Exhibit 10.35

 

CACTUS COMMERCE, LLC,
 
as Landlord
 
AND
 
UNITED NATURAL FOODS, INC.,
 
as Tenant
 
_________________________
 
LEASE AGREEMENT
 
_________________________
 
Dated:
 
December 3, 2007
 
Premises:
 
22150 Goldencrest Drive
 
Moreno Valley, California
 

 

 
 
 
 
TABLE OF CONTENTS

Page
 

ARTICLE 1
REFERENCE DATA AND DEFINITIONS
1
ARTICLE 2
DEMISED PREMISES AND TERM
4
 
Section 2.1
Demised Premises
4
 
Section 2.2
Term
4
 
Section 2.3
Tenant’s Entry upon Demised Premises before Commencement Date
5
ARTICLE 3
RENT AND SECURITY DEPOSIT
5
 
Section 3.1
Fixed Rent
5
 
Section 3.2
Additional Rent
5
 
Section 3.3
Past Due Rent
5
 
Section 3.4
Intentionally Omitted
6
 
Section 3.5
Rent Payments
6
ARTICLE 4
TENANT’S SHARE OF OPERATING COSTS AND TAXES
6
 
Section 4.1
Definitions
6
 
Section 4.2
Tenant’s Payment of Operating Costs, Taxes and Insurance
8
 
Section 4.3
Refunds; Other Items
10
ARTICLE 5
COMPLETION AND OCCUPANCY OF DEMISED PREMISES
11
 
Section 5.1
Delivery of Demised Premises
11
 
Section 5.2
Construction of Tenant Improvements
11
ARTICLE 6
CONDUCT OF BUSINESS BY TENANT
11
 
Section 6.1
Use of Demised Premises
11
 
Section 6.2
Compliance with Laws and Requirements of Public Authorities
11
 
Section 6.3
Rules and Regulations
12
ARTICLE 7
INTENTIONALLY OMITTED
13
ARTICLE 8
REPAIRS, ALTERATIONS AND MECHANICS’ LIENS
13
 
Section 8.1
Repairs
13
 
Section 8.2
Alterations
14
 
Section 8.3
Mechanics’ Liens
15
ARTICLE 9
UTILITIES AND BUILDING SERVICES
15
 
Section 9.1
Utilities and Building Services
15
 
Section 9.2
Interruption of Services
15
ARTICLE 10
PROPERTY AND OTHER TAXES
16
 
Section 10.1
Tenant’s Property
16
ARTICLE 11
INSURANCE AND INDEMNITY
16

 
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TABLE OF CONTENTS
(continued)
Page
 

 
SECTION 11.1
INSURANCE
16
 
Section 11.2
Indemnity and Non Liability
17
 
Section 11.3
Waiver of Subrogation
18
ARTICLE 12
DAMAGE BY CASUALTY
19
 
Section 12.1
Notice
19
 
Section 12.2
Restoration of Improvements
19
 
Section 12.3
Damage During Last Year of Lease Term
20
ARTICLE 13
EMINENT DOMAIN
20
 
Section 13.1
Taking of Demised Premises
20
 
Section 13.2
Partial or Temporary Taking of Building
20
 
Section 13.3
Surrender
21
 
Section 13.4
Rent Adjustment for Partial Taking of Demised Premises
21
 
Section 13.5
Awards
21
 
Section 13.6
Sole Remedy
21
ARTICLE 14
RIGHTS RESERVED TO LANDLORD
22
 
Section 14.1
Access to Demised Premises
22
 
Section 14.2
Additional Rights
22
ARTICLE 15
ASSIGNMENT AND SUBLETTING
23
 
Section 15.1
Consent Required
23
ARTICLE 16
BANKRUPTCY
25
 
Section 16.1
Bankruptcy
25
 
Section 16.2
Measure of Damages
25
ARTICLE 17
DEFAULT
26
 
Section 17.1
Events of Default
26
 
Section 17.2
Remedies
26
 
Section 17.3
Waiver of Jury Trial
27
ARTICLE 18
SURRENDER
28
 
Section 18.1
Possession
28
 
Section 18.2
Merger
28
ARTICLE 19
HOLDING OVER
28
 
Section 19.1
Holding Over
28
ARTICLE 20
REMEDIES CUMULATIVE
28
 
Section 20.1
No Waiver
28
ARTICLE 21
ESTOPPEL CERTIFICATE, SUBORDINATION, ATTORNMENT
29
 
Section 21.1
Estoppel Certificate
29

 
-ii-
 
 
TABLE OF CONTENTS
(continued)
Page
 

 
Section 21.2
Subordination
29
 
Section 21.3
Attornment
29
 
Section 21.4
Mortgages
29
ARTICLE 22
QUIET ENJOYMENT
30
 
Section 22.1
Quiet Enjoyment
30
ARTICLE 23
NOTICES
30
 
Section 23.1
Notices
30
ARTICLE 24
MISCELLANEOUS PROVISIONS
30
 
Section 24.1
Time
30
 
Section 24.2
Applicable Law and Construction
30
 
Section 24.3
Parties Bound
31
 
Section 24.4
Representations by Landlord
31
 
Section 24.5
Brokers
31
 
Section 24.6
Severability
32
 
Section 24.7
Force Majeure
32
 
Section 24.8
Definition of Landlord
32
 
Section 24.9
No Option
32
 
Section 24.10
Exculpatory Clause
32
 
Section 24.11
No Recording
32
 
Section 24.12
Counterparts
32
 
Section 24.13
Financial Statements
33
 
Section 24.14
ERISA
33
ARTICLE 25
OPTIONS TO RENEW
33
 
Section 25.1
Grant of Option
33
ARTICLE 26
ABATEMENT OF RENT
34
 
Section 26.1
Abatement of Rent
34

 
-iii-
 
 

LEASE
 
This Lease is made between Landlord and Tenant named in Article l as of the date
set forth therein.  Landlord and Tenant, in consideration of the covenants and
agreements contained herein, agree as follows:
 
ARTICLE 1
 

 
REFERENCE DATA AND DEFINITIONS
 
The following are definitions of terms used in this Lease, and each reference in
this Lease to any of the following subjects shall be construed to incorporate
the data, terms, covenants and provisions stated for that subject in this
Article 1, subject to the terms of the balance of this Lease:
 
DATE OF EXECUTION:
December 3, 2007
   
LANDLORD:
CACTUS COMMERCE, LLC, a Delaware limited liability company
   
MANAGING AGENT:
BlackRock Realty Advisors, Inc.
   
LANDLORD’S AND
MANAGING AGENTS ADDRESS:
CACTUS COMMERCE, LLC,
a Delaware limited liability company
BlackRock
4400 MacArthur Boulevard, Suite 700
Newport Beach, CA  92660
Attn:  Larry Mohr
With a copy to:
BlackRock
300 Campus Drive, 3rd Floor
Florham Park, NJ  07932
Attn:  Jeremy A. Litt
   
WIRE INSTRUCTIONS AND/OR
ADDRESS FOR RENT PAYMENT:
Overton Moore Properties
19300 Hamilton Avenue, Suite 200
Gardena, CA 90248
Attn: Accounts Receivable
   
TENANT:
United Natural Foods, Inc.
   
STATE OF TENANT’S
FORMATION/INCORPORATION:
Delaware
   
TENANT’S ADDRESS:
260 Lake Road
Dayville, Connecticut 06241

 
1
 
 

DEMISED PREMISES:
The Building described below, as shown on Exhibit A, which is agreed for all
purposes of this Lease to contain 613,174 square feet of floor area, and any and
all other improvements now or hereafter constructed on the Land described below.
   
LAND:
The Land described on Exhibit B, it being agreed and understood that the portion
of Day Street that is currently included within the legal description set forth
in Exhibit B and shown within the property line on the Site Plan attached hereto
as Exhibit A shall eventually be dedicated to the City and will become public
property.
   
BUILDING:
The building located on the Land described above, having an address of 22150
Goldencrest Drive, Moreno Valley, California
   
PROPERTY:
The Land, the Building and all other improvements located on the Land,
including, without limitation, parking areas, driveways, walkways and landscaped
areas.
   
USE OF DEMISED PREMISES:
The storage and distribution of food products and uses incidental thereto,
including some temperature control space and any other legally permitted use,
subject to Landlord’s prior written consent thereof which consent shall not be
unreasonably withheld (collectively, “Permitted Use”).
   
SCHEDULED
COMMENCEMENT DATE:
July 1, 2008
   
EXPIRATION DATE:
July 31, 2018
   
TERM:
Ten (10) Years; one (1) Month.
   
RENEWAL TERM:
Two (2) renewal term(s) – each of Five (5) Years; Zero (0) Months

 
2
 
 

ANNUAL FIXED RENT:
Initial Term:
Months 1-12--       $2,182,899.44 per annum
Months 13-24--     $2,379,115.12 per annum
Months 25-36--     $2,438,593.00 per annum
Months 37-48--     $2,499,542.49 per annum
Months 49-60--     $2,561,963.61 per annum
Months 61-72--     $2,626,162.92 per annum
Months 73-84--     $2,691,956.49 per annum
Months 85-96--     $2,759,099.05 per annum
Months 97-108--   $2,828,142.44 per annum
Months 109-121-- $3,107,995.05 per annum
 
First Renewal Term:
Months 122-133-- $3,090,396.96 per annum
Months 134-145-- $3,183,108.84 per annum
Months 146-157-- $3,278,763.96 per annum
Months 158-169-- $3,376,626.60 per annum
Months 170-181-- $3,478,168.20 per annum
 
Second Renewal Term:
Months 182-193-- $3,679,044.00 per annum
Months 194-205-- $3,789,415.32 per annum
Months 206-217-- $3,903,465.72 per annum
Months 218-229-- $4,020,459.24 per annum
Months 230-241-- $4,141,131.96 per annum
   
MONTHLY FIXED RENT:
Initial Term:
Months 1-7--     $171,688.72 per month
Months 8-19--   $196,215.68 per month
Months 19-31-- $201,121.07 per month
Months 32-43-- $206,149.10 per month
Months 44-55-- $211,299.76 per month
Months 56-67-- $216,573.06 per month
Months 68-79-- $222,030.31 per month
Months 80-91-- $227,548.87 per month
Months 92-103-- $233,251.39 per month
Months 104-121-- $239,076.54 per month
 
First Renewal Term:
Months 122-133-- $257,533.08 per month
Months 134-145-- $265,259.07 per month
Months 146-157-- $273,230.33 per month
Months 158-169-- $281,385.55 per month
Months 170-181-- $289,847.35 per month
 
Second Renewal Term:
Months 182-193-- $306,587.00 per month
Months 194-205-- $315,784.61 per month
Months 206-217-- $325,288.81 per month
Months 218-229-- $335,038.27 per month
Months 230-241-- $345,094.33 per month

 
3
 
 

TENANT’S
PROPORTIONATE SHARE:
100%
   
DEFAULT RATE:
The Prime Rate plus six percent (6%) per annum.  “Prime Rate” shall mean the
highest of the prime rates as reported in the Money Rate Section of the Wall
Street Journal.  If the Wall Street Journal no longer publishes the Prime Rate
as an index, Landlord may substitute a comparable index including the Prime Rate
or reference rate of a reputable financial institution.
   
SECURITY DEPOSIT AMOUNT:
None
   
BROKERS:
Collins Commercial Corporation for Landlord Charles Dunn Company for Tenant

 
ARTICLE 2
 
DEMISED PREMISES AND TERM
 
Section 2.1                                Demised Premises.  Landlord hereby
leases unto Tenant, and Tenant hereby leases from Landlord, the Demised
Premises, upon and subject to the covenants, agreements, terms, conditions,
limitations, exceptions and reservations of this Lease.
 
Section 2.2                                Term.  The Term and Tenant’s
obligation to pay Rent shall commence on July 1, 2008 (the “Commencement Date”)
and shall end, unless sooner terminated or extended as herein provided or
pursuant to law, at the close of business on the Expiration Date set forth in
Article 1 (“Expiration Date”).
 
Section 2.3                                Tenant’s Entry upon Demised Premises
before Commencement Date.  Provided that Tenant complies at all times with the
provisions and requirements of this Lease (other than the obligation to pay
Fixed Rent and, except as provided for below, the obligation to pay Additional
Rent (as defined in Section 3.2 hereof)), including without limitation providing
Landlord with the proof of insurance required under Section 11.1(b) prior to any
such entry, Tenant may enter upon the Demised Premises prior to the Commencement
Date to perform its tenant improvement work therein pursuant to, and in
accordance with, the terms and conditions of Exhibit D and to install trade
fixtures and furnishings, to make the Demised Premises ready for the conduct of
Tenant’s business and to use the Premises for the Permitted Use.  Tenant shall
be obligated to pay for electricity, HVAC (as defined in Section 4.1(a)(2)
hereof) and other services furnished to the Demised Premises upon Tenant’s entry
pursuant to this Section 2.3 at Landlord’s stated rates therefor.  However,
Landlord, subject to Landlord’s representations and warranties set forth in
Section 24.4 below, does not assume responsibility for the availability of any
services during the period prior to the Commencement Date.
 

 
4
 
 

ARTICLE 3
 
RENT AND SECURITY DEPOSIT
 
Section 3.1                                Fixed Rent.  Tenant shall pay to
Landlord, without any prior demand therefor and without any deduction or set off
whatsoever except as otherwise expressly set forth in this Lease, the Fixed Rent
set forth in Article 1.  Fixed Rent shall be due and payable in monthly
installments each equal to the Monthly Fixed Rent set forth in Article l, in
advance on the first day of each and every calendar month during the
Term.  Tenant shall pay to Landlord upon execution of this Lease an amount equal
to the first Monthly Fixed Rent, which amount shall be held by Landlord without
interest and applied to the first Monthly Fixed Rent obligation of Tenant.
 
Section 3.2                                Additional Rent.  Any sums or charges
to be paid by Tenant pursuant to the provisions of this Lease, other than the
Fixed Rent, shall be designated as “Additional Rent” and shall be payable within
10 days after Landlord gives written notice that payment is due, unless
otherwise provided in this Lease.  Landlord shall have the same rights against
Tenant for default in payment of Additional Rent as for default in payment of
the Fixed Rent.  As used in this Lease, the term “Rent” shall mean the Fixed
Rent and Additional Rent.
 
Section 3.3                                Past Due Rent.
 
(a)           If Tenant shall fail to pay any installment of Rent before the
sixth day after such Rent is due and payable, Tenant shall pay a charge (the
“Late Charge”) which shall be 2% of the amount of such unpaid installment of
Rent.  The parties agree that the amount of such Late Charge represents a
reasonable estimate of the cost and expense that will be incurred by Landlord in
processing each delinquent payment of Rent by Tenant and that such Late Charge
shall be paid to Landlord as liquidated damages for each delinquent
payment.  Notwithstanding the foregoing Tenant shall not be obligated to pay the
Late Charge with respect to the first late payment by Tenant during any twelve
(12) month period so long as Tenant makes the applicable payment, in full,
within five (5) days after written notice from Landlord to Tenant that the
applicable payment is overdue.
 
