SUBLEASE AGREEMENT
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THIS SUBLEASE AGREEMENT entered into this 30 day of July, 1997, by and
between UNITED GROCERS, INC., an Oregon corporation, hereinafter designated as
Sublessor, and LAMKO, LLC , ▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ shall be Guarantors of
this Sublease, hereinafter jointly and severally designated as Sublessee;
W I T N E S S E T H
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WHEREAS, the Sublessor has entered into a Lease dated July 30, 1997,
with FLAGSHIP PROPERTIES, LLC , for a supermarket located in Portland, Oregon
(more particularly described in exhibit "A" attached to said lease), commencing
on the date set forth in the attached Exhibit "A," a copy of which is hereby
incorporated by reference, as fully as if its terms and conditions were herein
set forth.
WHEREAS, Sublessees desire to sublet said premises for a period not to
exceed 20 years, commencing on date set forth in paragraphs ----- and ----- of
Exhibit "A." and Sublessor is willing to so sublet in accordance with the terms
and conditions hereinafter set forth; now. therefore,
IT IS HEREBY AGREED as follows:
(1) Sublessor hereby sublets unto Sublessees those premises described
in said Exhibit "A," for the term of 20 years.
1. 1 The Sublessees, so long as they are not in default hereunder
and further provided that no event or condition exists that, with the passage of
time or giving of notice would constitute default, shall be granted the right to
exercise the renewal options contained in Exhibit "A," for the first five years
only, as set forth in paragraph 1.3 of said Exhibit.
(2) Sublessees covenant and agree to pay for the whole of said term the
rental hereinafter provided, together with all affirmative covenants including,
without limitation, those pertaining to minimum rent, Common Area Charges (CAM),
percentage of gross sales, taxes, assessments, insurance and all of the
covenants and obligations to be performed by Lessee, as set forth in said
Exhibit "A," and to make such payments and provide such performance when due
by the terms of the lease and amendments thereto.
(3) Sublessees shall, upon execution hereof, pay any and all rental or
security deposits and all other sums except minimum rent, as required pursuant
to the terms and conditions of said Exhibits "A", and shall pay rent to
Sublessor, in accordance with the "Sublease Rent Schedule" attached hereto. All
such rental payments to Sublessor shall be made without offset, adjustment or
deduction of any kind.
(4) Sublessees shall be bound by the same responsibilities, rights,
privileges and duties as Sublessor, as enumerated in Exhibit "A" and covenants
and agrees to fully indemnify and hold Sublessor harmless from any and all
responsibility and/or liability which Sublessor may incur by virtue of said
Exhibit "A," and/or Sublessees' occupancy of the premises. Furthermore,
Sublessees shall be bound by any subsequent amendment, revision, supplement or
addition to the prime lease between Sublessor and the prime Lessor, and to keep
the Sublessor indemnified against all actions, claims and demands whatsoever in
respect to said exhibit "A." and Sublessees use of the demised premises.
4.1 Assignment and Subletting. Sublessees acknowledge that provisions
for extension options and assignment and subletting in the Lease are applicable
to the prime Lessor and Sublessor only. Sublessees will not assign this Sublease
or sublet the premises without the prior written consent of Sublessor which may
be granted or withheld in its absolute discretion. A direct or indirect transfer
of ownership and control of a majority of the voting stock of a corporate
Sublessees, by whatever demands, shall be deemed an assignment of this Sublease
for the purposes of this paragraph.
(a) In the event of an assignment, Tenant shall thereafter pay to
Landlord in connection with such assignment, fifty percent (50%) of all sums and
other consideration paid (or payable) to and for the benefit of Tenant by the
Transferee on account of the assignment as and when such sums and other
consideration are paid (or are payable) by the Transferee.
(b) In the event the transfer is by virtue of a sublease, fifty
percent (50%) of any rent or other consideration received by Tenant, either
initially or over the term of the sublease, in excess of such rent called for
hereunder, or in the case of a sublease of a portion of the Leased Premises, in
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excess of such rent fairly allocable to such portion, after appropriate
adjustments to ensure that all other payments called for hereunder are taken
into account, shall be paid by tenant to Landlord, promptly after its receipt by
Tenant.
