, 1999 (the "Outside Commencement Date") through no fault of
Lessor or its Authorized Representatives, either Lessor or Lessee may terminate
this Lease upon written notice to the other within thirty (30) days of the
Outside Commencement Date, upon which all obligations of Lessor and Lessee shall
terminate and be of no further force or effect.
39. Financial Statements: In the event Lessee is not required to file
reports under the Securities and Exchange Act of 1934, as amended, within ten
(10) days after Lessor's request Lessee shall deliver to Lessor the then current
financial statements of Lessee (including interim periods following the end of
the last fiscal year for which annual statements are available) which statements
45
shall be prepared or compiled by a certified public accountant and shall present
fairly the financial condition of Lessee at such dates and the result of its
operations and changes in its financial positions for the periods ended on such
dates. Lessee shall be required to comply with this provision only in the event
Lessor is contemplating a sale or re-financing of the property and so notifies
Lessee in writing. Lessor agrees that it will use its reasonable best efforts to
keep such financial statements confidential and will not disclose the same
except to its lenders or prospective purchasers (other than entities which are
competitors of Lessee).
40. General Provisions:
A. Time. Time is of the essence in this Lease and with respect to
each and all of its provisions in which performance is a factor.
B. Successors and Assigns. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.
C. Recordation. Lessor agrees to execute, acknowledge and deliver a
short form or memorandum of this Lease for recording purposes promptly upon the
prior written request of Lessee.
▇. ▇▇▇▇▇▇'▇ Personal Liability. Except as provided in Section 27G,
the liability of Lessor (which, for purposes of this Lease, shall include Lessor
and the owner of the Building if other than Lessor) to Lessee for any default by
Lessor under the terms of
46
this Lease shall be limited to the actual interest of Lessor and its present or
future partners in the Park, including proceeds of insurance and rents and
profits (collectively, "Lessor's Interest"), and Lessee agrees to look solely to
Lessor's Interest for the recovery of any judgment against Lessor, it being
intended that Lessor shall not be personally liable for any judgment or
deficiency. The liability of Lessor under this Lease is limited to liability on
account of acts and circumstances occurring during its actual period of
ownership of title to the Building, and Lessor shall be released from liability
upon transfer of title to the Building and the assumption in writing by the
transferee of all obligations of Lessor hereunder.
E. Separability. Any provisions of this Lease which shall prove to
be invalid, void or illegal shall in no way affect, impair or invalidate any
other provisions hereof and such other provision shall remain in full force and
effect.
F. Choice of Law. This Lease shall be governed by the laws of the
State of Washington.
G. Attorney's Fees. In the event any legal action is brought to
enforce or interpret the provisions of this Lease, the prevailing party therein
shall be entitled to recover all costs and expenses including reasonable
attorneys' fees.
H. Entire Agreement. This Lease supersedes any prior agreements and
contains the entire agreement of the parties on matters covered. No other
agreement, statement or promise made by
47
any party that is not in writing and signed by all parties to this Lease shall
be binding.
I. Warranty of Authority. Each person executing this agreement on
behalf of a party represents and warrants that (1) such person is duly and
validly authorized to do so on behalf of the entity it purports to so bind, and
(2) if such party is a partnership, corporation or trustee, that such
partnership, corporation or trustee has full right and authority to enter into
this Lease and perform all of its obligations hereunder.
J. Notices. All notices and demands required or permitted to be sent
to the Lessor or Lessee shall be in writing and shall be sent by United States
mail, postage prepaid, certified or by personal delivery or by overnight
courier, addressed to Lessor at c/o ▇▇▇▇▇▇ ▇▇▇▇▇ Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: H. ▇▇▇▇▇▇ ▇▇▇▇▇ III, or to Lessee at
the Premises and c/o United Natural Foods, Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial Officer, and ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or to such other place(s) as such party may designate
in a notice to the other party given as provided herein. Notice shall be deemed
given upon the earlier of actual receipt or the third day following deposit in
the United States mail.
K. Interlineation. The use of underlining or strikeouts within the
Lease is for reference purposes only. No other meaning or emphasis is intended
by this use, nor should any be inferred.
48
L. Consent. Except as otherwise expressly provided in this Lease,
whenever it is necessary under the terms of this Lease for either party to
obtain the consent or approval of the other party, such consent or approval
shall not be unreasonably withheld or delayed, and all such determinations shall
be made on a reasonable basis and in a reasonable manner.
M. Force Majeure. In any case where either party hereto is required
to do any act, delays caused by or resulting from Acts of god, war, civil
commotion, fire, flood or other casualty, labor difficulties, shortages of
labor, materials or equipment, government regulations, unusually severe weather,
or other causes beyond such party's reasonable control shall not be counted in
determining the time during which work shall be completed, whether such time be
designated by a fixed date, a fixed time or a "reasonable time", and such time
shall be deemed to be extended by the period of such delay.
(the next page is the signature page)
49
IN WITNESS WHEREOF, this Lease is executed on the date and year first
written above.
LESSOR: LESSEE:
Valley Centre I, L.L.C.,
a Washington Limited
Liability Company UNITED NATURAL FOODS, INC.,
a Delaware corporation
By:________________________ By:___________________________
Its:_______________________ Its:__________________________
STATE OF WASHINGTON
COUNTY OF ____________
On this ____ day of August, 1998, before me personally appeared
_________________________, to me known to be the _________________ of Valley
Centre I, L.L.C. and executed the within and foregoing instrument, and
acknowledged said instrument to be the free and voluntary act and deed of said
limited liability company, for the uses and purposes therein mentioned, and on
oath stated that (s)he was authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunder set my hand and affixed my official
seal the day and year first above written.
_____________________________
(Signature)
_____________________________
(Typed or printed name)
NOTARY PUBLIC in and for the
State of Washington, residing at
______________________________
My appointment expires:
______________________________
50
STATE OF WASHINGTON
COUNTY OF ____________
On this ____ day of August, 1998, before me personally appeared
_________________________, to me known to be the _________________ of United
Natural Foods, Inc. and executed the within and foregoing instrument, and
acknowledged said instrument to be the free and voluntary act and deed of said
corporation, for the uses and purposes therein mentioned, and on oath stated
that (s)he was authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunder set my hand and affixed my official
seal the day and year first above written.
_____________________________
(Signature)
_____________________________
(Typed or printed name)
NOTARY PUBLIC in and for the
State of Washington, residing at
______________________________
My appointment expires:
______________________________
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