(b)           Any amount due from Tenant to Landlord which is not paid when due
shall bear interest at the Default Rate from the date such payment is due, after
the expiration of any applicable grace period, until paid.  The rate so
determined shall continue in effect following any default by Tenant pursuant to
this Lease.  Payment of such interest shall not excuse or cure any default by
Tenant under this Lease.  The parties agree that the payment of interest and the
payment of Late Charges provided for in Section 3.3(a) above are distinct and
separate from one another in that the payment of interest is to compensate
Landlord for its inability to use the money improperly withheld by Tenant, while
the payment of Late Charges is to compensate Landlord for its additional
administrative expenses in handling and processing delinquent payments.
 

 
5
 
 

Section 3.4                                Intentionally Omitted.
 
Section 3.5                                Rent Payments.  All Rent payments
shall be made to Landlord at the address set forth in Article l, or at such
other place designated by Landlord in writing, in lawful currency of the United
States of America.  Rent payments applicable to partial months falling within
the Term or occurring as a result of the application of the Monthly Fixed Rent
payable upon Lease execution shall be prorated.
 
ARTICLE 4
 
TENANT’S SHARE OF OPERATING COSTS AND TAXES
 
Section 4.1                                Definitions.  As used herein:
 
(a)           “Operating Costs” shall, subject to (d) below, mean any and all
costs, charges, expenses and disbursements of every kind and nature which
Landlord shall pay or become obligated to pay in connection with the operation,
ownership, maintenance, management and repair of the Property, including,
without being limited to, the following:
 
(1)           All normal and customary wage, salary and labor costs of all
persons engaged in the operation, maintenance, management and repair of the
Property (including, without being limited to, all applicable taxes, insurance
and benefits); provided, however, that to the extent any such person is engaged
in the operation, maintenance, management and repair of other properties the
costs of any such person shall be prorated by Landlord on a reasonable basis.
 
(2)           Intentionally Omitted.
 
(3)           Costs of repairs, replacements, and general maintenance,
including, without being limited to, exterior building maintenance, paving,
curbs, drainage, lighting and sidewalks.
 
(4)           Professional fees and expenses (including, without being limited
to, legal, accounting, architectural and engineering fees); provided, however,
that to the extent any such fees relate to other properties such fees shall be
prorated by Landlord on a reasonable basis.
 
(5)           All costs of making any capital improvements or repairs to the
Property, amortized over the useful life of such improvements or repairs, with a
return on capital at the rate of ten percent (10%) per annum, it being agreed
and understood that Tenant shall be responsible only for that portion of
such  amortized costs that fall within the Term of this Lease, as such may be
extended.
 

 
6
 
 

(6)           A property management fee, it being agreed and understood that the
property management fee over the Term of this Lease shall be equal to two
percent (2%) of the gross rental income (i.e., the sum of (i) Fixed Rent
(ii) Operating Costs, (iii) Taxes and (iv) Insurance).
 
(7)           All fees or other charges incurred in conjunction with involuntary
membership in any energy conservation, air quality, environmental, traffic
management or similar organizations which benefit or affect the Property.
 
(b)           “Taxes” shall include any form of assessment; real estate,
general, special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes); improvement bond; and/or license
fee imposed upon or levied against any legal or equitable interest of Landlord
in the Property, Landlord's right to other income therefrom, and/or Landlord's
business of leasing, by any authority having the direct or indirect power to tax
and where the funds are generated with reference to the Property address and
where the proceeds so generated are to be applied by the city, county or other
local taxing authority of a jurisdiction within which the Property is
located.  Taxes shall also include any tax, fee, levy, assessment or charge, or
any increase therein: (i) imposed by reason of events occurring during the Term
of this Lease, including but not limited to, a change in the ownership of the
Property, (ii) a change in the improvements thereon, and/or (iii) levied or
assessed on machinery or equipment provided by Landlord to Tenant pursuant to
this Lease.
 
(c)           “Insurance” shall mean costs of all insurance, including, without
being limited to, casualty, worker’s compensation, rental and liability
insurance; provided, however, that to the extent any such costs relate to other
properties, such costs shall be prorated by Landlord on a reasonable basis.
 
(d)           “Exclusions from Operating Costs.”  Notwithstanding anything to
the contrary in the definition of Operating Costs set forth above, Operating
Costs shall not include the following, except to the extent specifically
permitted by a specific exception to the following:
 
(i)           Any ground lease rental;
 
(ii)           Costs incurred by Landlord for the repair of damage to the
Building, to the extent that Landlord is reimbursed by insurance proceeds;
 
(iii)           Costs incurred by Landlord due to the violation by Landlord of
the terms and conditions of this Lease;
 
(iv)           Overhead and profit increment paid to Landlord or to subsidiaries
or affiliates of Landlord for goods and/or services in or to the Building to the
extent the same exceeds the costs of such goods and/or services rendered by
unaffiliated third parties on a competitive basis;
 

 
7
 
 

(v)           Interest, principal, points and fees on debts or amortization on
any mortgage or mortgages or any other debt instrument encumbering the Building
or the Property (except as permitted in Section 4.1(a)(5) above);
 
(vi)           Landlord’s general corporate overhead and general and
administrative expenses;
 
(vii)           Costs arising from the negligence or fault of Landlord or its
agents, or any vendors, contractors, or providers of materials or services
selected, hired or engaged by Landlord or its agents including, without
limitation, the selection of Building materials;
 
(viii)                      Costs arising from latent defects in the base, shell
or core of the Building or improvements installed by Landlord or repair thereof;
 
(ix)           Costs associated with the operation of the business of the
partnership or entity which constitutes Landlord as the same are distinguished
from the costs of operation of the Property, including limited liability company
accounting and legal matters, costs of defending any lawsuits with any mortgagee
(except as the actions of Tenant may be in issue), costs of selling,
syndicating, financing, mortgaging or hypothecating any of Landlord’s interest
in the Property, costs of any disputes between Landlord and its employees (if
any) engaged in Building operation or disputes of Landlord with Building
management; and
 
(x)           “In house” legal and/or accounting fees.
 
Section 4.2                                Tenant’s Payment of Operating Costs,
Taxes and Insurance.  
 
(a)           For each calendar year during the Term, Tenant shall pay to
Landlord, as Additional Rent, at the times and in the manner provided below,
Tenant’s Proportionate Share of the sum of (1) Operating Costs for such calendar
year, (2) Taxes for such calendar year, and (3) Insurance for such calendar year
(collectively, “Tenant’s Expense Charge”).
 
(b)           At any time during the Term (but not more than two times in any
calendar year), Landlord shall have the right to compute and deliver to Tenant
an estimate (an “Estimate”) of Tenant’s Expense Charge for the applicable
calendar year together with any reasonably required supporting documentation and
Tenant shall pay to Landlord commencing with the next payment of Monthly Fixed
Rent which is due at least thirty (30) days after Tenant’s receipt of the
Estimate and continuously thereafter with payments of Monthly Fixed Rent until
delivery of the next Estimate, monthly installments equal to one twelfth of the
amount set forth in such Estimate, together with, in the case of the first such
monthly payment, an amount equal to the difference between (i) the amount of
such monthly installment times the number of months in such year preceding the
first monthly payment, less (ii) the amount of any monthly installments in
respect of the prior Estimate theretofore paid to Landlord.  The foregoing
 

 
8
 
 

notwithstanding, if the first monthly payment pursuant to the foregoing sentence
is more than twice the previously established amount under the Estimate, the
first monthly payment will be capped at twice such amount and the unpaid balance
shall be spread ratably over the remaining monthly payments in such year.  In
the event Landlord is required under any mortgage of the Land or the Building to
escrow Operating Costs and/or Taxes, Landlord may (without obligation) use the
amount required to be escrowed as a basis for determining the Estimate.
 
(c)           Landlord shall endeavor to deliver to Tenant within 120 days after
the end of each calendar year during the Term a written statement (the
“Statement”) setting out in reasonable detail Tenant’s Expense Charge for such
year certified to be correct by Landlord.  If the aggregate of the monthly
installments actually paid by Tenant to Landlord on account of the estimated
Tenant’s Expense Charge during any calendar year (the “Actual Payments”) differs
from the amount of Tenant’s Expense Charge payable according to the Statement
(the “Obligated Payments”), Tenant shall (1) if the Obligated Payments shall
exceed the Actual Payments, pay to Landlord, within 30 days after the date of
delivery of the Statement, an amount equal to such excess, or (2) if the Actual
Payments shall exceed the Obligated Payments, be granted a credit against the
next installments of Rent in an amount equal to such overpayment.  Each time
Landlord provides Tenant with an actual and/or estimated Statement of Operating
Costs, such Statement shall be itemized on a line item by line item basis,
showing the applicable expense for the applicable year.
 
(d)           Tenant shall have the right to examine Landlord’s books and
records with respect to the items in a Statement during Normal Business Hours
(except, however, Saturdays) at any time within one hundred eighty (180) days
following the furnishing of the Statement to Tenant.  In conducting such
examination, Tenant must utilize either its own full time salaried employees or
an independent certified public accountant (“CPA”), which CPA shall be paid by
Tenant on an hourly fee for services rendered basis, and not on a contingency
fee basis.  Unless Tenant takes written exception to any item on the subject
Statement within one hundred eighty (180) days after the furnishing of the
Statement, such Statement shall be considered as final and accepted by
Tenant.  If Tenant timely provides such written exception to Landlord, but
Landlord and Tenant disagree on the accuracy of Tenant’s Expense Charge as set
forth in the Statement, Tenant shall nevertheless make payment in accordance
with the Statement, but the disagreement shall immediately be referred by
Landlord for prompt decision to a mutually acceptable public accountant or other
professional consultant who shall be deemed to be acting as an expert and not as
an arbitrator, and a determination signed by the selected expert shall be final
and binding on both Landlord and Tenant.  If Landlord and Tenant shall fail to
agree on such an expert within 15 days after Tenant’s notice of disagreement (as
hereinafter described), such expert shall be Ernst & Young, so long as such firm
is available to do the work and is not then doing any work for either Landlord
or Tenant.  If Ernst & Young is not available or is then doing work for either
Landlord or Tenant, Landlord and Tenant shall agree upon another of the “Big 4”
accounting firms or a regional accounting firm to serve as expert.  Any
adjustment required to be made by reason of any such decision shall be made
within 15 days thereof and payment shall be made or credit allowed in the manner
set forth in Section 4.2(c) hereof together with interest on the amount of any
such
 

 
9
 
 

adjustment at a rate equal to the Prime Rate plus two percent (2%) per annum for
the period from the time the original payment was made to the time the adjusted
payment or credit is made or applied.  If the adjustment is greater than 3% and
the amount of the adjustment is to be paid to Tenant, Landlord will pay the cost
of the expert; otherwise Tenant will pay the cost of the expert.
 
(e)           Tenant shall pay prior to delinquency all taxes assessed against
and levied upon Tenant owned alterations and utility installations, trade
fixtures, furnishings, equipment and all personal property of Tenant contained
in the Demised Premises.  When possible, Tenant shall cause its Tenant owned
alterations and utility installations, trade fixtures, furnishings, equipment
and all other personal property to be assessed and billed separately from the
real property of Landlord.   If any of Tenant's said property shall be assessed
with Landlord's real property, Tenant shall, within twenty (20) days of demand
by Landlord, pay Landlord the taxes attributable to Tenant's property in
accordance with the provisions of Section 10.1.  Landlord agrees that it will
provide Tenant with a copy of any notice which Landlord receives with respect to
any taxes payable by Tenant pursuant to this Section 4.2(e).
 
Section 4.3                                Refunds; Other Items.  
 
(a)           In the event a refund of any Operating Costs or Taxes is obtained
and actually paid to Landlord, Landlord shall credit an appropriate portion
thereof (after deducting any unrecouped expenses in connection with obtaining
such refund) to the next installment(s) of Rent.
 
(b)           The rendering of a Statement for any year shall not preclude
Landlord from issuing a correction thereto at a later time, including a
correction for items not included in the original Statement, it being agreed and
understood that any such correction shall be subject to Tenant’s rights set
forth in Section 4.2(d) above and further that this Section 4.3(b) shall not be
applicable to any items which were resolved pursuant to the provisions of
Section 4.2(d).
 
(c)           Attached hereto as Exhibit F is an estimate of the Operating
Costs, Taxes and Insurance for calendar year 2008.  Tenant acknowledges that the
attached Exhibit F is an estimate only and does not constitute a representation
or warranty of any kind by Landlord that the amounts shown on Exhibit F will be
the actual amount of Operating Costs, Taxes and Insurance for calendar year
2008.
 
ARTICLE 5
 
COMPLETION AND OCCUPANCY OF DEMISED PREMISES
 
Section 5.1                                Delivery of Demised
Premises.  Landlord shall, upon the execution of this Lease, tender possession
of the Demised Premises to Tenant.
 
Section 5.2                                Construction of Tenant
Improvements.  Upon Landlord’s tender of possession of the Demised Premises to
Tenant, Tenant shall, subject to Landlord’s representations and warranties set
forth in Section 24.4 below, accept the Demised Premises in
 

 
10
 
 

their then “as-is” condition and shall promptly commence the design and
installation of the Tenant Improvements and shall diligently prosecute same to
completion, all in accordance with the terms and conditions of the Work Letter.
 
ARTICLE 6
 
CONDUCT OF BUSINESS BY TENANT
 
Section 6.1                                Use of Demised Premises.  Tenant
shall use the Demised Premises during the Term solely for Permitted Use
specified in Article 1 and for no other purpose.
 
Section 6.2                                Compliance with Laws and Requirements
of Public Authorities.  
 
(a)           At all times during the Term, Tenant shall give prompt notice to
Landlord of any notice Tenant receives of any violation of any law or
requirement of a governmental authority affecting the Demised Premises or the
Property or any regulation of the board of fire underwriters having jurisdiction
over the Property (“Applicable Law”), and, at its sole cost and expense, shall
comply with all Applicable Laws, including any violation, order or duty imposed
upon Landlord or Tenant, arising from or relating to (1) Tenant’s use of the
Demised Premises; (2) the manner or conduct of Tenant’s business or operation of
its installations, equipment or other property therein; (3) any cause or
condition created by or at the insistence of Tenant; or (4) breach of any of
Tenant’s obligations hereunder.
 
(b)           Tenant shall not do, permit or suffer any act or thing to be done
which is injurious to the Property or the Demised Premises, which is immoral, a
nuisance, contrary to Applicable Law or in violation of the certificate of
occupancy issued for the Building or which would result in the cancellation of,
or any increase in premiums for, insurance maintained by Landlord with respect
to the Property or the Demised Premises.
 