4.2 Covenants. Representations and Warranties.
(a) Membership in United Grocers, Inc. Upon execution and during
the term hereof, Sublessees agree to maintain or cause to be maintained the
membership of the store in good standing in United Grocers, in accordance with
the Bylaws of United Grocers, as long as this Sublease remains in effect.
(b) Purchases from Sublessor. Sublessees agree that throughout the
term of the Sublease and any extensions or renewals thereof, except as
hereinafter provided, Sublessees will purchase from Sublessor not less than
forty-five percent (45%) of its retail sales of all goods and merchandise
required by it for resale on the premises to the extent that Sublessor shall now
or hereafter be able to supply such goods and merchandise to the Sublessees, and
Sublessor will supply all of Sublessees' requirements at such prices and on such
terms as are reasonably comparable to those offered by Sublessor to other
purchasers from Sublessor carrying on businesses similar to that of the
Sublessees in the Portland area. If, at any time, the Sublessees contend that
Sublessor is not able to supply particular goods or merchandise customarily
stocked by retail supermarkets in the Portland area, or that terms offered by
Sublessor are not reasonably comparable to those offered by Sublessor to other
purchasers described above, the Sublessees shall so advise Sublessor in writing,
specifying such contention with particularity. If, within 30 days after receipt
of such notice, Sublessor does not offer to supply goods or merchandise so
specified or does not advise Sublessees that the terms and conditions offered
are reasonably comparable to those offered to such other purchasers, Sublessees
shall be free to secure such specified goods and merchandise from any source
which it desires. If Sublessor demonstrates that it is offering reasonably
comparable terms, and Sublessees nonetheless purchase from another source, such
purchase or purchases shall not be an exception from the 45% requirement
specified above. If the above percentage requirements are not complied with, it
shall constitute a default hereunder. In the event of a breach of this purchase
covenant, Sublessor may terminate this sublease and, in addition
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to the remedies hereinafter offered Sublessor, Sublessee agrees to pay
Sublessor, as liquidated damages, and not as a penalty or forfeiture. a sum
computed as follows:
1. The average weekly purchases from the date of the
agreement to the date of the breach shall be determined;
2. the average weekly purchases so determined shall then be
multiplied by the number of weeks from the date of the breach to the end of
the term of the purchase agreement; and
3. The computed sum shall be multiplied by two and
one-quarter percent (2-1/4 %) to determine the liquidated damages due and
owing Sublessor by reason of Sublessee's default. Said sum shall become
immediately due and owing within 15 days from date of written notice of the
liquidated damages.
(c) Sublessees covenant that as long as this Sublease remains in
effect, and for an additional period of six (6) months thereafter, Sublessees
shall not directly or indirectly sell or permit the sale of the store and the
owners of Sublessees shall not directly or indirectly sell controlling interests
in Sublessees (whether in one or a series of related transactions) without first
offering to sell said store or controlling interest, as the case may be, to
Sublessor upon the same terms and conditions as the Sublessees or their owners,
as the case may be, are prepared to accept from a third party. Prior to such
sale by the Sublessees or their owners, the Sublessees shall first notify
Sublessor of the desire to sell the store or controlling interest in the
Sublessees and of all the terms and conditions of such sale and shall provide to
Sublessor all documents, instruments, agreements, offers, acceptances,
appraisals, inventories, equipment lists, leases, financial statements and such
other material and information as Sublessor may reasonably request to aid in its
decision to exercise or decline its right to purchase as hereinafter provided.