(c)           Tenant shall not use, maintain or allow the use or maintenance of
the Demised Premises or any part thereof to treat, store, dispose of, transfer,
release, convey or recover Hazardous Materials (as hereinafter defined) nor
shall Tenant otherwise, in any manner, possess or allow the possession of any
Hazardous Materials on or about the Demised Premises; provided, however, any
Hazardous Material lawfully permitted and generally recognized as necessary and
appropriate for the Permitted Use specified in Article 1 may be stored and used
on the Demised Premises so long as (i) such storage and use is in the ordinary
course of Tenant’s business permitted under this Lease or any other Permitted
Use; (ii) such storage and use is performed in compliance with all applicable
laws and in compliance with the standards prevailing in the industry for the
storage and use of such materials; and (iii) Tenant delivers prior written
notice to Landlord of the identity of and information regarding such materials
as Landlord may reasonably require.  “Hazardous Materials” shall mean any solid,
liquid or gaseous waste, substance or emission or any combination thereof which
may (i) cause or significantly contribute to an increase in mortality or serious
illness, or (ii) pose the risk of a substantial present or potential hazard to
human health, to the environment or otherwise to animal or plant life, and shall
include without limitation hazardous substances and materials described in the
 

 
11
 
 

Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended; the Resource Conservation and Recovery Act, as amended; and any other
applicable federal, state or local laws.  Tenant shall immediately notify
Landlord of the presence or suspected presence of any Hazardous Materials on or
about the Demised Premises and shall deliver to Landlord any notice received by
Tenant relating thereto.  Landlord acknowledges that Tenant intends to provide
on-site refueling and minor maintenance (e.g., oil changes) for its
vehicles, and Tenant acknowledges that Tenant must obtain any and all government
approvals for any such activities and that all such activities must be performed
in compliance with all Applicable Laws and with any reasonable rules and
regulations imposed by Landlord.
 
(d)           Tenant agrees that it shall not keep, use, sell or offer for sale
in or upon the Demised Premises any article which may be prohibited by any then
available standard forms of fire insurance policies with extended
coverage.  Tenant agrees to pay to Landlord any increase in premiums for
insurance maintained by Landlord with respect to the Demised Premises or the
Property resulting from the use of the Demised Premises by Tenant, whether, or
not Landlord has consented to such use.
 
(e)           Tenant shall pay all costs, expenses, fines, penalties or damages
which may be imposed upon Landlord by reason of Tenant’s failure to comply with
the provisions of this Section 6.2.
 
Section 6.3                                Rules and Regulations.  Tenant and
its agents, employees, contractors and invitees shall faithfully observe and
comply with the rules and regulations attached hereto as Exhibit C and
incorporated herein by this reference, and such reasonable changes thereto,
whether by modification, elimination or addition, as Landlord may, at any time
and from time to time, make in respect of the Demised Premises and/or the
Property so long as any such change does not materially and unreasonably
interfere with Tenant’s use of the Property for the Permitted Use (the “Rules
and Regulations”).  Such changes shall be effective upon notice thereof from
Landlord to Tenant.  In the case of any conflict or inconsistency between the
provisions of this Lease and any of the Rules and Regulations, as originally
promulgated or as changed, the provisions of this Lease shall control.  Landlord
shall not be liable to Tenant for the nonperformance or violation thereof by any
party.
 
ARTICLE 7
 
INTENTIONALLY OMITTED
 
 
ARTICLE 8
 
REPAIRS, ALTERATIONS AND MECHANICS’ LIENS
 
Section 8.1                                Repairs.  
 
(a)           Landlord shall make all necessary repairs to keep the roof,
exterior walls, foundation and structural frame of the Building and the parking
area in good order and repair, excluding, however, all repairs which Tenant is
obligated to make or pay for
 

 
12
 
 

pursuant to this Section 8.1. Tenant shall give Landlord prompt notice of any
defective condition required to be corrected by Landlord pursuant to this
Section 8.1(a) and following such notice, Landlord shall use commercially
reasonable efforts to initiate all repairs promptly and to remedy the condition
with due diligence, subject to unavoidable delay, but at the expense of Tenant
if repairs are necessitated by any act attributable to Tenant, Tenant’s
servants, agents, employees, invitees or licensees; provided, however, that no
liability of Landlord to Tenant shall accrue hereunder unless and until Tenant
has given notice to Landlord of the specific repair to be made.  If Tenant
provides written notice (or oral notice in the event of an emergency such as
damage or destruction to the roof of the Building), to Landlord of an event or
circumstance which requires the action of Landlord with respect to repair and/or
maintenance pursuant to this Section 8.1(a), Landlord shall provide for such
repair or maintenance within a reasonable period of time, given the
circumstances after the receipt of such notice but in any event not later than
thirty (30) days after receipt of such notice.  Tenant waives any rights and
benefits of Section 1 of Section 1982 and Sections 1941 and 1942 of the
California Civil Code or under any similar law, statute or ordinance now or
hereafter in effect.
 
(b)           Tenant, at its sole cost and expense, shall take good care of the
Demised Premises, including all landscaping, all Building equipment and HVAC and
other systems (including without limitation any fire/life safety, plumbing,
heating system or electrical lines located in, servicing or passing through the
Demised Premises) located therein and serving the Demised Premises and plate
glass, floors, windows and doors, and Tenant’s property and fixtures.  Tenant,
at its expense, shall obtain a preventative maintenance contract on the HVAC
system, the form and contractor under which shall be subject to Landlord’s
reasonable approval.  Tenant shall provide Landlord with an executed copy of the
preventative maintenance contract no later than ninety (90) days after the
Commencement Date.  The preventative maintenance contract shall provide for the
inspection and maintenance of the HVAC system on not less than a semi-annual
basis.  In addition Tenant shall be responsible for the maintenance and testing,
as required by applicable codes, of all fire/life safety equipment (including
the pump, fire sprinklers and fire hydrants).  Tenant shall provide Landlord
with monthly reports of all such testing of the fire/life safety systems.  All
repairs made by or on behalf of Tenant shall be made and performed in accordance
with the provisions of Section 8.2 and shall be at least equal in quality and
design to the original construction of the Demised Premises and the
Building.  If Tenant fails to proceed with due diligence to make repairs
required to be made by Tenant, and such failure shall continue for 10 days after
notice from Landlord, the same may be made by Landlord at the expense of Tenant
and the amount so incurred by Landlord shall be paid to Landlord by Tenant
immediately upon submission of a bill or statement therefor by Landlord.
 
Section 8.2                                Alterations.  Tenant is granted the
right, subject to Landlord’s prior written consent which shall not be
unreasonably withheld, to make alterations, additions or improvements
(collectively, “Alterations”) in or to the Demised Premises, as long as (a)
Tenant pays for the entire cost of such Alterations, (b) Tenant agrees to remove
said Alterations upon the expiration or termination of the Lease if requested by
Landlord at the time the Alterations are approved by Landlord, and (c) such
Alterations will not (i) adversely affect the structure of the Building, (ii)
adversely affect the systems of the Building, (iii) affect the exterior
appearance of
 

 
13
 
 

the Building, and (iv) be in violation of any applicable law, code or ordinance
((i), (ii), (iii) and (iv) individually and collectively hereinafter referred to
as a “Design Problem”).  Any time Tenant proposes to make any Alterations,
Tenant shall provide Landlord with at least ten (10) business days’ prior
written notice of the proposed Alterations, together with the plans and
specifications therefor, and Landlord shall grant its approval or disapproval
(which may be given only if a Design Problem exists) within such ten (10)
business day period.  Notwithstanding the foregoing, Tenant may make Alterations
which do not involve a Design Problem and do not cost in excess of $50,000.00
without any obligation to obtain Landlord’s approval but subject to the other
terms and conditions of this Section 8.2 Tenant shall, before making any
Alterations, at its expense, obtain all permits, approvals and certificates
required by any governmental or quasi governmental bodies and (upon completion)
certificates of final approval thereof and shall deliver promptly duplicates of
all such permits, approvals and certificates to Landlord, and Tenant agrees to
carry, and to cause Tenant’s contractors and sub contractors to carry such
workmen’s compensation, general liability, personal and property damage
insurance as Landlord may reasonably require.  Upon completion of any
Alterations, Tenant shall deliver to Landlord one set of “as built” plans and
specifications therefor.  All fixtures and all paneling, partitions, railing and
like Alterations, installed in the Demised Premises, either by Tenant or by
Landlord on Tenant’s behalf, shall become the property of Landlord and shall
remain upon and be surrendered with the Demised Premises upon the expiration or
earlier termination of the Lease, unless Landlord, by notice to Tenant given at
the time Tenant requests Landlord’s consent to the applicable Alteration, elects
to have them removed by Tenant, in which event, the same shall be removed from
the Demised Premises by Tenant.  Landlord hereby acknowledges that upon the
expiration or earlier termination of this Lease Tenant shall not be required to
remove any of the initial tenant improvements or any of the equipment or trade
fixtures which are to be installed by Tenant as part of Tenant’s initial tenant
improvement work in the Building and which are specifically listed on Exhibit E
attached hereto.  Other than as listed on Exhibit E Landlord may, at Landlord’s
option, require Tenant to remove any of Tenant’s initial tenant improvements or
any of its equipment or trade fixtures initially installed in the
Building.  Nothing in this section shall be construed to give Landlord title to
or to prevent Tenant’s removal of trade fixtures, moveable furniture and
equipment, but upon removal of any such equipment and fixtures from the Demised
Premises or upon removal of other installations as may be required by Landlord
pursuant to this Section 8.2, Tenant shall immediately and at its expense,
repair and restore the Demised Premises to the condition existing prior to
installation (subject to ordinary wear and tear) and repair any damage to the
Demised Premises or the Property due to such removal.  All property that was
permitted or required to be removed by Tenant at the end of the Term but which
remains in the Demised Premises for 10 days after Tenant vacates the Demised
Premises shall be deemed abandoned and may, at the election of Landlord, either
be retained as Landlord’s property or may be removed from the Demised Premises
by Landlord at Tenant’s expense.  Except as otherwise expressly set forth in
this Section 8.2 with respect to Tenant’s restoration obligations with respect
thereto, the design and construction of the initial tenant improvements in the
Demised Premises by Tenant shall be governed by the provisions of the Work
Letter Agreement attached hereto as Exhibit D.  
 
Section 8.3                                Mechanics’ Liens.  Tenant shall
(a)  pay before delinquency all costs and expenses of work done or caused to be
done by Tenant in the Demised Premises; (b) keep the title to the Property and
every part thereof free and clear of any lien or encumbrance in respect of such
work; and (c) indemnify and hold harmless Landlord against any claim, loss,
cost, demand
 

 
14
 
 

(including reasonable legal fees), whether in respect of liens or otherwise,
arising out of the supply of material, services or labor for such work.  Tenant
shall immediately notify Landlord of any lien, claim of lien or other action of
which Tenant has or reasonably should have knowledge and which affects the title
to the Property or any part thereof, and shall cause the same to be removed
within 15 days (or such additional time as Landlord may consent to in
writing).  If Tenant shall fail to remove same within said time period, Landlord
may take such action as Landlord deems necessary to remove the same and the
entire cost thereof shall be immediately due and payable by Tenant to Landlord
and such amount shall bear interest at the Default Rate.  Nothing contained in
this Section 8.3 or elsewhere in this Lease shall be deemed or construed in any
way as giving Tenant any right, power or authority to contract for or permit the
rendering of any services or the furnishing of any materials that would give
rise to the filing of a materialmen’s, mechanics’ or other lien against the
Demised Premises or any other portion of the Property.
 
ARTICLE 9
 
UTILITIES AND BUILDING SERVICES
 
Section 9.1                                Utilities and Building
Services.  Tenant shall obtain in its own name and shall pay directly to the
appropriate supplier the cost of all utilities and services serving the Demised
Premises and the Property, including but not limited to: natural gas, heat,
light, electrical power, telephone, janitorial service, refusal disposal and
other utilities and services.
 
Section 9.2                                Interruption of Services.  Landlord
does not covenant that utility or other Building services will be free from
interruptions caused by repairs, improvements, changes of service, alterations,
strikes, lockouts, labor controversies, accidents, inability to obtain fuel,
water or supplies or any other cause beyond the reasonable control of
Landlord.  No such interruption of service shall be deemed a constructive
eviction or disturbance of Tenant’s use and possession of the Demised Premises
or any part thereof, or otherwise render Landlord liable to Tenant for damages,
by abatement of rent or otherwise, or otherwise relieve Tenant from performance
of Tenant’s obligations under this Lease except as otherwise expressly set forth
in Article 26 below.  Tenant hereby waives and releases all claims against
Landlord for damages for interruption or stoppage of such services except as
otherwise expressly set forth in Article 26 below.
 
ARTICLE 10
 
PROPERTY AND OTHER TAXES
 
Section 10.1                                Tenant’s Property.  In addition to
the Rent and other charges to be paid by Tenant hereunder, Tenant shall
reimburse Landlord, upon demand, for any and all taxes payable by Landlord
whether or not now customary or within the contemplation of the parties hereto,
levied, assessed or imposed:  (1) upon or with respect to the possession,
leasing, operation, management, maintenance, alteration, repair, use or
occupancy by Tenant of the Demised Premises or any portion thereof; (2) upon the
measured value of Tenant’s personal property owned, installed, used or located
in the Demised Premises, it being the intention of Landlord and Tenant that, to
the extent possible, such personal property taxes shall be billed to and paid
directly by Tenant; (3) upon the leasehold interest or any right of occupancy of
Tenant
 

 
15
 
 

in the Demised Premises; or (4) upon this transaction.  Any reimbursement
referred to above shall be collectible by Landlord as Additional Rent hereunder.
 
ARTICLE 11
 
INSURANCE AND INDEMNITY
 
Section 11.1                                Insurance.  
 
(a)           Landlord’s Insurance.  At all times Landlord shall keep in full
force and effect a policy of property damage insurance with respect to the
Building (i.e., the shell and core of the Building).
 
(b)           Tenant’s Insurance.  At all times Tenant shall keep in full force
and effect a policy of comprehensive public liability with respect to the
Demised Premises and property damage insurance with respect to all of Tenant’s
tenant improvements, alterations, equipment, trade fixtures and personal
property, in such limits as may be reasonably required from time to time by
Landlord.  The limits of public liability insurance on the Commencement Date
shall be not less than $3,000,000 for death or injury to any number of persons
or for property damage, for each occurrence.  Such limits may be provided
through a combination of primary and excess policies.  In no event shall the
limits of any coverage maintained by Tenant pursuant to this Section 11.1 be
considered as limiting Tenant’s liability under this Lease.  These policies
shall name Landlord, any person, firms or corporations (including, without being
limited to, any mortgagee or lessor of Landlord) reasonably designated by
Landlord and Tenant as insureds, shall include blanket contractual liability
coverage which insures contractual liability under the indemnifications set
forth in Section 11.2 hereof and shall contain a clause that the insurer will
not cancel or change the insurance without first giving Landlord 30 days prior
written notice.  The insurance shall be written by an insurance company,
licensed and qualified to do business in the State in which the Property is
located, which is reasonably acceptable to Landlord.  An original copy of the
policy or a certificate of insurance shall be delivered to Landlord upon the
execution and delivery of this Lease and replacement certificates shall be
delivered not less than ten (10) days prior to the expiration of any then
existing coverage.  The insurance which Tenant is required to maintain in force
and effect under this Section 11.1 shall be primary insurance as respects
Landlord (and any other additional insureds designated by Landlord) and not
excess over or contributory with any other available insurance.  Certificates of
insurance evidencing the liability insurance coverage required under this
Section 11.1 shall contain an endorsement to such effect.  In addition, at all
times during the Term hereof, Tenant shall procure and maintain Worker’s
Compensation Insurance in accordance with the laws of the State in which the
Property is located.
 