Within 30 days following receipt of such notice of desire to sell and all
materials and information reasonably requested by Sublessor, Sublessor shall
advise Sublessees whether Sublessor elects to purchase or declines to purchase
the store or such controlling interest upon the offered terms and conditions. If
Sublessor shall elect to purchase, Sublessor shall purchase and the Sublessees
or their owners shall sell, such retail grocery business or such controlling
interest, as the case may be, all on the terms set forth in the offer. If
Sublessor declines the purchase, the Sublessees or their owners shall be free to
sell the store or controlling
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interest, as the case may be, upon (and only upon) the terms and conditions
offered as aforesaid to Sublessor; provided that such sale is consummated within
120 days following the date Sublessor declined the purchase, and if such sale is
not consummated in accordance with the offered terms and conditions within said
120-day period, the provisions of this paragraph shall apply again and no
subsequent sale of any portion of the offered store or controlling interest may
be effected without again offering the same to Sublessor as provided herein.
Sublessor may waive its rights under this section provided such waiver is in
writing. The foregoing provisions shall not apply to transfers of assets or
interests by sale, gift or as a result of death to the lawful issue of
Sublessees, or transfers of assets to a corporation or partnership or transfers
of a controlling interest to a trust as long as such corporation, partnership or
trust is controlled by the transferor; provided such transferee agrees that it
holds such assets or controlling interest subject to the restrictions contained
in this paragraph.
(d) Sublessees represent and warrant that there are no brokers,
finders or other persons entitled to any fee, commission or other compensation
in connection with this Sublease, and agree to hold Sublessor harmless from any
claims for such fees, commissions and/or compensation.
(e) Sublessees hereby represent and warrant to Sublessor that the
financial statements, appraisals and other documents submitted to Sublessor in
connection herewith or pursuant hereto are and shall be true, correct, complete
and accurate in every respect and said financial statements fairly and
accurately present the assets, liabilities, financial condition and results of
operations reflected herein.
(5) Security Agreement.
5.1 Grant. Collateral and Obligations. Sublessees and Sublessor
agree that this Sublease shall constitute a security agreement within the
meaning of the Oregon Uniform Commercial Code (hereinafter referred to as the
"Code") with respect to:
(a) required cash deposits (as defined in the Bylaws of
Sublessor) presently or hereafter held by or deposited with Sublessor by
Sublessees;
(b) any and all patronage rebates and rebate notes
representing patronage rebates (as defined in the Bylaws of Sublessor) earned or
hereafter earned by reason of patronage of Sublessor by Sublessees;
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(c) all replacements of substitutions for, and additions to
the foregoing, and the proceeds thereof (all of said personal property and the
replacements, substitutions and additions thereto and the proceeds thereof being
sometimes hereinafter collectively referred to as the "Collateral"), and that a
security interest in and to the Collateral is hereby granted to the Sublessor,
and the Collateral and all of the Sublessees' right, title and interest therein
are hereby assigned to the Sublessor, all to secure all presently existing or
hereafter incurred direct, indirect, absolute or contingent indebtedness,
liabilities and other obligations of Sublessees to Sublessor (referred to as
"the Obligations" herein) including, but not limited to, the payment of all rent
and other sums and the performance of all other obligations of Sublessees under
this Sublease, all renewals and extensions thereof, the price of goods, services
and merchandise purchased by Sublessees from Sublessor from time to time, and
all costs of collection, legal expenses and attorneys' fees paid or incurred by
Sublessor in enforcing any rights in respect to the Obligations or in connection
with assembling, collecting, selling or otherwise dealing with or realizing upon
the Collateral. Not withstanding the foregoing; it is understood by Sublessor
that Key Bank/Key Corp has a first priority security interest in the store's
inventory, furniture, trade fixtures and equipment, and will retain that
position until the loans or leases for that store are fully satisfied.
5.2 Security Agreement Warranties. In addition to and without
limiting the force or effect of any other covenants, representations and
warranties of Sublessees contained in this Sublease, Sublessees hereby covenant,
represent and warrant to and with Sublessor as follows:
(a) Sublessees are the owners of the Collateral free and
clear of liens, security interests and encumbrances of every kind and
description, except Key Bank/Key Corp who has a first priority security interest
in the store's inventory, furniture, trade fixtures and equipment, and will
retain that position until the loans or leases for that store are fully
satisfied.
(b) Sublessees will not sell, dispose of, encumber or permit
any other security interest, lien or encumbrance to attach to the Collateral
except the security interest of Sublessor and the Permitted Liens.
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(c) All tangible Collateral shall be kept at Sublessees'
place(s) of business located on the premises, and Sublessees shall not permit
the same to be removed therefrom without the prior written consent of Sublessor.
(d) Sublessees shall keep the tangible Collateral at all
times insured against risks of loss or damage by fire (including so-called
extended coverage), theft and such other casualties as Sublessor may reasonably
require, all in such amounts, under such forms of policies, upon such terms, for
such periods and written by such companies or underwriters as Sublessor may
approve. All such policies of insurance shall name Sublessor as loss payee
thereon as its interest may appear and shall provide for at least 30 days' prior
written notice of modification or cancellation to Sublessor. Sublessees shall
furnish Sublessor with certificates of such insurance or other evidence
satisfactory to Sublessor as to compliance with the provisions of this
paragraph. Sublessor may act as attorney-in-fact for Sublessees in making,
adjusting and settling claims under and canceling such insurance and endorsing
Sublessees' name on any drafts drawn by insurers of the Collateral.
(e) Sublessees will keep the Collateral in good order and
repair, shall not waste or destroy the Collateral or any part thereof, and shall
not use the Collateral in violation of any statute, ordinance or policy of
insurance thereon. Sublessor may examine and inspect the Collateral at any
reasonable time or times, wherever located.
(f) Sublessees will pay promptly when due all taxes and
assessments upon the Collateral or for its use or operation or upon this
Sublease or upon any instruments evidencing the Obligations.
(g) Sublessees will pay promptly when due all indebtedness
secured by any lien or other security interest in the Collateral, whether
superior or junior to the security interest established hereby.
5.3 Additional Remedies. Upon any default hereunder and at any
time thereafter (such default not having previously been cured), Sublessor at
its option may declare all Obligations immediately due and payable and shall
have the remedies of a secured party under the Uniform Commercial Code of Oregon
(the "Code"), including without limitation the right to take immediate and
exclusive possession of the Collateral.
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5.4 Financing Statements. Sublessees will at their own cost and
expense, upon demand, furnish to Sublessor such financing statements and other
documents in form satisfactory to Sublessor and will do all such acts and things
as Sublessor may at any time or from time to time request or as may be necessary
or appropriate to establish and maintain a perfected security interest in the
Collateral.
5.5 Attorneys' Fees. In the event of the institution of any suit or
action to terminate this Sublease, or to enforce the terms or provisions hereto,
Sublessees shall and do hereby agree to pay, in addition to the costs and
disbursements provided by statute, reasonable attorneys' fees in such
proceedings or on any appeal from any judgment or decree entered therein.
(6) Default. The following shall constitute a default under this
Sublease:
6.1 Any failure by Sublessees to pay, when due, rent or any other
amount due under the Lease or to perform any other obligation of Sublessor
under the Lease or any other default under the Lease which continues for up to
one-half of the cure period as defined in the lease, provided with respect
thereto in the Lease;
6.2 Any failure by Sublessees to pay when due rent or any other
amount due under this Sublease or to perform when due any other obligation of
Sublessees hereunder;
6.3 If any warranty, representation or statement made or
furnished to Sublessor by or on behalf of the Sublessees is false in any
material respect when made or furnished;
6.4 Any failure by Sublessees to pay when due and/or satisfy any
other present or hereinafter incurred indebtedness or obligation of Sublessees
to Sublessor, including but not limited to those arising from Sublessees'
purchases of goods and services from Sublessor any other loans or leases
Sublessees may have or enter into with Sublessor, and Sublessees' obligations
under the Bylaws of Sublessor and its application for membership in Sublessor;
6.5 If Sublessees vacate or abandon the premises or allow the
premises to remain vacant or unoccupied;
6.6 If Sublessees make an assignment for the benefit of creditors,
or if, with or without Sublessees' acquiescence, a petition in bankruptcy is
filed against Sublessees, or Sublessees are adjudicated a bankrupt or insolvent,
or a trustee, receiver or liquidator is appointed for all or part of
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Sublessees' assets, or a petition or answer is filed by or against Sublessees
seeking or acquiescing in any reorganization, liquidation or similar relief
under any federal, state or local law relating to bankruptcy, insolvency or
other relief for debtors; and
6.7 If Sublessees sell or otherwise dispose of all or any
substantial portion of the assets of Sublessees located at or associated with
the store, other than inventory sold at retail in the ordinary course of
business.