Section 11.2                                Indemnity and Non Liability.  
 
(a)           Neither Landlord nor Landlord’s agents (including, without being
limited, to the Managing Agent), employees, contractors, officers, trustees,
directors, shareholders, partners or principals (disclosed or undisclosed) shall
be liable to Tenant or
 

 
16
 
 

Tenant’s agents, employees, contractors, invitees or licensees or any other
occupant of the Demised Premises, and Tenant shall save Landlord, its successors
and assigns and their respective agents, employees, contractors, officers,
trustees, directors, shareholders, partners and principals (disclosed or
undisclosed) harmless from any loss, cost, liability, claim, damage, expense
(including reasonable attorneys’ fees and disbursements), penalty or fine
incurred in connection with or arising from any injury to Tenant or to any other
person or for any damage to, or loss (by theft or otherwise) of, any of Tenant’s
property or of the property of any other person, irrespective of the cause of
such injury, damage or loss unless due to the gross negligence or willful
misconduct of Landlord or Landlord’s agents or employees.  However, even if such
loss or damage is caused by the gross negligence or willful misconduct of
Landlord, its agents or employees, Tenant waives, to the full extent permitted
by law, any claim for consequential damages in connection therewith.  Likewise,
even if any loss or damage is caused by the gross negligence or willful
misconduct of Tenant, its agents or employees, Landlord waives, to the full
extent permitted by law, any claim for consequential damages in connection
therewith.
 
(b)           Neither any (1) performance by Landlord, Tenant or others of any
repairs, improvements, alterations, additions, installations, substitutions,
betterments or decorations in or to the Property or the Building, the Building
equipment and systems, or the Demised Premises, (2) failure of Landlord or
others to make any such repairs or improvements, (3) damage to the Property or
the Building, the Building equipment and systems, the Demised Premises or
Tenant’s property, (4) injury to any persons, caused by other persons in the
Building, or by operations in the construction of any private, public, or quasi
public work, or by any other cause, (5) latent defect in the Building, the
Building equipment and systems, or the Demised Premises, nor (6) inconvenience
or annoyance to Tenant or injury to or interruption of Tenant’s business by
reason of any of the events or occurrences referred to in the foregoing
subdivisions (1) through (5) shall impose any liability on Landlord to Tenant,
other than, subject to Section 24.10 hereof, such liability as may be imposed
upon Landlord by law for Landlord’s gross negligence or the gross negligence of
Landlord’s agents or employees in the operation or maintenance of the Building,
the Building equipment and systems or the Common Areas or for the breach by
Landlord of any express covenant of this Lease on Landlord’s part to be
performed or as expressly set forth in Section 26.1.
 
(c)           Tenant hereby indemnifies and holds harmless Landlord and
Landlord’s agents, employees, contractors, officers, trustees, directors,
shareholders, partners or principals (disclosed or undisclosed) from any loss,
cost, liability, claim, damage, expense (including reasonable attorneys’ fees
and disbursements), penalty or fine incurred in connection with or arising from
(1) any default by Tenant in the performance of any of the terms of this Lease
on Tenant’s part to be performed, or (2) the use or occupancy or manner of use
or occupancy of the Demised Premises by Tenant or any person claiming under
Tenant, or (3) any acts, omissions or negligence of Tenant or any such person,
or the contractors, agents, employees, invitees, licensees, assignees or
sublessees of Tenant or any such person, or (4) any accident, injury or damage
whatsoever caused to any person or to the property of any person and occurring
in or about the Demised Premises except to the extent of Landlord’s gross
negligence or
 

 
17
 
 

willful misconduct.  Tenant’s obligations under this Section 11.2 shall survive
the expiration or earlier termination of this Lease.
 
(d)           Tenant shall pay to Landlord as Additional Rent, within 30 days
after submission by Landlord to Tenant of bills or statements therefor, sums
equal to all losses, costs, liabilities, claims, damages, fines, penalties and
expenses referred to in this Section 11.2; provided, however that if a court or
an arbitration makes a final judgment that the damages were caused solely by
Landlord’s gross negligence or willful misconduct then Landlord shall reimburse
Tenant for all of Tenant’s reasonable out-of-pocket costs (including reasonable
attorneys’ fees) incurred in defending Landlord together with interest thereon
at a rate equal to the Prime Rate plus two percent (2%).
 
Section 11.3                                Waiver of Subrogation.  Landlord and
Tenant shall each endeavor to procure an appropriate clause in, or endorsement
to, each of its policies for fire and extended coverage insurance, pursuant to
which the insurance company waives subrogation or consents to waiver of its
right of recovery against the other party, which, in the case of Tenant, shall
be deemed to include any subtenant in the Demised Premises, and having obtained
such clause or endorsement of waiver of subrogation or consent to a waiver of
the right of recovery, such party hereby agrees that it will not make any claim
against or seek to recover from the other for any loss or damage to its property
or the property of others covered by such fire or extended coverage insurance;
provided, however, that the release, discharge and covenant not to sue herein
contained shall be limited by the terms and provisions of the waiver of
subrogation clause or endorsement, or the clause or endorsement consenting to a
waiver of right of recovery, and shall be co extensive therewith.  If either
party hereto shall not be able to obtain such clause or endorsement on a
particular policy or if the inclusion of such clause or endorsement would result
in an increase in premium, then that party shall so notify the other party
hereto at least 15 days prior to the date the policy is to take effect.  The
other party shall be obligated to pay the amount of any increase in premium
resulting from the inclusion of such clause or endorsement, unless such other
party notifies the party obtaining the insurance, within twenty (20) days
following notice of the amount of such increase, that such other party declines
to pay such increase, in which event the party obtaining the insurance may omit
such clause or endorsement.  If a party shall fail to give notice either of
inability to obtain such clause or endorsement or notice of an increase in
premium, then that party shall be deemed to have waived its right of recovery
from the other party with respect to any loss or damage insured against by the
policy with respect to which notice was not given as provided above.
 
ARTICLE 12
 
DAMAGE BY CASUALTY
 
Section 12.1                                Notice.  Tenant shall give immediate
written notice to Landlord of any damage caused to the Demised Premises by fire
or other casualty.
 
Section 12.2                                Restoration of Improvements.  
 
(a)           In the event the Building is damaged by fire or other casualty,
Landlord shall, unless this Lease is terminated as hereinafter provided, proceed
with reasonable
 

 
18
 
 

diligence and at its sole cost and expense to repair the shell and core of the
Building, but only to the extent of the insurance proceeds that are available to
Landlord or that would have been available if Landlord had carried the insurance
required under this Lease.  Tenant shall promptly, at its sole cost and expense,
remove such of its furniture and other belongings from the Building as Landlord
shall require in order to repair and restore the shell and core of the
Building.  Until any such repairs to the Building are completed, the Fixed Rent
shall be abated in proportion to the part of the Building, if any, that is
unusable by Tenant in the conduct of its business.  If the fire or other
casualty is due to the negligence or misconduct of Tenant, its agents,
employees, contractors or invitees, there shall be no abatement of Fixed Rent,
and Tenant shall be liable to Landlord for the amount by which the cost of such
repairs exceeds the insurance proceeds received by Landlord.
 
(b)           If the shell and core of the Building shall be destroyed or
damaged by a casualty not sufficiently, in Landlord’s sole judgment, covered by
insurance or, even if covered by insurance, which, in Landlord’s sole judgment,
cannot be restored to tenantable condition within 180 days after the casualty,
then Landlord may elect to proceed to rebuild and repair the shell and core of
the Building or to terminate this Lease, effective upon giving notice of such
election to Tenant within 30 days after the occurrence of such
casualty.  Landlord’s obligation to rebuild and repair under this Section 12.2
shall in any event be limited to restoring the shell and core of the Building to
substantially the condition in which it existed prior to the casualty (in no
event shall Landlord be required to repair any of Tenant’s leasehold
improvements, fixtures, equipment, furniture, furnishings and personal property)
and then only to the extent that insurance proceeds shall be sufficient to pay
for such restoration.  Tenant agrees that, promptly after the completion of such
work by Landlord, it will proceed with reasonable diligence and at its sole cost
and expense to rebuild, repair and restore its fixtures, equipment and other
installations.
 
(c)           If the Demised Premises shall be destroyed or damaged by a
casualty such that, in Landlord’s reasonable judgment, the Demised Premises
cannot be restored (including Tenant’s tenant improvements and trade fixtures)
to a tenantable condition for the operation of Tenant’s business therein within
270 days after the casualty, and Landlord has not elected to terminate this
Lease pursuant to Section 12(b) above, then Tenant may elect to terminate this
Lease, effective upon giving notice of such election to Landlord within 30 days
after the occurrence of such casualty.  In the event of any such termination by
Tenant pursuant to this Section 12.2(c) Tenant shall provide Landlord with the
proceeds of any insurance carried by Tenant (or required to be carried by Tenant
under this Lease) with respect to the Tenant Improvements and any Alterations
and any coverage for the removal of debris.
 
(d)           Tenant shall have no right to terminate this Lease in the event of
the damage or destruction of the Demised Premises other than as set forth in
this Section 12.2 and hereby waives the provisions of any Applicable Law
granting Tenant such right, including, without limitation, Sections 1932(2) and
1933(4) of the California Civil Code.
 

 
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Section 12.3                                Damage During Last Year of Lease
Term.  Without limiting Landlord’s or Tenant’s rights under Section 12.2, in the
event the Building or Demised Premises shall, in Landlord’s reasonable judgment,
be substantially damaged during the last year of the term of this Lease, either
party may elect to terminate this Lease effective upon giving notice of such
election, in writing, to the other party within thirty (30) days after the
happening of the fire or other casualty.   For purposes of this Section 12.3
“substantially damaged” shall mean that, in Landlord’s reasonable judgment, the
Demised Premises cannot be restored to tenantable condition within 60 days after
the casualty.
 
ARTICLE 13
 
EMINENT DOMAIN
 
Section 13.1                                Taking of Demised Premises.  If
during the Term all of the Demised Premises shall be taken for any public or
quasi public use under any statute or by right of eminent domain, or sale in
lieu of such taking, this Lease shall automatically terminate on the date on
which the condemning authority takes possession of the Demised Premises
(hereinafter called the “Date of Taking”).  If so much of the Demised Premises
(but less than all) is taken as shall render the Demised Premises untenantable
in Landlord’s reasonable judgment, Tenant and Landlord shall each have the right
to terminate this Lease by giving written notice to the other party of
termination within 30 days after the Date of Taking.
 
Section 13.2                                Partial or Temporary Taking of
Building.  
 
(a)           If during the Term, the Building, or any portion thereof, is taken
or sold as set out in Section 13.1, then (1) if in the reasonable opinion of
Landlord substantial alteration or reconstruction of the Building is necessary
as a result thereof; (2) if one quarter or more of the value, in Landlord’s sole
judgment, of the  Building is included in such taking or sale; or (3) if such
portion of the parking area and access areas shall be taken as, in Landlord’s
sole judgment, to materially interfere or prevent access to the Building or
reduce the value of the Land and the Building by more than one quarter; then,
either party shall have the right to terminate this Lease by giving the other
party at least 30 days’ written notice thereof.
 
(b)           If during the Term the Building or the parking area and access
areas, or any portion thereof, shall be taken as set out in Section 13.1 for a
period of less than one (1) year, this Lease shall remain in full force and
effect subject to Section 13.4 hereof.  If such a taking shall be for a period
of one (1) year or more, then the provisions of Section 13.1 and Section
13.2(a), as the case may be, shall be applicable.
 
(c)           If either party exercises its rights of termination under Section
13.1 or 13.2 (and any such right must be exercised within 30 days after the Date
of Taking, failing which such right shall be deemed waived), this Lease shall
terminate on the date stated in the notice, provided, however, that no
termination pursuant to notice hereunder may occur later than 60 days after the
Date of Taking.
 

 
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Section 13.3                                Surrender.  On the date of any
termination under Section 13.1 or 13.2, Tenant shall immediately surrender to
Landlord the Demised Premises and all interests therein under this Lease and
Tenant shall pay Landlord Rent through the date of termination (or through the
Date of Taking if such date shall not be the same as the date of
termination).  Landlord may re enter and take possession of the Demised Premises
and remove Tenant therefrom.
 
Section 13.4                                Rent Adjustment for Partial Taking
of Demised Premises.  If any portion of the Demised Premises (but less than the
whole thereof) is so taken, and no rights of termination herein conferred are
timely exercised, the Term shall expire (or, in respect of a taking pursuant to
Section 13.2(b) hereof, have no force and effect for the period of such
temporary taking) with respect to the portion so taken on (or from) the Date of
Taking.  In such event, the Rent thereafter payable under this Lease shall be
adjusted pro rata by Landlord in order to account for the resulting reduction
(either temporarily or permanently) in the number of rentable square feet in the
Demised Premises.
 
Section 13.5                                Awards.  Upon any taking or sale
described in this Article 13, Landlord shall be entitled to receive and retain
the entire award or consideration for the affected lands and improvements, and
Tenant shall not have nor advance any claim against Landlord or anyone else for
the value of its property or its leasehold estate under this Lease, or for the
costs or removal or relocation, or business interruption expense or any other
damages arising out of such taking or purchase.  Nothing herein shall give
Landlord any interest in or preclude Tenant from seeking and recovering on its
own account a separate award from the condemning authority attributable to the
taking or purchase of Tenant’s trade fixtures, or the removal or relocation of
its business and effects, or the interruption of its business provided that
Landlord’s award is not diminished thereby.  If any such award made or
compensation paid to either party specifically includes an award or amount for
the other, the party first receiving the same shall promptly account therefor to
the other.
 
Section 13.6                                Sole Remedy.  The rights contained
in this Article 13 shall be Tenant’s sole and exclusive remedy in the event of a
taking or condemnation.  Each party waives the provisions of Sections 1265.130
and 1265.150 of the California Code of Civil Procedure and the provisions of any
successor or other law of like import.
 
ARTICLE 14
 
RIGHTS RESERVED TO LANDLORD
 
Section 14.1                                Access to Demised
Premises.  Landlord and Landlord’s agents shall have the right (but shall not be
obligated) to enter the Demised Premises in any emergency at any time, and to
perform any acts related to the safety, protection or preservation thereof or of
the Building.  At other reasonable times, and upon reasonable notice, Landlord
may enter the Demised Premises (1) to examine and make such repairs,
replacements and improvements as Landlord may deem necessary or reasonably
desirable to the Demised Premises or to any other portion of the Building, (2)
for the purpose of complying with laws, regulations and other requirements of
governmental authorities or the provisions of this Lease, (3) for the purpose of
posting notices of nonresponsibility, or (4) for the purposes of showing the
same to prospective purchasers or mortgagees of the Building, and during the
last 12 months of the Term for the
 

 
21
 
 

purpose of showing the same to prospective tenants.  Tenant shall, so long as
Landlord uses commercially reasonable efforts so as not to unreasonably disrupt
Tenant’s business operations in the Demised Premises permit Landlord to use and
maintain and replace unexposed pipes and conduits in and through the Demised
Premises and to erect new unexposed pipes and conduits therein.  Landlord may,
during the progress of any work in the Demised Premises, take all necessary
materials and equipment into the Demised Premises and close or temporarily
suspend operation of areas of the Demised Premises without such interference
constituting an eviction, but subject to the provisions of Section 26.1.  Tenant
shall not be entitled to any damages by reason of loss or interruption of
business or otherwise during such periods.  During such periods Landlord shall
use reasonable efforts to minimize any interference with Tenant’s use of the
Demised Premises.  If Tenant is not present to open and permit an entry into the
Demised Premises, Landlord or Landlord’s agents may enter the same whenever such
entry may be necessary or permissible by master key or otherwise, provided
reasonable care is exercised to safeguard Tenant’s property.  Such entry shall
not render Landlord or its agents liable therefor, nor in such event shall the
obligations of Tenant hereunder be affected.  
 
Section 14.2                                Additional Rights.  Landlord shall
have the following additional rights exercisable without notice (except as
provided below) and without liability to Tenant for damage or injury to
property, person or business, all claims for damage being hereby released, and
without effecting an eviction or disturbance of Tenant’s use or possession or
giving rise to any claim for setoffs, or abatement of Rent:
 
(a)           To change the name, number or designation by which the Building
may be known; and
 
(b)           To perform any act, obligation or other commitment required of or
by Tenant which Tenant has failed to perform for any reason whatsoever
(including, without being limited to, obtaining insurance coverage) where such
failure has continued for thirty (30) days after written notice from Landlord
(except in the case of an emergency where no such notice shall be required
except what may be reasonable given the circumstances), and to charge Tenant as
Additional Rent all reasonable costs and expenses incurred by Landlord for such
performance, together with interest thereon at the Default Rate from the dates
of Landlord’s expenditures until paid.
 
ARTICLE 15
 
ASSIGNMENT AND SUBLETTING
 
Section 15.1                                Consent Required.  
 
(a)           Tenant shall not, voluntarily or involuntarily, by operation of
law or otherwise:  (i) assign, mortgage, pledge, encumber or in any manner
transfer this Lease in whole or in part, or (ii) sublet all or any part of the
Demised Premises, or allow any other person to occupy all or any part thereof,
without the prior written consent of Landlord in each instance, which consent
shall not be unreasonably withheld, and any attempt to do any of such acts
without such consent shall be null and void and of no effect.  Along with
Tenant’s request, Tenant shall pay Landlord Five Hundred and No/100 Dollars
($500.00)
 

 
22
 
 

to cover Landlord’s expenses in reviewing said request.  The consent by Landlord
to any assignment, mortgage, pledge, encumbrance, transfer or subletting shall
not constitute a waiver of the necessity for such consent to any subsequent
assignment, mortgage, pledge, encumbrance, transfer or subletting.
 
(b)           In the event Tenant desires to assign this Lease or sublet all or
a portion of the Demised Premises, Tenant shall submit to Landlord:  (a) the
proposed sublease or assignment, which is not to commence prior to thirty (30)
days from the date the submission to Landlord occurs, and (b) sufficient
information to permit Landlord to determine the acceptability, financial
responsibility, and character of subtenant or assignee.
 
(c)           Within thirty (30) days after receipt of the materials and
information set forth in Section 15.1(b), Landlord shall respond by, either: (i)
granting or refusing its consent to the proposed sublease or assignment, as
provided in Section 15.1(d); (ii) as to an assignment or a sublease of all or
substantially all of the Demised Premises for all or substantially all of the
remaining Term of this Lease terminating this Lease on the date the assignment
or sublease was to commence; or (iii) as to a sublease other than as described
in (ii) above and other than any subleases entered into during the first two (2)
years of the Term of this Lease, up to an aggregate of 200,000 square feet of
floor area, terminating this Lease for only the portion of the Demised Premises
to be subleased (the “Subject Premises”) as of the date on which the sublease
was to commence and only for the proposed term of the sublease.  Tenant shall
remain liable for all payments due under this Lease through the date of
termination even though such amounts may be billed subsequent to termination.
 
(d)           If Landlord does not terminate this Lease in the case of a
proposed assignment or terminate the Lease as to the Subject Premises pursuant
to Section 15.1(c), Landlord shall not unreasonably withhold its consent to the
proposed sublease or assignment.  Such consent shall be deemed to be reasonably
withheld if: (i) in the judgment of Landlord the  subtenant or assignee is of a
character or engaged in a business which is not in keeping with the standards of
Landlord for the Building; (ii) in the judgment of Landlord the purposes for
which the subtenant or assignee intends to use the Demised Premises or Subject
Premises, as the case may be, are not in keeping with the standards of Landlord
for the Building or the terms of this Lease, or are in violation of the terms of
any other lease in the Building; (iii) Tenant is in default under this Lease;
(iv) the Subject Premises or the remaining balance of the Demised Premises, if
any, is not regular in shape with appropriate means of ingress and egress and
suitable for normal renting purposes; (v) the proposed subtenant or assignee is
either a governmental unit (or subdivision or agency thereof) or negotiating for
space in the Building; (vi) the assignee or sublessee is not, in the sole
judgment of Landlord, solvent or does not have unencumbered assets of a value at
least equal to twice the projected costs of the obligations to be assumed for
the unexpired term of this Lease; (vii) in the judgment of Landlord such a
sublease or assignment would violate any term, condition, covenant, or agreement
of the Landlord involving the Building; (viii) the proposed use or occupancy of
the Demised Premises or Subject Premises, as the case may be, by the assignee or
 

 
23
 
 

sublessee would either violate any applicable law, statute, ordinance, code or
regulation or would impose any obligation upon Landlord to comply with any of
the foregoing or increase Landlord’s obligation to comply with any of the
foregoing (including, without limitation, the restriction on office use with
respect to the westerly one-fifth (1/5th) of the Property as set forth in March
Air Reserve Base and Inland Cargo Port Operations (APZ-2); or (ix) any such
proposed sublease or assignment would cause a breach of the ERISA
representations set forth in Section 24.14 below.  Notwithstanding anything to
the contrary contained in this Lease, Tenant’s sole right and remedy in any
dispute as to whether Landlord’s consent to a proposed sublease or proposed
assignment has been unreasonably withheld shall be an action for declaratory
judgment or specific performance and Tenant shall not be entitled to any damages
if Landlord is adjudged to have unreasonably withheld such consent.
 
(e)           If Landlord grants consent to any assignment or sublease
hereunder, it shall be upon and subject to the following terms: (i) the terms
and conditions of this Lease shall in no way be deemed modified, abrogated or
amended; (ii) Tenant shall pay Landlord a reasonable fee determined by Landlord
for each sublease or assignment submitted; and (iii) the consent shall not be
deemed a consent to any further subletting or assignments by either Tenant,
subtenants or assignees.  In addition to the foregoing conditions, if Tenant
shall assign this Lease, the assignee shall expressly assume all obligations of
Tenant hereunder in a written instrument satisfactory to Landlord and furnished
to Landlord by Tenant not later than fifteen (15) days prior to the effective
date of the assignment; if Tenant shall sublease any portion or all of the
Demised Premises as permitted herein, Tenant shall obtain and furnish to
Landlord, not later than fifteen (15) days prior to the effective date of such
sublease and in form satisfactory to Landlord, the written agreement of such
subtenant to the effect that the subtenant will attorn to Landlord, at
Landlord’s option and written request, in the event this Lease terminates before
the expiration of the sublease.  Tenant shall not be released from any
obligations or liabilities under this Lease as a result of any assignment of
this Lease or sublet of all or any portion of the Demised Premises.
 
(f)           If Tenant shall assign this Lease or sublet all or any portion of
the dry storage area of the Demised Premises pursuant to the terms of this
Article 15, then Tenant shall pay Landlord as additional Rent,
 
 
A.
With respect to the First Year of the term of any such sublease all of the
excess payments or other economic consideration whether denominated as rent or
otherwise (together with escalations) payable to Tenant under the sublease or
assignment which might be in excess of the sum of (i) the Fixed Rent plus
Additional Rent payable to Landlord under this Lease (or, if only a portion of
the Demised Premises is being sublet, the excess payments or other economic
consideration allocable on a rentable square footage basis to the space sublet)
plus (ii) any out-of-pocket costs incurred by Tenant in connection with the
sublease or assignment amortized over the term of the sublease or the
assignment; and

 

 
24
 
 

 
B.
With respect to the balance of the term of any such sublease, fifty percent
(50%) of any such excess.

 
In computing the amount to be paid to Landlord pursuant to this Section 15(f)
the total excess payable to Tenant pursuant to any such sublease shall be
amortized over the term of the sublease.
 
ARTICLE 16
 
BANKRUPTCY
 
Section 16.1                                Bankruptcy.  If at any time after
the execution and delivery of this Lease, there shall be filed by or against
Tenant in any court pursuant to any statute either of the United States or of
any State a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee or conservator of all or a portion of
Tenant’s property, or if Tenant makes an assignment for the benefit of
creditors, this Lease, (a) if such event shall occur prior to the Commencement
Date, shall ipso facto be cancelled and terminated, or (b) if such event shall
occur on or after the Commencement Date, at the option of Landlord to be
exercised within 60 days after notice of the happening of any one or more of
such events, may be cancelled and terminated, and in any such event of
termination neither Tenant nor any person claiming through or under Tenant or by
virtue of any statute or of an order of any court shall be entitled to
possession or to remain in possession of the Demised Premises but shall
forthwith quit and surrender the Demised Premises, and Landlord, in addition to
the other rights and remedies granted by virtue of any other provision in this
Lease or by virtue of any statute or rule of law, may retain as damages any
Rent, Security Deposit, or moneys received by it from Tenant or others on behalf
of Tenant.
 
Section 16.2                                Measure of Damages.  In the event of
the termination of this Lease pursuant to Section 16.1 above, Landlord shall be
entitled to the same rights and remedies as set forth in Article 17.
 
ARTICLE 17
 
DEFAULT
 
Section 17.1                                Events of Default.  Each of the
following events shall be deemed to be an Event of Default by Tenant under this
Lease:
 
(a)           whenever Tenant shall have failed to pay any installment of Rent,
or any portion thereof when the same shall be due and payable, and Tenant shall
have failed to pay same for a period of five (5) days after the due date of such
payment; or
 
(b)           whenever Tenant shall have failed to comply with, shall have
violated or shall be in default in the performance of any other provision of
this Lease and Tenant shall have failed to cure such default (except a default
under Section 17.1(e)) within 30 days after notice from Landlord of such
noncompliance, violation or default (in the case of a default which cannot with
due diligence be cured within a period of 30 days, Tenant shall have such
additional time, but in no event to exceed 90 days in the aggregate, to
 

 
25
 
 

cure same as may reasonably be necessary, provided Tenant commences curing such
default within the 30 day period and proceeds promptly, effectively,
continuously and with due diligence to cure such default after delivery of said
notice); or
 
(c)           whenever Tenant shall vacate or abandon the Demised Premises and
leave same vacated or abandoned for a period of 15 days; or
 
(d)           whenever Tenant shall do or permit to be done anything which
creates a lien upon the Demised Premises and/or the Building and such lien is
not removed within 30 days; or
 
(e)           whenever any warranty, representation or statement made or
furnished by Tenant to Landlord at any time in connection with this Lease or any
other agreement to which Tenant and Landlord are parties is determined to have
been false or misleading in any material respect when made or furnished.
 
Section 17.2                                Remedies.  In the event of an Event
of Default, Landlord may, with or without further notice or demand, and without
limiting Landlord in the exercise of any right or remedy which Landlord may have
by reason of such Event of Default:
 
(a)           Terminate Tenant's right to possession of the Demised Premises by
any lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Landlord. In such event Landlord shall be
entitled to recover from Tenant: (i) the unpaid Rent which had been earned at
the time of termination; (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 of such rental loss that Tenant proves could
have been reasonably avoided; (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 Tenant proves could be reasonably
avoided; and (iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom, including but not limited to the cost of recovering possession
of the Demised Premises, expenses of reletting, including necessary renovation
and alteration of the Demised Premises, reasonable attorneys’ fees, and that
portion of any leasing commission paid by Landlord in connection with this Lease
applicable to the unexpired Term of this Lease.  The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of the District within which the Demised Premises are
located at the time of award plus one percent (1%). Efforts by Landlord to
mitigate damages caused by Tenant's Breach of this Lease shall not waive
Landlord's right to recover damages under this Article 17.  If termination of
this Lease is obtained through the provisional remedy of unlawful detainer,
Landlord shall have the right to recover in such proceeding any unpaid Rent and
damages as are recoverable therein, or Landlord may reserve the right to recover
all or any part thereof in a separate suit.  If a notice and grace period
required under Section 17.1 was not previously given, a notice to pay rent or
quit, or to perform or quit given to Tenant under the unlawful detainer statute
 

 
26
 
 

shall also constitute the notice required by Section 17.1.  In such case, the
applicable grace period required by Section 17.1 and the unlawful detainer
statute shall run concurrently and the failure of Tenant to cure the Event of
Default within the greater of two such grace periods shall constitute both an
unlawful detainer and an Event of Default entitling Landlord to the remedies
provided for in this Lease and/or by said statute.
 
(b)           Continue the Lease and Tenant's right to possession and recover
the Rent as it becomes due, in which event Tenant may sublet or assign, subject
only to reasonable limitations.  Acts of maintenance, efforts to relet and/or
the appointment of a receiver to protect the Landlord’s interests, shall not
constitute a termination of the Tenant’s right to possession.
 
(c)           Pursue any other remedy now or hereafter available under the laws
or judicial decisions of the state wherein the Demised Premises are
located.  The expiration or termination of this Lease and/or the termination of
Tenant’s right to possession shall not relieve Tenant from liability under any
indemnity provisions of this Lease as to matters occurring or accruing during
the Term hereof or by reason of Tenant’s occupancy of the Demised Premises.
 
Section 17.3                                Waiver of Jury Trial.  To the
fullest extent permitted by the applicable law, the parties hereto shall and
they hereby do waive trial by jury in any action, proceeding or counterclaim
brought by either of the parties hereto against the other on any matters
whatsoever arising out of or in any way connected with this Lease or the
interpretation thereof, the relationship of Landlord and Tenant, Tenant’s use or
occupancy of the Demised Premises, and/or any claim of injury or damage.  
 
ARTICLE 18
 
SURRENDER
 
Section 18.1                                Possession.  Upon the expiration or
earlier termination of this Lease, Tenant shall immediately quit and surrender
possession of the Demised Premises in as good a state and condition as they were
when entered into, reasonable wear and tear and casualty damage (other than that
which Tenant is obligated to repair) excepted.  Upon such surrender, all right,
title and interest of Tenant in the Demised Premises shall cease.
 