(7) Remedies. In the event of any default under this Sublease:
7.1 Sublessor shall have the right, at its election then or at any
time thereafter, upon notice to Sublessees, to terminate this Sublease or to
terminate Sublessees' rights of possession in the premises without terminating
this Sublease;
7.2 Sublessor shall have the immediate right, whether or not the
Sublease shall have been terminated pursuant to paragraph 7. 1, to re-enter and
repossess the premises or any part thereof by force, summary proceedings,
ejectment or any other legal or equitable process, all without any liability on
Sublessor's part for such entry, repossession or removal;
7.3 Sublessor may (but shall be under no obligation to), whether
or not this Sublease shall have been terminated pursuant to paragraph 7. 1,
resublet the premises, or any part thereof, in the name of Sublessees, Sublessor
or otherwise, without notice to Sublessees, for such term or terms and for such
uses as Sublessor, in its absolute discretion, may determine and may collect and
receive rents payable by reason of such resubletting (without any liability for
any failure to collect such rents);
7.4 Sublessor may (but shall be under no obligation to) procure
any insurance, pay any rentals, taxes or liens, make any repairs, pay any sums
required to be paid, and to do and perform such other acts as may be required of
Sublessees hereunder, and any payments so made shall bear interest at the rate
of 12 percent per annum from the time of such payment until repaid; and
7.5 Sublessor may exercise any and all other rights and remedies
afforded to the prime Lessor upon default under the Lease and any and all other
rights and remedies Sublessor may have as provided herein, pursuant to the laws
of the State of Oregon. In addition to the other remedies provided above,
Sublessor shall be entitled to current damages and final damages as provided in
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paragraph (8) below, and, to the extent permitted by applicable law, to
injunctive relief in case of the violation, or attempted or threatened
violation, of any of the provisions of this Sublease, or to a decree compelling
performance of this Sublease.
7.6 No expiration or termination of this Sublease, repossession of
the premises or any part thereof, or resubletting of the premises or any part
thereof, whether pursuant to the above paragraph or by operation of law or
otherwise, shall relieve Sublessees of their liabilities and obligations under
this Sublease, all of which shall survive such expiration, termination,
repossession or resubletting.
(8) Damages.
8.1 Current Damages. In the event of any expiration or termination
of this Sublease or repossession of the premises or any part thereof by reason
of the occurrence of an event of default, Sublessees will pay to Sublessor the
rent and other sums required to be paid by Sublessees for the period to and
including the date of such expiration, termination or repossession; and,
thereafter, until the end of what would have been the term in the absence of
such expiration, termination or repossession, and whether or not the premises or
any part thereof shall have been resublet, Sublessees shall be liable to
Sublessor for, and shall pay to Sublessor, as liquidated and agreed current
damages the rent and other sums which would be payable under this Sublease by
Sublessees in the absence of such expiration, termination or repossession, less
the net proceeds, if any, of any resubletting effected for the account of
Sublessees, after deducting from such proceeds all of Sublessor's expenses
reasonably incurred in connection with such resubletting (including, without
limitation, all repossession costs, brokerage commissions, legal expenses,
attorney's fees, employee expenses, alteration costs and expenses of preparation
for such resubletting). Sublessees will pay such current damages on the days on
which rent would have been payable under this Sublease in the absence of such
expiration, termination or repossession, and Sublessor shall be entitled to
recover the same from Sublessees on each such day.