Section 18.2                                Merger.  The voluntary or other
surrender of this Lease by Tenant or the cancellation of this Lease by mutual
agreement of Tenant and Landlord shall not work a merger, but shall, at
Landlord’s option, terminate all or any subleases and subtenancies or operate as
an assignment to Landlord of all or any subleases or subtenancies.  Landlord’s
option hereunder shall be exercised by notice to Tenant and all known sublessees
or subtenants in the Demised Premises or any part thereof.
 

 
27
 
 

ARTICLE 19
 
HOLDING OVER
 
Section 19.1                                Holding Over.  If Tenant retains
possession of the Demised Premises or any part thereof after the expiration or
earlier termination of this Lease, Tenant shall pay as Rent a sum equal to two
times the amount, including Fixed Rent and Additional Rent hereunder, payable
for the month preceding such holding over computed on a daily basis for each day
that Tenant remains in possession.  Tenant shall also be liable for and shall
pay to Landlord, all damages, consequential as well as direct, sustained by
reason of Tenant’s holding over.  In addition, at any time while Tenant remains
in possession, Landlord may elect instead, by written notice to Tenant and not
otherwise, to have such retention of possession constitute a renewal of this
Lease for one (1) year for the fair market rental value of the Premises as
reasonably determined by Landlord but in no event less than the Rent payable
immediately prior to such holding over.  The provisions of this section do not
waive Landlord’s right of re entry or right to regain possession by actions at
law or in equity or any other rights hereunder, and any receipt of payment by
Landlord shall not be deemed a consent by Landlord to Tenant’s remaining in
possession or be construed as creating or renewing any lease or right of tenancy
between Landlord and Tenant.
 
ARTICLE 20
 
REMEDIES CUMULATIVE
 
Section 20.1                                No Waiver.  No waiver by Landlord or
Tenant of a breach of any covenants, agreements, obligations or conditions of
this Lease shall be construed to be a waiver of any future breach of the same or
any other covenant, agreement, obligation or condition hereof.  No receipt of
money by Landlord from Tenant after notice of default, or after the termination
of this Lease or the commencement of any suit or final judgment of possession of
the Demised Premises, shall reinstate, continue or extend the term of this Lease
or affect any notice, demand or suit.  The rights and remedies hereby created
are cumulative, and the use of one remedy shall not be construed to exclude or
waive the right to the use of another, or exclude any other right or remedy
allowed by law.
 
ARTICLE 21
 
ESTOPPEL CERTIFICATE, SUBORDINATION, ATTORNMENT
 
Section 21.1                                Estoppel Certificate.  Tenant shall
at any time upon the request of Landlord, execute and deliver in recordable form
and in substance reasonably satisfactory to Landlord, an estoppel certificate
certifying:  the date Tenant accepted occupancy of the Demised Premises; the
date to which Rent has been paid; the amount of any Security Deposit; that this
Lease is in full force and effect and has not been modified or amended (or if
modified or amended, describing the same) and that there are no defenses or
offsets thereto or defaults of Landlord under this Lease (or if any be claimed,
describing the same); and such other matters as Landlord may reasonably request;
provided, however, that in no event may any such requested
 

 
28
 
 

matter modify or amend any provision of this Lease.  Tenant’s failure to deliver
such certificate within ten (10) days of the demand therefor shall be a default
hereunder.
 
Section 21.2                                Subordination.  This Lease is and
shall be subject and subordinate to all ground or underlying leases, mortgages
and deeds of trust which now or hereafter affect the Land, Building and/or any
ground or underlying leases thereof and to all renewals, modifications,
consolidations, replacements and extensions thereof.  The provisions of this
section shall be automatic and shall not require any further action.  In
confirmation of such subordination, Tenant will execute and deliver upon demand
of Landlord any and all instruments desired by Landlord subordinating this lease
to such lease, mortgage or deed of trust.  Landlord is hereby irrevocably
appointed and authorized as agent and attorney in fact of Tenant to execute and
deliver all such subordination instruments in the event Tenant fails to execute
and deliver said instruments within five (5) days after notice from Landlord
requesting the execution thereof.
 
Section 21.3                                Attornment.  Tenant agrees that, at
the option of the landlord under any ground lease now or hereafter affecting the
real property of which Demised Premises forms a part, Tenant shall attorn to
said landlord in the event of the termination or cancellation of such ground
lease and if requested by said landlord, enter into a new lease with said
landlord (or a successor ground lessee designated by said landlord) for the
balance of the term then remaining hereunder upon the same terms and conditions
as those herein provided.
 
Section 21.4                                Mortgages.  Tenant covenants and
agrees that, if by reason of default under any mortgage or deed of trust which
may now or hereafter affect the Land and/or the Building, the mortgagee
thereunder enters into and becomes possessed of the said mortgaged property
either through possession or foreclosure action or proceeding, or in the event
of the sale of the said mortgaged property as a result of any action or
proceeding to foreclosure the said mortgage, Tenant will attorn to the mortgagee
or such then owner as its landlord under this Lease.  Tenant agrees to execute
and deliver, at any time and from time to time, upon the request of the
mortgagee or the then owner of the said mortgaged property of which the Demised
Premises forms a part any instrument which may be necessary or appropriate to
evidence such attornment.  Tenant further waives the provisions of any statute
or rule of law now or hereafter in effect which may give or purport to give
Tenant any right of election to terminate this Lease or to surrender possession
of the Demised Premises in the event any proceeding is brought by the mortgagee
under any such mortgage to terminate the same, and agrees that this Lease shall
not be affected in any way whatsoever by any such proceeding.
 
ARTICLE 22
 
QUIET ENJOYMENT
 
Section 22.1                                Quiet Enjoyment.  Landlord covenants
and agrees with Tenant that upon payment by Tenant of the Rent hereunder and
upon the observance and performance of all of the terms, covenants and
conditions on Tenant’s part to be observed and performed, Tenant may peaceably
and quietly enjoy the Demised Premises, free of all claims from Landlord and
those claiming by, through or under Landlord, but subject, nevertheless, to the
terms and conditions of this Lease.
 

 
29
 
 

ARTICLE 23
 
NOTICES
 
Section 23.1                                Notices.  Whenever any notice or
consent is required or permitted hereunder, such notice or consent shall be in
writing.  Any notice or document required or permitted to be delivered hereunder
shall be deemed to be delivered (a) upon receipt or refusal of receipt when sent
by recognized overnight courier or (b) upon receipt or refusal of receipt when
deposited in the United States Mail, postage prepaid, Registered or Certified
Mail, Return Receipt Requested, addressed to the parties hereto at the addresses
set forth in Article l, or at such other addresses as they have theretofore
specified by written notice delivered in accordance herewith.
 
ARTICLE 24
 
MISCELLANEOUS PROVISIONS
 
Section 24.1                                Time.  Time is and shall be of the
essence of this Lease and all its provisions.
 
Section 24.2                                Applicable Law and Construction.  
 
(a)           This Lease shall be governed by and construed under the laws of
the State in which the Property is located.
 
(b)           The necessary grammatical changes required to make the provisions
of this Lease apply in the plural sense where there is more than one tenant and
to either corporations, associations, partnerships or individuals, males or
females, shall in all instances be assumed as though fully expressed.  If there
is more than one person or entity who or which are Tenant under this Lease, the
obligations imposed upon Tenant under this Lease shall be joint and
several.  The relationship between Landlord and Tenant created hereunder shall
be that of lessor and lessee and nothing herein shall be construed as creating
any joint venture or partnership.  The captions used in this Lease are for
convenience only and do not in any way limit or amplify the terms and provisions
hereof.
 
Section 24.3                                Parties Bound.  It is agreed that
this Lease, and each and all the covenants and obligations hereof, shall be
binding upon and inure to the benefit of, as the case may be, the parties
hereto, their respective heirs, executors, administrators, successors and
assigns, subject to all agreements and restrictions herein contained with
respect to assignment or other transfer of Tenant’s interest herein.
 
Section 24.4                                Representations by
Landlord.  Neither Landlord nor Landlord’s agents have made any representations
or promises with respect to the physical condition of the Property or the
Building, the Demised Premises, permissible uses of Demised Premises, the rents,
leases, expenses of operation or any other matter or thing affecting or related
to the Demised Premises except as herein expressly set forth below, and no
rights, easements, or licenses are acquired by Tenant by implication or
otherwise except as expressly set forth in the provisions of this Lease.
 

 
30
 
 

Tenant has inspected the Building and the Demised Premises and is thoroughly
acquainted with their condition, and agrees to accept the same “as is” subject
to completion of Landlord’s Work, if any, and further subject to Landlord’s
representations and warranties set forth below.  All understandings and
agreements heretofore made between the parties hereto are merged in this Lease,
which alone fully and completely expresses the agreement between Landlord and
Tenant, and any executory agreement hereafter made shall be ineffective to
change, modify, discharge or effect an abandonment of it, in whole or in part,
or a surrender of this Lease or of the Demised Premises or any part thereof or
of any interest of Tenant therein unless such executory agreement is in writing
and signed by Landlord and Tenant.
 
Landlord hereby warrants and represents to Tenant, for the express benefit of
Tenant, as follows:
 
(a)           Landlord has good, indefeasible, and marketable fee simple title
to the Demised Premises and the Property, full right and authority to make and
execute this Lease and, to Landlord’s current actual knowledge, as of the Date
of Execution, the Demised Premises are free and clear of and from any liens,
restrictions, leases or other encumbrances which would materially and adversely
restrict or prevent Tenant’s use of the Demised Premises for the Permitted Use;
and
 
(b)           To Landlord’s actual knowledge, based on the Phase I Environmental
Report prepared by Golder Associates for Alere Property Group, LLC and dated
July 2004 (a copy of which has been provided to Tenant), the Demised Premises
and the Property are in full compliance with all environmental laws;
 
(c)           The structural elements of the Building, the roof and any of the
systems currently installed in the Building are in good condition; and
 
(d)           There is access to Day Street from the Property.
 
Section 24.5                                Brokers.  Tenant warrants that it
has had no dealings with any broker, agent or any other person in connection
with the negotiation or execution of this Lease other than the brokers
identified in Article 1.  Tenant agrees to indemnify and hold harmless Landlord
from and against any and all cost, expense, or liability for commissions or
other compensation and charges claimed by any broker or agent (other than the
brokers identified in Article 1) with respect to this Lease on account of
Tenant’s acts.  
 
Section 24.6                                Severability.  The invalidity or
unenforceability of any provision of this Lease shall not affect or impair the
validity of any other provision.
 
Section 24.7                                Force Majeure.  In the event
Landlord shall be delayed or hindered in or prevented from the performance of
any act required hereunder by reason of strikes, lock outs, labor troubles,
inability to procure materials, failure of power, restrictive governmental laws
or regulations, riots, insurrection, war or other reason of a like nature beyond
the reasonable control of Landlord, in performing work or doing acts required
under the terms of this Lease, then performance of such act shall be extended
for a period equivalent to the period of such delay.
 

 
31
 
 

Section 24.8                                Definition of Landlord.  As used in
this Lease, the term “Landlord” shall mean only the owner, or the mortgagee in
possession, for the time being, of the Building and the Land or the owner of a
lease of the Building or of the Land and the Building, so that in the event of
any sale of the Building or of the Land and the Building or of said Lease, or in
the event of a lease of the Building or of the Land and the Building, said
Landlord shall be and hereby is entirely freed and relieved of all covenants and
obligations of Landlord hereunder thereafter to be performed or observed, and it
shall be deemed and construed without further agreement between the parties or
their successors in interest, or between the parties and any such purchaser or
lessee, that such purchaser or lessee has assumed and agreed to performed and
observe any and all covenants and  obligations of Landlord hereunder.
 
Section 24.9                                No Option.  The submission of this
Lease for examination or execution does not constitute a reservation of or
option for the Demised Premises, and this Lease becomes effective as a lease
only upon execution and delivery thereof by Landlord and Tenant.
 
Section 24.10                                Exculpatory Clause.  All separate
and personal liability of Landlord or any trustee, director, officer, partner or
principal (disclosed or undisclosed) thereof of every kind or nature, if any, is
waived by Tenant, and by every person now or hereafter claiming by, through or
under Tenant; and Tenant shall look solely to Landlord’s estate in the Property
for the payment of any claim against Landlord.
 
Section 24.11                                No Recording.  Tenant shall not
record this Lease, or any portion or any reference hereto.  In the event Tenant
records this Lease, or permits or causes this Lease, or any portion hereof or
reference hereto to be recorded, this Lease shall terminate at Landlord’s option
or Landlord may declare a default hereunder and pursue any and all of its
remedies provided in this Lease.
 
Section 24.12                                Counterparts.  The parties may
execute this Lease in multiple counterparts, each of which constitutes an
original, and all of which, collectively, constitute only one agreement.  The
signatures of all of the parties need not appear on the same counterpart, and
delivery of an executed counterpart signature page by facsimile is as effective
as executing and delivering this Lease in the presence of the other parties to
this Lease.  This Lease is effective upon delivery of one executed counterpart
from each party to the other parties.  In proving this Lease, a party must
produce or account only for the executed counterpart of the party to be
charged.  Any party delivering an executed counterpart of this Lease by
facsimile shall also deliver a manually executed counterpart of this Lease, but
the failure to do so does not affect the validity, enforceability, or binding
effect of this Lease.
 
Section 24.13                                Financial Statements.  Tenant,
within 15 days after request, shall provide Landlord with a current financial
statement and such other information as Landlord may reasonably request in order
to create a “business profile” of Tenant and determine Tenant’s ability to
fulfill its obligations under this Lease.  Landlord, however, shall not require
Tenant to provide such information unless Landlord is requested to produce the
information in connection with a proposed financing or sale of the
Building.  Notwithstanding the foregoing, so long as Tenant is a publicly traded
company and its financial statements are available online, Tenant shall not be
required to comply with the foregoing provisions of this Section 24.13.
 

 
32
 
 

Section 24.14                                ERISA.  Tenant hereby represents
and warrants to Landlord that (i) Tenant is not a “party in interest” (within
the meaning of Section 3(14) of the Employee Retirement Income Security Act of
1974, as amended) or a “disqualified person” (within the meaning of Section 4975
of the Internal Revenue Code of 1986, as amended) with respect to any retirement
or pension plan of the Metropolitan Life Insurance Company, and (ii) no portion
of or interest in the Lease will be treated as a “plan asset” within the meaning
of Regulation 29 CFR Section 2510.3-101 issued by the Department of Labor.
 
ARTICLE 25
 
OPTIONS TO RENEW
 
Section 25.1                                Grant of Option.  Landlord hereby
grants to Tenant two (2) options (each, an “Option”; collectively, the
“Options”) to extend the Term of this Lease, each for an additional five (5)
years (each, a “Renewal Term”; collectively, the “Renewal Terms”) upon and
subject to the terms and conditions set forth in this Lease.  Tenant shall have
no right to extend the Term except as provided herein.  The Options shall be
personal to United Natural Foods, Inc. and to any entity controlling, controlled
by or under common control with United Natural Foods, Inc. (collectively,
“Affiliates”), and shall not be transferable or assignable to any other assignee
of the Lease.  Each of the Options shall be exercised, if at all, by Tenant’s
delivery of written notice of exercise to Landlord no later than nine (9) months
nor earlier than twelve (12) months prior to the expiration date of the initial
Term or the first Renewal Term, as applicable.  The Fixed Rent to be paid by
Tenant during the Renewal Terms shall be as set forth in Article 1.  If
(i) Tenant is in default under any of the terms, covenants, or conditions of
this Lease or (ii) Tenant and/or Affiliates do not occupy, in the aggregate, all
of the Demised Premises, either at the time Tenant exercises the applicable
Option or at any time thereafter prior to the commencement date of the
applicable Renewal Term, then in each case, Tenant’s exercise of the applicable
Option shall be of no force and effect and Tenant shall have no rights hereunder
to extend the Term.
 
ARTICLE 26
 
ABATEMENT OF RENT
 
Section 26.1                                Abatement of Rent.  In the event
that Tenant is prevented from using, and does not use, the Demised Premises or
any portion thereof as a result of Landlord’s failure to provide Tenant with
services or access to the Demised Premises and/or the Building as required by
this Lease, which is caused by the gross negligence or willful misconduct of
Landlord or Landlord’s employees, agents or contractors, then Tenant shall give
Landlord written notice of any such event and if such event continues for three
(3) consecutive business days after Landlord’s receipt of such notice (the
“Eligibility Period”), then the Fixed Rent and Additional Rent payable under
this Lease shall be abated or reduced, as the case may be, after expiration of
the Eligibility Period for such time that Tenant continues to be prevented from
using, and does not use, the Demised Premises or a portion thereof in the
proportion that the floor area of the portion of the Demised Premises that
Tenant is prevented from using, and does not use, bears to the total floor area
of the Demised Premises (i.e., 613,174 square feet).  However, in the event that
Tenant is prevented from conducting, and does not conduct, its business in any
portion of the
 

 
33
 
 

Demised Premises for a period of time in excess of the Eligibility Period, and
the remaining portion of the Demised Premises is not sufficient to allow Tenant
to effectively conduct its business therein, and if Tenant does not conduct its
business from such remaining portion, then for such time after expiration of the
Eligibility Period during which Tenant is so prevented from effectively
conducting its business therein, the Fixed Rent and Additional Rent for the
entire Demised Premises shall be abated; provided, however, if Tenant reoccupies
and conducts its business from any portion of the Demised Premises during such
period, the rent allocable to such reoccupied portion, based on the proportion
that the floor area of such reoccupied portion of the Demised Premises bears to
the total floor area of the Demised Premises, shall be payable by Tenant from
the date such business operations commence.
 
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be executed as
of the date first written above.
 
TENANT:
 
UNITED NATURAL FOODS, INC.,
a Delaware corporation
 
LANDLORD:
 
CACTUS COMMERCE, LLC,
a Delaware limited liability company
 
By: BlackRock Realty Advisors, Inc., its manager
 
By:
/s/ Mark Shamber   
By:
/s/ Robert D. Norberg
 
Mark Shamber
 
Name:
Robert D. Norberg
   
Chief Financial Officer
 
Title:
Director
 

 

 
34
 
 

EXHIBIT A
 
SITE PLAN SHOWING LOCATION OF BUILDING
 

[ex35-a1.gif]

 
A-1 
 
 

EXHIBIT B
 
LEGAL DESCRIPTION OF PROPERTY
 
PARCEL 7 OF PARCEL MAP NO. 27732, IN THE CITY OF MORENO VALLEY, COUNTY OF
RIVERSIDE, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 195, PAGES 75 TO 79
INCLUSIVE OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

 
B-1 
 
 

EXHIBIT C
 
RULES AND REGULATIONS
 
1.           No sidewalks or entrance shall be obstructed or encumbered by
Tenant or used for any purpose other than ingress and egress to and from the
Demised Premises, the Building or the landscaping, parking facilities and other
improvements and appurtenances.
 
2.           No awning or other item or projection (including, without
limitation, aerials, antennae and satellite dishes) shall be attached to the
outside walls or windows of the Building, or affixed to the roof or any other
portion of the Building, without the prior written consent of Landlord.  Such
awnings and projections must be of a quality, type, design, color, material and
general appearance approved by Landlord, and shall be attached in the manner
approved by Landlord.
 
3.           No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by Tenant on any part of the outside of
the Building without the prior written consent of Landlord.  In the event of the
violation of the foregoing by Tenant, Landlord may remove same without
liability, and may charge the expense incurred by such removal to Tenant.
 
4.           No show cases or other articles shall be put in front of or affixed
to, or stored on or about, any part of the exterior of the Building without the
prior written consent of Landlord.
 
5.           Except as otherwise permitted under the Lease or consent to by
Landlord, neither Tenant nor any of Tenant’s agents, servants, employees,
contractors, visitors or licensees shall at any time bring or keep upon the
Demised Premises or in the Building or the Property any flammable, combustible
or explosive fluid, chemical or substance.
 
6.           No additional locks, bolts or mail slots of any kind shall be
placed upon any of the doors or windows by Tenant, nor shall any change be made
in existing locks or the mechanism thereof; however, the foregoing shall not
apply to any card key system which Tenant installs in full compliance with all
other provisions of the Lease at its sole expense and with respect to which
Landlord is provided with all access cards necessary to fully exercise all of
its entry rights under the Lease with respect to the Demised Premises; provided,
however that Tenant may upgrade the locks at the Building so long as Tenant
provides written notice to Landlord with respect to any such upgrade and
immediately provides copies of keys to the new locks.  Tenant must, upon the
termination of the tenancy, restore to Landlord all keys of stores, offices and
toilet rooms either furnished to or otherwise procured by Tenant and, in the
event of the loss of any keys so furnished, Tenant shall pay to Landlord the
cost thereof.
 
7.           If the Demised Premises is or becomes infested with vermin as a
result of the use or any misuse or neglect of the Demised Premises by Tenant,
its agents, servants, employees, contractors, visitors, or licensees, Tenant
shall forthwith at Tenant’s expense cause the same to be exterminated from time
to time to the satisfaction of Landlord.
 
8.           Tenant shall, to the extent required by any applicable law, install
and maintain, at Tenant’s sole cost and expense, an adequate visibly marked (at
all times property operational)
 

 
C-1 
 
 

fire extinguisher next to any duplicating or photocopying machine or similar
heat producing equipment, which may or may not contain combustible material, in
the Demised Premises.
 
9.           Tenant shall not use the name of the Property for any purpose other
than as the address of the business to be conducted by Tenant in the Demised
Premises, nor shall Tenant use any picture of the Property in its advertising,
stationary or in any other manner without the prior written permission of
Landlord.  Landlord expressly reserves the right at any time to change said name
without in any manner being liable to Tenant therefor.
 
10.           Landlord reserves the right to make such other and further
reasonable rules and regulations as in Landlord’s judgment may from time to time
be needful for the safety, care and cleanliness of the Demised Premises or the
Building, or the Property, and any such other or further rules and regulations
shall, upon written notice thereof to Tenant, be binding upon Tenant with the
same force and effect as if they had been inserted herein at the time of the
execution hereof.
 

 
C-2 
 
 

EXHIBIT D
 
WORK LETTER
 
This WORK LETTER AGREEMENT (“Agreement”) is being entered into as of December 3,
2007, by and between CACTUS COMMERCE, LLC, a Delaware limited liability company
(“Landlord”) and UNITED NATURAL FOODS, INC., a Delaware corporation (“Tenant”),
in connection with the execution of the Lease between Landlord and Tenant dated
of even date herewith (“Lease”), who hereby agree as follows:
 
1.           General.
 
(a)           The purpose of this Agreement is to set forth how the interior
improvements in the Demised Premises as set forth on the Construction Documents,
as defined below in Section 3(e) (“Tenant Improvements”), are to be designed and
constructed, who will be responsible for the design and construction of the
Tenant Improvements, who will pay for the design and construction of the Tenant
Improvements, and the time schedule for completion of the design and
construction of the Tenant Improvements.
 
(b)           Except as defined in this Agreement to the contrary, all terms
utilized in this Agreement shall have the same meaning as the defined terms in
the Lease.
 
(c)           The provisions of the Lease, except where clearly inconsistent or
inapplicable to this Agreement, are hereby incorporated into this Agreement.
 
(d)           Except for the Tenant Improvements to be constructed pursuant to
this Agreement, Tenant accepts the Demised Premises in its “as-is” condition and
acknowledges that it has had an opportunity to inspect the Demised Premises
prior to signing the Lease.
 
2.           Commencement Date.  The Commencement Date shall be determined in
accordance with Section 2.2 of the Lease.
 
3.           Tenant Improvement Plans.
 
(a)           Tenant’s Designer.  Tenant shall retain a designer (“Designer”) to
prepare Space Plans as defined in Section 3(b) below, and Final Plans as defined
in Section 3(c) below for the Tenant Improvements.  The Designer shall be
familiar with the Building and with all applicable laws, statutes, codes, rules
and regulations (collectively, “Laws”) applicable to tenant construction in the
Building and shall be subject to the approval of Landlord, which approval will
not be unreasonably withheld or delayed and shall be conditioned on the
Designer’s reputation for quality of work, timeliness of performance, integrity,
and Landlord’s prior experience (if any) with such Designer.  Landlord hereby
consents to and approves of ARCO Design/Build as Designer.
 
(b)           Space Plans.  Tenant shall deliver the Space Plans to
Landlord.  Such Space Plans shall be compatible with the design, construction
and equipment of the Building, comply with all applicable Laws, and must
identify all demising walls, corridors, entrances, exits, doors, interior
partitions, offices, dry storage areas and temperature control space and any
other information required to obtain a building permit.  Landlord shall approve
or disapprove, for
 

 
D-1
 
 

reasonable reasons and subject to the Approval Criteria as defined in
Section 3(d) below, the Space Plans within five (5) business days after Landlord
receives the Space Plans and, if disapproved, Landlord shall return the Space
Plans to Tenant, who shall make all necessary revisions within five (5) business
days after Tenant’s receipt thereof.  This procedure shall be repeated until
Landlord ultimately approves the Space Plans.
 
(c)           Construction Documents.  After the Space Plans are ultimately
approved by Landlord, Tenant shall, subject to (e) below, cause the Designer to
prepare a fully coordinated and engineered set of architectural, structural,
mechanical, electrical and plumbing final plans and specifications (“Final
Plans”) to allow for the full and complete construction of the Tenant
Improvements.  Tenant shall then deliver the Final Plans to Landlord.   Landlord
shall approve or disapprove, for reasonable reasons and subject to the Approval
Criteria, the Final Plans within ten (10) business days after Landlord receives
the Final Plans and, if disapproved, Landlord shall return the Final Plans to
Tenant who shall make all necessary revisions within five (5) business days
after Tenant’s receipt thereof.  This procedure shall be repeated until Landlord
ultimately approves the Final Plans.  As approved, the Final Plans, as modified,
shall be deemed the “Construction Documents.”  Subject to Section 6(c) below,
any and all costs incurred by Tenant and/or Landlord in connection with the
preparation, review and approval of the Space Plans and the Final Plans shall be
deducted from the Tenant Improvement Allowance set forth below in
Section 6(a).  All deliveries of the Space Plans and the Final Plans shall be
delivered by messenger service, by personal hand delivery, by overnight parcel
service or by electronic delivery.
 
(d)           Standards for Landlord’s Approval.  Landlord’s approvals required
hereunder shall not be unreasonably withheld, but Landlord will be deemed to
have acted reasonably if Landlord’s disapproval is predicated upon (i) affect on
the structural integrity of the Building, (ii) possible damage to any of the
Building’s electrical, plumbing or fire/life safety systems that were in place
when the Building was delivered to Tenant, (iii) non-compliance with applicable
laws, codes and regulations, (iv) incompatibility with the base building plans,
and (v) any material affect on the exterior appearance of the Building or any of
the exterior areas of the Property which, in Landlord’s reasonable judgment, is
not compatible with a first-class industrial property, it being agreed and
understood that this Approval Criteria No. (v) may not be used by Landlord to
disapprove Tenant’s construction of any required refrigeration equipment outside
the Building so long as any such construction is done in compliance with all
applicable Laws (“Approval Criteria”).  While Landlord has the right to approve
the Space Plans, Preliminary Plans, Engineering Plans and the Final Plans,
Landlord’s sole interest in doing so is to protect the Building and Landlord’s
interests.  Accordingly, Tenant shall not rely upon Landlord’s approvals and
Landlord shall not be the guarantor of, nor responsible for, the correctness or
accuracy of any such Space Plans, Preliminary Plans, Engineering Plans or Final
Plans, or the compliance thereof with applicable Laws, and Landlord shall incur
no liability of any kind by reason of granting such approvals.
 
(e)           Design-Build.  Notwithstanding anything to the contrary set forth
in (c) above, Landlord and Tenant acknowledge that it is currently anticipated
that the Tenant Improvements will be constructed on a “design build”
basis.  Accordingly, plans may be submitted to Landlord with respect to portions
of the work (e.g., mechanical or electrical or structural) rather than as a
complete set of Construction Drawings as contemplated in (c) above.  The
procedure set forth in (c) above shall be applicable with respect to any plans
which are
 

 
D-2
 
 

submitted to Landlord for approval and Tenant may not start construction on any
portion of the work until the plans therefor have been approved by
Landlord.  Such plans, as approved by Landlord, shall individually and
collectively be defined as the Construction Documents for purposes of this
Agreement.
 
(f)           Ammonia Equipment.  Notwithstanding anything to the contrary set
forth herein Landlord hereby acknowledges and consents to the installation of
ammonia equipment outside of the Building so long as any such installation is
done in compliance with Applicable Law.
 
(g)           4,000 AMP Transformer.  Landlord and Tenant each acknowledges that
Tenant intends to have a 4,000 AMP transformer (“Transformer”) installed by
Southern California Edison (“Edison”).  In this regard, Landlord and Tenant
agree that the costs, if any, incurred in connection with Edison’s installation
of the Transformer shall be split 50/50 between Landlord and Tenant; provided,
however, that any costs incurred in connection with expediting the installation
of the Transformer shall be the sole responsibility of Tenant.
 
4.           Permits.  Tenant shall be responsible for obtaining all
governmental approvals of the Construction Documents to the full extent
necessary for the issuance of a building permit for the Tenant Improvements
based upon such Construction Documents.  Thereafter, Tenant shall also cause to
be obtained all other necessary approvals and permits from all governmental
agencies having authority over the construction and installation of the Tenant
Improvements in accordance with the approved Construction Documents and shall
undertake all steps necessary to insure that the construction of the Tenant
Improvements is accomplished in strict compliance with all Laws applicable to
such construction and the requirements and standards of any generally recognized
insurance underwriting board, or inspection bureau or insurance carrier insuring
the Demised Premises pursuant to the Lease.
 