8.2 Final Damages. At any time after any such expiration or
termination of this Sublease or repossession of the premises or any part thereof
by reason of the occurrence of an event of default, whether or not Sublessor
shall have collected any current damages pursuant to paragraph 8.1,
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Sublessor shall be entitled to recover from Sublessees, and Sublessees will pay
to Sublessor on demand, as and for liquidated and agreed final damages for
Sublessees' default and in lieu of all current damages beyond the date of such
demand (it being agreed that it would be impracticable or extremely difficult to
fix the actual damages), an amount equal to the excess, if any, of (a) the rent
and other sums which would be payable under this Sublease from the date of such
demand (or, if it be earlier, the date to which Sublessees shall have satisfied
in full their obligations under paragraph 8.1 to pay current damages) for what
would be the then unexpired term in the absence of such expiration, termination
or repossession, discounted to present value at an assumed interest rate of
seven percent (7%) per annum, over (b) the then net rental value of the
premises discounted to present value at an assumed interest rate of seven
percent (7%) per annum for the same period. Rental value shall be established by
reference to the terms and conditions upon which Sublessor resublets the
premises if such resubletting is accomplished within a reasonable period of time
after such expiration, termination or repossession, and otherwise established on
the basis of Sublessor's estimates and assumptions of fact regarding market and
other relevant circumstances, which shall govern unless shown to be erroneous.
If any statute or rule of law shall validly limit the amount of such liquidated
final damages to less than the amount above agreed upon, Sublessor shall be
entitled to the maximum amount allowable under such statute or rule of law.
(9) Rights Cumulative, Nonwaiver. No right or remedy herein conferred
upon or reserved to Sublessor is intended to be exclusive of any other right or
remedy, and each and every right and remedy shall be cumulative and in addition
to any other right or remedy given hereunder or now or hereafter existing at law
or in equity or by statute. The failure of Sublessor to insist at any time upon
the strict performance of any covenant or agreement or to exercise any option,
right, power or remedy contained in this Sublease shall not be construed as a
waiver or relinquishment thereof for the future. No waiver by Sublessor of any
provision of this Sublease shall be deemed to have been made whether due in the
receipt of rent or otherwise, unless expressed in writing and signed by
Sublessor.
(10) Notices. Any notice or demand required or permitted to be given
under this Sublease shall be deemed to have been properly given when, and only
when, the same is in writing and has
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been deposited in the United States Mail, with postage prepaid, to be forwarded
by registered or certified mail and addressed to the party to be notified at the
address appearing below its signature. Such addresses may be changed from time
to time by serving of notice as above provided.
(11) Right of Refusal: If, during the term of this Sublease, or any
extension hereof, Sublessee or any successor to Sublessee shall receive a bona
fide offer to purchase the business being operated under this sublease, i. e.,
goodwill, fixtures and/or equipment and inventory or the property of which the
premises are a part, which offer is acceptable to Sublessee, Sublessor shall
have the right to purchase the business (or the property) upon the same terms
and conditions. Sublessee agrees to immediately, upon receipt of such offer, to
give Sublessor written notice of the terms and conditions thereof, and the
Sublessor shall have the right, for thirty (30) days after receipt of such
notice, to exercise its option to purchase under the identical terms and
conditions of such offer. Sublessor's exercise of its option shall be given in
writing, within said thirty-day period.
(12) Additional Provisions.
12.1
12.2
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IN WITNESS WHEREOF, the parties have executed the foregoing Sublease
Agreement the day and year first above written.
SUBLESSOR:
UNITED GROCERS, INC., an Oregon Corporation
an Oregon Corporation
▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
Vice President
By:
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SUBLESSEES:
LAMKO, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇ Member
▇▇▇▇▇▇ ▇. ▇▇▇▇, Member
By: /s/ ▇▇▇▇ ▇▇▇▇▇ Member
Gake Lasko, Member
INDIVIDUALLY:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
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SCHEDULE FOR SUB-LEASE PAYMENTS
Months 1 through 60 $28,000.00
Months 61 through 120 $32,648.00
Months 121 through 180 $35,912.00
Months 181 through 240 $39,504.00
This rent schedule contains the standard 6 percent fee required by United
Grocers, Inc. to sign as Master Lessee.
EXHIBIT "Y"
-----------
All present and hereinafter acquired inventory, equipment, fixtures and
capital stock of United Grocers, Inc.
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