5.           Construction.  Tenant shall employ an outside contractor or
contractors of Tenant’s choice (“Contractor”) to construct the Tenant
Improvements in substantial conformance with the Construction Documents;
provided, however, that such construction contracts shall provide for progress
payments, and Tenant shall pay for the entire cost of design and construction of
the Tenant Improvements and all permits and governmental review and approval
fees in connection therewith, subject to Landlord’s obligation to disburse the
Tenant Improvement Allowance in accordance with Section 6 below.  Contractor and
the performance of the work shall be subject to the following conditions:
 
(a)           Contractor shall be duly licensed and subject to Landlord’s prior
written approval, which approval shall not be unreasonably withheld and shall be
conditioned on the Contractor’s reputation for quality of work, timeliness of
performance, integrity and Landlord’s prior experience (if any) with such
Contractor.  Landlord hereby consents to and approves ARCO Design/Build as the
Contractor
 
(b)           Landlord or Landlord’s agents shall have the right, upon at least
48 hours’ advance notice (which notice may be oral) and subject to compliance
with all on-site safety requirements, to inspect the construction of the Tenant
Improvements by Tenant during the progress thereof, it being the intent of the
parties hereto that Landlord shall be reasonable in its inspection of the
construction of the Tenant Improvements and that Landlord shall recognize, to
the extent commercially reasonable and practicable, the necessity of field
changes based on field
 

 
D-3
 
 

conditions.  If Landlord shall give written notice to Tenant of any material
deviation from the Construction Documents, Tenant shall, unless Tenant disagrees
with Landlord with respect thereto, cause Contractor to make corrections
promptly.  If Tenant disagrees with Landlord’s determination that there has been
a material deviation from the Construction Documents, Tenant shall give Landlord
written notice thereof within one (1) business day of Tenant’s receipt of
Landlord’s notice with respect thereto, and the parties shall negotiate in good
faith to resolve their disagreement.  If, however, the parties do not reach
agreement within three (3) business days after Landlord’s receipt of Tenant’s
notice, then the determination of Landlord’s construction supervisor shall be
final.  Neither the privilege herein granted to Landlord to make such
inspections, nor the making of such inspections by Landlord, shall operate as a
waiver of any rights of Landlord to require good and workmanlike construction
and improvements erected in accordance with the Construction Documents.
 
(c)           Tenant shall instruct the Contractor to cause the Tenant
Improvements to be completed as soon as reasonably possible.
 
(d)           Tenant’s construction of the Tenant Improvements shall comply with
the following:  (i) the Tenant Improvements shall be constructed in strict
accordance with the Construction Drawings; and (ii) Tenant’s and Tenant’s
Contractor shall, prior to the commencement of any work, submit schedules of all
work relating to the Tenant Improvements to Landlord for Landlord’s information
only.
 
(e)           Tenant hereby indemnifies and holds Landlord harmless with respect
to any and all costs, losses, damages, injuries and liabilities related in any
way to any act or omission of Tenant or Tenant’s Contractor, or anyone directly
or indirectly employed by any of them, or in connection with Tenant’s
non-payment of any amount arising out of the Tenant Improvements.  Such
indemnity by Tenant, as set forth above, shall also apply with respect to any
and all costs, losses, damages, injuries and liabilities related in any way to
Landlord’s performance of  any ministerial acts reasonably necessary (i) to
permit Tenant to complete the Tenant Improvements, and (ii) to enable Tenant to
obtain any building permit or certificate of occupancy for the Demised Premises;
provided, however, that Tenant’s indemnity set forth herein shall not apply to
any damages or costs that result from any illegal act performed by Landlord.
 
(f)           Tenant’s Contractor and the subcontractors utilized by Tenant’s
Contractor shall provide the standard and customary warranties to Tenant and for
the benefit of Landlord with respect to the portion of the Tenant Improvements
for which it is responsible.  Tenant’s Contractor shall be responsible for the
replacement or repair, without additional charge, of all work done or furnished
in accordance with its contract that shall become defective within one (1) year
after the substantial completion of the work performed by such contractor or
subcontractors.  The correction of such work shall include, without additional
charge, all additional expenses and damages incurred in  connection with such
removal or replacement of all or any part of the Tenant Improvements, and/or the
Building and/or common areas that may be damaged or disturbed thereby.  All such
warranties as to materials or workmanship of or with respect to the Tenant
Improvements shall be contained in the Contract or subcontract and shall be
written such that such warranties shall inure to the benefit of both Landlord
and Tenant, as their respective interests may appear, and can be directly
enforced by either.  Tenant covenants
 

 
D-4
 
 

to give to Landlord any assignment or other assurances which may be necessary to
effect such right of direct enforcement.
 
(g)           Commencing upon the issuance of a building permit, Landlord and/or
its agents (“Landlord’s Representative”) shall have the right to attend any
meetings held by Tenant with its Contractor or Designer regarding the progress
of the construction of the Tenant Improvements.  Meetings will be held on the
first and third Wednesdays of each month at 10 a.m.  At Tenant’s request, other
than at such meeting, Landlord’s Representative shall make no direct
communications whatsoever with Tenant, the Contractor, any subcontractors and/or
the Designer; and all communications from Landlord’s Representative shall be
made in writing to Landlord who shall convey them in writing to Tenant.  If
Landlord’s Representative acts in a manner that is outside the scope of, or not
in keeping with, his job description as set forth in this Section 5(g) and that
in Tenant’s reasonable judgment is interfering with the construction of the
Tenant Improvements, then upon notice from Tenant to Landlord the Landlord’s
Representative shall be replaced prior to the next bi-monthly meeting.
 
(h)           Within ten (10) days following the completion of the Tenant
Improvements, Tenant shall notify Landlord of the completion thereof and shall
provide Landlord an opportunity to inspect the same.  Within ten (10) days
following Tenant’s notice, Landlord (or its representative) shall walk through
and inspect the Tenant Improvements, and upon the completion of such
walk-through shall either approve such work or advise Tenant in writing of any
failure of the Tenant Improvements to conform with the Construction
Documents.  Tenant shall, at Tenant’s sole cost and expense, promptly repair
such nonconforming items to Landlord’s satisfaction.  Landlord’s approval of the
Tenant Improvements, or Landlord’s failure to advise Tenant of any nonconforming
items in the Tenant Improvements, shall not relieve Tenant of responsibility for
constructing and installing the Tenant Improvements substantially in accordance
with the Construction Drawings and this Agreement, and in conformance with all
applicable laws, statutes and ordinances.
 
(i)           Upon completion of the Tenant Improvements, Tenant
shall:  (i) obtain and deliver to Landlord a certificate of occupancy for the
Tenant Improvements from the governmental agency having jurisdiction thereof;
(ii) deliver to Landlord a full set of reproducible as-built drawings for the
Tenant Improvements (including all Change Orders) to the extent applicable,
including, without limitation, architectural drawings, structural drawings,
mechanical drawings, including plumbing, fire sprinkler, electrical and life
safety; (iii) obtain and deliver to Landlord the building permit or permits for
the Tenant Improvements with final sign-off by the applicable governmental
entity; (iv) complete Landlord’s punch list items provided by Landlord to Tenant
in accordance with (h) above; and (v) deliver to Landlord copies of all written
construction and equipment warranties related to the portions of the Tenant
Improvements involving Building systems or those portions of the Demised
Premises Landlord is required to maintain or repair under the Lease.
 
(j)           Tenant agrees to (A) fully pay and discharge all claims for labor
done and materials and services furnished in connection with the construction of
the Tenant Improvements and (B) immediately upon Landlord’s request cooperate
with Landlord in connection with the filing of (i) a valid notice of completion
on the standard form used in California within ten (10) days following the
completion of construction of the Tenant Improvements, and (ii) a valid notice
of cessation on the standard form used in California upon a cessation of labor
of the
 

 
D-5
 
 

Tenant Improvements for a continuous period of thirty (30) days or more, and (C)
take all steps to forestall the assertion of claims of lien against the Property
or any part thereof or right or interest appurtenant thereto by contractors
retained by Tenant in connection with the Tenant Improvements.  In the event
that there shall be recorded against the Demised Premises or the Building or the
Property any claim or lien arising out of the Tenant Improvements, and such
claim or lien shall not be removed from title or discharged within the time
period specified in Section 8.3 of the Lease, then Landlord may exercise its
right to remove said liens in accordance with Section 8.3 of the Lease.
 
6.           Tenant Improvement Allowance.
 
(a)           Tenant Improvement Allowance.  Landlord will pay $2,452,696.00
(“Tenant Improvement Allowance”) toward the cost of the design, construction and
permitting (only to the extent set forth herein) of the Tenant Improvements and
for the review and approval of the Space Plans and Final Plans, including
Landlord’s costs with respect thereto as set forth in Section 6(c)
below.  Landlord will pay the Tenant Improvement Allowance to Tenant within
thirty-five (35) days after all of the following have occurred: (i) Tenant has
submitted a final request for disbursement on the standard AIA form, (ii) a
certificate of occupancy for the  Demised Premises has been issued, (iii) a
notice of completion has been duly recorded with respect to the Tenant
Improvements, (iv) no lien claim shall have been recorded within the thirty (30)
day period following such recordation (or if there be a lien claim, such lien
shall have been removed) and (v) Landlord’s receipt of an unconditional
mechanics’ lien release from the Contractor.  In the event the cost of the
design and construction of the Tenant Improvements is less than the Tenant
Improvement Allowance, the difference shall be retained by Landlord.
 
(b)           Change Orders.  In the event that Tenant requests or approves of
any “material changes” to the Construction Documents (each, a “Change Order”),
Landlord shall not unreasonably withhold its consent to any such Change Order,
but subject to the Approval Criteria listed in Section 3(d) above.  If any such
Change Orders, as approved by Landlord, increase the cost of constructing the
Tenant Improvements as shown on the Construction Documents in excess of the
Tenant Improvement Allowance, Tenant shall pay such increased costs.  For
purposes of this Section 6(b), a “material change” shall be one that involves a
change to any of the structural elements or building systems of the Building,
the exterior of the Building or any exterior areas of the Property or that will
cost in excess of $50,000.00.
 
(c)           Landlord’s Costs.  Landlord shall in connection with Landlord’s
obligations set forth in Section 3 with respect to reviewing and approving the
Space Plans and Final Plans and in Section 6 with respect to inspecting and
supervising the construction of the Tenant Improvements be reimbursed for all of
its costs incurred in connection with such review, approval, inspection and
supervision (including services performed in-house to the extent the costs are
not in excess of costs that would have been incurred if such services were
performed by independent third parties), which reimbursement shall be
accomplished by Landlord deducting such amount from the Tenant Improvement
Allowance; provided, however, in no event shall Tenant’s reimbursement
obligation under this Section 6(c) exceed $20,000.
 
7.           Default.  Any default by Tenant under the terms of this Agreement
shall, if not cured within five (5) days after written notice from Landlord,
constitute a default under the Lease to which this Agreement is attached, and
shall entitle Landlord to exercise all remedies set forth
 

 
D-6
 
 

in the Lease.  Tenant shall have any and all rights to remedy such default
pursuant to the provisions of the Lease.
 
8.           Reasonable Diligence.  Both Landlord and Tenant agree to use
reasonable diligence in performing all of their respective obligations and
duties under this Agreement and in proceeding with the construction and
completion of the Tenant Improvements in the Demised Premises.
 
9.           Insurance Requirements.
 
(a)           General Coverages.  All of Tenant’s Contractors shall carry
worker’s compensation insurance covering all of their respective employees, and
shall also carry public liability insurance, including property damage, all with
limits, in form and with companies as are required to be carried by Tenant as
set forth in Article XI of the Lease.
 
(b)           Special Coverages.  Tenant shall carry “Builder’s All Risk”
insurance in an amount approved by Landlord covering the construction of the
Tenant Improvements, and such other insurance as Landlord may require, it being
understood and agreed that the Tenant Improvements shall be insured by Tenant
pursuant to Article VI of this Lease immediately upon completion thereof.  Such
insurance shall be in amounts and shall include such extended coverage
endorsements as may be reasonably required by Landlord including, but not
limited to, the requirement that all of Tenant’s Contractors shall carry excess
liability and Products and Completed Operation Coverage insurance, each in
amounts not less than $500,000 per incident, $1,000,000 in aggregate, and in
form and with companies as are required to be carried by Tenant as set forth in
Article VI of this Lease.
 
(c)           General Terms.  Certificates for all insurance carried pursuant to
this Work Letter must comply with the requirements of Article VI of the Lease
and shall be delivered to Landlord before the commencement of construction of
the Tenant Improvements and before the Contractor’s equipment is moved onto the
site.  In the event that the Tenant Improvements are damaged by any cause during
the course of the construction thereof, Tenant shall immediately repair the same
at Tenant’s sole cost and expense.  Tenant’s Contractors shall maintain all of
the foregoing insurance coverage in force until the Tenant Improvements are
fully completed and accepted by Landlord, except for any Products and Completed
Operation Coverage insurance required by Landlord, which is to be maintained for
three (3) years following completion of the work and acceptance by Landlord and
Tenant.  All policies carried under this Section 10 shall insure Landlord and
Tenant, as their interests may appear, as well as the Contractor.  All
insurance, except Workers’ Compensation, maintained by Tenant’s Contractors
shall preclude subrogation claims by the insurer against anyone insured
thereunder.  Such insurance shall provide that it is primary insurance as
respects the owner and that any other insurance maintained by owner is excess
and noncontributing with the insurance required hereunder.  Landlord may, in its
discretion, require Tenant to obtain a lien and completion bond or some
alternate form of security satisfactory to Landlord in an amount sufficient to
ensure the lien-free completion of the Tenant Improvements and naming Landlord
as a co-obligee.
 

 
D-7
 
 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
 
LANDLORD:
 
CACTUS COMMERCE, LLC,
a Delaware limited liability company

 
By:
BlackRock Realty Advisors, Inc.,
its Manager

 
 
By:                                                                
Its:                                                                
 
TENANT:
 
UNITED NATURAL FOODS, INC.,
a Delaware corporation

 
By:
/s/ Mark Shamber
 
 

 
 
Mark Shamber,

Chief Financial Officer

 

 

 
D-8
 
 

EXHIBIT E
 
LIST OF INITIAL INSTALLATIONS WHICH
 
TENANT WILL NOT HAVE TO REMOVE
 
·      Any standard office improvements
 
·      Any restrooms
 
 
·
Structural improvements made to roof structure to support equipment approved by
Landlord

 
 
·
Electrical improvements approved by Landlord

 
 
·
Concrete slab associated with freezer section of tenant improvements and all
under slab insulation and piping.  If glycol is used as the underslab warming
system, then Tenant agrees that piping will be drained and capped below slab
upon termination of this Lease

 
 
·
Data cabling and phone cabling throughout Demised Premises

 
 
·
Modifications to sprinkler system required to meet code and/or insurance
requirements which are approved by Landlord

 
 
·
Dock equipment including dock levelers, shelters, lights, etc.

 

 
E-1 
 
 

EXHIBIT F
 

[ex35-e1.gif]

 

 
F-1